Financial services and economic policy Reporter

THE TICKER

Like the tariffs that drove him out the door, the fact that Gary Cohn has telegraphed his exit for months didn’t soften the blow when he announced it Tuesday evening. 

The National Economic Council director plans to stay on the job for several weeks. But his decision amounts to a declaration of defeat in the West Wing fight raging over trade policy. Cohn had been organizing a meeting for President Trump to hear directly from business leaders opposed to the steel and aluminum tariffs — a last-ditch attempt by the captain of Team Free Trade to head off the global levies — but the president blocked it, The Washington Post’s Damian Paletta and Phil Rucker report

Investors got the message, with Dow futures selling off more than 350 points and S&P 500 futures dipping 1 percent in the immediate after the news. “Any move of more than 1 percent is significant, although nowhere near the worst the markets have seen in recent weeks,” my colleague Heater Long notes.

From Bloomberg's David Ingles: 

Market watchers agreed Tuesday night that conditions are primed to get even uglier. As Diane Swonk, chief economist at Grant Thornton, told Heather: “Buckle your seat belts. We are adding uncertainty, which is the enemy of the markets.” Ditto Todd Sohn of Strategas, who said in an email, “We should expect the daily swings in stocks to increase.”

Capital Alpha’s Ian Katz wrote in a note to clients that a swift successor with Cohn’s market-friendly credentials — Larry Kudlow, long an outside adviser to Trump, tops the unofficial shortlist — would calm nerves. “But if we go several days without news of a replacement, investors could get edgy. Investors want to know that someone with their interests at heart has the president’s ear.” 

There is no guarantee that figure will share the Wall Street-friendly outlook of Cohn, a former Goldman Sachs president. “You want somebody who’s credible to the economic community,” one top Republican lobbyist tells me. “If Peter Navarro [the newly ascendant trade adviser leading the tariff charge] becomes the head of the NEC, that’d be a very bad sign.”

Trump tweets that he'll move quickly:

Navarro — backed by his fellow trade hawks in the administration — has arguably usurped the post for the purposes of this year's most consequential economic debate. 

With Trump nearing a decision on the final shape and scope of steel and aluminum duties, Washington's free-trade establishment is pulling out the stops in a bid to blunt their impact. And the establishment is losing.

“Defense Secretary Jim Mattis and Secretary of State Rex Tillerson privately warned senior trade officials on Tuesday that President Trump’s proposed tariffs on steel and aluminum could endanger the U.S. national security relationship with allies, according to five people familiar with the meeting,” Damian and Josh Dawsey report. “The morning meeting came as Republican lawmakers grasped for a strategy to convince Trump to change his mind, with House Speaker Paul D. Ryan (Wis.), who had loudly criticized the plan on Monday, telling members in a closed-door meeting not to bully Trump on the decision. He said it could backfire and make things even worse.”

Corporate interests opposed to the tariffs are also mobilizing en masse in Washington. CEOs with White House ties are calling senior administration officials. Blackstone chief Steve Schwarzman argued the case directly to Trump last Friday over dinner at Mar-a-Lago, Fox Business News reports. (A Blackstone spokesman declined to comment.) 

And lobbyists from a wide array of industries — from makers of autos, beer, pet food, and machine tools to farmers of wheat, soybeans and pork — are blanketing Capitol Hill to press the point to sympathetic Republican lawmakers. “Many of the end-users are getting hit with double and triple whammies, because their costs will be going up and their foreign competitors costs will be going down, and when they export, they’ll get hit with retaliation,” says Rufus Yerxa, president of the National Foreign Trade Council, which launched a lobbying coalition Tuesday aimed at heading off the tariffs. “The only thing we can do is to continue arguing the facts.”

House Speaker Paul Ryan (R-Wis.) urged the White House to take a tailored approach and focus on “true abusers” such as China. And Senate Majority Leader Mitch McConnell (R-Ky.) said Senate Republicans fear Trump’s approach could “metastasize into a larger trade war.”

But all that campaigning so far is dead-ending into a constituency of one. At a news conference Tuesday with the Swedish prime minister, Trump showed no intention of moderating. “We’ve been mistreated as a country for many years,” he said, pointing to trade imbalances with allies. “We’re going to straighten it out and we'll do it in a very loving way. It will be a loving, loving way. They'll like us better and they will respect us much more.”

Trump doubled-down in a tweet this morning: 

The tariffs could be just the beginning, as the Trump administration considers “clamping down on Chinese investments in the U.S. and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property,” Bloomberg reports. “An announcement following an investigation by the U.S. Trade Representative’s office into China’s IP practices is expected in the coming weeks, potentially handing… Trump further cause to impose trade restrictions.”

Cohn allies framed his exit as past due since he never intended to stay in the administration much longer than a year. Yet Trump held discussions with him in recent weeks about the possibility of replacing John Kelly as chief of staff. And it’s clear Cohn’s participation in the internal trade talks soured fast in recent days.

Commerce Secretary Wilbur Ross and Navarro “didn’t drive the decision to impose the tariffs, but they helped Trump craft it in secret, senior administration officials said, aware that lawmakers and other top advisers would try to torpedo any decision if they found out in advance,” Damian and Josh write. “Cohn learned of Trump’s decision hours after he made it and was furious, according to five people who spoke to him.”

Cohn then “harmed his own ability to negotiate by telling Mr. Kelly last week that if the tariffs went forward, he might have to resign,” The New York Times’s Kate Kelly and Maggie Haberman report. “The president was told by Cohn critics that Mr. Cohn had made the issue about himself, as opposed to Mr. Trump’s policies.”

By Tuesday, during an Oval Office meeting as Trump prepared to forge ahead with the global tariffs, the president demanded Cohn fall in line. “According to one source with knowledge of the exchange, Trump specifically asked Cohn: We’re all on the same team, right? He then asked if Cohn was going to support the president on the issue,” Bloomberg’s Jennifer Jacobs writes. “Cohn didn’t answer, the people said.” Hours later, he resigned. 

Potential Cohn replacements, besides Kudlow, per Axios's Jonathan Swan

  • "Kevin Warsh, former Fed governor and economic official for President George W. Bush.
  • Shahira Knight, Deputy Assistant to the President for Economic Policy, Cohn's top tax official.
  • Peter Navarro, White House trade adviser, who argued for tariffs."
MARKET MOVERS

Cohn news set to rattle stocks. WSJ's Riva Gold and Gregor Stuart Hunter: "Economic adviser Gary Cohn’s resignation from the White House hit global equities and U.S. stock futures while the currencies of America’s trade partners fell Wednesday, as many investors judged the news meant President Donald Trump was pushing forward with planned tariffs. Futures pointed to a 0.9% opening fall for the S&P 500 and a 1.2% drop for the Dow Jones Industrial Average. Shares of heavy machinery maker Caterpillar fell 2.6% in premarket trading, leading Dow declines on the assumption that trade frictions could increase raw materials costs for industrial giants."

The European Union voiced mounting concern over U.S. President Donald Trump’s plan to impose punitive import tariffs.
Bloomberg
The U.S. Treasury Secretary Steven Mnuchin said the federal government is prepared to extend Puerto Rico the loans approved by Congress to help it recover from Hurricane Maria.
Bloomberg
TRUMP TRACKER

White House staffers braced. Politico's Andrew Restuccia and Nancy Cook: "Some worry the White House could return to the uncontrolled days immediately following Trump’s inauguration, when many West Wing jobs were still unfilled and former strategist Steve Bannon was writing executive orders with policy adviser Stephen Miller, including the disastrous travel ban that was ultimately knocked down by multiple courts. 'The number of bad ideas that have come though this White house that were thankfully killed dead — there are too many to count,' a White House official told Politico. 'With Gary gone, I just think, from a policy perspective, it means disaster.'"

The Post's Philip Rucker: 

Kudlow concerned. CNBC's Kellie Ell: "Cohn's resignation may be a 'turn for the worse' in the ongoing trade battles, said [Kudlow] ... 'I wouldn't necessarily say the cause for freer trade is over,' Kudlow said Tuesday on CNBC... 'But we'll see who is appointed. I personally regret this [resignation] very much.' Kudlow said he's spoken with Cohn in recent days and "personally urged him to stay" in his post as... Trump's economic advisor... Kudlow, who called Cohn a 'powerful force' in Washington, said Trump "tends to have balance" in appointing new people. 'I really would suggest to investors: Wait and see. Don't make any hasty judgments,' he said. 'Even when I worked with [former President] Reagan, we had staff changes at the highest levels, and life went on,' he said. 'Just don't panic over this.'"

Wall Street frets. Bloomberg's Max Abelson and Amanda Gordon: "For more than a year, the nerves of the most powerful people in finance have been soothed by Cohn’s presence in the White House. Days before Trump’s inauguration, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon explained in a Bloomberg Television interview why he wasn’t worried about the future of the U.S., despite the incoming president’s populist campaign. Trump was bringing on “very serious people,” the banker said, mentioning Cohn... The possibility that Cohn’s departure will unleash protectionist policies jarred global markets... Tom Nides, the vice chairman of Morgan Stanley, was sitting alone in his office watching CNN when the news broke. 'Oh, that’s a problem,' he said out loud. 'You can like Gary or hate Gary, but experience matters and Gary has plenty of experience,' Nides, who was a deputy secretary of state during the Obama administration, said later. 'And I think that’s really important, in both calm markets and choppy markets.'”

From Goldman Sachs CEO Lloyd Blankfein: 

The New York Times's Alex Burns: 

The Atlantic contributor Julia Ioffe: 

Budget director Mick Mulvaney weighs in:

Big Aluminum opposes tariffs. CNN Money's Danielle Wiener-Bronner: "The Aluminum Association told the president in an open letter that it is 'deeply concerned' by the damage a global aluminum tariff could inflict on US jobs and production. The association represents American aluminum companies. 'We fear that the proposed tariff may do more harm than good,' said Heidi Brock, head of the Aluminum Association, in the letter. Instead, Brock recommended the Trump administration enact tariffs on China and exclude trading partners, such as Canada and the European Union Brock pointed to China's overcapacity — production that exceeds demand and lowers global prices — as the main threat to US aluminum makers.."

Mnuchin: Tariffs turn on NAFTA talks. WSJ's Kate Davidson: "Treasury Secretary Steven Mnuchin told lawmakers Tuesday new tariffs on steel and aluminum wouldn’t apply to Canada and Mexico if the U.S. is able to successfully renegotiate the North American Free Trade Agreement. 'To the extent that we’re successful in renegotiating Nafta, those tariffs won’t apply to Mexico and Canada,' Mr. Mnuchin said in response to questions at a House hearing Tuesday, echoing remarks President Donald Trump made on Twitter on Monday. Mr. Mnuchin said the administration is trying to balance protecting the U.S. steel and aluminum industries 'with making sure we don’t do undue harm to the economy.' He also acknowledged Canada is a significant U.S. steel trading partner."

Tariffs are unpopular. Business Insider's Bob Bryan: "Only 31% of respondents in the new Quinnipiac University survey said they supported the tariffs, while 50% opposed them. Breaking down the survey:

  • 58% of Republicans supported the tariffs, while 20% said they opposed them. GOP congressional leaders like House Speaker Paul Ryan have come out against Trump's proposal.
  • 28% of independents supported the tariffs, while 55% said they were against them.
  • 36% of respondents said the tariffs would be bad for American jobs.
  • 26% said they would be a good thing for jobs. According to a new study, the tariffs would cost the US around 146,000 on net."

Hatch: Would eat into tax cuts. Washington Examiner's Joseph Lawler: "President Trump's proposed steel and aluminum tariffs would undercut the GOP-passed tax law, Utah Republican Orrin Hatch warned Tuesday. 'I am particularly troubled that the impact of these proposed tariffs would undermine the overwhelming and immediate success of the Tax Cuts and Jobs Act that we worked together to bring into law,' Hatch, the chairman of the Senate Finance Committee with oversight of taxes and trade, told Trump in a letter. Hatch warned that the burden of the tariffs would fall on American consumers, not on other countries."

Andy Card warns. The Post's Heather Long: "Trump wants to tax steel coming into the United States. He isn't the first president to try this. George W. Bush put tariffs on a lot of steel imports in March 2002. Top Bush administration officials now say that was a mistake, and they are warning Trump not to make the same blunder. 'I don’t think it was smart policy to do it, to be honest,' said Andrew H. 'Andy' Card Jr., Bush's chief of staff from 2001 to 2006. 'The results were not what we anticipated in terms of its impact on the economy or jobs.' Card is the latest high-ranking Bush administration official to warn Trump of just how bad it could get economically and politically if he proceeds."

Some red-state Dems approve. Politico's Elana Schor: "Some of the biggest cheerleaders of Donald Trump’s trade crackdown happen to be the very Democratic senators his party is gunning to defeat in November. As Republicans howl that new tariffs could cause an economic meltdown, a handful of Rust Belt Democrats are giving the president a rare serving of praise. His stance could give the trio — Sens. Sherrod Brown of Ohio, Joe Manchin of West Virginia and Bob Casey of Pennsylvania, all top GOP targets — a chance to tout their bipartisan credentials and defend their home-state metals industries all at once."

Senior adviser to U.S. President Donald Trump, Jared Kushner, will visit Mexico on Wednesday and meet President Enrique Pena Nieto, amid strained relations over trade and Trump's demands that Mexico pay for a border wall.
Reuters
Politics
There is no indication that he is a subject or target of the investigation into Russian interference in the 2016 election.
Rosalind S. Helderman, Tom Hamburger and Josh Dawsey
Investigations
The lawsuit filed in Los Angeles alleges that President Trump, then the Republican presidential nominee, never approved a $130,000 settlement arranged by his personal attorney, and asks the court to declare it invalid.
Beth Reinhard, Frances Stead Sellers and Emma Brown
Anthony Scaramucci says there was a silver lining to getting booted from the White House: It helped him to rebuild his marriage.
The Hill
MONEY ON THE HILL

Bank deregulation advances. The Post's Erica Werner and Renae Merle: "A plan to scale back post-financial-crisis banking rules cleared a key Senate hurdle Tuesday, with more than a third of the Senate Democratic caucus joining united Republicans to move the measure toward passage. The vote was 67 to 32, well over the 60 votes needed in the closely divided Senate, setting up debate and final passage in coming days. Days of contentious wrangling on the Senate floor lie ahead, with Sen. Elizabeth Warren (D-Mass.) pledging to deliver speeches in opposition. But the level of bipartisan support Tuesday, with 17 members of the Senate Democratic caucus voting 'yes,' suggested the measure will ultimately get the chamber’s approval."

Warren calls out fellow Democrats:

Here's a rundown of what's in the bill, via WSJ's Ryan Tracy. 

Barney Frank's opposed. Dodd-Frank's co-architect laid out his critique last week for CNBC : "While I share the view of many of the pro-reform Senate Democrats who have accepted this package that responding to the concerns of small and midsized banks has both substantive and political arguments in its favor, I believe that the price the Republican colleagues are demanding is too high."

POCKET CHANGE
Stronger global growth and booming stock markets have been great for the super rich.
Bloomberg
Amazon could rival the nation's big banks in a few years, capitalizing off its digital prowess and massive consumer base, according to Bain.
CNBC
That the biggest A.I. deal comes out of Wall Street (from a 158-year institution no less) and not Silicon Valley, shows just how much the future of finance might rely on bots over brokers.
Forbes
THE REGULATORS

Trump backs off regs. The Post's Renae Merle and Tracy Jan: "Trump and the regulators he appointed are taking a far less aggressive approach to consumer protection than their predecessors, delaying key regulations and imposing fewer penalties against financial institutions and other corporations accused of wrongdoing, according to a Washington Post review of available data and interviews with consumer advocates and government officials.

At the Consumer Financial Protection Bureau, for example, enforcement actions have dropped from an average of three-to-five each month during the past four years down to zero since a Trump appointee took charge of the agency in late November. The Labor Department has delayed full implementation of a rule requiring financial advisers to act in their clients’ best interest. And the Department of Education has withdrawn Obama-era regulations meant to strengthen protections for student borrowers. The new approach — welcomed by banks and business leaders — has alarmed consumer advocates who fear it gives an advantage to Wall Street and other powerful industries while leaving ordinary Americans more susceptible to fraud, discrimination and predatory lending."

Payday lender wants CFPB job. AP's Ken Sweet: "The former CEO of a payday lending company that had been under investigation by the Consumer Financial Protection Bureau has asked to be considered for the top job at the watchdog agency, The Associated Press has learned. Such a request would have been extraordinary in the years when the agency was run by an Obama appointee and often targeted payday lenders. Along with recent actions taken by the CFPB, it suggests a cozier relationship between industry and regulator since the Trump administration took over in November... Under [Richard] Cordray, the CFPB opened in investigation into lending practices at World Acceptance. On Jan. 22, the company said the investigation had been completed without enforcement action. It also said CEO Janet Matricciani had resigned after 2 ½ years in that position. Two days later, Matricciani sent an email to what appears to be Mulvaney’s personal email address to pitch herself as a candidate to lead the CFPB."

CHART TOPPER

"How American steelmakers have survived — without Trump’s help" from The Post's Steven Mufson and Andrew Van Dam:

DAYBOOK

Lagarde at The Post. On Thursday, International Women’s Day, International Monetary Fund Managing Director Christine Lagarde will sit down for a wide-ranging interview with Washington Post Opinion Writer Catherine Rampell. Lagarde, who became the first woman appointed to the post of Finance and Economy Minister of France in 2007 and the first woman to hold the top job at the IMF in 2011, will discuss women’s economic equality, women’s rights and what’s next for the #MeToo movement at home and around the world. The interview will take place at The Washington Post (1301 K St. NW) from 6:00-6:45p.m. Doors open at 5:30p.m. Register here

Today

  • The House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on data security.
  • The House Financial Services Subcommittee on Housing and Insurance holds a hearing on the State Insurance Regulation Preservation Act.
  • The House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies holds a hearing with Commodity Futures Trading Commission’s J. Christopher Giancarlo.
  • Wilson Center holds an event on TPP.

Coming Up

  • Politico holds an event on the Future of Prosperity on Thursday.
  • SEC Investor Advisory Committee holds its quarterly meeting on Thursday.
THE FUNNIES

From The Onion: 

BULL SESSION

Fact Check: Is DNC fundraising through the roof?

The debate on Trump’s tariffs, explained:

Stephen Colbert jokes North Korean dictator Kim Jong Un tests a new weapon: "optimism:"