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Presented by the Independent Community Bankers of America: 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. | | | Going big on cap gains — White House NEC Director Brian Deese tried to lay out the rationale for basically doubling the capital gains rate to what would be the restored top personal income rate of 39.6 percent. “We need to do something about equalizing the taxation of work and wealth in this country,” Deese said. “And that’s why the reforms that the president will lay out are focused on this top sliver of people.” Deese added that the higher rate — which could top 50 percent in New York and California and other places with high state taxes — would only hit about 500,000 wealthy Americans. Those numbers may be correct . But there is no way the White House is going to be able sell Congress on cap gains rates this high. And there would certainly be a major economic impact if they did manage to do so, from investors scrambling to realize gains before the new rates hit (possible whacking markets) to lower incentives to invest capital going forward. Or for investors to simply hang on to paper gains rather than realizing them, leading to lower tax revenues (more on this below.) Biden will try and sell a broadly progressive agenda in his address to Congress tomorrow night. But the White House is in complete fantasy land on a lot of these tax hikes, which are simply not going to happen. But the incentive now is to keep the left fully on board — and tax hikes on the rich are very politically popular — so it makes sense that the administration would go hard at the start. But they are not going to wind up with anything that looks remotely like what they are proposing. No outdoor masks ahead?? — Via Bloomberg: “A growing call for health officials to relax rules about outdoor mask wearing could soon lead to one of the most significant changes in virus guidelines since the U.S. first told Americans to don face coverings to curb the spread of Covid-19. “Outdoor mask wearing has been the subject of controversy in recent weeks. There’s evidence that vaccines not only prevent illness, but also viral transmission. And with the U.S. averaging 2.74 million vaccine doses daily … even some public health experts are calling for less strict guidelines as warmer weather arrives. A response could come as early as Tuesday” GOOD TUESDAY MORNING — Please. Someone help the Yankees stop losing games. MM can’t take it. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver. | | A message from the Independent Community Bankers of America: Community banker congressional meetings this week: Accounting for roughly 60 percent of Paycheck Protection Program lending from nearly 50,000 locations serving every congressional district, community banks have been financial first responders during the coronavirus pandemic. As part of this week’s ICBA Capital Summit, community bankers are meeting with members of Congress and offering bipartisan legislative solutions to continue moving our nation forward. Read ICBA’s bipartisan agenda. | | | | | | President Joe Biden is expected to issue an executive order requiring federal contractors to pay a $15 minimum wage … In the afternoon, Biden will offer remarks on Covid on the North Lawn … Case-Shiller Home Prices at 9 a.m. expected to rise 1.1 percent … Consumer Confidence at 10 a.m. expected to rise to 112.0 from 109.7 … NEW GOLDMAN/BLOOMBERG PARTNERSHIP — Mike Bloomberg and Goldman Sachs CEO David Solomon are “announcing a new partnership [that] has two overarching goals: drive more clean energy investment in emerging markets (especially in South and Southeast Asia) and develop new climate-friendly tools to help investors align their portfolios with the transition to net zero emissions.” NOBODY UNDERSTANDS CRYPTO — Per a poll from Future Majority & Change Research: “Voters have a broad but paper-thin understanding of cryptocurrency. Most say they have heard of cryptocurrency (87%) generally and Bitcoin (97%) specifically. “However, three-quarters (76%) of voters say they do not know about or understand Blockchain technology, a significantly high share given that people generally report greater knowledge of a topic than they actually possess.” INSIDE THE CAP GAINS NUMBERS — Our Brian Faler: “Biden’s plan to hike capital gains taxes would actually cost the government $33 billion, according to a new analysis. But if he also ended so-called stepped up basis at death, then it would generate $133 billion, say budget forecasters at the University of Pennsylvania. “The analysis highlights a challenge Democrats will face making good on Biden’s plan to charge the wealthy ordinary income tax rates on their capital gains. The problem is that budget analysts believe that if rates get too high — typically, they say beyond the high 20s — people will stop selling assets in order to avoid the tax, and government receipts will actually fall compared to what they would have otherwise been had the tax never changed.” | | | | JOIN AN IMPORTANT CONVERSATION, SUBSCRIBE TO "THE RECAST": Power is shifting in Washington and across the country. More people are demanding a seat at the table, insisting that all politics is personal and not all policy is equitable. “The Recast” is a twice-weekly newsletter that explores the changing power dynamics in Washington and breaks down how race and identity are recasting politics and policy across America. Get fresh insights, scoops and dispatches on this crucial intersection from across the country and hear critical new voices that challenge business as usual. Don't miss out, SUBSCRIBE . Thank you to our sponsor, Intel. | | | | | | | | STOCKS REACH MORE RECORDS — AP’s Damian J. Troise and Alex Veiga: “Technology companies helped lift stocks modestly higher on Wall Street Monday, nudging the S&P 500 and Nasdaq indexes to all-time highs. “The S&P 500 rose 0.2 percent, with only slightly more than half the companies in the index notching gains. Banks and companies that rely on consumer spending were among the winners, outweighing a pullback in household goods makers and health care stocks, among others.” NASDAQ COMPOSITE SETS FIRST RECORD SINCE FEBRUARY — WSJ’s Caitlin Ostroff and Alexander Osipovich: “The Nasdaq Composite on Monday set its first record since February as investors looked ahead to a busy week of corporate earnings reports, including from some of the biggest technology companies. … “Technology stocks have lagged behind other sectors this year, including financials, industrials and energy. While highflying tech stocks led the market’s rebound from the depths of last year’s coronavirus-fueled selloff, investors in recent months have pivoted toward shares of companies with less lofty valuations, as well as economically sensitive stocks that could benefit from a broad post-pandemic recovery.” INVESTORS STAY HUNGRY FOR INFLATION-PROTECTED BONDS — WSJ’s Matt Wirz: “Demand for inflation-protected bonds remains high despite a recent decline in Treasury yields, indicating that investors have long-term concerns about the impact of economic growth on interest rates. Investors poured a net $1.2 billion into mutual funds that buy Treasury inflation-protected securities, or TIPS, in the week ended April 21, according to data from EPFR. It was the 29th consecutive week of inflows into such funds, the longest streak since 2010. “Yields of conventional Treasury bonds, which fall when prices rise, have slipped recently as concerns subsided that the Federal Reserve would raise interest rates sooner than projected and foreign investors returned after an early-year exit.” AS SMALL-CAP STOCKS LAG, WALL STREET WORRIES ABOUT BROAD SLOWDOWN — Reuters’ David Randall: “An historic rally in share prices for smaller U.S. companies has slowed sharply in April after six months of strong gains, leading many investors to worry that the stock market as a whole may have already priced in a strong rebound from the pandemic. “‘The easy money has been made for small caps and for the market overall,’ said Doug Foreman, chief investment officer of fund manager Kayne Anderson Rudnick, who expects the broad U.S. market will offer ‘single-digit returns’ for the rest of 2021. ‘The economic recovery is over in financial markets but not in the real world.’” | | | |   | | | | | | STILL GETTING YOUR HEAD AROUND DIGITAL CURRENCY? SO ARE CENTRAL BANKERS. — NYT’s Jeanna Smialek: “America’s Federal Reserve says it is in no rush to issue a digital currency, but it is coming under intense and increasing pressure to research and understand the design and potential of digital money. “From the Bahamas to China, global central banks are experimenting with digital offerings, fueling concerns on Capitol Hill that the Fed might fall behind the competition. And breakneck innovation in the private sector suggests that the Fed, a key financial regulator, needs to understand budding private digital payment technologies.” EVEN AS ECONOMY HEATS UP, FED TO STICK TO NEAR-ZERO RATES — AP’s Christopher Rugaber: “Hiring is accelerating as Americans increasingly venture out to shop, eat at restaurants and travel, and inflation pressures are even picking up after lying dormant for years. Yet this week, the Federal Reserve is all but sure to reiterate its commitment to ultra-low interest rates. “At a news conference Wednesday after the Fed’s latest policy meeting ends, Chair Jerome Powell will likely underscore his view that the economy is far from fully recovered and needs the central bank’s continued support in the form of low borrowing costs. There are still 8 million fewer jobs than there were before the pandemic struck. And the unemployment rate, at 6 percent, though well below where it was a year ago, remains elevated.” | | | | DON'T MISS OUT ON OUR NEW PLAYBOOK DEEP DIVE PODCAST: Washington is full of whispers, colorful characters and little-known back stories that even D.C. insiders might not know. Playbook Deep Dive is a new, weekly podcast that pulls back the curtain on the stories behind the power. From Congress and the White House to bar stools and backrooms, POLITICO's top reporters and Playbook authors bring you the most compelling and confounding stories that explain what’s really going on in Washington. SUBSCRIBE NOW. | | | | | FED’S ‘MAXIMUM EMPLOYMENT’ PUSH COULD FALL SHORT — Reuters’ Howard Schneider: “The Federal Reserve has promised to help restore the U.S. economy to "maximum employment," and is pointing to the months just before the coronavirus pandemic as the touchstone for what that might mean. “Yet early evidence from the reopening of the economy suggests the push to reach that goal may be elusive, or at best a more drawn-out process, as the labor market shifts away from the types of jobs lost in 2020, is potentially further transformed by massive infrastructure spending, and sees some workers quit job-seeking altogether.” WHAT WALL STREET IS TELLING US ABOUT THE ECONOMIC OUTLOOK — WSJ’s Sam Goldfarb and Peter Santilli: “What do investors expect from a post-pandemic economy? They generally seem quite optimistic. Stocks are hitting records. Meanwhile, yields on U.S. government bonds and certain derivatives are suggesting the economy will be strong enough for the Federal Reserve to start raising short-term interest rates by 2023 and keep going for a couple of additional years. “In essence, investors are betting that a combination of government stimulus and coronavirus vaccines can drive a quick return to the economy that existed just before the pandemic. Back then, a decade of slow, steady growth had finally started to produce meaningful gains for even low-skilled workers.” TRANSITIONS — Nida Zaman has joined Wells Fargo as federal government relations director covering Senate Democrats. She most recently served as a leader in congressional relations in the Office of the Comptroller of the Currency. | | A message from the Independent Community Bankers of America: Community bankers and ICBA offer bipartisan solutions: At a time of historic challenge and opportunity, community bankers this week are meeting with members of Congress as part of the ICBA Capital Summit.
Congress is closely divided, but it need not be gridlocked. While saving an estimated 33.7 million jobs through the first round of Paycheck Protection Program lending and serving every congressional district with their more than 700,000 employees, community banks have a track record of working with both parties to craft pragmatic solutions.
During this week’s ICBA meetings, community bankers will discuss bipartisan policy reforms to help continue the economic recovery in urban, suburban, and rural communities nationwide. Read ICBA’s bipartisan agenda. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
