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Presented by Canadian National Railway Company: 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. | | | Markets flash inflation warnings — The Fed doesn’t see it. The White House isn’t worried about it at all. But markets are clearly freaking out a bit about the prospect for higher gas prices, a potential sustained labor crunch and continued wide open fiscal and monetary policy to create an inflation shock. The Dow tanked around 500 points Tuesday, not a huge deal at only 1.4 percent. But it came after another down day with other indices also dropping in the last several sessions. The risk of sharply higher inflation cutting into the economic recovery remains among the biggest risks facing President Joe Biden’s White House. Via Brian Price , Head of Investment Management for Commonwealth Financial Network: “Given that equity markets are still in shouting distance of all-time highs it is not surprising to see investors hit pause and evaluate the various catalysts for the next move higher in stock prices. For the time being I think that investors may remain on edge until there is more certainty from Washington regarding fiscal policy.” Via Ryan Detrick, Chief Market Strategist for LPL Financial: “What started in technology earlier this month has finally moved over to the broader markets … Although we are coming off a record earnings season, continued supply chain and labor shortages are adding to potential inflationary pressures.” Powell defended — Lots of react to our piece on whether Biden will renominate Jay Powell for another term as Fed Chair. Via RBAdvisors’ Rich Bernstein: “I’m not sure how the left could be upset with Powell. We’ve got the fastest money growth in my lifetime … by a lot! Isn’t that what progressive-sponsored MMT is all about?” Speaking of higher gas prices — Our Ben Lefebvre and Eric Geller: “The Biden administration is scrambling to ease the gasoline crunch that is causing scattered shortages and fears of price spikes in parts of the Mid-Atlantic and Southeast — one of the most economically and politically worrisome consequences of the cyberattack that shuttered one of the nation’s biggest fuel pipelines. “The moves, including waivers of some environmental and labor rules to ease gasoline shipments, come as the closure of the Colonial Pipeline enters its fifth day, further straining a fuel market approaching its busiest season of the year. Already, industry estimates indicate that about 8 percent of gas stations in Virginia and North Carolina are out of fuel, even if supplies nationwide are ample enough to cope with demand.” GOOD WEDNESDAY MORNING — Happy Hump Day, all! 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 Canadian National Railway Company: CN + KCS: Creating The North American railway for the 21st century.
CN is the better bid, better partner, better railway and best solution for KCS. Together, CN and KCS will create a true USMCA railroad that establishes a seamless single-line service to expand North American trade and power economic prosperity. For important information, visit www.connectedcontinent.com. | | | | | | House Financial Services has a mark-up hearing at 10 a.m. on multiple bills …Consumer Prices at 8:30 a.m. expected to show a gain 0.2 percent headline and 0.3 percent core, driven rents, airfares and vehicle prices … DEM SENS AIM AT CARRIED INTEREST — Per release out this morning: “U.S. Senators Tammy Baldwin (D-WI), Joe Manchin (D-WV), and Sherrod Brown (D-OH) … introduced tax reform legislation to close the carried interest tax loophole that benefits wealthy money managers on Wall Street. “Currently, the carried interest loophole allows investment managers to pay the lower 20 percent long-term capital gains tax rate on income received as compensation, rather than the ordinary income tax rates of up to 37 percent that they would pay for the same amount of wage income. The Carried Interest Fairness Act will require carried interest income to be taxed at ordinary rates. According to the Joint Committee on Taxation, closing this loophole will raise $15 billion in revenue over 10 years.” MM SIDEBAR — This is a hearty perennial for Democrats and certainly part of Biden’s plans for higher tax rates on the wealthy. But the private equity industry has crushed it many times before and could very well do so again. SENATE KILLS TRUMP LENDING RULE — Our Victoria Guida: “The Senate voted … to kill a Trump-era regulation that made it simpler for lenders to skirt state-level interest rate caps, a move that marks a major legislative victory for Banking Chair Sherrod Brown. “The 52-47 vote is a step toward nullifying the so-called true lender rule, finalized in October by the Office of the Comptroller of the Currency, which oversees national banks. The resolution also has a good chance of passing the House, given that it picked up bipartisan support in the upper chamber. Sens. Cynthia Lummis (R-Wyo.), Marco Rubio (R-Fla.) and Susan Collins (R-Maine) joined with Democrats to overturn the rule under the Congressional Review Act” REACT — Center for Responsible Lending Director of State Policy Lisa Stifler: “The OCC rule promotes illegal, predatory lending that traps financially vulnerable families in debt” … Graciela Aponte-Diaz, director of federal campaigns at the Center for Responsible Lending: “The U.S. Senate, on a bipartisan basis, voted to curb the spread of predatory loans. The House should do the same without delay and regulators should crack down on these rent-a-bank schemes.” said TAX SYSTEM HIGHLY PROGRESSIVE, PER JCT — Our Brian Faler: “ A new government analysis illustrates a basic fact about the U.S. tax system: It is highly progressive. While stories of the rich paying less than average people get lots of attention, figures by the official Joint Committee on Taxation suggest those are the exceptions to the rule. “It says people earning more than $1 million in 2018 paid an average tax rate of 31.5 percent, including federal income, payroll, corporate and excise taxes. That means 31.5 cents of every dollar they earned went to the IRS. By comparison, JCT says, people earning between $75,000 and $100,000 paid 15.8 percent and those making between $20,000 and $30,000 paid 3.1 percent.” | | | |   | | | | | | STOCKS PULL BACK AS INFLATION CONCERNS GROW — AP’s Damian J. Troise and Alex Veiga: “Stocks closed lower on Wall Street, led by banks, industrial and health care companies. Inflation remains a growing concern among investors, which would be a major drag on the overall market if it takes hold. “The S&P 500 lost 0.9% Tuesday and the Dow Jones Industrial Average gave back 1.4%. Tech stocks, which get most of their valuation from the future profits those companies are expected to earn, become less valuable if inflation decreases the value of those earnings.” CFTC WHISTLEBLOWER PROGRAM IN PERIL — WSJ’s Alexandra Berzon: “The Commodity Futures Trading Commission’s whistleblower program is in turmoil over a potential payout exceeding $100 million to a former Deutsche Bank AG executive — one so large it would deplete the agency’s whistleblower funds and has led it to seek congressional action. “The executive had provided information that helped CFTC and Justice Department investigations that led to roughly $2.5 billion in settlements with Deutsche Bank in 2015, including $800 million with the CFTC. They alleged that the bank manipulated the London interbank offered rate, or Libor, a benchmark interest rate used to set short-term loans for global banks.” | | | | SUBSCRIBE TO "THE RECAST" TODAY: Power is shifting in Washington and in communities across the country. More people are demanding a seat at the table, insisting that 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 in 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. | | | | | | | | FED OFFICIALS SAY ECONOMIC OUTLOOK BRIGHT, BUT AID STILL NEEDED — Bloomberg’s Craig Torres, Matthew Boesler and Steve Matthews: “The U.S. economy is on the road to recovery but still faces risks and it’s premature to discuss reducing monetary policy support, according to a chorus of Federal Reserve officials. “‘The outlook is bright, but risks remain, and we are far from our goals,’ Governor Lael Brainard told a virtual event Tuesday hosted by the Society for Advancing Business Editing and Writing. ‘It will be important to remain patiently focused on achieving the maximum-employment and inflation outcomes in our guidance.’ JOB OPENINGS SOAR TO HIGHEST LEVEL ON RECORD — AP’s Christopher Rugaber: “U.S. employers posted a record number of available jobs in March, illustrating starkly the desperation of businesses trying to find new workers as the country emerges from the pandemic and the economy expands. "Yet total job gains increased only modestly, according to a Labor Department report issued Tuesday. The figures follow an April jobs report last week that was far weaker than expected, largely because companies appear unable to find the workers they need, even with the unemployment rate elevated at 6.1 percent.” And Fed officials are left trying to decipher what that means — Reuters’ Howard Schneider and Ann Saphir: “Federal Reserve officials grappled on Tuesday with April's surprisingly weak employment growth, maintaining faith in the U.S. economic rebound but acknowledging the pace of the jobs recovery may prove choppier than anticipated. "The United States added 266,000 jobs last month, about a quarter of the gain penciled in by economists, including Fed officials themselves, in what had been anticipated to be the start of a steady run of strong job growth.” CREDIT CARD DEBT KEEPS FALLING, LEAVING BANKS ON EDGE — WSJ’s AnnaMaria Andriotis: “Americans are paying down their credit-card debt at levels not seen in years. That is good news for everyone but credit-card issuers. Large card issuers that cater to borrowers ranging from the affluent to the subprime say that overall card balances — and thus the firms’ interest income — are falling. To make up for it, issuers are spending more on marketing and loosening their underwriting standards.” | | | | SUBSCRIBE TO WEST WING PLAYBOOK: Add West Wing Playbook to keep up with the power players, latest policy developments and intriguing whispers percolating inside the West Wing and across the highest levels of the Cabinet. For buzzy nuggets and details you won't find anywhere else, subscribe today. | | | | | | | | TRANSITIONS — Christopher Gray is now VP in the office of strategic engagement at the American Bankers Association. He previously was deputy chief of staff at the Small Business Administration … Brian Montgomery, Hunter Kurtz, Michael Marshall, Keith Becker and Dror Oppenheimer have launched Gate House Strategies LLC, an advisory venture focused on FHA/Ginnie Mae/HUD/Fannie Mae/Freddie Mac compliance and support. They’re all former executives at these agencies. NEW ON COVID FINANCES — Per JPMorgan Chase Institute report out this a.m.: “Among their findings, researchers found that cash balances temporarily increased by roughly 70% after the arrival of each round of stimulus. “Balances fell continuously after the stimulus payments, with faster spend-down for families that are lower-income, younger, or working in essential industries. This shows that the social safety net and stimulus are playing a key role in boosting the cash buffers of families, especially low-income families.” NEW VOTING REPORT — Accountable.US has a new report “on the U.S. Chamber's long history supporting” voting limitation laws. | | A message from Canadian National Railway Company: CN+KCS: Safer. Faster. Cleaner. Stronger.
Creating The North American railway for the 21st century.
Safer. CN brings an uncompromising commitment to safety – both in culture and in ongoing investments in advanced technology.
Faster. A combination will provide more end-to-end single-owner, single-operator services from Mexico to Detroit than any other Class 1 railroad with more network access and benefits for customers, ports and terminal owners.
Cleaner. New competitive routes will be created through a combination of CN and KCS, accelerating the shift from truck to rail while driving down greenhouse gas emissions, fuel consumption and congestion.
Stronger. CN and KCS will create a true USMCA railroad that establishes a seamless single-line service to expand North American trade and power economic prosperity.
For important information, visit www.connectedcontinent.com. | | | | | | | Follow us on Twitter | | | | Follow us | | | | |  |
