THE TICKER

Some big bank chiefs are waking up to a headache this morning. 

The House Democratic takeover likely means Rep. Maxine Waters (D-Calif.) will seize the gavel of the House Financial Services Committee. And industry insiders expect her to subject certain firms to painful scrutiny while also throwing a wrench into the Trump administration’s deregulatory push. 

Wells Fargo, with its litany of consumer abuse scandals, tops the list of megabanks in line for rough treatment under the committee’s hot lights. Waters issued a report last year that called for shuttering the bank. (The bank's troubles have continued to mount, and it acknowledged Tuesday it had improperly foreclosed on 545 homeowners.) Waters has introduced legislation (“The Megabank Accountability and Consequences Act”) requiring bank regulators to dismantle any big firm found to have repeatedly harmed consumers. 

Other companies are likely to find themselves newly in the committee’s sights. Among them: Equifax, the consumer credit company that exposed the data of up to 148 million people in a data breach last year, and Deutsche Bank, which supplied hundreds of millions of dollars in loans to the Trump Organization when other banks turned it down. “Waters has requested — and as the committee head could subpoena — records that could dislodge closely held details of Deutsche Bank’s relationship with the Trump Organization,” my colleague Karoun Demirjian writes. “The German bank lent Trump more than $400 million during a decade-long real estate buying spree that began in 2005, largely through its private wealth management office, not the commercial banking division that typically handles real estate.

A key question for these firms is whether the attention will amount to more than a public drubbing. “A lot of this is headline risk, but they have to prepare to handle that and make sure it doesn’t spiral into real regulatory or legal concerns,” says Jason Rosenstock, a partner at the lobbying firm Thorn Run Partners. 

The legislative threat facing these companies is tempered by the fact that Senate Republicans aren’t likely to support punitive measures emerging from the House — and President Trump can always wield his veto pen.

That said, Capital Alpha’s Charles Gabriel wrote in a recent note, Trump “can’t be counted to lean against any populist anti-bank wave if it gains velocity (particularly of the bipartisan nature) in the Senate. Nevertheless a one-chamber, House-led/Democratic attack on Wells and other banks is unlikely to do much more than further accentuate the better treatment being afforded mid-sized banks.”

Waters has built a national profile over the past two years as an anti-Trump firebrand, but Washington veterans recognize her as a practiced dealmaker. “People are using this refrain that she’s a very skilled legislator,” one banking lobbyist tells me. Politico recently noted her “surprising willingness to work across the aisle and with industry groups,” in a profile that featured praise from Republicans on the committee and some leading industry lobbyists. 

“I believe in hearing a range of views on the issues before the Committee, which are complex,” Waters said in a statement. “I have always maintained an open door policy, to hear the priorities and concerns of all stakeholders, including representatives of the financial services industry, as well as advocates. I look forward to continuing to work with Members on both sides of the aisle on sensible solutions to benefit hardworking Americans and strengthen our nation's economy.”

Beyond zeroing in on some financial services heavyweights, look for Waters to push back against the Trump team’s broader effort to ease rules on the industry. And as Capital Alpha’s Ian Katz notes, she wouldn’t need to move legislation to accomplish the task. Rather, Waters could slow the progress regulators are making toward rolling back industry restrictions simply by keeping their inboxes full with requests to testify, answer questions and supply documents. “One impact that has been a little understated and maybe not fully appreciated is that when she calls up regulators, that takes a lot of bandwidth for those agencies to prepare for hearings,” Katz says. “If you have a pretty big to do list like they do at the Fed, that can really slow you down.”

The Trump administration now has installed nine of the ten financial regulators, Compass Point’s Isaac Boltansky notes, arguing the “regulatory relief agenda will continue no matter the outcome of the election.” But he also added a Democratic majority “could slow the deregulatory agenda through hearings, subpoenas, and public pressure.”

And Rosenstock raised the prospect of Waters borrowing from the GOP playbook and seeking to attach policy riders limiting Trump’s regulatory rollback to must-pass spending bills.

“I think everyone's nervous,” the other banking lobbyist said. “We remind clients all the time: if Democrats are in charge, they should be very wary of escaping without any wounds. Banks are everybody’s favorite boogeyman — and pay-for, and they should be very worried about both of those.”

MONEY ON THE HILL

SPLIT VERDICT: Dems take House, lose ground in Senate. The party has picked up 26 House seats so far, more than the 23 it needed to recapture control of the chamber. And they flipped at least seven governorships. But Republicans padded their Senate majority. "The most expensive and consequential midterm elections in modern times came to a dramatic finish that underscored the nation’s deep polarization, but fell short of delivering a sweeping repudiation of Trump that Democrats had hoped would put an exclamation point on the 'resistance' movement," The Washington Post’s Philip Rucker, Matt Viser, Anne Gearan and David A. Fahrenthold write. "The president helped Republicans win hotly contested Senate races in IndianaMissouriNorth Dakota, Tennessee and Texas, and proclaimed the election’s outcome a 'tremendous success.' Republicans held their grip throughout the South and in rural and exurban areas. But Democrats — propelled by a rejection of Trumpism in the nation’s suburbs, and from women and minority voters especially — notched victories in areas that just two years ago helped send Trump to the White House."

A number of races, including Senate contests in Arizona and Montana, remain too close to call. See live updates here

Trump declared victory and predicted progress on trade deals: 

More from our coverage: 

  • Conservatives are wondering if Trump will leave them in the lurch to pursue deals with newly empowered Democrats, Bob Costa writes
  • Senate Republicans just got Trumpier, with victories by Trump loyalists in North Dakota, Indiana and Missouri, per Sean Sullivan
  • A suburban rejection of Trump's fear-stoking bombast helped deliver the House to Democrats, Michael Scherer and Josh Dawsey write
  • The country looks as divided as ever, Dan Balz writes

More reactions. From James Oliphant of Reuters: 

From GOP strategist Mike Murphy: 

Former House Ways and Means Committee aide notes that Trump's proposed middle-class tax cut is likely dead: 

From NYT's Jim Tankersley: 

Richard Cordray, who lead the Consumer Financial Protection Bureau, lost his bid for Ohio governor, Reuters's Pete Schroeder notes: 

Two ballot initiatives to raise the minimum wage passed, per The Post's Heather Long: 

MARKET MOVERS

— Stocks surge. Reuters: “Wall Street looked set for a surge on Wednesday and global stocks rose after sharp U.S. election gains for the opposition Democrats, but the outcome, which casts doubt on further tax cuts, hit the dollar and sent Treasury yields lower... While gridlock in Washington could hamper Trump’s political and economic agenda, few expect a reversal of tax cutting and financial deregulation measures that have already been enacted. That view put all three New York equity indices on track for a strong opening, with S&P500 and Nasdaq futures up 1 percent and 1.3 percent respectively.”

Per the Wall Street Journal: “Some market participants said they were simply pleased to have the event in the rearview, removing a source of uncertainty that has contributed to recent volatility in markets.”

The dollar is slumping, “as the outcome of a split U.S. Congress raised expectations that any major U.S. fiscal policy boost to the economy is unlikely for now,” Reuters writes

— JPMorgan Chase: Beware the “self-fulfilling prophecy.” CNBC's Hugh Son: “Concern about when a near-historic U.S. economic expansion might end could actually hasten the arrival of the next recession, according to JPMorgan Chase Co-President Gordon Smith. ‘This late-cycle recession has the potential to become a self-fulfilling prophecy,’ Smith said Tuesday during a financial conference held in New York. ‘There is a great deal of volatility in the equity markets, a great deal of conversation around how late we are in the cycle and worry about the cycle,’ Smith said. . . . To be clear, Smith — who runs J.P. Morgan's mammoth consumer banking division — began the discussion by saying that the U.S. economy looks ‘extremely strong.’ ”

— More job openings than unemployed Americans. WSJ's Eric Morath: “Unfilled jobs in the U.S. exceeded the number of unemployed Americans by more than one million as the summer came to a close, a sign it is increasingly difficult for employers to find workers. There were a seasonally adjusted 7.01 million job openings on the last business day of September, the Labor Department said Tuesday. That compares with 5.96 million jobless Americans actively looking for work during the month that the unemployment rate fell to a 49-year low of 3.7% . . . Before March, job openings had never exceeded unemployed workers in more than 17 years of monthly records.”

Oil prices are in danger of ending their longest bull market in a decade.
The Wall Street Journal
Investment, confidence and the pound could all get a boost
Bloomberg News
Both average hourly earnings and employment cost index are up
Bloomberg News
TRUMP TRACKER

TRADE FLY-AROUND:

Gary Cohn: No instant cure for U.S.-China trade war. Bloomberg: "Ex-White House economic adviser Gary Cohn said he didn’t expect Democratic election gains to speed the end of [Trump’s] China trade war, even as some in Beijing held out hope he might warm to talks. 'I don’t think there’s an instant cure for the trade issue,' Cohn told Bloomberg’s New Economy Forum in Singapore as assembled business and political leaders digested the results Wednesday. 'I wish that I could sit here and say, after the midterm elections, the White House and the administration understand they’ve gotta solve trade issues.'"

— Trump brings Russia and China together. Bloomberg Businessweek's Marc Champion: “China and Russia are now as close as at any time in their 400 years of shared history. The U.S., meanwhile, has targeted both countries with sanctions and China with a trade war. . . . In a speech last month, Vice President Mike Pence said the U.S. was responding to ‘Chinese aggression’ with military spending and trade tariffs. Beijing, he said, was expanding at the expense of others and trying to drive the U.S. from the western Pacific. That kind of talk won’t be easy to forget, even if Trump and Xi agree to a trade truce at a scheduled meeting at the end of November . . . Chinese investment and energy purchases make it easier for Russia to resist economic pressure over Ukraine; Russian sales of oil, missile defense systems, and jets are changing U.S. calculations in the Pacific by raising the potential cost of any future showdown with China.”

But economist says Trump and Xi could mend ties. Bloomberg News's Lillian Chen: “An economist who accurately predicted the rising trade tensions between the U.S. and China now sees a likely resolution of the dispute next year. A trade deal may be reached at some point in 2019 as tariffs will start to hurt the U.S., Danske Bank A/S chief analyst and China economist Allan von Mehren wrote in a report last week, just before [Trump] tweeted that discussions with Chinese President Xi Jinping are ‘moving along nicely.’ Following the tweet, the strategist now sees a 60 percent chance of a positive outcome from a planned Trump-Xi meeting at the Group of 20 summit in Argentina from Nov. 30-Dec. 1, up from 50 percent earlier, he said in an email response to questions on Thursday. A positive outcome would mean ‘a clear framework for negotiation with a list of demands and a plan to go work on them one by one.’ ”

— Iran dismisses sanctions. The Associated Press's Nasser Karimi and Jon Gambrell: “The ‘largest-ever’ U.S. sanctions list targeting Iran drew mockery from Iranian officials on Tuesday for including mothballed Boeing 747s, a bank that closed years earlier and a sunken oil tanker that exploded off China months ago. However, the new list of sanctions, which also aims to cut Iran’s vital oil industry off from international sales, also included for the first time its state airline and its atomic energy commission, further highlighting the maximalist approach of [Trump’s] administration.”

— Financial bodies warn about trade disputes. AP: “Leaders of the World Bank, International Monetary Fund and other global financial organizations warned Tuesday that trade tensions pose a growing risk for emerging economies. With the U.S. and China embroiled in their worst trade conflict in decades, global growth has ‘plateaued and some downside risks have materialized,’ the leaders said in a joint statement issued after a meeting in Beijing.”

POCKET CHANGE

— Foxconn looks to China to staff U.S. plant. WSJ's Yang Jie, Shayndi Raice and Eric Morath: “Foxconn Technology Group is considering bringing in personnel from China to help staff a large facility under construction in southern Wisconsin as it struggles to find engineers and other workers in one of the tightest labor markets in the U.S. The company, the Taiwanese supplier to Apple Inc., has been trying to tap Chinese engineers through internal transfers to supplement staffing for the Wisconsin plant, according to people familiar with the matter. . . After an earlier version of this article posted online, Foxconn said in another statement, ‘We can categorically state that the assertion that we are recruiting Chinese personnel to staff our Wisconsin project is untrue.’ ”

— Prosecutors search BlackRock office. Reuters's John O'Donnell and Matthias Inverardi: “Prosecutors searched the Munich offices of BlackRock on Tuesday . . . as part of the country’s largest post-war fraud investigation. The practice being investigated, known as cum-ex, typically involved trading company shares rapidly around a syndicate of banks, investors and hedge funds to create the impression of numerous owners, each of whom was entitled to a tax rebate. A BlackRock spokesman said the world’s biggest fund manager was ‘fully cooperating with an ongoing investigation relating to cum ex transactions in the period 2007-2011’. BlackRock’s inclusion is significant because it oversees more than $6.4 trillion in assets, including company shares which it lends to banks as part of its business.”

— HSBC announces data breach. American Banker's Penny Crosman: “A small number of HSBC online banking customers — less than 1% of accounts — were breached last month by unauthorized users, the bank acknowledged Tuesday. HSBC sent a disclosure notice Nov. 2 to customers saying the breaches occurred between Oct. 4 and Oct. 14 of this year. The bank suspended all affected accounts. Customer information that may have been accessed includes full names, mailing addresses, phone numbers, email addresses, dates of birth, account numbers, account types, account balances, transaction history, payee account information, and statement history.”

Business
The acknowledgement is sure to raise the pressure on the San Francisco-based bank, which has been struggling to repair its image after a series of missteps.
Renae Merle
Transportation
Northern Virginia remains favored to land part of the project, but the prize could be split with another locale.
Jonathan O'Connell and Robert McCartney
National
Under the proposed settlement agreement, the hotel chain has also agreed not to share guests' personal information without a warrant or subpoena.
Lindsey Bever
DAYBOOK

Coming soon

  • Federal Reserve Vice Chairman for Supervision Randal Quarles delivers a speech on financial regulation at the Brookings Institution on Friday in Washington.
  • Senate Judiciary Committee hearing titled “Big bank bankruptcy: 10 years after Lehman Brothers” on Nov. 13.
  • Senate Banking Committee hearing on “Oversight of pilot programs at Fannie Mae and Freddie Mac” on Nov. 14.
  • Federal Reserve Vice Chairman for Supervision Randal Quarles appears before the Senate Banking Committee on Nov. 15.
  • The National Economists Club holds an event titled “US Outlook: Exploring the Key Debates” on Nov. 15 in Washington.
THE FUNNIES

— From The Post's Tom Toles: “Seeing the American future is hard, especially from this particular present.”

BULL SESSION

2018 midterm election: A night of firsts.

We talked to voters around the country on Election Day. Here's what they said:

Here's the story behind your “I Voted” sticker: