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Presented by the American Bankers Association: Delivered daily by 8 a.m., Morning Money examines the latest news in finance politics and policy. | | | | | |  | | By Kate Davidson and Aubree Eliza Weaver | | | Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. | | | The White House is hoping to have good news to tout this week on the president’s economic agenda, as Democrats close in on a framework for their social spending legislation and a possible vote on a $550 billion infrastructure bill. New economic data may complicate that happy narrative. Down with GDP: The Commerce Department releases its initial read of third-quarter economic output at 8:30 a.m. Thursday, giving us the first look at gross domestic product from July through September. That’s when the Delta variant prompted a sharp pullback in economic activity, as the resurgent virus kept worried consumers from dining out and traveling, disrupted global supply chains and pushed sick or fearful workers to the labor market sidelines. Forecasters surveyed by The Wall Street Journal expect GDP growth slowed to a seasonally adjusted annual rate of 2.8 percent, down from 6.7 percent in the second quarter. Could it be worse? Some are even more pessimistic: Moody’s Analytics economist Mark Zandi, whom White House officials often cite, says he expects output rose just 1.4 percent in the third quarter or possibly even shrank, depending on how much businesses drew down their inventories last summer. Gregory Daco, chief economist at Oxford Economics, pegs third-quarter annualized GDP growth at an even softer 0.9 percent — down from his 2.4 percent forecast in September — and agreed we could even see a negative GDP print tomorrow. If Delta is to blame, that means the economy is likely poised for a strong rebound in the fourth quarter as the virus abates. “It already feels like the economy is improving,” Zandi tells MM, saying he expects fourth-quarter growth to advance by more than 6 percent. “Mobility at workplaces is up in the past few weeks, as is travelers going through TSA checkpoints, and unemployment insurance claims have resumed their decline.” Nevertheless, “the weak Q3 GDP number will be tough for the Biden administration to message,” he said. “The president will be criticized that his policies are failing. This is far from the reality for why Q3 was such a bad quarter, but the criticisms will be hard to deflect.” | | | | 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. | | | | | Republicans ready to pile on: Rep. Kevin Brady (R-Texas) previewed those criticisms on a call with reporters Tuesday, pointing to slowing job growth, a lackluster third quarter and rising prices as evidence that President Joe Biden has bungled the recovery, despite injecting trillions more in Covid relief into the economy this year. “Why would the American people trust the Biden administration or Nancy Pelosi’s jobs promises on this next massive, socialist, big-government spending package,” Brady asked. “President Biden faces a real question about his competency to heal the economy.” The bigger picture: The problem with the GDP report, especially during a pandemic, is that it looks in the rearview mirror rather than around the corner, says White House economist Jared Bernstein. Thursday’s data reflects what was happening months ago, and we know a lot has changed since then, including a roughly 60 percent decline in new Covid cases from the summer peak, and another 60 million doses of vaccines that have been administered, according to White House figures. That’s reflected in recent economic data, Bernstein said: New claims for unemployment insurance are close to where they were before the pandemic, consumer confidence readings in October came in better than expected yesterday, and retail sales have surpassed their pre-pandemic peak. “We know that in an economy where the pandemic is still out there, improvement will come in a nonlinear fashion,” said Bernstein, a member of the president’s Council of Economic Advisers. “There’s going to be some quarters that look better than others. In that regard, it’s very important to look at the broader [underlying] trend.” IT’S WEDNESDAY — Stealing a page from our friends at West Wing Playbook and just going to put this out there: Are you in touch with the White House about Fed vacancies? Do you know who the next Fed leader will be? Are you FED CHAIR JEROME POWELL? Email us: kdavidson@politico.com or aweaver@politico.com, or DM on Twitter @ katedavidson. Of course we’ll keep you anonymous! | | A message from the American Bankers Association: America’s banks firmly believe that everyone should pay their taxes, but a proposal in Congress would force banks to provide details to the IRS on what’s going in and out of millions of bank accounts across the country. This dragnet of data collection raises serious questions about Americans’ right to privacy. Learn more about the issue and take action here. | | | | | | CHOPRA ON THE HILL WEDNESDAY—CFPB Director Rohit Chopra is set to testify before the House Financial Services Committee Wednesday at 10 a.m., his first time on the Hill since his confirmation. Our colleague Katy O’Donnell reports Chopra “in congressional testimony Wednesday will call for more competition in consumer financial markets and single out mortgage servicers, credit reporting companies and large technology firms as targets for greater scrutiny.” LET’S TALK ABOUT TAX, BABY — The queen of tax? The push by Sen. Kyrsten Sinema (D-Ariz.) for more novel tax increases, rather than the slate of rate hikes Democrats had been banking on, is raising a host of complications lawmakers are scrambling to address. From our colleague Brian Faler: “With their new billionaires tax proposal meant to placate Sinema, Democrats are building an entirely new tax regime on the fly, amid numerous questions over not only how it would work but whether it is even constitutional. And that's not to mention hostility from House Democratic tax writers, who have already approved a comprehensive package focused on rate hikes.” More from Brian on the details of the billionaires tax here. Can Wyden beat the buzzer? From our colleagues Burgess Everett and Heather Caygle: “Ron Wyden played sparingly during his college basketball career. Now he’s throwing up a bank shot as time winds down.” So far, House Democrats aren’t having it: “The jeering section includes House Ways and Means Chair Richard Neal (D-Mass.), who feels like months of work from his panel is being undercut to satisfy a single centrist senator. Rep. Dan Kildee (D-Mich.) chimed in that Wyden's plan is ‘just a public relations idea, it’s not a substantive policy suggestion.’ Even those who support the concept, like Rep. Peter Welch (D-Vt.), complained it's coming too late given its complexity.” About that 16th Amendment: If enacted, the proposal is almost certain to face a constitutional challenge , WSJ’s Richard Rubin reports: “The likely argument: Taxing capital gains that haven’t been realized yet falls outside the income taxes allowed by the 16th Amendment that don’t have to be apportioned based on state population. Under current law, individuals pay capital-gains taxes only when the gain is realized, typically when they sell an asset, such as a stock, closely held business or painting.” Manchin Lobs Grenade at IRS Reporting Plan: Meanwhile, Sen. Joe Manchin (D-W.Va.) sharply criticized a proposal that would force banks to report more account information to the IRS, making it much more likely that Democrats will have to drop a plan that could raise hundreds of billions of dollars for their social spending bill, our colleagues Bernie Becker and Kellie Mejdrich report. “Do you understand how messed up that is?” Manchin said he told the president, in an interview hosted by the Washington Economic Club Tuesday. “This cannot happen. It’s screwed up.” “I think that one’s going to be gone,” Manchin added. More dissent on the way? A financial industry source tells MM they didn’t know Manchin was opposed to the provision and had no idea he was planning to weigh in against it so strongly on Tuesday. “My email is blowing up,” the person said. They added: “We know that there are some House [Democrats] that have concerns about this. I wouldn’t be surprised if Manchin gives them cover to come out against this.” The banking industry in particular has come out strongly against the proposal, organizing a letter to the White House Monday signed by nearly 100 business and financial groups urging the administration to drop the plan. GENSLER LOOKS TO SHORTEN TRADE SETTLEMENT TIME — Our Kellie Mejdrich reports: SEC Chair Gary Gensler on Tuesday said the agency is drafting a proposal to shorten the settlement cycle for stock trades, part of a market structure overhaul accelerated by the GameStop trading upheaval. | | | | BECOME A GLOBAL INSIDER: The world is more connected than ever. It has never been more essential to identify, unpack and analyze important news, trends and decisions shaping our future — and we’ve got you covered! Every Monday, Wednesday and Friday, Global Insider author Ryan Heath navigates the global news maze and connects you to power players and events changing our world. Don’t miss out on this influential global community. Subscribe now. | | | | | FED WATCH — It’s all happening: The Biden White House has started getting serious about this whole Fed vacancy thing . From Bloomberg’s Nancy Cook and Jennifer Jacobs: “Biden has started to meet with top White House and Treasury aides to review candidates, according to two people familiar with the process, even as the White House has been largely consumed with negotiations over the size and contents of the president’s multitrillion-dollar economic agenda. Biden hasn’t settled on a choice, and it remains unclear whether he’s leaning toward reappointing [Fed Chair Jerome] Powell or replacing him with the favored candidate of liberal Democrats, Fed Governor Lael Brainard -- or a different nominee altogether.” Translation: The administration is still keeping all of this incredibly close. Brown on Powell: Will Biden nominate Powell for another term? Maybe, maybe not, says Senate Banking Chair Sherrod Brown . From Bloomberg’s Steven Dennis and Megan Howard: Brown “said that he expects President Joe Biden will release a combination of nominations to the board of the Federal Reserve at the time he unveils his decision on the central bank chair, which may or may not be Jerome Powell.” Scott on Powell: Add this one to your lists: Florida Republican Sen. Rick Scott says he won’t support Powell if Biden picks him for a second term, citing “rising inflation, broken supply chains and continued workforce challenges.” (Just a reminder from your MM host that Powell, who was first nominated by President Trump, still enjoys broad support on both sides of the aisle.) FIRST LOOK: YELLEN IRELAND SPEECH — Treasury Secretary Janet Yellen, who is traveling to Italy, Scotland and Ireland in the coming days, is set to deliver the keynote address at an event in Dublin on Nov. 1 called “The Future of the Global Economy: U.S. and Irish Perspectives.” The secretary’s speech will focus on the hugely consequential decision by Ireland to join 135 countries in support of a global minimum tax, Treasury says. She’ll also emphasize the importance of the U.S.-Irish bond (more than 900 U.S. companies have put down roots in Ireland and employ more than 18,000 people there, and invest around $6 billion in capital expenditures in the country every year) and the need for collective rather than individual action. FIRST LOOK: TRANSITIONS — Former Justice Department official Jai Ramaswamy is joining Andreessen Horowitz’s crypto fund as its chief regulatory officer. Ramaswamy, who heads up risk compliance at Celo, a crypto payments startup, previously oversaw risk management at Capital One and anti-money-laundering compliance at Bank of America, and served as chief of the money laundering section at the Justice Department, overseeing prosecutions of BNP Paribas and HSBC. | | | | A message from the American Bankers Association:   | | | | | | Add the Federal Deposit Insurance Corp. to the list of regulators with their eyes on crypto, Bloomberg’s Luke McGrath reports. Bloomberg’s Robert Schmidt and Jesse Hamilton dive into the fight over Biden’s OCC pick. From NYT’s Matt Phillips: “Investors in the Treasury bond market who are keenly attuned to inflation have been steadfast in their belief that it was a temporary phenomenon. That’s now changing.” | | A message from the American Bankers Association: A proposal in Congress would force financial institutions to provide details to the IRS on the inflows and outflows of millions of bank accounts. While supporters say the proposal is aimed at reducing the tax gap by targeting wealthy tax cheats, this data dragnet would actually capture information from millions of small businesses and consumers who are not suspected of tax avoidance.
Everyone should pay their fair share of taxes, but this proposal goes too far and raises serious questions about Americans’ right to privacy—while damaging the hard-earned trust between banks and their customers. Tell Congress to oppose this misguided reporting regime and demand that the IRS focus on tax cheats, not all taxpayers.
It’s not too late to protect your financial data. Learn more about the issue and take action here. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
