with Bastien Inzaurralde
Wall Street chiefs and the Trump administration alike have been resisting a break with the Middle Eastern power, even as evidence mounts implicating the Saudi regime in the disappearance of Khashoggi, a Saudi citizen who had been living in the United States and was last seen Oct. 2 entering the nation’s consulate in Istanbul. Neither camp may be able to resist a reckoning with the oil giant as more facts of the case are laid bare.
As far as the conference, Wall Street chiefs and the Trump administration's emissary have been slow to follow fellow Western executives — and corporate and media sponsors — in canceling appearances. As of this writing, those still attending include David Bonderman, founder of private equity giant TPG Capital, for example. But the entire event looks to be to be on increasingly shaky ground as key players withdraw. (Among others who’ve canceled: Uber CEO Dara Khosrowshahi, Viacom CEO Bob Bakish, AOL co-founder and investor Steve Case, and World Bank president Jim Yong Kim.)
Treasury Secretary Steven Mnuchin is still slated to attend. The New York Times reports that Dimon, Fink and Schwarzman have all reached out to him, urging him to press for the event's postponement, “or to publicly make his attendance conditional on more disclosure from the Saudis about Mr. Khashoggi’s disappearance.” And Sen. Marco Rubio (R-Fla.) said Sunday he thinks Mnuchin shouldn't go.
The fallout from the conference comes as President Trump signals he is conflicted over how to proceed with Saudi Arabia. While he vowed “severe punishment” for the country if the United States determines its regime was responsible for killing Khashoggi, he also said the matter is still being investigated and noted the Saudis deny involvement.
“Well, nobody knows yet, but we’ll probably be able to find out,” Trump said in an interview with Lesley Stahl of CBS’s “60 Minutes.” “It’s being investigated, it’s being looked at very, very strongly. And we would be very upset and angry if that were the case. As of this moment, they deny it, and they deny it vehemently. Could it be them? Yes.”
See Trump here:
“There will be severe punishment.” – President Trump on what will happen if Saudi Arabia is found to be behind the disappearance of missing journalist Jamal Khashoggi pic.twitter.com/aE4581jHqY— 60 Minutes (@60Minutes) October 14, 2018
Trump says he wants to move deliberately, in part to protect pending arms sales to the kingdom by a handful of American contractors. “Boeing, Lockheed, Raytheon … I don't want to hurt jobs. I don't wanna lose an order like that,” he said in the “60 Minutes” interview. Last week, he put a $110 billion price tag on Saudi commitments to buy American military equipment. There’s no factual support for that claim, as The Washington Post’s Glenn Kessler wrote last week (“In essence, this is a wish list,” Kessler noted.)
There’s another problem with Trump’s kid-gloves approach: It invites a head-scratching comparison with the much tougher approach the president took with other allies. The Atlantic’s David Frum put his finger on the incongruence Sunday:
As Saudi Arabia threatens massive economic reprisals against the US if held to account for the disappearance of a WashPo columnist, a friendly reminder that the Trump administration formally labeled America's top source of imported oil, Canada, a threat to national security— David Frum (@davidfrum) October 14, 2018
In the “60 Minutes” interview, for example, he took an arguably tougher line with Europe than Saudi Arabia, declaring that “nobody treats us much worse than the European Union. The European Union was formed in order to take advantage of us on trade, and that's what they've done.”
Trump also tries to square the circle by denying his trade war has cost Americans at all. Asked by Stahl how far he’s willing to push his confrontation with China as American consumers pay higher prices for imported goods, the president rejected the premise. “That hasn’t turned out to be the case,” he said. (Among other consequences, The Wall Street Journal reports that small and midsize manufacturers say higher costs thanks to tariffs are hurting their businesses.)
One explanation for the inconsistency: Trump has invested significantly in his relationship with Saudi Arabia.
The president visited the country on his first foreign trip in office. And his son-in-law and adviser Jared Kushner “has carefully cultivated a close partnership with the heir to the Saudi throne, Crown Prince Mohammed bin Salman, whom Kushner has championed as a reformer poised to usher the ultraconservative, oil-rich monarchy into modernity,” The Post’s Phil Rucker, Carol Leaning and Anne Gearan reported Sunday. And Kushner “has already signaled that he has no intention of turning his back on the crown prince, known by the initials MBS.”
What’s more, Trump’s business ties to the Saudi government date back at least to the 1990s. As The Post’s David A. Fahrenthold and Jonathan O'Connell reported last week, “in Trump’s hard times, a Saudi prince bought a superyacht and hotel from him. The Saudi government paid him $4.5 million for an apartment near the United Nations. Business from Saudi-connected customers continued to be important after Trump won the presidency. Saudi lobbyists spent $270,000 last year to reserve rooms at Trump’s hotel in Washington. Just this year, Trump’s hotels in New York and Chicago reported significant upticks in bookings from Saudi visitors.”
As Trump put it to a crowd at an Alabama campaign rally in 2015, ““Saudi Arabia, I get along with all of them. They buy apartments from me. They spend $40 million, $50 million. Am I supposed to dislike them? I like them very much.”
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— Kudlow defends Trump's Fed criticism. The Washington Post's Felicia Sonmez: “White House chief economic adviser Larry Kudlow on Sunday defended [Trump] for saying that the Federal Reserve has ‘gone crazy,’ arguing that the president was not telling the central bank what to do but was merely expressing his view that interest rates are being raised too quickly. In an appearance on ‘Fox News Sunday,’ Kudlow said that ‘as a successful businessman and investor,’ Trump is knowledgeable about economic issues and was ‘giving his opinion’ on interest rates. ‘His concern is that the Fed might move too quickly and might choke off the economic recovery, which is now running 3 to 4 percent,’ Kudlow said. ‘He’s not impinging on Fed independence. He didn’t say, “I want you to change your plan.’ ”
White House Economic Adviser Larry Kudlow defends President Trump's comments on the Federal Reserve: "The President as a successful business man and investor knows a lot about these topics and he’s giving his opinion...he’s not impinging on Fed independence." pic.twitter.com/NWUYRGjtVp— FoxNewsSunday (@FoxNewsSunday) October 14, 2018
And so do Republicans. The Hill's Sylvan Lane: “GOP lawmakers are downplaying [Trump's] escalating attacks on the Federal Reserve, saying his comments are unlikely to influence the central bank’s policy makers, many of whom were appointed by Trump. ... Sen. Mike Rounds (R-S.D.), a member of the Senate Banking Committee, said Trump is just expressing his opinion. ‘I have no objection to him sharing his thoughts on it just like all of us like to share our thoughts on it,’ Rounds said. ‘I don't think it will pose a challenge to the Fed's independence.’ ... Banking Committee Chairman Mike Crapo (R-Idaho) said Trump’s criticisms won’t sway the Fed, but he declined to comment on whether it was appropriate for the president to blast the bank. ... Most Republicans are eager to see the Fed neutralize interest rates as unemployment falls into record-low territory and inflation begins to pick up.”
— Lagarde: Turbulence ahead. Bloomberg News's Michelle Jamrisko: “Policy makers should prepare for more market volatility amid further financial tightening and ‘choppy’ waters in the global economy stemming from trade tensions, said Christine Lagarde, managing director of the International Monetary Fund. The fund’s advice to central bankers and finance chiefs is to continue building monetary and fiscal buffers for the risks ahead, she said in an interview Sunday with Bloomberg Television’s Haslinda Amin, at the conclusion of the IMF and World Bank meetings in Bali, Indonesia. ‘Now is not the time to say, OK, fine, let’s just relax and do a bit of fiscal tolerance here and a slowing of reforms,’ Lagarde said.”
— U.S. stocks no longer outperform. The Wall Street Journal's Steven Russolillo and Mike Bird: “For months, U.S. stocks powered higher to records while most of the world’s markets crumbled, a divergence that analysts and investors said wouldn’t last. It didn’t. The factors that helped U.S. stocks to solidly outperform other global equity markets this year — a booming tech sector, and seemingly little concern for the pace of the Federal Reserve’s interest rate increases — faded sharply last week, when a sudden selloff left the S&P 500 down 5% for the month. . . . ‘We have seen a rapid shakeout of very crowded and over-owned U.S. assets,’ said Chris Weston, head of research at Pepperstone Group Limited in Melbourne. ‘Statistically, it feels as though convergence is due,’ he said, between equities in the U.S. and the rest of the world.”
Investors look to earnings. NYT's Matt Phillips: "After the stock market was rocked by its worst week in seven months, investors will now start to contend with the quarterly parade of updates on profits and losses from corporate America. These reports, and the executive pronouncements that come with them, will either give credence to investors’ fears — that rising borrowing and operating costs, along with trade tensions, could hurt growth — or ease them... For the third quarter, analysts at the financial data firm Refinitiv, formerly the financial and risk business of Thomson Reuters, expect third-quarter profit to rise 21.5 percent for the large companies included in the Standard & Poor’s 500-stock index."
— Chinese ambassador: This is “very confusing.” The Post's Felicia Sonmez: “Cui Tiankai, the Chinese ambassador to the United States, said Sunday that it’s ‘very confusing’ trying to discern who has [Trump’s] ear on trade policy, as China-U. S. relations continue to come under strain over the issue. In an interview on ‘Fox News Sunday,’ Cui was asked for his take on the Trump administration’s approach to trade. ‘Are you clear who President Trump listens to on trade issues, whether it’s moderates like Kudlow and Mnuchin or hard-liners like Navarro?’ host Chris Wallace asked... Cui replied: ‘You tell me.’ ‘Honestly, I’ve been talking to ambassadors of other countries in Washington, D.C., and this is also part of their problem,’ Cui continued. ‘They don’t know who is the final decision-maker. Of course, presumably the president will take the final decision. But who is playing what role? Sometimes, it could be very confusing.’ ”
China's Ambassador to the U.S. Cui Tiankai says that it can be “very confusing” who President Trump listens to on trade.— FoxNewsSunday (@FoxNewsSunday) October 14, 2018
“Presumably, the president will take the final decision, but who is playing what role? Sometimes it could be very confusing.” pic.twitter.com/svazXmlTtv
Trump again threatens more China tariffs. Bloomberg's Jennifer Epstein: "Trump threatened to impose another round of tariffs on China and warned that Chinese meddling in U.S. politics is a “bigger problem” than Russian involvement in the 2016 election. Asked in an interview with CBS’s '60 Minutes' whether he wants to push China’s economy into a depression, Trump said “no” before comparing the country’s stock-market losses since the tariffs first launched to those in 1929, the start of the Great Depression in the U.S... Questioned about his relationship with Russian President Vladimir Putin and the Kremlin’s efforts to influence the 2016 presidential election, Trump quickly turned back to China. 'They meddled,' he said of Russia, 'but I think China meddled too.'"
— Finance leaders warn about trade disputes. Bloomberg News's Enda Curran, Michelle Jamrisko and Alessandro Speciale: “Global finance chiefs used the closing sessions of talks in the tropical resort of Bali to hammer home the message that simmering trade tensions are already denting global growth and need to be resolved . . . While People’s Bank of China Governor Yi Gang called for a constructive solution to the dispute — he added that China is preparing for the worst. ‘You see a lot of people in China now preparing for this trade tension to be a prolonged situation,’ Yi said during a panel discussion hosted by the Group of Thirty, a consultative group on international economics. ‘The downside risks from trade tensions are significant.’ . . . As officials left Bali, there was little prospect of any resolution to the U.S.-China trade dispute in sight. ‘We are moving from synchronized growth to economic divergence,’ said Bank of France Governor Francois Villeroy de Galhau.”
— Sears files for bankruptcy. The Post's Rachel Siegel: “Sears, the one-time titan of American retail, filed for bankruptcy ahead of a $134 million debt payment due Monday and announced that it will close 142 stores. For years, Sears has contended with the threat that it would become the latest big-name retailer to fall to online competition and crushing debt. The icon once known for its pristine catalogs, and more recently known for decrepit showrooms and a controversial chief executive, saw its stock price plunge last week after reports that it had hired an advisory firm to prepare a bankruptcy filing ahead of the Oct. 15 payment. ...
"The company had been in talks about securing special financing known as a debtor-in-possession loan of several hundreds of million dollars to carry it through the bankruptcy period while it restructures its debt and reorganizes its business. That loan would come from creditors, including banks such as Bank of America, Wells Fargo and Citi Group.”
— Tracking the uneven recovery. From the “two economies” file, the Economic Innovation Group is out with a new report this morning documenting how uneven the recovery has been nationally. It includes some stark figures:
- Economic distress is increasingly concentrated in rural areas. The number of rural Americans living in distressed zip codes rose by 1 million over the decade following the financial crisis, even as the total number of Americans in distressed communities fell by 3 million.
- The recession erased jobs in remarkably similar numbers from communities across the board. But it took less than five years for the most prosperous zip codes to replace the jobs they lost; the most distressed zip codes still haven't recovered and, based on current trend lines, won't ever.
- The five most populous counties added more businesses from 2007-2016 than the country itself. In other words, remove L.A., Brooklyn, Queens, Miami-Dade, and Harris, Texas from the map, and the country would have fewer businesses.
Read the full report here.
— Warren lays foundation for 2020 bid. The Post's Matt Viser: "During the past six months, Sen. Elizabeth Warren (D-Mass.) has built a shadow war room designed to elect Democrats across the country in the midterm elections, overtaking some of the traditional duties of Democratic Party campaign committees and further positioning herself for an all-but-certain 2020 presidential bid. Her effort, which goes far beyond the fundraising and endorsement speeches in which prospective presidential candidates typically engage, has encompassed work in all 50 states and close coordination with more than 150 campaigns. The result is a wide-ranging network that includes those running for state treasurer in Nevada, state legislature in Iowa and congressional offices across the country. It is unmistakably aimed at some of the early-primary states that Warren would need to contest in a presidential campaign."
And she took a DNA test. The Boston Globe's Annie Linskey writes that Warren "has released a DNA test that provides 'strong evidence’' she had a Native American in her family tree dating back 6 to 10 generations, an unprecedented move by one of the top possible contenders for the 2020 Democratic nomination for president. Warren, whose claims to Native American blood have been mocked by [Trump] and other Republicans, provided the test results to the Globe on Sunday in an effort to defuse questions about her ancestry that have persisted for years. She planned an elaborate rollout Monday of the results as she aimed for widespread attention."
— Prudential de-designation coming? From Capital Alpha’s Ian Katz, in a Sunday note: “For weeks, the feeling in regulatory circles has been that Prudential would ‘finally’ be de-designated at the FSOC’s October meeting. It’s been surprising that this didn’t happen in the spring or summer, but regulatory bureaucracy -- even in an administration that agrees with de-designation -- can be daunting. Then on Friday, the Wall Street Journal and Bloomberg published stories suggesting that de-designation at Tuesday’s meeting seems more likely than not. So the winds are blowing in that direction… We’ve long observed that de-designation of Prudential is a matter of when, not if… A vote to free Prudential would mark the end -- for the foreseeable future -- of the FSOC designating firms. We don’t see it happening again under Trump, barring a disaster involving a large non-bank.”
- Kara Stein, commissioner at the Securities and Exchange Commission, takes part in a conversation on “retirement security” at the Brookings Institution in Washington tomorrow.
- The American Enterprise Institute hosts a presentation of the book “Finance and Philosophy: Why We’re Always Surprised” by Alex Pollock in Washington on Thursday.
- The Heritage Foundation holds an event titled “Problems with the JOBS Act and how they can be fixed” in Washington on Oct. 23.
President Trump meets Pastor Andrew Brunson at White House:
“Ground zero” of Michael’s devastation, ride with rescue teams at Mexico Beach:
Presidential impersonations throughout “Saturday Night Live” history: