Infrastructure deal! — But it could be a wild summer in D.C. — Calabria out at FHFA

From: POLITICO's Morning Money - Thursday Jun 24,2021 12:03 pm
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By Ben White and Aubree Eliza Weaver

Presented by Accountable.US

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Quick fix

Infrastructure deal! — Nothing is done until there is actual legislation drafted and on the floor of Congress but it seems like the White House and a bipartisan group of Senators have an agreement on an infrastructure package that includes $579 billion in new spending narrowly focused on physical projects and shorn of much of the rest of President Biden’s “Build Back Better Agenda.”

The bi-partisan group, which features Sens. Susan Collins (R-Maine), Joe Manchin (D-W.Va.) and Mitt Romney (R-Utah) are set to visit the White House today to discuss their plan. But the agreement, should it win final White House blessing, sets up a number of hurdles later this summer. The Senate is about to depart for the July Fourth recess, so the package would wait until later this month.

And the White House wants to push through the rest of its much larger spending agenda through the budget reconciliation process requiring just 51 votes in the Senate, which means passage of an actual budget resolution when members return. So Congress would be dealing with an infrastructure bill, a potentially much larger reconciliation package … and oh yeah the need to raise the debt ceiling by the end of July.

We’ve seen many summers of wild fiscal follies and brinksmanship and 2021 looks like it could be another one. For now, markets are not very concerned about D.C. drama given the relative strength of the Covid-19 economic snapback and continued dovish Fed policy. But given fissures on the left about the scope of Biden’s agenda and resistance on the right to new spending, the potential exists for some summer drama that could spook investors.

GOOD THURSDAY MORNING — 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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Dear Corporate America: (a) protect voting rights (b) remain a member of the U.S. Chamber of Commerce. Pick one. You can’t do both. The U.S. Chamber of Commerce has poured millions of dollars into organizations that have pushed voter suppression and is fighting against legislation that would protect our democracy. It’s time to live your values and #DropTheUSChamber. TAKE ACTION: dropthechamber.org

 
Driving the Day

Biden visits Raleigh, N.C. “to highlight the ease of getting vaccinated, encourage vaccinations, and mobilize grassroots vaccine education and outreach efforts” … Senate Banking has a hearing at 10:00 a.m. on “Examining Bipartisan Bills to Increase Access to Housing” … Jobless claims at 8:30 a.m. expected to dip back down to 380K from 412K

ALSO TODAY: Heather Boushey, a member of the White House Council of Economic Advisers will join Women Rule on Thursday noon ET for a live conversation about the policies and systemic changes that can help women recover from the disproportionate impact of the pandemic. Register here to watch live.

CALABRIA OUT AT FHFA — Via our Katy O’Donnell: “The White House on Wednesday removed Mark Calabria as the regulator of U.S. mortgage giants Fannie Mae and Freddie Mac, hours after the Supreme Court gave … Biden more power to fire him.

“The White House late Wednesday appointed Sandra Thompson to succeed Calabria as acting director of the Federal Housing Finance Agency. Thompson has served as deputy director of the agency's Division of Housing Mission and Goals since 2013. … The shuffle at the top of the FHFA will revive the debate over how to overhaul Fannie and Freddie, the behemoths behind about half of the $11 trillion U.S. residential mortgage market.”

LEFT SOURS ON BIDEN — Our Laura Barrón-López and Nicholas Wu: “Biden's honeymoon with progressives is over. During the first six months of his presidency, party activists mostly heaped praise on Biden's tactics and agenda as Democrats moved to capitalize on what they feared would be a very short time with total control of Congress and the White House. When they did express concern, they rarely mentioned the president by name.

“But things have changed. In recent days, liberal lawmakers and grassroots progressive groups have shifted their anxiety and ire toward Biden, as voting legislation, police reform and other major priorities have run into a Republican blockade in the Senate. Progressives are increasingly urging Biden to use the kind of aggressive arm twisting immortalized by former Democratic President Lyndon Johnson to change the minds of conservative Democrats”

RED STATES LEAD THE RECOVERY — Our Rebecca Rainey and Eleanor Mueller: “Republican-led states are leading the recovery from the Covid-19 economic shock, reporting the lowest levels of unemployment and the highest output — and complicating .. Biden’s push for a new sweeping infusion of federal aid.

“Of the 15 states that have returned to pre-pandemic levels of economic activity, 12 are led by Republican governors, Federal Reserve data shows. Of the 10 states reporting the lowest levels of activity since January 2020, seven — including New York, Pennsylvania and Illinois — are run by Democratic governors.”

 

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Fly Around

STOCKS END MIXED AFTER LISTLESS DAY ON WALL STREET — AP’s Damian J. Troise and Stan Choe: “A listless day on Wall Street ended with indexes mixed on Wednesday, as nervousness continues to wash out of the market following last week’s jolt by the Federal Reserve. …

“The majority of stocks in the S&P 500 fell, but gains for financial companies and others that do best when the economy is healthy helped limit the losses. Markets have calmed notably since the Federal Reserve surprised investors last week by saying it could start raising short-term interest rates by late 2023, earlier than expected.”

BIDEN’S ECONOMIC AGENDA FACES FAMILIAR HURDLE WITH FIGHT OVER FINANCING — NYT’s Jim Tankersley and Emily Cochrane: “Biden’s ambitions for a large-scale investment in the nation’s aging public works system along with other parts of his economic agenda hinge on what has always been the most difficult problem for lawmakers: agreeing on how to pay for the spending.

“That question has sent a group of centrist senators scrounging to find creative ways to cover nearly $600 billion in new spending that they want to include as part of a potential compromise plan to invest in roads, broadband internet, electric utilities and other federal infrastructure projects.”

YELLEN: U.S. COULD BREACH DEBT LIMIT DEADLINE IN AUGUST — WSJ’s Kate Davidson: “The U.S. could run out of room to keep paying the government’s bills some time during Congress’s August recess unless lawmakers raise or suspend the federal borrowing limit before then, Treasury Secretary Janet Yellen said

“Congress in 2019 suspended the borrowing limit, or debt ceiling, through July 31, 2021. After that, the Treasury Department won’t be able to raise additional cash through the sale of government securities and would need to deploy emergency measures to keep paying the government’s obligations, as it has in the past.”

She also said inflation should be lower than current levels by the end of the year — Reuters: “U.S. Treasury Secretary Janet Yellen said on Wednesday that inflation should retreat by year end from its current elevated level as supply bottlenecks get worked out, adding she sees little evidence inflation expectations are becoming unanchored.

“Yellen, testifying at a Senate subcommittee on the Biden administration's budget proposal, said the economy has been on a ‘bumpy path’ during its reopening after months of restrictions to combat the spread of COVID-19. Asked by Republican Senator John Kennedy if she thought inflation would keep increasing at the 5 percent year-over-year rate seen last month, Yellen said she thought it would be closer to 2 percent by late this year or early 2022.”

FED OFFICIALS SAY ‘TEMPORARY’ INFLATION SURGE COULD LAST A WHILE LONGER — Reuters’ Howard Schneider: “A period of high inflation in the United States may last longer than anticipated, two U.S. Federal Reserve officials said on Wednesday, prompting one to pull forward his views on when the central bank should start raising interest rates.

“Atlanta Fed president Raphael Bostic said with growth surging to an estimated 7 percent this year and inflation well above the Fed's 2 percent target, he now expects interest rates will need to rise in late 2022. … Both Bostic and Fed Governor Michelle Bowman on Wednesday said that while they largely agree recent price increases will prove temporary, they also feel it may take longer than anticipated for them to fade.”

FED’S BOSTIC: BOND BUYING DRAWDOWN NEAR — WSJ’s Michael S. Derby: “Federal Reserve Bank of Atlanta President Raphael Bostic said Wednesday he has moved forward his expectations for a central bank rate rise to next year and that the time is coming soon for the Fed to pare its bond buying stimulus efforts.

"‘Given the upside surprises and recent data points, I’ve pulled forward my projection for our first move to late 2022,’ Mr. Bostic said in a call with reporters. Mr. Bostic said he also expects two additional increases in the federal-funds rate in 2023.”

KAPLAN SEES HIKE IN 2022, BUT TAPER STARTING SOONER — Bloomberg’s Catarina Saraiva: “The U.S. economy will likely meet the Federal Reserve’s threshold for tapering its asset purchases sooner than people think, said Dallas Fed President Robert Kaplan, who has penciled in an interest-rate increase next year.

“‘As we make substantial further progress, which I think will happen sooner than people expect — sooner rather than later — and we’re weathering the pandemic, I think we’d be far better off, from a risk-management point of view, beginning to adjust these purchases of Treasuries and mortgage-backed securities,’ Kaplan said Wednesday in an interview with Bloomberg News.”

 

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For Your Radar

NEW FROM MFA — The Managed Funds Association today “is launching ‘Investing In Opportunity,’ a new initiative to drive awareness of the value hedge funds provide to millions of Americans across all 50 states.”

TRANSITIONS — Mary Baskerville is now a manager of external affairs at Philip Morris International. She most recently worked for Mastercard’s Center for Inclusive Growth and is a Clinton Foundation and Obama administration alum.

 

A message from Accountable.US:

Dear Corporate America:

(a) protect voting rights
(b) remain a member of the U.S. Chamber of Commerce

Pick one. You can’t do both.

Corporate America has pledged to speak up and protect Americans’ sacred right to vote … but many remain members of the U.S. Chamber of Commerce, a group that has poured millions of dollars into voter suppression efforts and backing anti-democratic actions. You can’t protect democracy and support the U.S. Chamber.

It’s time to live your values and #DropTheUSChamber. TAKE ACTION: dropthechamber.org

 
 

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