Financial services and economic policy Reporter


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There is a version of events in which a hurricane wreaking historic devastation on a major American city calls bitterly divided leaders to a common purpose. In that version of events, the urgency of the crisis not only rallies bipartisan support behind an expensive recovery operation, it also compels policymakers to set aside disputes over measures to keep the government open and lift the debt ceiling that they must pass next month.

We are not living in that version of events. 

Even as what remains of Harvey regathered strength Monday to wallop southeastern Texas again, President Trump re-upped his threat to shut down the government if lawmakers deny him funding for a Mexican border wall. “It has nothing to do with it,” Trump said of the need to secure funding for Harvey relief. “I think this is separate.”

My colleagues Mike DeBonis and Damian Paletta put that presidential brushoff in context

Trump’s comments, delivered at a White House news conference, illustrate the political minefield he will navigate in September as he tries to draw support for disaster recovery funds but wages a bitter fight with lawmakers from both parties about whether U.S. taxpayers should finance the creation of a wall that he has long promised Mexico would fund…

Harvey’s devastation represents a new challenge for the White House and Congress, requiring lawmakers to approve billions of dollars in recovery spending even though they haven’t agreed on much else this year. It will test whether Trump can overcome deep divisions within his own party on fiscal matters to prioritize aid, and whether he can suspend his adversarial governing style and even postpone his own agenda, notably an overhaul of the tax code. 

It isn’t clear yet how congressional Republicans, for their part, will try to wend their way through the thicket of competing demands next month. At first blush, GOP leaders could use disaster relief as an inducement for a package that also includes a government funding extension and a debt-ceiling hike (or a short-term suspension). It would give them cover to stiff-arm the fiscal hawks in the hardline Freedom Caucus — who weren’t likely to vote for either anyway — and instead gather votes they need from Democrats. 

But Trump’s border wall demand ties that strategy in knots. Stan Collender, a federal budget expert now with Qorvis, makes the case in a Forbes piece this morning:

Trump may be thinking that adding the funds for his wall to a bill with Harvey relief will make it easier for him to get the dollars he wants. After all, would congressional Democrats, who so far have indicated they're adamantly against the wall, dare oppose a bill if funding for the wall and Harvey relief aid were combined?

But House and Senate Democrats almost certainly see this coming and are likely to announce very soon -- perhaps even this week -- that they insist that the hurricane relief funds be in a standalone bill rather than the [spending measure] and that this bill not include anything other than aid for Harvey victims. As a sweetener, they could ask that a Harvey relief bill be considered now rather than by the end of the month so that the aid can start flowing immediately.

That would put the White House in a political bind. If the president signed the standalone relief bill, he might be giving up what he considers to be the best chance at getting the funds for his wall. If he vetoed it, he would be delaying aid to Texas, Louisiana and everywhere else affected by the storm and causing a great deal of voter and congressional GOP angst.

One plugged-in Republican lobbyist tells me some Trump advisers are trying to prevail on the president to postpone the battle over the border wall until the end of the year. “There’s an effort being made to convince him a short-term extension isn’t the place to make the fight,” he says. That is, in a bill that holds government spending steady through the end of the year, money for the wall would stick out like a sore thumb. But in December, when lawmakers are haggling over funding levels across the board in an omnibus spending package, the wall could be just one more chit with which to bargain. 

Will Trump listen? “I don’t make any predictions about what this president will do,” this lobbyist says. 

There are still other issues in the mix. The National Flood Insurance Program expires at the end of the month, and reauthorizing it has become newly pressing in Harvey’s wake. The program is nearly $25 billion in debt, and like the federal government, it has its own borrowing limit — of roughly $30 billion. Covered losses will almost certainly exceed the program’s remaining borrowing authority. As The Post’s Phillip Bump points out, Hurricane Katrina left NFIP on the hook for $18 billion, and losses from 2012's Hurricane Sandy neared $10 billion. 

Lawmakers aren’t anywhere near a consensus on a long-term renewal of the program. House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) has been pushing for a wholesale overhaul that would shift more of the burden onto policyholders, but he’s encountered bipartisan resistance in the chamber; and the Senate Banking Committee has yet to mark up its own version. 

Steve Ellis, vice president of Taxpayers for Common Sense, which has pushed for reforms to the program, says lawmakers will likely approve a short-term extension. “Even if Harvey hadn’t happened, it’d be hard to see them getting it done on time,” he says. “Now, people are going to say they need to see what the impacts are on the program.” Insurance industry lobbyists expect such an extension will also hike the program’s borrowing authority. 

Most immediately, though, those in Harvey’s path will receive disaster relief funds administered by the Federal Emergency Management Agency. In a Monday note to clients, Morgan Stanley pointed out that that the program had $3.3 billion on hand at the end of last week. Because the Treasury is running so close to empty, if the feds burn through that reserve, and then Congress appropriates more money for disaster relief before lifting the federal debt ceiling, it could accelerate the deadline for acting to avert a debt default. The bank notes that outcome is unlikely, since a debt ceiling hike and extra disaster relief funding are likely to move in the same package. But it presents one more headache for policymakers as a messy month gets even messier. 

And it's unclear what Trump will ultimately do. Here's disaster historian Scott Gabriel Knowles:


The bill for Harvey's damage is likely to run into the tens of billions of dollars. That's just the start of the economic consequences, which can be tricky to measure. The Wall Street Journal's Josh Zumbrun: "Even after the immediate threat from Hurricane Harvey has passed and the floodwaters receded, the Texas Gulf Coast faces tens of billions of dollars in property damage, bottlenecks at some of the nation’s largest oil refineries, and work disruptions possibly for millions of workers. 'The damage will likely be much higher than most recent hurricanes have been,' said Adam Kamins, senior economist at Moody’s Analytics. There are 'very high levels of housing density where some of the most severe flooding is taking place. Because of that you have very high expected property and vehicle damage.' Moreover, the storm could impact the economy nationwide due to the large oil refining presence in the Gulf Coast. Refiners in Corpus Christi, Lake Charles and Houston have about 30% of the nation’s oil refining capacity."

Some economists believe such a disaster can end up as a net positive for the economy, because of the stimulative effect of the recovery spending. Conor Dougherty and Nelson D. Schwartz of the New York Times: "Economists say the region is likely to recover quickly and may even experience a bump in growth from rebuilding... The economic impact of the storm will not be clear with any degree of accuracy for a while. But given Houston’s commercial importance — and its perch along a well-trod hurricane zone — economists and others have long taken it for granted that an epic storm would hit the region eventually, so have a head start on the numbers. About two years ago, Ray Perryman, the head of an economic analysis firm, looked at the hypothetical economic damage that would be wrought if storms of various sizes and magnitudes hit coastal Texas. The estimates ranged from around $11 billion to $80 billion — and the earliest estimates suggest this disaster will be on the upper end of that range."


Vice President Pence says the federal government has the money it needs to fund Harvey relief efforts. “In speaking with FEMA officials, we truly believe that we have the reserves to address the financial burden of this crisis,” Pence told a Houston television station on Monday. Roll Call's John Bennett: "But the VP left open the door that the administration might have to ask lawmakers for more aid dollars. 'Before I was vice president, I was a governor,' the former Indiana chief executive said. 'Before that, I was in the Congress. And we’re very confident that the Congress of the United States is going to be there to provide the resources necessary.'"

Oops: Trump earlier this month threw out an Obama administration requirement that federal, state and local agencies work to enhance flood protection for buildings and other infrastructure. HuffPost's Marina Fang:  "Trump’s rollback of the Federal Flood Risk Management Standard was part of his executive order billed as a plan to streamline infrastructure projects. He signed the order earlier this month at Trump Tower in New York, minutes before the fiery press conference during which he blamed 'both sides' for the deadly violence in Charlottesville, Virginia, incited by a white supremacist rally. Flanked by cabinet officials and aides, Trump heralded the order as part of his administration’s efforts to rid industry of what he sees as onerous and unnecessary regulation. He called such rules 'a massive, self-inflicted wound on our country.'"


Did Janet L. Yellen talk herself out of her job on Friday? The rapidly-emerging consensus among central bank watchers holds that the Fed chair's forthright defense of Obama-era financial regulation, delivered at the annual summit in Jackson Hole, Wyo., all but seals her fate as a single-termer.

CNBC's Jeff Cox: "She said the crisis 'demanded action' and said the reforms 'have made the system safer.' That, however, is just the opposite of what Trump has been preaching. The president has long bemoaned the handcuffs he sees Dodd-Frank and other reforms have put on banking, and is unlikely to want a Fed chair at odds with his thinking... PredictIt, an online betting site that allows members to "invest" on the outcomes of various events, put [National Economic Council Chair Gary] Cohn out in front Monday. The current betting line translates to a 28 percent chance that the former Goldman Sachs chief operating officer gets the post, compared to 24 percent for Yellen. Former Fed Governor Kevin Warsh is emerging as a dark horse, with an 18 percent chance that got a boost in Monday wagering."

Others aren't willing to rate Cohn's chances so highly, especially after his own comments Friday to the Financial Times criticizing Trump's handling the Charlottesville aftermath. To boot, as the Post reported Friday, he was overheard earlier in the week at a restaurant on Long Island's North Fork loudly complaining about Trump's hapless management style.

Cap Alpha's Ian Katz, who's been voicing skepticism of Cohn's chances for weeks, is now even more bearish. Here was his assessment, in a Sunday note to clients: "We think the possibility that either Janet L. Yellen or Gary Cohn will be the next Federal Reserve chair has been reduced. Three weeks ago we estimated a roughly 60 percent chance that the next Fed chair will be someone other than Yellen or Cohn. We’ll now bump that up to 65-70 percent... Trump might be willing to allow Cohn to publicly express his displeasure. He might even understand it. But that’s not the same as rewarding Cohn for it with the Fed nomination."

Bond traders don't see a distinction worth making between Yellen and Cohn, at least when it comes to monetary policy. Bloomberg's Brian Chappatta: "Whether Trump nominates the former Goldman Sachs Group Inc. president or reappoints Yellen, investors overseeing more than $1 trillion in fixed-income assets see little change in the Fed’s course: a drawn-out process of trimming its balance sheet and raising interest rates. And they’re putting money on that view, with positions that are at least neutral -- if not outright bullish -- on the $14.1 trillion Treasuries market."

Financial markets are suggesting the political drama surrounding Congressional efforts to raise the nation’s debt ceiling will play out more like the lesser of two recent showdowns.
Shares of oil refinery companies rose on Monday after Tropical Storm Harvey forced refineries in Houston to shut down.
The synthetic CDO, a villain of the global financial crisis, is back.A decade ago, investors’ bad bets on collateralized debt obligations helped fuel the crisis. Billed as safe, they turned out to be anything but. Now, more investors are returning to CDOs—and so are concerns that excess is seeping into the aging bull market.

Uber's likely new CEO is described as low-key, no-nonsense, and likable — a stark contrast, in other words, to the man he's replacing. Maybe most importantly, the Wall Street Journal's Glen Bensinger and Drew FitzGerald write, Dara Khosrowshahi knows how to wrangle a difficult board: "If he accepts Uber’s job, Mr. Khosrowshahi, will need to work closely with the eight-member board to fix a host of problems, including replenishing Uber’s depleted executive ranks and implementing changes mandated by the board to address allegations from a former female engineer that the company ignored complaints of sexism and sexual harassment. He will also need to shore up Uber’s finances: The company lost over $3 billion last year. Mr. Khosrowshahi, 48 years old... would inherit a board divided by a heated legal dispute between Benchmark Capital and Mr. Kalanick, and the public airing of factions that emerged during the CEO hunt."

Another question for Khosrowshahi, longtime CEO of Expedia: Just how ambitious would he be? The New York Times's Farhad Manjoo writes: "Will the company still aim to become the Amazon of transportation, or will it settle for being the Expedia of its market — one of the largest of several players in its industry, but not expansionist and messianic, hellbent on becoming the next great American technology behemoth? Mr. Khosrowshahi is a cipher in Silicon Valley... But Mr. Khosrowshahi’s past at Expedia sheds some light on his temperament. He has had a largely successful run there, and appears to be a patient operator who can fix an ailing company. His tenure also suggests a very different outlook from Mr. Kalanick’s. In one of the biggest misses of Expedia’s history, Mr. Khosrowshahi appeared wary of taking a big, potentially lucrative risk on a groundbreaking new idea in his industry — and he came out the loser."

All the recent nuclear saber-rattling between Trump and Kim Jong Un is translating into brisk sales for the bomb shelter industry (Trump said this morning that "all options are on the table" following North Korea's latest missile launch over Japan).

McClatchy's Stuart Levenworth reports: "Sales and inquiries have spiked, according to several of the U.S. companies that make money from doomsday fears. 'The increase in demand is everywhere. We are getting hundreds of calls,' said Ron Hubbard, president of Atlas Survival Shelters, a firm based in Montebello, California. Inquiries have slowed down as tensions have eased over the last week, but Hubbard said he still expects to have a banner year, selling 1,000 shelters at an average price of $25,000 each... 'We are back in the 1960s again,' said Hubbard, referring to the Cold War demand for bomb shelters. 'We’ve got a crazy man on one side and Donald Trump on the other.'"

From baby kale to rotisserie chicken, Amazon is serious about making Whole Foods more competitive.
This explosion in interest is prompting concerns that investors may not be truly aware of what they are getting into. On the other hand, a former Target manager in Ocala, Fla., made himself a multimillionaire.
New York Times
Apple Inc. Chief Executive Officer Tim Cook collected 560,000 shares, half of them linked to the company’s performance and the maximum allowed under the iPhone maker’s long-term compensation program.

RUSSIA WATCH: A top executive from Trump's business empire sought help from Vladimir Putin's personal spokesman on a Moscow real-estate development deal during the presidential campaign.

The Post's Rosalind S. Helderman, Carol D. Leonnig and Tom Hamburger with the scoop: "The request came in a mid-January 2016 email from Michael Cohen, one of Trump’s closest business advisers, who asked longtime Putin lieutenant Dmitry Peskov for assistance in reviving a deal that Cohen suggested was languishing... Cohen’s email marks the most direct outreach documented by a top Trump aide to a similarly senior member of Putin’s government... The note adds to the list of contacts between Trump associates and Russian officials that have been a focus of multiple congressional inquiries as well as an investigation led by special counsel Robert S. Mueller III exploring Russian interference in the 2016 election. U.S. intelligence agencies have concluded that the Kremlin intervened to help elect Trump. Cohen’s email to Peskov provides an example of a Trump business official directly seeking Kremlin assistance in advancing Trump’s business interests."

Trump has insisted since questions first emerged about his links to Russia that he has no business interests in the country. The Post's Philip Bump details Trump's long history of seeking business there, going all the way back to 1987. 

The president hit a new low Monday in the Gallup tracking poll. He's now lost more than a fifth of the support he enjoyed at the start of his presidency, dropping from a 45 percent approval rating then to 35 percent now, Bump writes


Trump on Wednesday will make his first pitch in what the White House is framing as an extended campaign to build public support for a tax code overhaul. But he won't be talking details, because there aren't any yet.

CNN's Jeremy Diamond: "Trump's argument for tax reform will emphasize the benefits he says it will deliver for the middle class and small businesses as well as the potential for broader economic growth, an administration official said. But Trump is not expected to tie his tax reform push to specific percentages or numbers as administration officials and GOP congressional leaders continue to hash out the details of a proposal that would make its way through Congress' committee process. The President's speech will be the first in a series of regularly scheduled trips he will make around the country to rally support for his tax reform effort, the administration official said. Trump is expected to make several more trips around the country to pitch tax reform before Congress takes up the legislation, the administration official said."

Big companies have a message for congressional tax-writers: Don't impose a minimum tax on foreign earnings and don't do away with the interest deduction. A coalition that includes Bank of America, GE, Google and IBM made the case in a policy paper they sent lawmakers on Monday, The Hill's Naomi Jagoda reports

The U.S. Chamber of Commerce, on the other hand, is signaling it will work to bounce from office any lawmaker who gets in the way of an overhaul. 

“We're going to hold them accountable about whether or not they help get tax reform across the finish line or whether or not they stood in the way,” Neil Bradley, the Chamber's chief policy officer, told C-SPAN's “Newsmakers" over the weekend. The Post's Heather Long: "Asked whether the Chamber would consider supporting primary challengers to sitting Republicans, Bradley said that “all options are on the table... The Chamber has typically used a scorecard to decide which candidates it will support. The scorecard is usually based on how politicians voted on the most important bills to the business community in the past year as well as over the course of their entire career. But in 2018 and 2020, 'who helped versus who stood in the way of getting tax reform done; will be the determining factor in the Chamber's resource deployment, Bradley told The Washington Post."

Add Pennsylvania Sen. Patrick J. Toomey to the list of Republican lawmakers expressing frustration with Trump's leadership.

Specifically, Toomey says the president has been getting in the way of his own agenda, clouding prospects for a tax code overhaul, among other items. "I think the President has gotten off message too often and hasn’t been able to be an effective spokesman for his own agenda,” Toomey told a local radio station in Philadelphia. The senator, who serves on the tax-writing Senate Finance Committee, has been a key figure in the GOP push to revamp taxes. 


Devastating flooding after Harvey will get worse before it gets better, per The Post's Darla Cameron, Samuel Granados, Chris Alcantara and Gabriel Florit.



  • The Atlantic Council’s Global Business and Economics Program holds a discussion on “The Future of Infrastructure Investment” in North Carolina. 
  • Labor Department’s Employment and Training Administration holds a meeting of the Workforce Innovation and Opportunity Act Native American Employment and Training Council today and Wednesday. 

  • President Trump is scheduled to travel to Corpus Christi and Austin, Tex. following Hurricane Harvey.

Coming Up

  • Trump will travel to Missouri on Wednesday to talk tax reform.
  • The American Enterprise Institute holds an event on Wednesday on retirement income.
  • The Brookings Institution holds an event on “Building a secure and inclusive global financial ecosystem” on Thursday.
  • The House Homeland Security Subcommittee on Emergency Preparedness, Response and Communications holds a hearing on the future of FEMA on September 6.
  • The Urban Institute and Brookings Institution Tax Policy Center hold a discussion on “Tax Policy and the Immigrant Experience” on September 7.
  • The National Economists Club holds a discussion on "What Will Make Economics Professors Succeed or Fail in the Future? The Discipline at a Crossroads” on September 7.
  • The New York Times hosts its first TimesTalk D.C. series featuring House Speaker Paul D. Ryan on September 7.

President Trump praises 'the spirit and the enthusiasm' of Harvey survivors:

Texans battle against Harvey's destruction:

Battered Texas coast braces for more Harvey:

Watch Texas Gov. Greg Abbott (R), President Trump, and other officials address response to storm:

Fact Check: Sen. Ted Cruz (R-Tex.)'s claim that two-thirds of the Hurricane Sandy bill 'had nothing to do with Sandy' :

Inside the plan to develop a Trump Tower in Moscow: