National Economic Director Gary Cohn and Treasury Secretary Steven Mnuchin. (Reuters/Kevin Lamarque)
Wall Street’s affection for the GOP has always come with an asterisk.
Although most financiers share the party’s zeal for cutting taxes and deregulating, they also live and work in liberal strongholds, and their allegiances are frequently divided: Their hearts tug them left, and their wallets pull them right. (For reference, see: Mnuchin, Steven and Cohn, Gary.)
The rise of the tea party challenged Republicans’ tenuous toehold in the industry. It empowered a conservative breed that no longer takes it for granted that policies benefiting the sector justify themselves.
Now, those hard-right ideologues are attempting to assert themselves amid the chaos engulfing the party — a move threatening the party’s Wall Street ties anew.
Arguably nothing outranks tax cuts on the industry’s Washington wish list. The promise of lowered rates helped turbocharge the market rally that President Trump’s election victory unleashed, and it has remained a fixation even as hopes dim for a big deal.
Yet the House Freedom Caucus has emerged as a major stumbling block. The group is hatching its own tax plan (with a 16 percent corporate tax rate, according to HFC Chair Mark Meadows) to contrast with the proposal the “Big Six” negotiators from the administration and GOP leadership are forging behind closed doors. “The Freedom Caucus plan is far more ambitious than anything the “Big Six” can realistically achieve,” Jonathan Swan of Axios wrote this week, quoting a Republican close to leadership who summed it up this way: “It appears that the whole plan is another example of the Freedom Caucus setting unachievable goals that they know leadership can't deliver rather than trying to make law.”
For a tax bill to stand any chance of advancing, congressional Republicans first need to iron out a new budget agreement. That spending blueprint will include the instructions allowing the party to pass a package without Democratic support, a cornerstone of their strategy. There again, though, the Freedom Caucus has thrown a wrench in the works, demanding as the price of their support that the Big Six give them assurances that the tax measure will meet certain marks.
Rep. Jim Jordan (R-Ohio). (Pete Marovich/Bloomberg)
“Hope is not a plan,” Rep. Jim Jordan (R-Ohio), a co-founder of the group, said Thursday morning at a breakfast hosted by Bloomberg News. “What the plan is for tax reform? What the corporate rate's gonna be? What the repatriation rate's gonna be, what the personal rates are gonna be... Tell me what that plan is.”
GOP leaders are loathe to meet conservatives’ demands -- in part because the Big Six doesn't want to tip their hands as to what exactly their tax proposal contains.
Donors, meanwhile, are losing patience. At a retreat for top Republican benefactors that House Speaker Paul D. Ryan (R-Wis.) hosted in Jackson Hole, Wyo., last week, several discussed giving the party until the end of the month to deliver major progress toward a tax package or reconsidering future support, one attendee said.
And this week, the U.S. Chamber of Commerce launched what it billed as a multimillion-dollar, multi-state ad campaign to drum up support for the project, starting with New York Republicans. The New York Post reported the group plans to focus next on some Freedom Caucus members, though one source close to the chamber tells me it will be targeting lawmakers from a wider range of profiles.
House Speaker Paul Ryan (R-Wis.) (AP /Jacquelyn Martin)
It isn’t just on taxes that the hard-right is taking on the financial industry.
They also object to the debt-ceiling deal Trump cut with Democrats — a breakthrough that cheered investors by removing the immediate specter of a calamitous default — because it comes with new spending for Harvey emergency aid.
The Republican Study Committee, a coalition of more than 150 conservatives, released a “menu of options” on Thursday for Ryan to consider adding to the debt-limit hike in order to secure more support from their ranks. The House vote is expected around noon today and with support from Democrats, is likely to pass in its current state.
But the RSC wish list is an instructive one for future battles. It includes repeal of the “Dodd Frank bailout authority,” otherwise known as orderly liquidation authority, a post-financial crisis provision enabling the FDIC to assume control of a failing financial institution. The measure aims to wall off the rest of the industry from the threat of a domino effect in the event of another market crash — and big banks support preserving it. Those firms withheld endorsements from the Dodd-Frank overhaul that House Financial Services Committee Chair Jeb Hensarling (R-Tex.) guided through his chamber in June, in part because it would have repealed the provision.
Typically, of course, financiers favor the Republican inclination to rip up regulations.
And the industry applauded Hensarling a month later when he moved to block the Consumer Financial Protection Bureau from easing consumer lawsuits against big banks. That measure now awaits action in the Senate, where it faces a narrow margin.
But some outside conservative groups, surprisingly, are rallying in defense of the CFPB rule. An outfit called the American Future Fund, founded by former Mitt Romney aides, released polling Thursday showing that voters in four states represented by swing-vote GOP senators strongly favor keeping the CFPB rule on the books.
Over the last decade, big banks contributed roughly $106 million to Republican candidates, nearly twice what they contributed to Democratic candidates, according to figures from the Center for Responsive Politics.
The industry almost certainly will keep giving Republicans the benefit of the doubt — but maybe less of it.
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Trump meets with congressional leaders. (Reuters/Kevin Lamarque)
Uncertainty on the Hill: Aftershocks from Trump's stunning new outreach to Democrats continued to reverberate Thursday, with Republicans wondering what it will mean for their governing agenda.
Recapping, via The Post's Bob Costa, Sean Sullivan and Mike DeBonis: "In the span of 48 hours, Trump cut a deal with Democrats to keep the government funded and raise the nation’s borrowing authority, advanced talks with the senior Senate Democrat on a permanent debt ceiling solution and followed the advice of the top House Democrat, who urged him to use Twitter to ease the fears of young undocumented immigrants.
The developments confounded congressional Republicans and Democrats at the Capitol, where some long-standing political norms seemed to many to be shattered. The upheaval also raised new questions about how Trump plans to approach the looming debates over tax reform, immigration, government funding and the nation’s debt — and where congressional Republicans fit in."
Sen. John McCain (R-Ariz.): "Haven’t seen anything like it before. I have no way of divining his motives.
I’m a pretty intelligent guy, but I don’t understand this."
Trump: Ditch the debt ceiling for good. The Post's Damian Paletta: "On Wednesday, Trump and Senate Minority Leader Charles E. Schumer (D–N.Y.) reached what one senior White House official called a “gentlemen’s agreement” to develop a plan that would no longer require Congress to routinely raise the limit on government borrowing. Details have not been worked out, and any plan would require approval from congressional Republicans, but the shift signifies a remarkable political evolution for Trump, who has long cheered weaponizing the debt ceiling, no matter the cost."
Senate approves debt-and-disaster package. The vote was 80-17. The House is expected to quickly follow suit, despite objections from conservatives, Kelsey Snell reports.
MONEY ON THE HILL
House Speaker Paul D. Ryan (R-Wis). (REUTERS/Yuri Gripas)
Ryan calls Trump's 15 percent top rate unworkable. Damian Paletta reports: "Ryan, who is playing a central role in designing the tax plan in the House, said “our goal is to get [the corporate tax rate] in the mid to low 20s, and we think that’s an achievable goal. Asked about Trump’s proposed 15 percent rate, Ryan said “'he numbers are hard to make that work. He obviously wants to push this as low as possible…at the end of the day, we have to make these numbers work.'"
The speaker won't commit to releasing a tax plan this month, Politico's Colin Wilhelm writes, though he's still gunning for passage by the end of the year. Mnuchin seconded that timeline in an interview with Fox Business News.
Republicans in both chambers still need to pass a budget to unlock reconciliation instructions for a tax package. The Wall Street Journal's Richard Rubin reports that Senate Budget Committee Chairman Mike Enzi (R-Wyo,) says his panel "could consider" a budget proposal by the end of the month.
Trump called the estate tax a tremendous burden on family farmers. It isn't. My colleague Christopher Ingraham explains: "Trump's rhetoric surrounding the “death tax” is deeply at odds with reality. According to the U.S. Department of Agriculture, 0.4 percent, or 153 farms out of 38,328 farm estates, actually paid any estate tax in 2016. If you round to the nearest whole percent, it's essentially zero."
House Financial Services Committee Chairman Rep. Jeb Hensarling (R-Texas) (AP Photo/Jacquelyn Martin, File)
Hensarling (who is from Harvey-rattled Texas, let's recall) dubs flood insurance subsidies a moral problem. Washington Examiner's Joseph Lawler reports: Hensarling "views the vast damage caused by Hurricane Harvey and imminent damage from Hurricane Irma as a motivation to redouble his efforts to reform the flood insurance program this fall, to stop the federal government from encouraging people to live in dangerous areas.
'This is beyond just a fiscal problem. This is a moral problem,' [Hensarling] said Wednesday of the program, which is nearly $25 billion in debt and will likely need authorization to borrow more to pay out claims from Houston and other areas hit by hurricanes."
Speaker Santorum? House conservatives are quietly discussing how to challenge their leadership this fall, including floating the idea of backing former Speaker Newt Gingrich (R-Ga.) or former Sen. Rick Santorum (R-Pa.) as an alternative to Ryan.
Another word for this is trolling. It won't happen, but it's insulting, which is almost certainly the point. Bob Costa reports: "The closed-door conversations are being led by Rep. Mark Meadows (R-N.C.), the chairman of the House Freedom Caucus, in consultation with his allies on the right, in particular Stephen K. Bannon, President Trump’s former chief strategist who recently returned to his perch as executive chairman of the Breitbart News website. Rep. Jim Jordan (R-Ohio) and other Freedom Caucus members are also involved in the talks to varying degrees, according to nearly a dozen people with knowledge of the discussions."
People view the flooded highways in Houston on August 27. (AFP / Thomas B. Shea)
Harvey's economic impact: The storm will distort a number of measures of the economy just as the Fed is trying to assess its strength. The Wall Street Journal's Josh Zumbrun and Sarah Chaney: "Everything from jobless claims, which already surged in a report on Thursday, to gross domestic product and inflation will be knocked off course, with brief spikes across a wide range of reports, economists say. And that is before any impact from Hurricane Irma, which could devastate cities across the Southeast. It will be hard to discern whether bad reports result from storm damage and then whether good reports owe to the effects of rebuilding."
For one, jobless claims last week hit their highest mark since 2012 as people displaced by Harvey filed claims. Bloomberg's Sho Chandra: "The jump in claims was the biggest since superstorm Sandy slammed into the Northeast and pushed the overall level of filings to the highest level since April 2015."
Dollar drops ahead of Irma. Bloomberg's Andrea Papuc: "The dollar tumbled to its weakest level since the start of 2015 as fading expectations of U.S. interest-rate increases, North Korea tensions and a historically powerful hurricane unsettled investors... The dollar’s decline deepened during Asian trading on Friday as the yen hit its strongest since November and investors girded for potential economic damage to Florida from the historically powerful Hurricane Irma."
Equifax potentially compromised 143 million Americans' data. The New York Times reports: "Equifax, one of the three major consumer credit reporting agencies, said on Thursday that hackers had gained access to company data that potentially compromised sensitive information for 143 million American consumers, including Social Security numbers and driver’s license numbers. The attack on the company represents one of the largest risks to personally sensitive information in recent years, and is the third major cybersecurity threat for the agency since 2015."> Las Vegas Sands Gives Billionaire CEO Adelson 400% Salary Bump The billionaire signed a new employment agreement with the casino operator that increased his salary fivefold to $5 million, and he can earn a bonus of as much as $12.5 million if the company beats its target for earnings before interest, taxes, depreciation and amortization.
Bloomberg> GE's Slump to Deepen Even After $64 Billion Slide, JPMorgan Says General Electric Co.’s stock slide is poised to get worse, according to JPMorgan Chase & Co., extending a slump that already has wiped out $64 billion in market value this year.
Gary Cohn, director of the U.S. National Economic Council, adjusts his tie before a Bloomberg Television interview outside the White House. (Andrew Harrer/Bloomberg)
Trump waffling on Cohn. Reuters' Svea Herbst-Bayliss and Jeff Mason: "A newly fraying relationship between U.S. President Donald Trump and top White House economic adviser Gary Cohn has raised questions about how long Cohn will stay in his job, say two people with close ties to the White House. Several sources said Cohn, director of the National Economic Council, had long planned to stay in his post for at least a year.
But one source said concern had grown among Cohn’s allies over the past 24 hours that he might be pressured to leave... One source close to the White House said Trump wanted to fire Cohn. 'Hates him. But that could be ephemeral,' the source said."
White House considers at least six for Fed chair. With Cohn apparently out of the running to lead the central bank, the Trump administration's search for a successor to Janet Yellin has opened back up. Bloomberg's Craig Torres and Jennifer Jacobs: "The White House is considering more than a half-dozen candidates to be the next head of the Federal Reserve, including economists and business people, with a goal of filling out a depleted board with expertise ranging from financial regulation to community banking, according to three people familiar with the matter... Some of the other possible contenders include former Fed Governor Kevin Warsh, Columbia University economist Glenn Hubbard and Stanford University professor John Taylor, one of the people familiar said. Lawrence Lindsey, a former economic adviser to President George W. Bush, has been discussed. Former US Bancorp CEO Richard Davis and John Allison, the former CEO of BB&T Corp., have also been considered."
RUSSIA WATCH: Did Facebook ads traced to a Russian company violate U.S. election law? The short answer is it depends.
The Post's Mattea Gold walks through the legal thicket:
"The news that a Russian company was behind 3,000 politically themed Facebook ads that appeared in the United States during the 2016 campaign has spurred calls for investigations and demands for better regulation of social media advertising."
Trump Jr. says he can’t recall White House role in explaining meeting with Russians. The Post's Tom Hamburger and Karoun Demirjian: "Donald Trump Jr. took questions Thursday from Senate investigators about his meeting with a Russian lawyer and other topics central to inquiries into Russian influence in the 2016 election, but he frequently said he could not provide important details, according to people who attended the hearing.
President Trump’s eldest son appeared for five hours before Senate Judiciary Committee members and staffers, a sign of the wide-ranging interest on Capitol Hill in Trump campaign and business interactions with Russians.
Trump Jr. was grilled about issues including Russian influence on campaign-related social media communications and Trump Organization plans to build a luxury skyscraper in Moscow.
But for the most part the closed-door session focused on his June 9, 2016, meeting with a Russian lawyer who reportedly promised negative information about Hillary Clinton, his father’s Democratic opponent. That conversation has become central to inquiries into possible collusion between the campaign and Russia."
Ways and Means rejects effort to uncover Trump's tax returns. The Hill's Naomi Jagoda: "A House panel on Thursday rejected another Democratic resolution to request President Trump’s tax returns, as Republicans are increasing their focus on overhauling the tax code. The House Ways and Means Committee voted along party lines to unfavorably report the measure to the House Floor. Rep. Bill Pascrell (D-N.J.) had introduced the resolution shortly before the House left for its monthlong August recess. He introduced the measure the same day that key GOP lawmakers and administration officials released joint tax-reform principles."
VIDEOS OF THE DAY:
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Stephen Colbert referenced Trump’s Access Hollywood tape in explaining how the president had imperiled his own party:
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