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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 Ben White and Aubree Eliza Weaver | Presented by |  | | | 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 6 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.
| | | No quick warm up with China — One hope on Wall Street for the Biden presidency was a quick warm up in relations with China after the bruising, trade-war dominated Trump years. Well, pump the brakes on that. Biden is not likely to continue to escalate tariffs the way Trump did. But there is no warm up in sight, at least as of Thursday’s Alaska summit. And there may not be one anytime soon, given plenty of Democrats want to see the administration keep up a tough line with the Chinese. Via our Nahal Toosi : “The first high-level meeting between U.S.-Chinese officials under the new Biden administration got off to a chilly start … with senior American diplomats accusing China of threatening world stability and Chinese officials alleging America is a human rights hypocrite due to its mistreatment of Black citizens. “National Security Adviser Jake Sullivan and Secretary of State Antony Blinken are meeting in Anchorage, Alaska, with top Chinese diplomats Yang Jiechi and Wang Yi. The two countries are at odds on many issues, from cyberattacks to trade; the relationship grew steadily worse under … Trump … To date, the administration hasn't moved to roll back the sanctions and tariffs imposed by Trump, but it has also said it wants to work with China on common challenges, like climate change.” Via Reuters: “The United States and China leveled sharp rebukes of each others’ policies … with deeply strained relations of the two global rivals on rare public display during the meeting’s opening session in Alaska. “The United States, which quickly accused China of ‘grandstanding’ and violating the meeting’s protocol, had been looking for a change in behavior from China, itself having expressed earlier this year a hope to reset sour relations. Blinken: “We will ... discuss our deep concerns with actions by China, including in Xinjiang, Hong Kong, Taiwan, cyber attacks on the United States, economic coercion of our allies,” Blinken said in blunt public remarks.” Why to care? — U.S.-China relations are not top of mind at the moment given Covid, the stimulus package, infrastructure, the legislative filibuster, anti-Asian violence and so many other issues dominating the news. But it remains the most significant bilateral relationship in the world and a sharp escalation of tensions will eventually be felt in markets. But the Biden White House can absolutely not be seen as going soft on China, especially as they are under attack over issues at the southern border. Watch this space. | | A message from the American Bankers Association: Since the onset of COVID-19, America’s banks have stepped up to provide PPP loans for more than 5.2 million businesses. Cap8 Doors and Hardware based in Washington, D.C., is one of them. Founder and principal Lisa Williams leaned on National Capital Bank when the crisis hit, and the bank delivered just as banks across the country did. “The importance of a trusted, local bank cannot be understated,” says Williams. See the story. | | | GOOD FRIDAY MORNING — Does it feel to anyone else like this week lasted a YEAR? Enough with the cold, chilly March. At least we get March Madness in earnest starting today. Best of luck to all your pools! Email me on bwhite@politico.com and follow me on Twitter @monringmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. CUOMO SHOW GOES DARK — Our Bill Mahoney and Anna Gronewold in Albany: “The Emmy-winning Cuomo Show has been canceled. The star of the show, embattled New York Gov. Andrew Cuomo, spent half an hour on Thursday yukking it up with representatives of the Mets and Yankees at a press conference in which the press was invited to participate via Zoom but was not allowed to ask any questions. “That came a day after Cuomo said he would no longer answer questions about topics like sexual harassment or nursing homes, issues that are under investigation at the state and federal level. ... It’s all a stark contrast from this point a year ago, when national television networks were beginning to air Cuomo’s daily Covid-19 briefings and his back-and-forth sessions with reporters in their entirety” EVERYONE WAITS ON THE FED AND THE SLR — Our Victoria Guida: “Federal Reserve Chair Jerome Powell … said the central bank would announce ‘in the coming days’ whether it will extend temporary regulatory aid making it less expensive for banks to hold cash and U.S. government debt on their books — a closely watched decision that’s set to be a market-moving event. “But the Fed also made another move that suggests the central bank could let that aid expire: giving banks a route to decrease the amount of deposits they have to hold. Expiration of the regulatory rollback would be a victory for Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.), as well as Rep. Maxine Waters (D-Calif.), who have urged the Fed not to extend it.” Cap Alpah’s Ian Katz: “The exemption was initially made via a Fed announcement/press release, so we expect the official extension or non-extension to be publicized similarly, not via a press conference. “Of course, the SLR question is always worth asking Powell or Fed reg czar Randy Quarles, because even a non-committal answer can provide tea leaves or body language to read. But in this case Powell just shut it down. More interesting was the FOMC/New York Fed announcement that’s being viewed in some circles as an indication that the Fed may let the SLR exemption expire.”
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TAX FILING DELAY COULD IMPACT CHILD TAX CREDIT — Our Brian Faler: “The delay in the tax-filing deadline could potentially postpone the launch of a new monthly child tax credit payment program, the head of the IRS warned … Commissioner Chuck Rettig also said he expected that people will not have to file amended returns in order to claim a new tax break on jobless benefits.
“Appearing before a House tax subcommittee, he rejected suggestions the agency postpone its deadline for filing quarterly estimated tax payments, as it did for annual returns. And Rettig pushed back against complaints about a backlog of unprocessed tax returns at the agency, pointing to the coronavirus pandemic and recent tax legislation approved by Congress.”
| | | | A message from the American Bankers Association:   | | | | | | STOCKS FALL, PULLED DOWN BY IT AND ENERGY — AP’s Damian J. Troise: “Stocks were mostly lower in afternoon trading Thursday, as higher bond yields once again pulled down shares of technology companies and the energy sector sold off on a drop in oil prices. The S&P 500 index was down 1 percent as of 3:00 p.m. Eastern. The technology-heavy Nasdaq Composite lost 2.4 percent. The Dow Jones Industrial Average was down 10 points to 33,004, after rising more than 200 points earlier.” POWELL CAN’T LET MARKETS SEE HIM SWEAT — WSJ’s Greg Ip: “Headed into Wednesday’s Federal Reserve meeting, investors wondered if a brightening outlook would force an earlier increase in interest rates. Officials didn’t blink: Their forecasts showed rates wouldn’t lift off from near zero before 2024, unchanged from December. “Superficially, this is surprising. Since December, vaccines have rolled out more quickly than planned and Congress has enacted trillions of dollars of new fiscal stimulus. Officials dutifully upgraded their projections of economic growth, employment and inflation. So why no change in the path of interest rates.” And now Powell is facing a political test on the bank capital relief issue — Reuters’ Pete Schroeder: “An esoteric bank capital rule has become an unlikely political hot potato for Federal Reserve Chair Jerome Powell, as the Republican appointee enters the final 12 months of his term under Democratic President Joe Biden’s administration, analysts said. “On March 31, an emergency pandemic regulatory relief measure that for the past year has allowed Wall Street banks to hold less loss-absorbing capital against certain assets is due to expire.” He also says Covid has highlighted the need to improve cross-border payments — WSJ’s Paul Kiernan: “The coronavirus pandemic has underscored the need to improve systems for transferring money across international borders, Federal Reserve Chairman Jerome Powell said Thursday. ‘The Covid-19 pandemic has shined a light on the less efficient areas of our current payment system and accelerated the desire for improvement and digitalization,’ Mr. Powell said” BOND MARKET LIKE A ‘COILED SPRING’ AFTER FED MEETING —Reuters’ Karen Brettell and Kate Duguld: “Investors are closely watching how fast U.S. Treasury yields may rise after the Federal Reserve this week reiterated its commitment to loose policies that are likely to help further boost economic growth and inflation. "That’s a key issue for both investors and Fed officials who would rather not have to ride out another bout of bond market volatility, as a growing body of indicators suggests U.S. growth is poised to take off this year.” | | A message from the American Bankers Association: Throughout the COVID-19 crisis, America has seen banks of all sizes at their best. As the largest economic rescue program in U.S. history, SBA’s Paycheck Protection Program put the entire banking industry to the test. And America’s banks stepped up.
To date, PPP relief has supported over 50 million American jobs across 50 states—with more than a quarter of the relief provided to women- and minority-owned businesses in historically underserved areas. In January alone, over 4,000 community banks delivered critical PPP funds to small businesses not unlike their own—cornerstones of their local economies.
Support from America’s banks through PPP ensures businesses and the economy have a viable path toward recovery. It’s what banks have done, and continue to do, every day—help build vibrant and growing communities, and fuel the national economy—and it’s never been more important. | | | | | | DALIO SAYS INFLATION HEIGHTENS RISK OF AN EARLIER FED RATE HIKE — Bloomberg’s Katherine Burton: “Ray Dalio, founder of Bridgewater Associates, said rising inflation could force the Federal Reserve to raise rates earlier than anticipated. ‘Think of the economy as being like an individual and their pulse is dropping,’ Dalio said in an interview with David Westin on Bloomberg TV. “‘When the pulse is dropping the doctors come running in with the stimulant and they inject the stimulant. Now that the economy is rebounding inflation pressures are rebounding.’” CORPORATE REFORMERS FACE MORE FIGHTS TO GET PROXY VOTES — Reuters’ Ross Kerber and Jody Godoy: “U.S. corporations are fighting harder this year to keep activist shareholder proposals off the ballot at their annual meetings, partly because of a proliferation of investor demands for racial justice reforms. “The trend shows the high stakes for the acting head of the U.S. Securities and Exchange Commission, Allison Herren Lee, who in a pair of speeches this week outlined reviews of the shareholder proposal process and voting disclosures.” WHY COVID AID, INFLATION FEARS HOLD THE KEY TO DOLLAR’S FUTURE — WSJ’s Paul J. Davies and Caitlin Ostroff: “The U.S.’s economic prospects look brighter than those of many other countries—and that has driven an unexpected dollar rally this year. Investors thought the greenback would weaken during a coordinated global rebound from Covid-19 lockdowns. “Instead, the U.S. stands apart from the rest. The flip side of this exceptionalism is a growing fear of higher inflation that could eventually reverse the dollar’s fortunes, according to some investors.”
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HOT HOUSING MARKET FUELS A RISE IN HOMEOWNERS’ EQUITY — AP’s Alex Veiga: “The red-hot U.S. housing market is paying off for many homeowners, even those who aren’t looking to sell their home. On average, homes with a mortgage gained $26,300 in equity in the last three months of 2020 versus a year earlier, according to real estate information company CoreLogic. That average gain is the highest since 2013, the firm said.”
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