The scenes I saw in Davos last week are the sort that would stalk Stephen K. Bannon through a restless sleep after some late-night snacking on lunchmeat past its sell date.
And most nightmarish of all for the tribunes of "America First" was the glee that President Trump took in the glowing reception he received from globalism’s high court. Trump arrived to find a once-hostile crowd won over by worldwide economic growth, soaring corporate profits and surging markets they credit him in part with catalyzing by cutting taxes and regulations. Instead of spoiling their party, the president closed it on a high note with a speech that was, in the words of World Economic Forum stalwart Fareed Zakaria, “forthright, intelligent and conciliatory, embracing the world rather than condemning it.”
The president, after all, nodded toward tough-guy trade talk in his Friday speech but also said he’d be willing to reconsider the Trans Pacific Partnership, Bannon's bête noire. The address, as Zakaria notes, was “extremely well received.” And here’s how Trump received the reception:
Heading back from a very exciting two days in Davos, Switzerland. Speech on America’s economic revival was well received. Many of the people I met will be investing in the U.S.A.! #MAGA— Donald J. Trump (@realDonaldTrump) January 26, 2018
Trump has demonstrated time and again his belief that it’s a president’s prerogative to change his mind. Tomorrow, his first State of the Union address will reveal whether the latest version of his economic vision at home hews to the measured script he read from in the Swiss Alps.
And more important still will be what he does: He preceded his Davos jaunt by announcing tariffs on washing machines and solar panels. But he has also sounded a softer note on trade disputes this year, and talks with Canada and Mexico over redrawing the North American Free Trade Agreement look likely to extend past their March 31 deadline, possibly into next year.
Davosians, for their part, were anything but perturbed by the specter of populist revolt that reportedly haunted last year’s gathering. The official theme of this year’s conference: “Creating a Shared Future in a Fractured World.” Yet everywhere I went, I saw a tableaux of unfathomable wealth communing in ease with world-bending power, the one sometimes difficult to distinguish from the other, with little sense that any fracturing endangered the order on display.
- There was Salesforce CEO Marc Benioff holding court before a small group on the top level of the Congress Centre, musing on the cloud software giant’s latest moves. “Ducati is building their next-generation motorcycle with us. Did you know that?” he said, standing before a wall printed with the query, “How can we maximize the benefits of science and technology for society?” Benioff continued: “I like Italian design, and I like Italian food. It’s a spiritual experience.”
- There was former House majority leader Eric Cantor (R-Va.) — now vice chairman of the investment bank Moelis & Company since his shocking defeat in a 2014 primary foreshadowed a fresh revolt on the right — embracing Rep. Mark Meadows (R-N.C.), co-chair of the hard-right House Freedom Caucus. “I heard you were here!” Cantor said. Meadows asked whether he’d see him later that night, but Cantor already had plans.
- There was Blackstone Group CEO Stephen Schwarzman, the billionaire private equity investor, ducking into a space between two restrooms to share an evidently funny story in low tones with International Monetary Fund chief Christine Lagarde, while her security guards kept an apprehensive watch.
- There was Sen. Bob Corker (R-Tenn.), the retiring Senate Foreign Relations Committee chairman, collecting handshakes and hugs everywhere he went from conferees thanking him for his leadership — presumably in defense of the values of temperance, inclusion and cooperation that Trump frequently assails. The senator has been in repair mode of late with the president he traded insults with last year, and on a panel moderated by Washington Post Executive Editor Martin Baron, he gave Trump’s “unpredictability” credit for creating new negotiating opportunities abroad and said he has “done an incredible job of rallying the animal spirits in our country.”
- There were two tall men with European accents, eating mini sandwiches standing up in the Congress Centre’s main foyer (two stories high, bathed in soft blue light) and worrying over the possibility that a partnership on offer from George Soros could invite retaliation from the Trump administration. “You’d have to be an idiot not to think it could happen … I’m reading ‘Fire and Fury’ and it’s clear it’s like a Byzantium court. It all revolves around the family, and it’s vicious.”
And yet some of the 15 European CEOs who showed up for a dinner with Trump on Thursday night braced to meet an American president with a scowl instead were surprised to find him jocular, even winning. Rumors of walkouts during the president’s Friday speech fizzled — only a handful left in protest.
Because in Davos, as Trump might attest, once you’ve found your way in, it’s tough to see yourself out.
|You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.|
|Not a regular subscriber?|
— Trump to push infrastructure. Bloomberg's Justin Sink, Jennifer Jacobs, and Margaret Talev: "Trump plans to use Tuesday’s State of the Union address to build momentum for sweeping legislation on infrastructure and immigration that could buoy the White House and fellow Republicans ahead of crucial midterm elections. Emboldened by a booming economy and victory in his stare-down with Senate Democrats over government funding, Trump will make the case that the Republican tax cuts passed in December and his administration’s efforts to curb regulations are drawing investment to the U.S. and creating jobs, said a White House official who discussed the speech on condition of anonymity."
... But some Republicans oppose a gas tax. CNBC's Ylan Mui: "Trump's massive infrastructure package just hit a major roadblock. Prominent Republican lawmakers are already coming out against raising the federal gas tax to pay for the president's promised $1 trillion investment in infrastructure. Speaking on Saturday night at a private donor retreat here hosted by billionaire industrialists Charles and David Koch, Senate Majority Whip John Cornyn [R-Tex.] opposed the idea... The U.S. Chamber of Commerce unveiled a plan earlier this month to raise the gas tax by 25 cents — five cents a year for five years — a move the group acknowledged would be an uphill battle."
— Kochs to spend $400M. CNN's Rebecca Berg: "The influential Koch network plans to invest close to $400 million toward protecting Republican majorities and promoting policy priorities in the 2018 midterm election cycle, the network's leaders confirmed Saturday -- roughly a 60% increase over the group's 2016 spending, they said ... The network had previously indicated it was to spend between $300 million and $400 million toward both policy and political objectives. The spending target was previously announced last summer; the network's leaders stressed Saturday that they now anticipate hitting the top of that range by Election Day."
... Including another $20M promoting the tax law. The Washington Post's Michelle Ye Hee Lee: "After spending $20 million to push the tax-code overhaul through Congress, the influential Koch network plans to spend up to another $20 million to educate the public about the benefits of the new law, network officials announced Saturday. The network views the education campaign, which will launch in February, as key to holding the Republican congressional majorities in the 2018 midterm elections."
The context. Michelle and James Hohmann have this deeper look at how the Koch network has adapted to the Trump era: "The strategy was on vivid display this weekend at a resort here in the desert outside Palm Springs, Calif., where more than 500 megadonors who each contribute at least $100,000 annually to Koch-linked groups gathered for their twice-annual seminar.
On areas of agreement with the president — from tax cuts to deregulation and judicial nominations — the leaders of the network now go out of their way to heap praise on Trump. On areas of disagreement where they were once outspoken — such as supporting free trade, advocating more open borders and opposing deficit spending — network officials now tread carefully to downplay divisions and avoid antagonizing Trump."
— Wynn out as RNC chair. The Post's Sean Sullivan and Bob Costa: "Casino mogul Steve Wynn stepped down as finance chairman of the Republican National Committee on Saturday, becoming the latest powerful figure to surrender an influential post amid allegations of sexual misconduct. In a statement, Wynn thanked President Trump, a close ally, for the opportunity to serve ... Wynn’s resignation came a day after a Wall Street Journal report that included interviews with dozens of people who have worked at his casinos or had been informed of his alleged misconduct, including accusations that he pressured some employees to perform sexual acts."
Collins says money should be returned, via Sean: "A Republican senator urged party candidates to return monetary contributions from embattled casino mogul Steve Wynn on Sunday, while a second GOP senator encouraged Republican officials to be open to refunding the cash. Sen. Susan Collins (R-Maine) said that if Republicans 'have accepted contributions recently from him that have not been spent,' they should give those back."
Wynn Resorts shares plunge. Reuters's John Foley: "There are some risks that investors can’t price. An allegation of sexual misconduct against a chief executive has now been added to that list. Wynn Resorts shares plunged more than 10 percent on Friday afternoon, wiping $2 billion off the company’s value, after [the WSJ report.] ... Wynn promptly dismissed the allegations to Reuters as 'preposterous.' The loss of value is a reminder to directors on all company boards that even an unproven suggestion of sexual harassment is now a financial risk."
— Trump administration considers nationalizing 5G network. Axios's Jonathan Swan and co.: "Trump national security officials are considering an unprecedented federal takeover of a portion of the nation’s mobile network to guard against China... We’ve got our hands on a PowerPoint deck and a memo — both produced by a senior National Security Council official — which were presented recently to senior officials at other agencies in the Trump administration... The documents say America needs a centralized nationwide 5G network within three years. There'll be a fierce debate inside the Trump administration — and an outcry from the industry — over the next 6-8 months over how such a network is built and paid for."
— Trump: U.K. should get "tough" on Brexit. Politico's James Randerson: "Trump said the U.K. should take a “tougher stand” in the Brexit talks and that the EU is 'not cracked up to what it’s supposed to be.' In a TV interview filmed at the World Economic Forum... the president said he would conduct the Brexit talks differently. Asked if he thought Prime Minister Theresa May was in a good position in the negotiations, he responded: 'Would it be the way I negotiate? No. I wouldn’t negotiate it the way it’s being negotiated.' 'I would have had a different attitude,' he went on, 'I would have said the European Union is not cracked up to what it’s supposed to be. I would have taken a tougher stand in getting out.'"
— Tourism down under Trump. NBC's Ben Popken: "Travel to the U.S. has been on the decline ever since President Donald Trump took office, and new data from the Commerce Department shows the slump translates to a cost of $4.6 billion in lost spending and 40,000 jobs, according to an analysis by the U.S. Travel Association. The latest data shows a 3.3 percent drop in travel spending and a 4 percent decline in inbound travel. The downturn has also caused America to lose its spot as the world's second-most popular destination for foreign travel, ceding to Spain. (France is in first place). International tourism to the U.S. began to wane after Trump took office, leading to a so-called 'Trump slump.' "
— Did Beijing steal the show in Davos? NYT's Keith Bradsher: "Trump used the World Economic Forum meeting to woo investors and business leaders by reassuring them that 'America first does not mean America alone.' But it was clear in Davos, Switzerland, this past week that geopolitical momentum lay with Beijing, not Washington. At one end of town, President Michel Temer of Brazil welcomed an unexpected offer from Beijing for Latin American nations to work closely with a Chinese initiative, known as the Belt and Road, intended to spread its economic and diplomatic influence abroad. At the other end of town, a senior Chinese diplomat helped introduce the prime minister of Pakistan at a breakfast meeting. Prime Minister Shahid Khaqan Abbasi used his talk to praise the rapidly expanding Chinese investments in his country, including to build power stations and a large port."
And what rules will the Trump administration follow? WSJ's Greg Ip: "For the last two decades American administrations have sought to establish global rules binding on everyone, and to accept the resulting outcomes. Mr. Trump has inverted those priorities: He aims for outcomes, such as lower trade deficits and more sales by U.S. companies, and will apply whatever rules achieve that.
This frustrates U.S. trading partners because they worry that even when they play by the rules they face retaliation simply because Mr. Trump or American companies are unhappy with the results. This is the real protectionist risk: Not that the U.S. deliberately dismantles the global trade system, but that it triggers cycles of unilateral action that make that system’s rules increasingly irrelevant and the business landscape less predictable."
— GOP divided on protecting Mueller. The Post's Sean Sullivan: "Republicans in Congress were divided Sunday over protecting special counsel Robert S. Mueller III, with two senators embracing plans to make it more difficult for President Trump to have him fired but a top House lawmaker declaring them unnecessary. Sen. Lindsey O. Graham (R-S.C.) highlighted his proposal to check Trump’s power over Mueller, while Sen. Susan Collins (R-Maine) said it wouldn’t hurt to pass legislation along those lines. But House Majority Leader Kevin McCarthy (R-Calif.) said there was no need to pass such a measure, as he defended how the president and his team have navigated Mueller’s probe into Russian meddling in the 2016 presidential election."
— Sanctions deadline today. Politico's Elana Schor: "Trump’s willingness to crack down on Russia will be seriously tested come Monday. Trump faces a major deadline to use the Russia sanctions power that Congress overwhelmingly voted to give him — and it’s anybody’s guess as to whether he’ll comply on time after missing the last deadline... The last time Trump’s administration confronted a deadline to set in motion penalties against Putin’s government, it took more than three weeks — and a nudge from... Corker... — for Trump’s team to comply."
— Crypto heist spurs regulation calls. Bloomberg's Yuji Nakamura and Andrea Tan: "At 2:57 a.m. on Friday morning in Tokyo, someone hacked into the digital wallet of Japanese cryptocurrency exchange Coincheck Inc. and pulled off one of the biggest heists in history.Three days later, the theft of nearly $500 million in digital tokens is still reverberating through cryptocurrency markets and policy circles around the world.
The episode, disclosed by Coincheck executives at a hastily arranged press conference on Friday night, has heightened calls for stricter oversight at a time when many governments are grappling with how to regulate the booming cryptocurrency exchange industry. Japanese policy makers began a new licensing system for the venues just a few months ago, and regulators in South Korea are debating whether to ban exchanges outright."
... As Deutsche Bank warns of "total loss." Bloomberg's Stephan Kahl: "Deutsche Bank AG’s Wealth Management currently does not advise to invest in crypto-currencies, according to Markus Mueller, Global Head of Chief Investment Office. Problematic issues include high volatility, possible price manipulation and data loss or data theft... Mueller is not the only person warning against crypto-currencies. Bank of Spain Governor Luis Maria Linde said crypto-currencies are an asset that carries enormous risks. And Austria’s Financial Planners Association compared bitcoin investments with a 'casino visit'."
— Hackers target ATMs. The Post's Avi Selk: "Hackers able to make ATMs spit cash like winning slot machines are now operating inside the United States, marking the arrival of 'jackpotting' attacks after widespread heists in Europe and Asia... Thieves have used skimming devices on ATM machines to steal debit card information, but 'jackpotting' augurs more sophisticated technological challenges that American financial firms will face in coming years."
Wynn Resorts stock plummeted on Friday after the Wall Street Journal reported of allegations of assault and harassment against founder and CEO Steve Wynn, via Axios's Dan Primack:
POST PROGRAMMING ALERT: The Washington Post is hosting an event today on the eve of President Trump’s first State of the Union Address, featuring House Minority Leader Nancy Pelosi (D-Calif.), Kellyanne Conway, counselor to the president, and several other lawmakers and political analysts. The program begins at 2:30 p.m. Sign up to get a notification when the event stream begins, which will be live here.
- The Internet Education Foundation hosts the State of the Net Conference series.
- Brookings Institution hosts an event previewing President Trump’s State of the Union.
- The Bipartisan Policy Center holds an event on how the financial system can serve Main street on Tuesday.
- The director of the Congressional Budget Office testifies before the House Budget Committee on Tuesday.
- Treasury Secretary Steve Mnuchin testifies before the Senate Banking, House and Urban Affairs Committee on Tuesday.
- The House Financial Services Subcommittee on Oversight and Investigations holds a earing on “How Human Traffickers Exploit U.S. Financial Markets” on Tuesday.
- The Senate Foreign Relations Committee holds a hearing on the economic relationship between the United States, Canada and Mexico on Tuesday.
- The American Enterprise Institute hosts an event on the divide between education and employment on Friday.
- George Mason University’s holds its 14th annual Symposium of the Journal of Law, Economics and Policy on Friday.
- The Peterson Institute for International Economics hosts an event on “Charting Europe’s Path Forward” on Feb. 13.
From the New Yorker:
See what you missed from the Grammys last night:
Ikea's founder dies at 91:
The feud between Trump and José Andrés, explained:
George W. Bush returns to Saturday Night Live:
Watch Stephen Colbert on the reports Trump wanted to fire special counsel Robert S. Mueller III: