Katie Porter wants voters in the Orange County, Calif., district she hopes to represent in the House next year to know that she won’t be beholden to big banks. So the Democratic candidate has eschewed donations from not only corporate political action committees, but individuals who work for the biggest Wall Street firms.
Not that financiers would be lining up to contribute to the consumer advocate and UC Irvine law professor, who earned a rare endorsement from Sen. Elizabeth Warren (D-Mass.) in her primary. She now faces a tough race to unseat Rep. Mimi Walters (R-Calif.).
“One of the lessons of what happened in the foreclosure crisis is that neither party was doing its job to make sure Wall Street was following the rules,” Porter tells me. She is making defending the Consumer Financial Protection Bureau a central issue in her campaign.
Here's her latest ad:
Porter’s race against Walters — a onetime stockbroker and stalwart defender of President Trump — presents voters with a stark ideological choice. Yet Porter is hardly alone among Democratic newcomers this year advocating for stricter policing of the financial services industry.
Their policy prescriptions run the gamut — from Amy McGrath, a former fighter pilot calling for tougher oversight of payday lenders in her bid against Rep. Andy Barr (R-Ky.); to Alexandria Ocasio-Cortez, who backed a financial transaction tax in her upset primary victory over Rep. Joe Crowley (D-N.Y.). But they share a theme: A decade after the financial meltdown, Washington policymakers are focused on how far to go rolling back post-crisis restrictions on the industry at the heart of it. This crop of candidates wants to shove the debate in the other direction, finding new ways to curb what they call ongoing excesses.
New polling — released exclusively to the Finance 202 — suggests there is popular support for cracking down on financial interests. Two-thirds of registered voters are more likely to support a candidate who campaigns on regulating big banks as part of a broader economic program, according to a survey by The Harris Poll on behalf of Better Markets, which advocates for tighter regulation of the industry. And 69 percent agree that weakening regulations on the banks that got bailed out 10 years ago is an example of Washington corruption. What’s more, 56 percent of registered voters — including majorities from each party — say they think deregulation threatens their jobs, savings and retirements.
“It highlights a huge disconnect between American voters of all parties who want to be protected from Wall Street, and elected officials in Washington who think Wall Street’s wish list should be their priority,” Better Markets President Dennis Kelleher says, adding that the candidates calling for tighter reins on big banks represent “the leading edge of a slowly gathering ultimate majority … Sooner or later, the people running for office need to reflect the priorities of the voters.”
Kelleher obviously has a dog in the fight, though he says his group designed the poll to elicit an accurate read on voter sentiment. Earlier surveys by Harris, Gallup, the National Opinion Research Center and others, pulled together earlier this week by the American Enterprise Institute’s Karolyn Bowman, lend the new Harris poll some credence. The number of people who say they have a great deal of confidence in the leaders of banks and financial institutions, for example, is hovering near its 40-year low:
Voters are similarly skeptical of Wall Street executives, with only 7 percent saying they have a great deal of confidence in them:
In an online survey conducted by YouGov and the Cato Institute in 2017, respondents rated Wall Street beneath used car dealers:
On the other hand, even in the immediate aftermath of the crisis, a majority of respondents to a Harris poll said Wall Street performs an essential function in the economy:
In a twist, the industry — which traditionally keeps a studiously low profile in campaigns — is sticking up for itself this season. The American Bankers Association for the first time is running ads in support lawmakers who have helped advance its agenda. So is a super PAC called Friends of Traditional Banking. “The industry's political fortunes are on the upswing after it played defense in Washington in the wake of the 2008 Wall Street meltdown, which prompted sweeping new regulations,” Politico’s Zachary Warmbrodt wrote of the development back in July. “Trump’s election and Republican control of Congress opened the door for a huge show of support for banks in the form of the deregulation bill that the president signed in May — the product of years of negotiations between Republicans and Democrats willing to ease post-crisis rules. Bankers are now trying to say thank you and keep the positive vibes going across party lines.”
ABA spokesman Jeff Sigmund emails that as the midterms approach, the group “will continue to look for opportunities to support candidates in both parties who have demonstrated an understanding and appreciation for the critical role banks play in the economy, focusing on races where we can make a difference.”
One of the group’s ads, for Rep. Ted Budd (R-N.C.), features Kelley Earnhardt Miller, the daughter of racecar legend Dale Earnhardt, thanking the lawmaker for supporting banking deregulation:
Challenger Kathy Manning has criticized Budd, a member of the House Financial Services Committee, for what she has framed as support for abusive payday lending practices:
Here’s Liz Watson, who’s challenging Rep. Trey Hollingsworth (R-Ind.), another member of the House Financial Services Committee:
If we taxpayers have to bail out the banks again, you can thank Trey Hollingsworth and his fat cat buddies on Wall Street.— Liz Watson (@LizForIndiana) May 23, 2018
Voters will have a clear choice in November: the people versus the powerful. You know where I stand.
And Colin Allred, in a close battle with Rep. Pete Sessions (R-Texas), blasted his opponent for supporting the Financial CHOICE Act to roll back Dodd-Frank rules. And he’s kept up the criticism:
Instead of looking out for North Texas, Pete Sessions voted to give a handout to his Wall Street donors while putting Medicare and Social Security at risk and leaving it to our kids to foot the bill. #PetePriorities #TX32 https://t.co/s5wi6G3Mzl— Colin Allred (@ColinAllredTX) April 21, 2018
Even if most, or all, win, the cohort itself doesn’t stand much of a chance of making a policy dent. “It will create dysfunction and gridlock but not runaway legislative risk, because the House can’t move things on its own,” says Charles Gabriel, president of Capital Alpha Partners, a Washington-based investment research firm.
Nevertheless, Isaac Boltansky, director of policy research at Compass Point Research, says what Rep. Maxine Waters (D-Calif.) would mean for the industry at the helm of the House Financial Services Committee now ranks among the top three questions he gets from hedge fund and mutual fund investors. “So it’s important for investors to be cognizant of where the far left and the far right agree: on student loan debt, drug pricing and big bank bashing,” he says. “History doesn’t repeat itself, but it often rhymes. And the House election is going to look a whole lot like 2010 did for Republicans, but with the Green Tea Party rising.”
Trump offered his own analysis of Waters's impact in a Tuesday night tweet:
Crazy Maxine Waters: “After we impeach Trump, we’ll go after Mike Pence. We’ll get him.” @FoxNews Where are the Democrats coming from? The best Economy in the history of our country would totally collapse if they ever took control!— Donald J. Trump (@realDonaldTrump) September 12, 2018
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— China softens tone with U.S. businesses. The Wall Street Journal's Lingling Wei and Yoko Kubota: “Chinese leaders are stepping up a charm offensive with U.S. multinationals and sheathing earlier threats of retaliation as Beijing changes tack to keep the trade fight with Washington from scaring off foreign investors. . . . At a meeting last month, Liu He, President Xi Jinping’s economic-policy chief, told visiting American business representatives that U.S. companies’ China operations won’t be targeted in Beijing’s trade-brawl counterattacks. . . .
"The tone is a marked shift from a few months ago when the Trump administration began ratcheting up threats of tariffs on tens of billions of dollars of Chinese products, and Beijing vowed to retaliate dollar for dollar. . . . While U.S. companies account for around 2% of foreign direct investments into China annually, many deals are in landmark sectors — Intel Corp. in semiconductors and General Electric Co. in aviation — that help Chinese companies improve their technology and management know-how. Punishing marquee American firms could dent the confidence of other foreign investors in China.”
But it's stiffing some on licenses. The Associated Press's Joe McDonald: “Amid a worsening tariff battle, China is putting off accepting license applications from American companies in financial services and other industries until Washington makes progress toward a settlement, an official of a business group said Tuesday. The disclosure is the first public confirmation of U.S. companies’ fears that their operations in China or access to its markets might be disrupted by the battle over Beijing’s technology policy . . . The license delay applies to industries Beijing has promised to open to foreign competitors.”
Chinese stocks are suffering, with fallout from the trade war driving the country's markets "into the same league as debilitated emerging markets such as Turkey, Argentina and Venezuela," per Reuters's Samuel Shen and John Ruwitch. "With around a 20 percent loss so far in 2018, Shanghai's stock market. SSEC has joined the crisis-hit trio among the world's four worst performers."
— U.S. consumers may pay more. Bloomberg News's Angus Whitley, Bruce Einhorn and Daniela Wei: “Trump’s next salvo in the trade fight could tax the shirt off America’s back — literally. The U.S. president’s threat to impose tariffs on virtually everything the country imports from China means everyday items including clothes and shoes in closets across America could be targeted, from Victoria’s Secret bras and Under Armour sports gear to Nike shoes. There will likely be no escape for Apple smartphones, either. Trump on Friday said he’s lined up an additional $267 billion of Made-in-China products to tax ‘on short notice if I want.’ Coupled with already proposed levies on $200 billion of goods that would crank up the price of household goods like fridges and freezers, the move would drag the American consumer squarely into Trump’s fight, with manufacturers and retailers from Target Corp. to Samsonite International SA warning tariffs will result in higher prices.”
— Canada considers concessions in NAFTA talks. Reuters’s David Ljunggren and David Lawder: “Canada is ready to offer the United States limited access to the Canadian dairy market as a concession in negotiations to rework the North American Free Trade Agreement, two Canadian sources with direct knowledge of Ottawa’s negotiating strategy said on Tuesday. … Chrystia Freeland, Canada’s foreign minister, returned to Washington on Tuesday for talks with U.S. Trade Representative Robert Lighthizer. Canada’s protected dairy industry is one of three sticking points in NAFTA talks between the two countries, along with a system for settling trade disputes and cultural protections for Canadian media firms. … Canada’s politically powerful dairy farmers are likely to resist changes to the price controls and high tariffs that protect them from foreign competition. But as an Oct. 1 deadline to renegotiate NAFTA looms, Canada is prepared to offer similar concessions on the dairy industry to those that it agreed to in free trade deals with the European Union and Pacific Rim nations, the sources said.”
Canada pitches WTO reform. Bloomberg News's Bryce Baschuk: “The Canadian government is poised to release a blueprint to reform the World Trade Organization as countries adjust to a newly protectionist America that has threatened to leave the organization entirely. Canadian trade officials, who spent August working on a draft of the reform proposal called ‘Strengthening and Modernizing the WTO,’ are seeking to forge an alliance of like-minded countries to ‘restore confidence in the multilateral trading system and discourage protectionist measures and countermeasures,’.”
— Steelworkers want pay raises. WSJ's Bob Tita: “Workers at two of the biggest U.S. steelmakers are demanding higher compensation as tariffs on foreign metal push prices and profits to their highest point in years. Leaders for some 30,000 members of the United Steelworkers union say United States Steel Corp. and ArcelorMittal aren’t passing those benefits to workers. . . . Factories have added workers this year and U.S. steel companies have made more money since the tariff took effect by raising prices. . . . ‘We feel we need some recognition and to share in the profits of the company,’ said Michael Young, president of the union local for U.S. Steel’s Midwest Plant in Portage, Ind.”
— Business coalition opposes tariffs. Reuters's Ginger Gibson: “After months of waging a behind-the-scenes war against [Trump’s] trade tariffs that have escalated far beyond what business groups once imagined, more than 60 U.S. industry groups are launching a coalition on Wednesday to take the fight public. Emergence of the group, Americans for Free Trade, comes after Trump has warmed to the use of tariffs, implementing billions of dollars worth in an effort to use them as a threat to win concessions or in the belief they will create U.S. jobs. ... The business coalition includes groups representing some of the nation’s largest companies. Among them, the American Petroleum Institute, which represents the largest refiners like Exxon Mobil Corp and Chevron Corp, and the Retail Industry Leaders Association, which represents companies like Target Corp and Autozone Inc.”
Urges Congressional action. In a letter to Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Paul Ryan (R-Wisc.) announcing the launch, the group "strongly encourage Congress to exercise its oversight role on trade policy matters to prevent further harm to U.S. workers, consumers and families" from new tariffs and those on the books. The group has events planned for this month in Nashville, Chicago, Harrisburg, Pa., and Columbus, Ohio.
- “Manafort in talks with prosecutors about possible plea, according to people familiar with the discussions.” The Washington Post’s Tom Hamburger, Devlin Barrett and Spencer Hsu.
- “Trump’s latest, highly premature Peter Strzok conspiracy theory.” The Post's Aaron Blake.
- “Donald Trump Jr. says his father can’t trust everyone around him after the anonymous op-ed.” The Post's John Wagner.
— Cohn criticizes Woodward's book. Axios's Jonathan Swan and Mike Allen: “Gary Cohn, former White House economic adviser to [Trump], is taking on Bob Woodward's ‘Fear’ with a statement calling it inaccurate — but is declining to say what specifically Woodward has gotten wrong . . . ‘This book does not accurately portray my experience at the White House,’ Cohn told Axios in a statement. ‘I am proud of my service in the Trump Administration, and I continue to support the President and his economic agenda.’ . . . Cohn cited no specific objections to Woodward's extensive reporting of his private views that Trump needed to be saved from his most dangerous impulses.”
— Record number of Americans quitting jobs. AP's Christopher Rugaber: “U.S. employers advertised the most jobs on record in July, and the number of workers quitting their jobs also hit a new all-time high. . . . The Labor Department said Tuesday that the number of job openings rose 1.7 percent to 6.9 million, the most on record dating back to late 2000. The number of people quitting jumped 3 percent to 3.58 million, also a record. Quits are typically a good sign that jobs are plentiful, because people usually quit when they have another job or are confident they can find one. . . . A more dynamic job market, with more people quitting and finding new work, can help fuel better wage gains. Workers who switch jobs are getting raises roughly one-third larger than those who remain at their jobs, according to the Federal Reserve Bank of Atlanta.”
— Bank of England governor extends term. AP's Pan Pylas: “The Bank of England’s Mark Carney agreed Tuesday to extend his period as governor by six months until January 2020 in order to help out in the initial phases of Britain’s exit from the European Union. The announcement from the government and the bank was expected after Carney told lawmakers last week that he was ‘willing’ to extend his tenure beyond his scheduled June 2019 departure. Britain is due to leave the EU in March 2019 but there is uncertainty as to how it will leave.”
— HQ2 Watch: Bezos in DC. Amazon CEO Jeff Bezos (who owns The Post) and Amazon’s board are “arriving in Washington in advance of a series of high-profile appearances for Bezos, amid intense anticipation among local officials and executives about when the Internet giant might announce the location of its second headquarters," The Post’s Jonathan O'Connell and Robert McCartney write. BUT: “The company says no announcement will be forthcoming on this trip… It is unclear whether the board is holding a formal meeting; Amazon has booked the Renwick Gallery for a 40-person dinner Tuesday night, according to a museum spokesman.”
— California bill aims to promote women on corporate boards. The Post's Jena McGregor: “California has a new tactic: Force boards to hire women — and levy monetary fines if they don't. The state legislature recently passed a bill that would require every publicly traded company with its principal offices in California to have at least one woman on its board by the end of 2019. The bill, which is opposed by many business groups and could face legal challenges, is waiting for Gov. Jerry Brown's signature. If the bill does become law, one key provision will take effect in 2021: Boosting the mandated number of female directors to three for any company with six or more directors.”
— Survey: New York beats London as financial center. Reuters's Andrew MacAskill: "New York has overtaken London as the world’s most attractive financial center, a survey said on Wednesday, as Britain’s decision to leave the European Union prompts banks to shift jobs out of the city to preserve access to Europe’s single market... New York took first place, followed by London, Hong Kong and Singapore in the Z/Yen global financial centers index, which ranks 100 financial centers on factors such as infrastructure and access to quality staff. London’s ranking fell by eight points from six months ago, the biggest decline among the top contenders. The survey’s authors said the drop reflected the uncertainty around Brexit."
— How bank employees made billions from the crisis. Bloomberg's Anders Melin: "“Stock options granted at the depths of the financial crisis have yielded billions of dollars for employees at some of the biggest U.S. banks, while others saw the promise of massive payouts vanish as shares of their firms languished. Goldman Sachs Group Inc., Wells Fargo & Co. and JPMorgan Chase & Co. employees reaped about $12.5 billion from stock options exercised in the decade since the collapse of Lehman Brothers Holdings Inc., as some bank stocks rebounded smartly. At Morgan Stanley, Bank of America Corp. and Citigroup Inc., millions of options were canceled or expired worthless amid fallout from the worst economic disaster since the Great Depression.”
— Tax Cuts 2.0 could cost $2 trillion. The Post's Jeff Stein: "House Republicans bracing for November's midterm elections unveiled a second round of tax cuts on Monday that could add more than $2 trillion to the federal deficit over a decade, aiming to cement the steep cuts they passed last fall despite criticisms of fiscal profligacy and tailoring their policies to help the rich... Starting in 2026, the cuts could cost the federal government about $165 billion annually in today's dollars, according to projections by the Tax Foundation, a conservative-leaning think tank. That annual cut would add up to a roughly $2.4 trillion additional to the federal deficit over a 10-year period, the Tax Foundation found."
As the deficit soars. The Post's Damian Paletta and Erica Werner: "The U.S. budget deficit is reaching levels that are abnormally high for a robust economy, and lawmakers from both parties are proposing ideas that would make the deficit swell even further. The government spent $895 billion more than it brought in from taxes and other revenue sources during the past 11 months, the Congressional Budget Office said this week, a 33 percent increase from one year before... Corporate tax receipts fell 30 percent in the past 11 months, the CBO said, precipitated by the large reduction in rates from the massive tax overhaul passed by Congress last year. Spending levels have risen sharply as a result of a bipartisan agreement to shed budget caps put in place to maintain fiscal discipline and pour more money into both military and domestic programs."
— Collins maintains innocence. The Post's Felicia Sonmez: "Rep. Chris Collins (R-N.Y.), who was indicted last month on charges of insider trading and lying to the FBI, on Monday maintained his innocence and vowed to battle 'to the end.' In an interview with Buffalo-based TV station WIVB, Collins also acknowledged reports that he had rejected a plea deal from federal prosecutors in April, months before his Aug. 8 indictment."
— Former Obama adviser launches firm. “Steve Glickman was a senior economic adviser in the Obama administration until 2013, when he set out to steer private capital to distressed parts of the U.S.,” Bloomberg writes. “As the co-founder and chief executive officer of the Economic Innovation Group, a bipartisan Washington-based think tank, he helped lay the groundwork for recently enacted tax breaks that give investors incentives to devote money to real estate and businesses in roughly 8,700 low-income areas called ‘opportunity zones.’ Now Glickman’s starting a consulting firm to speed funding to these parts of the country. His new company, Develop, will provide advice to investors wading into the new market, helping with everything from communicating the benefits of the tax breaks to government relations.”
— Wells Fargo plan rejected. Reuters's Patrick Rucker: "U.S. regulators have rejected Wells Fargo & Co’s plan to repay customers who were pushed into unnecessary auto insurance, telling the bank it must do more to ensure it has found and compensated every affected driver, three sources familiar with the matter told Reuters. Wells Fargo gave regulators the plan in June, as required by a $1 billion settlement the bank reached with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency in April. Wells Fargo gave regulators the plan in June, as required by a $1 billion settlement the bank reached with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) in April."
Senate Banking Committee hearing on the “implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act” tomorrow.
Senate Agriculture Committee hearing on U.S. agricultural trade tomorrow.
Senate Budget Committee hearing on transparency at the Congressional Budget Office tomorrow.
— From The Post's Tom Toles: “Republicans are responding to Hurricane Florence in the one way sure to make things worse.”
Trump at Flight 93 memorial: “We remember the moment when America fought back”
U.N. slams Myanmar for crackdown on journalists, freedom of press:
Putin and Xi treat themselves to pancakes, vodka and caviar: