Tough news on Covid — Powell inflation talk gets sharper — Can he keep his job?

From: POLITICO's Morning Money - Friday Jul 16,2021 12:04 pm
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By Ben White

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Quick Fix

Not so great on Covid — Without doubt, the U.S. is in a much better place now to handle fresh Covid outbreaks with much lower hospitalization levels. Nonetheless, cases “are rising in almost every state as the Delta variant attacks unvaccinated populations” leading to some troubling situations including the postponement of last night’s highly anticipated Yankees-Red Sox game, the only one on the schedule for the day after the All-Star Game.

Obviously, people getting very sick and dying is infinitely more important than any baseball game. And MM clearly has a Yankee-news bias, given our well documented allegiance to the team. But the outbreak among the 85 percent vaccinated Yankees is troubling given it was the first Covid-related baseball game postponement since April.

It will have an economic impact, albeit a tiny one. The larger question is whether the Delta variant spikes cut more broadly into consumer sentiment or the economic rebound.

And the news out of California doesn’t help, via our Victoria Collier: “Los Angeles County will reinstate indoor mask requirements in public spaces for all this weekend, regardless of vaccination status, amid an alarming rise in Covid-19 cases driven by the Delta variant.

“Thursday’s announcement by the nation's largest county sent a chill through the state just one month into California's long-awaited reopening. And it could prompt other local health officials to follow suit”

And not great on inflation — Keep reading below for the latest comments on the issue from Fed Chair Jerome Powell and Treasury Secretary Janet Yellen (and also a bit more on Powell’s future in the big seat.)

GOOD FRIDAY MORNING — Greetings from Allentown, Pa. (cue Billy Joel), where MM is staying en route to a family visit in Roanoke, Va. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben.

 

STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.

 
 
Driving the Day

President Joe Biden “will participate in the Asia-Pacific Economic Cooperation (APEC) Leaders’ Virtual Retreat, where Leaders will discuss ending the COVID-19 pandemic” … Biden will also get a briefing on the latest Covid news before heading to Camp David for the weekend and getting his weekly economic briefing on the way (or there) …

Treasury Secretary Janet Yellen “will preside over an executive meeting of the Financial Stability Oversight Council (Council) by videoconference. The preliminary agenda includes Federal Reserve stress tests, housing markets, and the proposed Council report to be issued under the Executive Order on Climate-Related Financial Risk.”

POWELL TALK GETS A LITTLE SHARPER — Fed Chair Jay Powell took a slightly more worried tone about inflation at his Senate hearing on Thursday, essentially rebuking MM’s prediction he would make no news. It’s not MUCH news but it’s worth noting especially coupled with comments from Yellen.

Here’s what Powell said: “This is a shock going through the system associated with the reopening of the economy and it’s driven inflation well above 2%, and of course we’re not comfortable with that.” Obviously, the “not comfortable” bit seemed new and raised eyebrows.

And then Yellen, on CNBC: “We will have several more months of rapid inflation so I'm not saying that this is a one month phenomenon. But I think over the medium term, we'll see inflation decline back toward normal levels. But, of course, we have to keep a careful eye on it.”

The “rapid” bit kind of jumped off the screen. Taken together, the firm wall of “everything is just fine” seemed to tremble just the slightest bit.

SPEAKING OF POWELL — Yellen demurred on whether she would advise Biden to re-nominate her successor as chair. (It’s an awkward thing all around given Yellen would much preferred to have stayed but got dumped by Trump.) “That's a discussion I'm gonna have with the President,” she said of Powell before fully dodging a question on whether she thinks he’s done a good job.

Some financial reform advocates, meanwhile, do not buy the idea that Biden can just appease the left by keeping Powell but getting rid of fin reg czar Randy Quarles.

MIT’s Simon Johnson emails: “The whole ‘replace Quarles and keep Powell’ line overlooks the dynamics that would ensue. You need strong financial regulation to cope with asset bubbles that only become more likely during prolonged periods of easy money.

“Is the Fed really going to do that with a chair who has overseen and perhaps even facilitated deregulation? The Fed staff typically recoil from an agenda that the chair might not like. Given Powell’s record, particularly during the Trump administration, can he provide credible leadership for more effective financial regulation? I don't see it.”

BIDEN/MERKEL PRESENT UNITED FRONT — Our Maeve Sheehey: “Biden and German Chancellor Angela Merkel presented a united front on energy and environmental issues after their bilateral meeting Thursday, despite ongoing disagreements over Nord Stream 2. At the joint press conference following the meeting, Biden said he reiterated his concerns about the $11 billion pipeline from Russia to Germany, which is almost fully built”

LIANG CONFIRMED FOR TREASURY — Our Victoria Guida: “The Senate in a bipartisan 72-27 vote … confirmed longtime Federal Reserve staffer Nellie Liang as undersecretary of domestic finance at the Treasury Department, where she will play a key role in influencing financial regulations, housing policy and government debt management.

“Liang, a Ph.D. economist, is a prominent expert on financial stability. She was the first head of the Fed’s office dedicated to that area, overlapping with now-Treasury Secretary Janet Yellen’s term when she was chair of the central bank. After leaving the Fed in early 2017, Liang went to the Brookings Institution, where she was a senior fellow. She’s since been a senior adviser to Yellen for months.”

 

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Fly Around

MANY JOBS NOT COMING BACK — WSJ’s Lauren Weber: “Job openings are at a record high , leaving the impression that employers are hiring like never before. But many businesses that laid off workers during the pandemic are already predicting they will need fewer employees in the future. …

“Economic data show that companies have learned to do more with less over the last 16 months or so. Output nearly recovered to pre-pandemic levels in the first quarter of 2021—down just 0.5% from the end of 2019—even though U.S. workers put in 4.3% fewer hours than they did before the health crisis.”

BIDEN GOES BIG — NYT’s Jim Tankersley: “The $3.5 trillion budget blueprint that Democrats unveiled in the Senate … promises to reshape the government’s role in the economy, in ways … Biden and his party have called essential to rebuilding the American middle class, lifting people out of poverty and tackling the threat of climate change.

“Its passage in Congress remains far from assured, with a series of hurdles in the coming months, including filling in key details on taxes and spending and holding together a fragile Democratic coalition. But if the plan’s central components become law, it would be the capstone achievement Democrats had promised when they won a pair of Senate elections in January to gain narrow control of Congress — and come with a reach that could exceed its cost.”

HARRIS’ TOP FUNDRAISER TO LAUNCH CONSULTING FIRM — “Vice President Kamala Harris’ former national campaign finance chair is opening a strategic advisory firm that will aim, in part, to guide corporations and C-suite executives through handling social justice and politically charged issues,” per CNBC’s Brian Schwartz reports.

Jon Henes, a corporate restructuring attorney previously at Kirkland & Ellis, “plans to launch his new New York-based firm around Labor Day” with a staff of a little over a dozen and potential plans to expand into D.C., Los Angeles and San Francisco. Henes raised at least $400,000 for Harris’ presidential campaign before becoming a bundler for now-President Joe Biden.”

 

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