An Elizabeth Warren administration would use its regulatory power to implement a flood of market-rattling moves on everything from antitrust enforcement to raising worker pay.
That’s the conclusion two former executive branch economic hands reach in a new report on what Warren winning the White House would mean for corporate America. Sarah Bianchi and Ernie Tedeschi, now analysts at research firm Evercore ISI, write in a private report the Massachusetts Democrat probably would face a Republican Senate, hamstringing her ability to move much of her legislative agenda.
But as Warren said at the last debate, “I know what we can do by executive authority, and I will use it.”
The resulting regulatory bonanza, Bianchi and Tedeschi argue, would reach into just about every corner of the economy. “All any President needs is to have an effective group of Administration officials in place with a clear agenda — which Warren certainly provides,” they write. “This is where much of the action in her Administration would be.” Bianchi was director of economic and domestic policy for ex-vice president Joe Biden, who is running for president in 2020; and Tedeschi served as a senior adviser and economist at the Treasury Department during the Obama administration.
We’ve written here about the difficulty Warren could face getting nominees confirmed by a GOP Senate. But it’s worth considering the range of the moves she could try to make toward the “big, structural change” to which she has committed herself on the campaign trail. President Trump has certainly taken advantage of his regulatory powers, as did his predecessor, former President Obama.
Here’s a look at some of the actions a President Warren could take, per the Evercore ISI report.
1. A muscular antitrust push.
A Warren administration could juice investigations the Justice Department and the Federal Trade Commission have launched into big tech companies — and push to break up Amazon, Facebook and Google, Bianchi and Tedeschi write (Warren has made no secret of her desire to break up large tech companies like Facebook). They argue the senator would also fight to block tech giants from acquiring startups that pose a competitive threat. “Companies have the ability to take the government to court,” they write. “But there is no doubt that a Warren Administration would make corporate America think twice before proposing many mergers.” (Amazon founder and CEO Jeff Bezos owns The Washington Post.)
It’s not just big tech that would feel new antitrust heat from Washington. Bianchi and Tedeschi argue. “Warren gave a speech in 2016 where she outlined her views about the concentration throughout the economy, including aspects of the health care sector, agriculture, and beyond,” the report says, noting Warren was critical of the Obama administration for not being more aggressive on this front. “There is no question she would look to undo certain mergers and there certainly would be a higher bar for [mergers and acquisitions] that increases industry concentration for a variety of industries.”
2. Tough new rules for Wall Street.
Though Warren wants to break up the big banks by restoring the Glass Steagall Act, the proposal stands little chance of moving on the Hill. But Bianchi and Tedeschi point to several other pressure points a President Warren could target through executive authority. Among them: Ramping up pressure on the big banks through the living wills process; applying new scrutiny to credit ratings agencies via the Securities and Exchange Commission; and cracking down on non-bank financial companies, including by reviving the designation of some as systemically risky, subjecting them to stricter federal oversight.
3. More “economic cold war” with China.
Warren has been a tough critic of Beijing and would likely confront the regime on a number of issues. “We think Senator Warren could be tougher particularly around issues such as labor, environmental rights, including Climate Change,” Bianchi and Tedeschi write. “Moreover, we think that she is trying to ‘out tough’ Trump on China given the political benefits of doing so, particularly in the Midwest.”
They argue Warren would speak out where Trump hasn’t, on human rights issues generally and the protests in Hong Kong specifically. She could look to bring that push home by extending “criticism or action to Americans companies that have stopped their workers from expressing views on China or have put their companies in vulnerable positions by producing in the country or making the intellectual property vulnerable.”
And they conclude she would continue the Trump team’s effort to decouple U.S. and Chinese supply chains, including by dialing up export controls, regulating foreign investment, and looking to build up American tech and manufacturing capacity.
4. Raising worker pay.
Warren can’t achieve her ambition of raising the federal minimum wage to $15 by executive fiat. But she could make some opportunities to force companies to hike employee compensation. For example, she could more aggressively enforce rules already on the books governing what constitutes full-time work versus contract work.
5. Stronger corporate accountability.
“One of Warren’s main messages is that a central reason for the high levels of wealth disparity in the United States is due to a lack of accountability for those at the top – whether it is the top of the income scale or corporations,” Bianchi and Tedeschi write. “She has called this out as a Senator and no doubt would use all of the relevant agencies in the government – from DOJ to CFPB to the SEC – to hold corporations accountable.” That would include prosecuting executives who break the law. And she could target stock buybacks through rules changes at the SEC.
Some of Warren’s more ambitious regulatory efforts could get knocked down in the courts.
But the Evercore pair note that Warren made her biggest mark on policy before arriving in the Senate in 2013 — by standing up the Consumer Financial Protection Bureau. “This is how she thinks about government and we believe her Administration would focus on a similar kind of accountability through the federal government,” they write.
— Trade uncertainty casts a pall over global growth. WSJ's Paul Kiernan: "Finance ministers and central bankers who gathered in Washington for the [International Monetary Fund's] fall meetings in recent days said in interviews and public events that the biggest risks to the global economy are trade-related uncertainties and divisions among nations over how to reduce them.
Global economic growth has ebbed this year to its slowest pace since the 2009 recession, the IMF said. The main culprit for the malaise has been the trade war between the U.S. and China, which the fund estimates to have left a Switzerland-size hole in the global economy... While the IMF predicts a modest pickup in 2020, it also stressed the risk of growth again falling short. The fund said the world’s three largest economies-—the U.S., China and Japan—are likely to slow further next year."
Lagarde says the U.S. is at risk of losing its role as a leader: "Christine Lagarde, the departing head of the International Monetary Fund who is set to take over as president of the European Central Bank, said in an interview that the U.S. risks diminishing its role as a global leader and warned of dire consequences of its trade war with China, the WSJ's Kate O’Keeffe reports.
"[Lagarde] also warned [Trump] against pushing the Federal Reserve for lower interest rates because it could spur inflation. 'When the unemployment rate is at 3.7%, you don’t want to accelerate that too much by lowering interest rates,' she said. 'Because the risk you take is that then prices begin to go up. You have to be very careful. You know, it’s like navigating a plane.'"
— Brexit's path remains uncertain. The Post's William Booth and Michael Birnbaum: "At the very last minute on Saturday night, [Britist Prime Minister Boris] Johnson asked the Europeans for a Brexit delay until the end of January 2020. In fact, he sent three letters, leaving people to puzzle over exactly which one meant what — and to wonder: Where Brexit is headed next? A most excellent question. Because nobody really knows.
"After lawmakers voted 322 to 306 to withhold support for Johnson’s new Brexit deal, scuppering his hope of finalizing Britain’s exit plan at an extraordinary — but ill-named? — 'Super Saturday' session in Parliament, the prime minister was forced to fold and seek an extension... Foreign Secretary Dominic Raab told the BBC, 'Notwithstanding the parliamentary shenanigans, we appear to have now the numbers to get this through.'"
British voters are exhausted. From Hermes Investment Management CEO Saker Nusseibeh: "At this stage, any prediction for the future of this process is by definition perilous, but the popular mood for some sort of closure and an end to uncertainty would argue for an eventual Brexit. The economic price of that divorce as well as any mitigants from a more independent economic policy will not be fully apparent for several parliamentary cycles. The UK has already suffered some economic loss, and I would argue more importantly, deep wounds to its social fabric and political framework, as a result of this process."
— Goldman Sachs: The economic slowdown is widespread. From a note to clients: "Economic data were titled to the downside this week, underscoring the broad-based nature of the ongoing economic slowdown. While we believe the US economy will be able to withstand the global storm, momentum will continue to cool into 2020. We see GDP growth slowing from 2.2% this year to 1.6% in 2020 as cautious consumers drive the economy at a slower pace."
— China braces for growth to fall below 6%: "China’s policy makers are preparing for two key policy meetings in the coming weeks with fresh evidence that sooner rather than later, the number for gross domestic product growth will start with a 5," Bloomberg reports.
"Data released Friday showed an economy expanding at just 6.0%, the slowest in almost three decades, and with broad investment growth too tepid to rely on an upturn down the road. People’s Bank of China Governor Yi Gang responded to the data not by hinting at much greater stimulus in the pipeline, but by reminding investors that China’s focus remains on keeping its heavy debt load under control."
And Liu He makes encouraging comments about a trade deal. Bloomberg: "China’s top trade negotiator offered positive signals that talks with the U.S. are making progress and both sides are working toward a partial trade deal. 'China and the U.S. have made substantial progress in many aspects, and laid an important foundation for a phase one agreement,' Vice Premier Liu He said at a technology conference in Nanchang, Jiangxi, on Saturday. He reiterated that China is 'willing to work in concert with the U.S. to address each other’s core concerns on the basis of equality and mutual respect.'"
— Huawei in talks with U.S. firms to license 5G platform: “Blacklisted Chinese telecoms equipment giant Huawei is in early-stage talks with some U.S. telecoms companies about licensing its 5G network technology to them, a Huawei executive told Reuters,” Reuters’s Alexandra Alper reports.
“Vincent Pang, senior vice president and board director at the company said some firms had expressed interest in both a long-term deal or a one-off transfer, declining to name or quantify the companies … The U.S. government, fearing Huawei equipment could be used to spy on customers, has led a campaign to convince allies to bar it from their 5G networks. Huawei has repeatedly denied the claim.”
— NAM promotes USMCA with Pence. The National Association of Manufacturers and glassmaker SCHOTT North America are hosting Vice President Mike Pence today in Duryea, Penn. Pence is touring the facility at 3:55 p.m. and then giving remarks about the importance of Congress passing the United States-Mexico-Canada trade agreement. The event comes as NAM continues a intensive lobbying push for congressional approval of the pact. By its count, the group has conducted over 450 meetings with lawmakers, with a focus on House Democrats.
— SoftBank seeks to avoid WeWork’s liabilities: “SoftBank Group Corp. is attempting to become the majority owner of WeWork without assuming the onerous lease obligations of the U.S. office-space sharing firm, according to people familiar with the matter,” Reuters’s Joshua Franklin, Greg Roumeliotis and Mike Spector report.
“SoftBank is offering a $5 billion financing lifeline that The We Company, the parent of New York-based WeWork, is assessing against a proposal by JPMorgan Chase & Co (JPM. N) for a debt package of similar size from banks and institutional investors. WeWork could run out of cash as early as next month without new financing, sources have said, after the company pulled plans in September for an initial public offering (IPO). It abandoned the IPO when investors questioned its large losses, the sustainability of its business model and the way WeWork was being run by its co-founder and former CEO Adam Neumann, who now serves as board chairman.”
— Facebook outlines a new path for Libra: "Facebook Inc. facing growing skepticism about its digital currency project Libra ... said the initiative could use cryptocurrencies based on national currencies such as the dollar, instead of the synthetic one it initially proposed," Reuters's Andrea Shalal reports.
"David Marcus, who heads the Libra project for Facebook, told a banking seminar the group’s main goal remained to create a more efficient payments system, but it was open to looking at alternative approaches for the currency token it would use ... Marcus said he was not suggesting currency-pegged stablecoins were the group’s new preferred option."
— Icahn will likely tap his son to take over his firm. Cue the "Succession" theme music. WSJ's Cara Lombardo: "At 83, Carl Icahn, the billionaire financier legendary for waging guerrilla warfare with corporate targets from TWA to Dell, finally has a succession plan. It’s a little complicated. Fed up with New York, Mr. Icahn says he’s moving his hedge fund to Miami and laying the groundwork to hand it over to his son, Brett.
"Mr. Icahn says Brett is the 'leading candidate' to take over the firm—once Mr. Icahn is ready to let go, which he doesn’t seem to be just yet. 'I’m not going to give up making the real decisions,' Mr. Icahn says. 'I’m still in charge, but he’d get a piece of the action.'"
MONEY ON THE HILL
— Exclusive: Private equity goes on offense. The industry has come in for some harsh criticism from Democrats — particularly from Warren, who has called the firms “vampires” that are “looting” the economy and pitched a plan one economist said would ”be the end of private equity as we know it.” Now the sector is fighting back, ramping up a campaign to convince voters and policymakers that the business model supports jobs and economic growth.
The American Investment Council, private equity’s lobbying group in Washington, is releasing a new economic report from Ernst and Young that says the industry supports 26 million American jobs and 5 percent of U.S. economic activity — while paying $174 billion in federal, state and local taxes last year. It highlighted Ohio’s share with a release and an ad last week timed to the Democratic presidential debate there. And as it braces for more heat from presidential contenders, the group is also going up with a six-figure digital ad campaign in Washington and early-voting states to advance its message about the industry’s contributions.
Lobbyists say they can work with Warren. Politico's Theodoric Meyer: "Even in a Democratic presidential field in which most candidates have sworn off contributions from lobbyists, Warren’s hostility to K Street stands out. But while Warren’s campaign rhetoric has made the influence industry nervous, many lobbyists who’ve worked with the Massachusetts senator’s office say she’s far from antagonistic when it comes to doing business with K Street.
"Six lobbyists who interacted with her office said they’d never had trouble getting meetings. Several of them said that while they’d be reluctant to bring corporate clients to meet with Warren’s leading progressive rival, Sen. Bernie Sanders (I-Vt.), they’d have no qualms about having them sit down with Warren."
— Congress ramps up scrutiny of Boeing: “U.S. lawmakers probing the 737 MAX jet crisis are ratcheting up scrutiny of Boeing Co. BA leaders as new details point to management pressure on engineers and pilots in its commercial-aircraft unit,” the Wall Street Journal’s Andrew Tangel and Andy Pasztor report.
“Investigators for the House Transportation and Infrastructure Committee looking into the design and certification of the 737 MAX have received details of a three-year-old internal Boeing survey showing roughly one in three employees who responded felt ‘potential undue pressure’ from managers regarding safety-related approvals by federal regulators across an array of commercial planes. Workload and schedule were cited as important causes. Such conflicts could become problematic, the survey found, when it came to Boeing engineers who played dual roles designing certain systems on behalf of the plane maker and then certifying the same systems as safe on behalf of the Federal Aviation Administration, as part of a decades-old agency program that effectively outsources such regulatory work to company employees.”
— Buttigieg eyes 35 percent corporate rate to fund health plan: “Pete Buttigieg would pay for his $1.5 trillion health-care plan by rolling back President Donald Trump’s corporate tax cut to return the rate to 35% and allowing Medicare to negotiate drug prices, campaign spokesman Sean Savett said,” Bloomberg News’s Sahil Kapur reports.
“Buttigieg’s ‘Medicare for all who want it’ plan would extend the federal health-care program for seniors as an option for Americans who prefer it, while also letting people opt for private plans. It’s a centerpiece of his campaign, positioning himself against the more far-reaching ‘Medicare for All’ plan by Vermont Senator Bernie Sanders and Massachusetts Senator Elizabeth Warren, which would put all Americans in Medicare.”
- The House Rules Committee holds a hearing on legislation by Rep. Carolyn Maloney (D-N.Y.) to address money laundering known as “The Corporate Transparency Act.”
- TD Ameritrade is among the notable companies reporting their earnings, per Kiplinger.
- The House Financial Services Committee holds a hearing on the Trump administration’s plans to change housing finance.
- The American Enterprise Institute holds an event on what comes next about the GOP’s tax law.
- McDonalds, Harley-Davidson, UPS, JetBlue Airways, Whirlpool, Biogen, Discover Financial Services, Skechers USA, United Technologies and Chipotle Mexican Grill are among the notable companies reporting their earnings today, per Kiplinger.
- The Brookings Institute holds an event on how millennials think about climate change and the national debt.
- Facebook CEO Mark Zuckerberg is scheduled to testify at a Financial Services Committee hearing about his company.
- Boeing, Anthem, Caterpillar, Ford, Hilton, General Dynamics, Microsoft, Tesla, Spirit Airlines, PayPal, O’Reilly Auto, eBay Inc. and Eli Lilly are among the notable companies reporting their earnings today, per Kiplinger.
- The Urban Institute holds an event on reimagining housing policy.
- Two House Education and Labor Committee subcommittees hold a hearing on preserving worker protections in the modern economy.
- Amazon, American Airlines, 3M, Intel, Comcast, Visa, Southwest Air, Dow, Capital One, Hershey Foods, GMC Holdings, Valero Energy, First Solar and Twitter are among the notable companies reporting their earnings today, per Kiplinger.
- Verizon, Phillips 66 Partners, Goodyear Tire and Anheuser-Busch InBev are among the notable companies reporting their earnings today, per Kiplinger.
From The Post's Tom Toles: