Why infrastructure talks are in real trouble — Manchin wants more time — Big bank CEOs on deck

From: POLITICO's Morning Money - Wednesday May 26,2021 12:05 pm

May 26, 2021

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Quick Fix

West Wing mind-meld: Why infrastructure talks are in real trouble — Bipartisan infrastructure talks seem all but dead, though Sen. Joe Manchin (D-W.Va.) wants to keep them going (more on which below). A big part of the reason is the still giant gap on price tag.

Another reason, a person familiar with White House thinking tells MM, is that while Republicans want to re-program already allocated funds under the American Rescue Plan or previous Covid stimulus bills, the administration doesn’t think that’s really possible or at all advisable.

This person said President Biden himself and other senior White House officials still want to figure out if there is an acceptable infrastructure compromise package that could draw both moderate Democratic and some GOP support. But that’s not likely to happen if the GOP comes forward with plans to cover some $700 billion or so of the cost by re-programming previously allocated funds.

The administration has looked into the idea and found that much of the money under discission is ear-marked for rural hospitals or headed to state and local governments that have already done budgets based on the funding or to emergency aid to businesses like restaurants.

Not all of the money is already out the door. But much of it is or will be. And a good bit of the possible re-programming would come from efforts, like the restaurant rescues, that Republicans have bragged about.

“There is this $700 billion [re-programming] number out there and there is just no way to get there or anywhere even close to there,” the person familiar with White House thinking said. “Though it will be interesting to see the details on what they come up with.”

Bottom line : This person said the administration is not looking for ways to kill GOP counter offers or end talks. They view the idea that all hope is lost on bipartisan deal-making as premature. But if the GOP bases its next proposal on reallocating previously appropriated money, that’s not likely to work.

GOOD WEDNESDAY MORNING — Happy Big Bank hearing day! 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.

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Driving the Day

The Big Six bank CEOs (Goldman, Morgan Stanley, Citi, Wells, BofA and JPMC) testify at 10:00 a.m. before Senate banking. Diversity, climate change, Covid and the economy are likely to be among the many topics … House Financial Services subcommittee has a hearing at noon on “Consumer Credit Reporting: Assessing Accuracy and Compliance” …

HEARING PREP — Sen. Elizabeth Warren (D-Mass.) comment ahead of the big hearing: “The big banks and giant corporations made billions in profits during the pandemic and passed those gains on to their executives and shareholders -- the banks have also used the crisis to try and weaken rules that protect our financial system while continuing to nickel and dime their customers.

“This is corporate greed plain and simple. Instead, we need financial institutions to make the big investments in communities and small businesses that our country needs for an equitable recovery and it is our job to fight for that."

Warren on Tuesday also pressed the Biden White House to dump Fed Vice Chair for Supervision Randy Quarles as soon as they can.

MM hears … That former CEA chair and current Harvard prof Jason Furman’s 13 year-old daughter went five for five in softball and executed an unassisted triple play at third base! Way to go! (Feel free to share all kid-related brags with me.)

SUMMERS REBUTTED — Center for Economic and Policy Research’s Dean baker: “Larry Summers has a column in the Washington Post warning about inflationary risks to the economy, due to what he considers an excessively large recovery package from the Biden administration. …

“Starting with the inflation that we have seen to date, it is important to remember that this follows the very low rate of inflation we saw in the pandemic. Much of this is just catch up. The overall Consumer Price Index (CPI) jumped 0.8 percent in April. That sounds scary, but it is up just 3.1 percent since February of 2020, which translates into a 2.6 percent annual rate of growth”

MARK YOUR CALENDARS! QUARLES EVENT — The U.S. economy is picking up speed, sparking fears of inflation and financial bubbles even as millions are still out of work following the Covid recession.

Join economics reporter Victoria Guida on POLITICO Live on Tuesday, June 1, at 10 a.m. ET for an interview with Federal Reserve Vice Chair of Supervision Randal Quarles to discuss the U.S. economic outlook, how the nation's banks are holding up, and what to expect from the Fed on interest rates and regulations. Register to receive a link to access the virtual interview.

Also via Victoria: A POLITICO Pro Q&A with Acting Comptroller of the Currency Michael

MANCHIN WANTS MORE TIME — Our Burgess Everett: “Democrats are warning time is already running out for … Biden’s agenda. Joe Manchin isn’t in any rush.

“The West Virginia Democrat isn’t ready to wind down bipartisan negotiations on infrastructure, willing to blow through the unofficial Memorial Day deadline. And progressive senators hoping to speed up Biden's priorities by shattering the filibuster shouldn't hold their breath: Manchin reiterated that he won't lower the 60-vote threshold even if Senate Republicans block an independent commission on Jan. 6 in the coming days.”

Markets

STOCKS CLOSE LOWER AFTER REBOUNDING TO START WEEK — WSJ’s Will Horner and Julia Carpenter: “U.S. stocks edged down Tuesday with the Dow Jones Industrial Average slipping in late trading after hovering around the flatline. Bitcoin prices also fell following a period of volatile trading.

“The S&P 500 and Dow both lost about 0.2 percent, while the Nasdaq Composite fell less than 0.1 percent. All three indexes had opened modestly higher before losing steam. Stocks jumped to start the week, with recent comments from Federal Reserve officials helping to ease concerns that rising inflation could stamp out growth or prompt the central bank to suddenly tighten policy.”

IN SIZZLING MARKET, DEMAND AND PRICES FOR HOMES SOAR — AP’s Christopher Rugaber: “America’s housing market has grown so overheated as demand outpaces supply that prices keep hitting record highs — and roughly half of all U.S. houses are now selling above their list price.

“Two years ago, before the pandemic struck, just a quarter of homes were selling above the sellers’ asking price, according to data from the real estate brokerage Redfin. On Tuesday, new data further illuminated the red-hot nature of the housing market: Prices rose in March at the fastest pace in more than seven years.”

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.

Fly Around

WALL STREET BANK CEOS TOUT COVID RELIEF PUSH, DIVERSITY EFFORTS — Reuters’ Michelle Price and Pete Schroeder: “Wall Street bank chiefs will tout the role their institutions have played in getting the pandemic-hit U.S. economy back on track when they appear before Congress this week, but they are likely to face tough questions on hot-button social and economic issues.

“The Senate Banking and House of Representatives Financial Services committees will hear from the chief executives of JPMorgan Chase & Co, Bank of America Corp, Citigroup Inc, Wells Fargo & Co, Goldman Sachs Group and Morgan Stanley on Wednesday and Thursday, respectively.”

WARREN TEARS INTO FED ON CREDIT SUISSE OVERSIGHT PRE-ARCHEGOS — Bloomberg’s Jesse Hamilton: “Senator Elizabeth Warren ripped the Federal Reserve for its oversight of Credit Suisse Group AG in the run-up to Archegos Capital Management’s implosion, arguing the regulator badly blundered when it freed the bank from heightened monitoring.

“Warren pointed out at a Tuesday Senate hearing that the Fed knew Credit Suisse had problems estimating its potential trading losses because the agency had flagged the Swiss bank over that issue in its 2019 stress tests.

CLARIDA SEES TIME APPROACHING FOR TALK ON CUTTING ASSET PURCHASES — WSJ’s Paul Kiernan: “A top Federal Reserve official said he expects to begin discussing a reduction in the central bank’s massive asset purchases at a coming policy meeting, while stressing the need to closely monitor economic data.

SAVED BY ONLINE LENDERS, BUSINESSES SAY THEY’LL BORROW AGAIN — AP’s Joyce M. Rosenberg: “Some small businesses forced to turn to online lenders for pandemic relief are making those niche players a bigger part of their financial game plan, and are even considering dumping their traditional banks altogether.

“Loans from online lenders saved thousands of small business owners who were unable to get COVID-19 relief loans from big traditional lenders. Now, encouraged by getting applications processed within days rather than weeks, these owners are becoming repeat customers.

PAYCHECKS GOT BIGGER FOR MOST BANK CEOS DURING PANDEMIC — Bloomberg’s Jennifer Surane: “The heads of most large U.S. banks saw their pay increase during the pandemic. Among banks with more than $1 billion in assets, two-thirds of chief executive officers had an increase in compensation this year, according to a study by analysts at broker-dealer Janney Montgomery Scott LLC. The average bump was 26 percent for those who got a raise, the data showed.”

STATE REVENUES POUR IN, RAISING PRESSURE ON BIDEN TO DIVERT FEDERAL AID — NYT’s Jim Tankersley and Alan Rappeport: “From California to Virginia, many states that faced devastating shortfalls in the depths of the pandemic recession now find themselves flush with tax revenues because of a rebounding economy and a soaring stock market. Lawmakers who worried about budget cuts are now proposing lucrative increases in school spending, tax cuts and direct payments to their residents.”

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For Your Radar

NIDES TO ISRAEL — Via AP: “Biden is expected to name former senior State Department official Tom Nides to serve as ambassador to Israel, according to a person familiar with the matter. Nides is currently the managing director and vice chairman of Morgan Stanley. He previously served as deputy secretary of state for management and resources under Hillary Clinton from 2011 to 2013.”

TRANSITIONS — Michael Greenwald has been named director of digital asset education for Tiedemann Advisors, while remaining director at Tiedemann Advisors. He is a Treasury Dept. alum.

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