THE TICKER

As the midterm dust settles, this much is clear: The message voters sent Washington about Wall Street regulation is anything but clear. 

The results don't spell out any clear popular preference for the direction of financial regulation. And that's a rare point of agreement between banking lobbyists and advocates of stricter industry rules.

Consider the fates of the eight most vulnerable Senate Democrats who earlier this year helped pass the first major rollback of Dodd-Frank strictures since the financial crisis. Four of them pulled out victories on Tuesday; the other four went down to defeat. 

Or zoom in on Ohio. Two Democrats running statewide, each of whom cultivated anti-Wall Street bona fides, finished surprisingly far apart. Sen. Sherrod Brown, a populist critic of the industry and the top Democrat on the Senate Banking Committee, won reelection by more than a quarter-million votes; Richard Cordray, a former state attorney general who served most recently as director of the Consumer Financial Protection Bureau, lost by more than 180,000 votes. 

Or take a closer look at the candidates that the industry supported. The American Bankers Association for the first time in its history launched ads for a dozen of its preferred lawmakers this cycle, and at least seven won (two lost and the others remain too close to call). But that success rate inverted for the broader sector, which is poised to see as many as seven of the 11 candidates it backed most aggressively defeated, as Reuters’s Pete Schroeder points out (though Arizona Rep. Kyrsten Sinema has now taken a razor-thin lead in her race): 

The mixed verdict speaks to an election fought over other, hotter issues, from health care and immigration to President Trump’s conduct in office. 

Ian McKendry, a spokesman for the ABA, said the group is “pleased so many of the candidates and issues we supported through our Voter Education Fund prevailed on Tuesday. Those Republicans and Democrats all demonstrated a willingness to work across the aisle and have supported pro-growth policies, including the bipartisan banking law that passed earlier this year.” Still, in an online analysis, the bank lobby lamented that “much like the past few cycles, hyper partisanship has continued to drag the political parties further away from a governing middle.”

Others say that the results present a confusing picture of what voters want from policymakers. “I don’t have a clearer vision of the country’s direction after Tuesday,” Compass Point’s Isaac Boltansky writes in an email. “The divisions in our country — blue vs red, suburban vs urban — are starker than ever, but how that pertains to policy remains to be seen. What is the lowest common denominator for policymaking in a political climate defined by the two ends of the ideological spectrum?”

It’s even less than clear where newly empowered Democrats intend to head on the issue of Wall Street reform. Four of the six House Democratic candidates that I highlighted here in September for featuring calls to tighten the regulatory screws on the industry ended up losing their bids. Meanwhile, donors in the securities and investment industry favored Democrats over Republicans this cycle for the first time in a decade. 

Rep. Maxine Waters (D-Calif.), in line to lead the House Financial Services Committee, says she plans to apply tough scrutiny to some of the industry’s biggest players. Industry sources say they are also waiting to see which freshmen lawmakers get named to the committee to gather a better sense of House Democratic leadership's priorities. Typically, the panel has been a magnet for more business-friendly newbies, who use the assignment to raise money from the industry. 

Rion Dennis, legislative and advocacy strategist for Americans for Financial Reform, argues the party’s compass is set toward taking a hard line on the sector. “If you get on the wrong side of Wall Street reform, you get all sorts of blowback from all quarters of the Democratic party, something you saw with members who supported the partial rollback of Dodd-Frank in this Congress,” he said in an email. “Also, the general suspicion of big money in politics, which this incoming class demonstrates with a vengeance, doesn’t exactly scream the need to do more favors for Wall Street.”

Polling commissioned by Better Markets, which also advocates stricter regulation, found 56 percent of voters believe deregulation threatens their jobs, savings and retirement — and roughly seven in ten believe weakening regulations on bailed-out banks is an example of Washington corruption. Better Markets president Dennis Kelleher says survey results like that reveal more about the attitude of the electorate than the midterm outcomes. And the issue is due to come roaring back into focus as Democratic presidential hopefuls launch their bids. 

“These issues are going to be front and center,” in the 2020 presidential contest, Kelleher says. “There will be tons of noise, but we’ll have a lot more clarity than we did in this very fragmented election, where we had different candidates running on different issues and Trump barnstorming the country on immigration.”

MARKET MOVERS

— Fed leaves rates untouched. The Wall Street Journal's Nick Timiraos: The Federal Reserve held short-term interest rates steady Thursday and offered a mostly upbeat assessment of the economy’s performance, suggesting another rate increase is likely at its next meeting. The Fed repeatedly emphasized the economy’s strength in a statement released after its two-day policy meeting. It offered nothing to dispel market expectations that it would deliver its fourth interest-rate increase of the year in December.

"Data since officials last met in September ‘indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate,’ the Fed’s rate-setting committee said in a statement Thursday. The only major change to the statement nodded to a recent pullback in business investment, which officials said had ‘moderated from its rapid pace earlier in the year.’ ”

Wall Street worries about another Fed move. Bloomberg News's Liz McCormick, Vivien Lou Chen and Alex Harris: “Fixed-income traders are telling the Federal Reserve that it might end up making a big policy mistake. And it’s not just rising interest rates they’re talking about. A more pressing concern has to do with the Fed’s crisis-era bond investments. Since October of last year, the central bank has been steadily reducing its holdings of Treasuries and mortgage-backed bonds. But as the unwind has picked up, unexpected knock-on effects are emerging in overnight lending markets, where demand for short-term cash has been on the rise . . . 

"The most vocal critics contend that if the Fed doesn’t slow or stop its unwind, it could end up draining too much money from the banking system, cause volatility to surge across financial markets and undermine its ability to control its rate-setting policy. All of which could eventually seep into the broader lending market and push up borrowing costs — even if just marginally — in an economy that some predict will start slowing next year.”

Investors wonder whether profits are peaking. The Associated Press's Stan Choe: “Here’s the challenge when something’s as good as it gets: What comes next? Companies across industries are in the midst of reporting another quarter of gargantuan profit growth, driven by lower tax bills and a growing economy . . . Yet stock prices are not getting the boost that they usually do when companies report better-than-expected earnings. On the flip side, investors have punished stocks much more severely when companies have fallen short of profit expectations . . . The reaction can be tied to the gnawing concern among investors that this may be the peak for corporate profit growth. Analysts say growth may slow to a roughly 15 percent rate in the last three months of the year. In conference calls with analysts following their earnings reports, CEOs have been citing several challenges including rising expenses, [Trump’s] tariffs and slowing economic growth in countries around the world.”

Tech stocks may struggle to recover. Bloomberg's Michael Regan: “For years, investors have been crowding into the tech pool, steadily raising the water levels at Facebook, Apple, Amazon.com, Netflix, and Google... Tech companies dominate lists of top holdings among hedge funds and retirement funds alike... That doesn’t look as smart today as it did a month ago, before the Nasdaq-100 Index lost close to $1 trillion in value. No one is sure yet whether the stampede out of the market was an overreaction. But unlike previous shareholder freakouts, this one reflects problems that can’t be erased by a strong quarter or two.

“One is higher interest rates, which raise corporate borrowing costs and boost the appeal of bonds relative to stocks. Another is the Trump-induced trade war, which threatens to reshape global supply chains and make investors rethink internet companies’ overseas ambitions. Low unemployment has added labor market pressure, as exemplified by Amazon.com Inc. increasing its minimum wage.” (Amazon.com founder and chief executive Jeffrey P. Bezos owns The Washington Post.)

See exactly how the statement from Fed policy makers changed.
The Wall Street Journal
The stock market's biggest buying force is on track to post a historic November as corporations resume a rapid pace of share buybacks after third-quarter earnings.
CNBC
New applications for U.S. unemployment fell slightly last week and the number of Americans receiving benefits remained at a 45-year low as strong labor market conditions continued.
Reuters
TRUMP TRACKER

TRADE FLY-AROUND:

U.S., China hold security talks. AP's Matthew Pennington: "Even as the United States and China butt heads over trade, their top diplomats and defense chiefs will be meeting in Washington Friday, looking to tamp down tensions on other issues that have put a chill on relations between the two world powers. Secretary of State Mike Pompeo and Defense Secretary Jim Mattis will meet with their counterparts Yang Jiechi and Wei Fenghe at the State Department. The talks were due to be held in Beijing last month but were postponed after Washington announced new arms sales to Taiwan, and U.S. and Chinese vessels came close to colliding in the South China Sea...  It’s something of a placeholder ahead of a planned meeting at the end of the month between President Donald Trump and China’s President Xi Jinping at a Group of 20 summit in Argentina."

NAFTA 2.0 signing at the G20. Reuters: "Cabinet ministers from the United States, Mexico and Canada will sign a new trade agreement on Nov. 30, Mexico’s economy minister said on Thursday. The deal will be signed in Buenos Aires, Argentina, the Mexican Economy Minister Ildefonso Guajardo told reporters at an event in Mexico City. Argentina is hosting the G20 international forum for governments and central bank governors."

But a Dem House will complicate passage. The Wall Street Journal's William Mauldin and Vivian Salama: "Securing congressional passage of the makeover of the North American Free Trade Agreement will get a lot harder with a split Congress. A Democrat-led House gives Mr. Trump’s political opponents power to demand concessions in exchange for ratification of the new agreement... Passage 'will depend on whether unions will want to push it,' a senior White House official said. The AFL-CIO, a large federation of labor unions, said in official comments that it has 'serious doubts that the improved rules will make a meaningful difference to North American working families without additional provisions.' Several environmental groups have rejected the new agreement."

Volvo cancels production, cites tariffs. Bloomberg: "Volvo Cars is shredding production plans drawn up for much of its lineup in an effort to dodge tariffs the U.S. and China have slapped on auto imports. Only a few months after opening its first U.S. plant, the Swedish brand has canceled plans to export the S60 sedans built there to China. Volvo also will stop U.S. imports of XC60 sport utility vehicles from China and dramatically reduce shipments of S90 sedans built there. The carmaker, which is owned by China’s Zhejiang Geely Holding Group Co., is ensnared in the tit-for-tat trade war between the world’s two biggest auto-buying countries, both of which have ratcheted up car tariffs. The dispute has dragged on profits of peers including BMW AG, which said this week that higher duties were partially to blame for its underwhelming earnings."

The United States on Thursday imposed sanctions on two Ukrainians, a Russian off...
Reuters

MELTDOWN WATCH:

POCKET CHANGE

— Blankfein attended 1MDB meeting. Bloomberg News's Sridhar Natarajan and Elffie Chew: “Years before Goldman Sachs Group Inc. arranged bond deals now at the heart of globe-spanning corruption probes, the firm’s then-CEO Lloyd Blankfein personally helped forge ties with Malaysia and its new sovereign wealth fund, according to people with knowledge of the matter. Blankfein was the unidentified high-ranking Goldman Sachs executive referenced in U.S. court documents who attended a 2009 meeting with the former Malaysian prime minister, the people said.

"The meeting was arranged with the help of men who are now tied to the subsequent plundering of the 1MDB fund, according to U.S. court documents unsealed last week. The meeting at the Four Seasons hotel in New York was set up and attended by two key figures in the 1MDB scandal, Malaysian businessman Jho Low and former Goldman partner Tim Leissner, one person with direct knowledge of the matter said, asking not to be identified as the information isn’t public. The high-level gathering laid the groundwork for a relationship that would prove profitable for the investment bank. ”

Musk turns to BofA for SpaceX loan. Bloomberg: "Elon Musk frequently makes outrageous requests of his staff in his quest to remake global transportation and colonize Mars. But the terms he wanted on a loan for SpaceX were too much even for his closest ally on Wall Street. As recently as last week, Goldman Sachs Group Inc. had been canvassing investors for interest in $500 million of Space Exploration Technologies Corp. debt. By the time interested parties showed up Wednesday at the Four Seasons hotel in midtown Manhattan for a breakfast meeting, Bank of America Corp. was running the show for a $750 million deal. The switch surprised bankers and investors, as Goldman is widely viewed as the Wall Street firm with the closest relationship to Musk.

DOJ sues UBS. WSJ's Brian Blackstone: "The Justice Department on Thursday filed a civil suit against UBS Group over ‘catastrophic’ losses incurred by investors from mortgage-linked securities sold in the run-up to the financial crisis in 2006 and 2007. The lawsuit, which UBS has vowed to fight, will likely leave a legal cloud hanging over Switzerland’s largest bank for many months. It also serves as a reminder that, more a decade after the collapse of Lehman Brothers, some of the issues at the heart of the financial crisis have yet to be fully resolved… In the complaint, the U.S. alleges that UBS misled investors about the quality of billions of dollars in subprime and other mortgage loans that were used to back 40 deals. UBS securitized more than $41 billion in mortgage loans through these deals, according to the complaint.

— Chevron reconsiders presence in Venezuela. WSJ's Kejal Vyas and Bradley Olson: “For nearly a century, Chevron Corp. has weathered dictatorships, coups and nationalization drives to keep pumping oil in Venezuela. Now, executives at the last U.S. oil major in the country are debating whether it may be time to get out . . . Chevron’s dilemma is both moral and commercial. It hopes to hang on and outlast President Nicolás Maduro, as it did with his late mentor Hugo Chávez and other rulers. The California-based giant long enjoyed close relations with the socialist regime that controls the world’s largest oil reserves, and has earned big money in Venezuela — about $2.8 billion between 2004 and 2014, according to cash-flow estimates by analytics firm GlobalData.

"The company is aware a pullout could trigger a collapse of the government’s finances, because a significant chunk of its scarce hard currency comes from joint operations with Chevron. Yet by staying in the country as its economic and humanitarian crises deepen, the company risks damage to its reputation by being seen as supporting an authoritarian regime sanctioned by the U.S. government. It also isn’t making much money here anymore.”

— McDonald's shows off Russian credentials. WSJ's Thomas Grove: “McDonald’s Corp. became a leading ambassador of American culture after opening its first restaurant here in the twilight of the Soviet Union. Now, as Russia-U. S. tensions rise and pro-Kremlin politicians call repeatedly to close the U.S. chain, management is taking a new tack: Go Russian. Earlier this year, the company boosted the share of Russian suppliers its restaurants use to 98%, and it has embarked on a marketing campaign to drive home the point that in Russia McDonald’s doesn’t have to be an American company. ... McDonald’s has succeeded world-wide in part by finding local suppliers wherever its restaurants operate, shortening supply chains and insulating against foreign-exchange volatility. But as tensions between Washington and Moscow rise, the company is finding that strategy can ease political pressures as well. ... The local focus appears to be paying off. The number of McDonald’s restaurants in Russia grew 6% year-over-year last quarter, well above the global average of 1.5%.”

Business
The company said that it will commit to building a safer workplace, which includes ending forced arbitration and increasing its transparency on reported incidents of sexual misconduct.
Taylor Telford
Wells Fargo has concluded “no gender bias” in its wealth management division, according to a top executive. Another executive who was a focus of the investigation and allegedly referred to women as “girls” is retiring.
WSJ
MONEY ON THE HILL

House Dems to seek rollback of tax cuts. WSJ's Richard Rubin: "Democrats will aim to reverse tax cuts for high-income households when they take the House majority, setting up a clash with Republicans that will color fiscal debates over the next two years, including prospects for a bipartisan deal to improve the nation’s infrastructure. Both sides have signaled they want a spending program to improve the nation’s roads, bridges, tunnels and other public works, but disagree on how to fund it. Last year, Senate Democrats proposed a $1 trillion infrastructure plan, financed largely by rolling back cuts in the corporate and top individual tax rates. Republicans are sure to reject that idea... Democrats on the tax-writing Ways and Means Committee met before the election to start planning."

Business
"We know that we don’t have this issue with the deficit hawks moving forward...we're actually very, very optimistic," Raytheon chief executive Thomas Kennedy told investors Wednesday.
Aaron Gregg
Business
The red state will be a test case over whether a higher minimum wage results in job losses. Business leaders are divided about what they think will happen.
Heather Long
THE REGULATORS

SEC to review corporate democracy rules. Reuters: "The U.S. securities regulator is set to review this month rules on corporate democracy, setting it up for a clash with investors who worry the agency will side with companies to diminish voting rights on charged issues like climate change and gun violence. On Nov. 15, the Securities and Exchange Commission will hold a roundtable on the ‘proxy process’ by which big pension funds and other shareholders can force companies to vote on a range of environmental, social and governance matters. For over a decade, corporate America has complained that voting rules have allowed special interests and proxy advisory firms that recommend how investors should vote to hijack corporate boardrooms with costly demands."

DAYBOOK

Today

  • Federal Reserve Vice Chairman for Supervision Randal Quarles delivers a speech on financial regulation at the Brookings Institution in Washington.

Coming soon

THE FUNNIES

— From  The Post's Tom Toles: “Trump’s idea of winning means we are are the brink of losing it all.”

BULL SESSION

Fact-checking President Trump's post-election news conference:

Roger Stone has a rule: “Deny everything.” And he does:

Dutch 69-year-old asks court to change his age to 49: