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Politico
9 hours ago
- Business
- Politico
The post-Long landscape
THAT DIDN'T TAKE LONG: In the end, Billy Long made it about eight weeks as IRS commissioner. For comparison's sake, it was around half a year between when President Donald Trump announced his intention to nominate Long and when the Senate confirmed him on a party-line vote. That Long flamed out as IRS chief won't come as a huge surprise to a lot of people. A former six-term GOP congressman from Missouri, Long didn't have extensive managerial experience, either in the bureaucracy or with other types of big organizations. Nor was he an expert in tax administration or law, while basically all of his immediate predecessors checked at least one of those boxes. Plus, there were definitely missteps in Long's opening weeks. He got ahead of his skis twice just in a single appearance before a conference of enrolled agents in Utah — announcing that he was killing the Direct File portal and that next year's filing season would be delayed. That raised further questions about Long's ability to lead an agency that still has around 75,000 employees, even with all the recent cuts. And yet, there's an argument that Long also got an incredibly short leash — particularly given that other rookies in the administration have been given more time to find their sea legs. WELCOME TO Weekly Tax. More on everything in a bit. And as the old saying goes: What's the matter with Kansas? (At least when it comes to identifying wild animals.) The first spin of the merry-go-round: Today marks 52 years since what's generally acknowledged as the birth of hip hop, when DJ Kool Herc played at a back-to-school party in the Bronx. Help keep us on the beat. Send your best tips and feedback. Email: bbecker@ bfaler@ and teckert@ You can also reach us on X at @berniebecker3, @tobyeckert, @brian_faler, @POLITICOPro and @Morning_Tax. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. MORE ON LONG'S SHORT TENURE: Here's one potential explanation — the Washington Post reported over the weekend that the IRS had not been particularly helpful in a recent data request from immigration authorities. (Treasury Secretary Scott Bessent has replaced Long as interim IRS chief.) It wouldn't be the first time this year that a head of the IRS left at least in part because of tensions over the data-sharing agreement with the Department of Homeland Security — though at the very least, Long put on a positive face about being pushed out at the IRS and subsequently being nominated as ambassador to Iceland. Either way, it's a tricky time for the IRS to be without a Senate-confirmed leader — and with little idea of how quickly another one can be put into place. Long quite prominently underscored how much work the IRS and Treasury have to do to implement the tax provisions from the megabill that Trump signed into law in July. That's largely because of the immediate work needed to flesh out new policies like the deductions for tipped income and overtime pay, something that administration officials are already deep in the weeds on. But there's plenty more, too. Companies will be looking into just what the rules are for winding down the clean energy incentives from the Inflation Reduction Act, and the changes that Republicans made to international provisions in the megabill, among other things. Speaking of: You know all that talk about another round of budget reconciliation for Republicans in the coming months? We'll see about that. House Republicans are showing a good deal of interest at taking another bite at that apple, but there's a similar amount of skepticism within the Senate GOP, as our Mia McCarthy, Jordain Carney and Cassandra Dumay noted. LET'S TAKE A STEP BACK: Taxpayer advocates say that data-sharing agreement between the IRS and immigration authorities could end up forcing the government to pay an extensive amount to affected taxpayers. Current tax law allows people to sue for civil damages if their tax information is wrongly disclosed, and to receive $1,000 or more in damages if the government is found liable. But how vulnerable is the government to those challenges under the IRS-DHS agreement? The answer to that question largely depends on whether you believe the Trump administration's public comments on the agreement. The memorandum of understanding between the IRS and the Department of Homeland Security allows for confidential taxpayer data to be shared to assist in criminal investigations. Some taxpayer advocates aren't buying that the sharing will be that limited, particularly after multiple outlets have reported that administration officials wanted the information from seven million-plus taxpayers. Experts argue that's far more disclosures than could feasibly be needed for criminal inquiries, which can number in the thousands per month — and tens of thousands for a given year. Using some of those reported figures, Dahlia Mignouna of the Tax Law Center at NYU Law argues that the government could be on the hook for $7 billion or more for improper disclosures. 'The reported data-sharing between the IRS and DHS could put a huge swath of taxpayers at risk, even American citizens or legal permanent residents who have similar names to those DHS requests,' said Mignouna, a senior attorney adviser at the Tax Law Center. IRS employees could also be liable for the unauthorized disclosure or inspection of confidential data, she added. A Treasury spokesperson didn't repond to a request for comment on this issue. But the government has stressed in court filings that it will follow the memorandum and won't use taxpayer information to help with civil deportation cases. This wouldn't be the first time the government potentially has found itself liable under this statute in recent years. The hedge fund billionaire Ken Griffin sued under the same statute after his returns were disclosed by Charles Littlejohn, the contractor who was sentenced to five years in prison after also leaking tax information about Trump and thousands of others. Griffin eventually settled with the government, receiving an apology for his trouble. But that case also raises another question: Griffin knew his returns were improperly shared because they ended up in the hands of a news organization. So how would a taxpayer whose information might be wrongly disclosed to DHS become aware of it? Some experts acknowledge that only the federal government would truly know how many taxpayers might be affected by such a breach. But plaintiffs also might not need to understand the full scope to start a class action suit that could potentially compel the federal government to identify those who might be eligible to receive damage payments. Around the World Bloomberg: 'Poland's New President Challenges Premier With Plan to Cut Taxes.' Bloomberg, again: 'Romania Holds Interest Rate With Tax Hikes Set to Fuel Inflation.' Reuters: 'South African tax authorities extend jet fuel lifeline to airports.' Around the Nation Boston Globe: 'Massachusetts collected $2 billion more in tax revenue than expected because of millionaires tax.' WHYY: 'Delaware progressives, Democratic leaders square off over plans to address high tax bills in upcoming session.' San Jose Spotlight: 'Santa Clara County puts sales tax measure on November ballot.' Also Worth Your Time Associated Press: 'College endowment tax is leading to hiring freezes and could mean cuts in financial aid.' CNBC: 'Trump's 'no tax on tips' raises worker questions: One bartender says it feels 'too good to be true.'' Wall Street Journal: 'The Estate Tax Mistake That Can Cost Families Millions.' Did you know? DJ Kool Herc was inducted into the Rock and Roll Hall of Fame in 2023.
Politico
9 hours ago
- Business
- Politico
Expectations grow for US-China trade truce
With help from Doug Palmer QUICK FIX — The United States is likely to extend a trade war truce with China that is set to expire Tuesday. The two could nail down a firmer deal during a global gathering this fall. — The White House clarified that Japan's 15 percent duty won't stack on top of existing tariffs amid conflicting interpretations of the trade deal. — The Trump administration is hiking duties on Canadian softwood lumber days after slapping the country with a 35 percent tariff on goods. It's Monday, Aug. 11. Welcome to Morning Trade! Got news tips? Suggestions? Want to grab a coffee? Hit us up at: ahawkins@ ddesrochers@ and dpalmer@ Follow us on X: @_AriHawkins, @drdesrochers and @tradereporter. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. Driving the day U.S.-CHINA DEAL TRACKER: The United States and China are likely to extend a tariff truce that expires on Tuesday. They could also push for a more comprehensive trade deal by the end of October, when leaders of the Asia-Pacific Economic Cooperation will meet in South Korea for their annual summit, according to three former U.S. trade officials. 'You can see the choreography of what's happening,' said Jeff Moon, a former assistant U.S. trade representative for China, during a discussion posted Friday by the Washington International Trade Association. Certain 'confidence-building steps,' including China easing restrictions on rare earths exports and the U.S. effectively reversing a ban on H20 chips, highlight the hopes of a bigger deal to manage trade relations between the two sides, he said. Context needed: With existing duties remaining in place, the U.S. in May agreed to temporarily lower tariffs on Chinese imports from 145 percent to 30 percent, while the Chinese dropped levies on U.S. goods from 125 percent to 10 percent. That agreement is set to expire and would amount to an effective blockade on trade between the world's largest economies. Chris Padilla, who was Commerce undersecretary for international trade in the George W. Bush administration, and Stephen Vaughn, who was USTR general counsel in the first Trump administration, both agreed that President Donald Trump was likely to extend the tariff truce. But the three had varying opinions about how likely the two sides were to reach a deal by the Oct. 31 APEC leaders summit and how comprehensive any agreement might be. Who has the upper hand? Trump 'exhausted his tariff leverage three months ago when he threatened an effective embargo and then backed off,' Moon said. 'The Chinese now have the leverage because they've found rare earths as a magic bullet and something that the West absolutely needs.' Trump's apparent decision not to hit China with 'secondary tariffs' over its oil purchases from Russia, after threatening to do that and hitting India with them last week, is another sign of how badly he wants an agreement, both Padilla and Moon said. What kind of deal? Vaughn, a partner at King & Spalding, where U.S. Trade Representative Jamieson Greer formerly worked, disagreed that the negotiating dynamic has shifted in favor of Beijing and said any deal reached at APEC is likely to be similar to the broad frameworks that the administration has reached with other trading partners. But Padilla said he doubts Chinese President Xi Jinping would agree to a 'very high-level, informal' deal like the ones Trump struck with the European Union, Japan and South Korea in which few details are written down. 'I call them 'bar napkin agreements,'' Padilla said. Moon said he thinks any deal would probably look like the January 2020 'Phase 1' agreement that committed China to buy an additional $200 billion worth of U.S. goods over two years — even though Beijing fell short of those purchase commitments. REGULATORY REVIEW CLARITY WANTED: Higher tariffs on Japanese imports will replace existing duties rather than be stacked on top, a White House official confirmed to your host on Sunday, clearing up competing interpretations of the agreement unveiled last month. 'We agreed in subsequent discussions to provide Japan the same treatment as the EU with respect to MFN duties and reciprocal tariff rates. But that was not what was initially hashed out in the Oval Office,' said the White House official, granted anonymity to divulge details. The statement seeks to clear up uncertainty over the terms of the U.S.-Japan trade agreement, after a 'no stacking' provision was applied to a trade deal between the U.S. and the EU but not Japan. That would mean certain Japanese commodities already subject to duties could see tariff rates rise, such as from the current 26.4 percent to 41.4 percent for beef. Trump is expected to issue a new executive order to make the change official in the near future. Why it matters: The development is the latest indication of how the lack of a deal on paper is sparking confusion and raising tensions between the U.S. and its fifth-largest trading partner. Keep in mind: The White House added that the 15 percent rate is 'separate from 232 matters,' referring to tariffs imposed under the Trade Expansion Act of 1962. Japan is still vulnerable to duties on critical sectors, after the administration hiked levies on steel, aluminum, autos and auto parts using the provision, and is conducting probes in nine additional sectors. FIRST IN MORNING TRADE: Fifty-two House Democrats sent Trump and Secretary of State Marco Rubio a letter Sunday asking for more information about the status of the U.S. negotiations with the Democratic Republic of Congo on critical minerals, which are being held behind closed doors. 'As Members of Congress, we are deeply concerned with your administration's failure to consult Congress and the lack of transparency, especially given the dire security, human rights, labor, and environmental situation associated with mineral mining in the DRC,' the lawmakers wrote in the letter, which was led by Rep. Linda Sanchez (D-Calif.). Keep in mind: China has historically outmaneuvered the U.S. when it comes to developments in Africa, particularly the DRC, thanks to Beijing's deployment of large-scale financing projects that include government-to-government engagement deemed exploitative by U.S. officials. Around the World LUMBER DUTIES HIKED: The Commerce Department on Friday announced higher countervailing duties on Canadian softwood lumber to offset what it says are unfairly low prices and Canadian subsidies, raising the total duty rate to 35.19 percent. The countervailing duty rate is being raised to 14.63 percent, up from 6.74 percent, and would be in addition to existing anti-dumping duty rates. Another stressor: The final levels are largely in line with projections, but are poised to inflame tensions between the U.S. and Canada as they pursue broader trade talks, and come days after Trump slapped a 35 percent tariff on the country, affecting goods deemed noncompliant with an existing North American trade deal known as the U.S.-Mexico-Canada Agreement. 'This decision will harm communities on both sides of the border,' Kurt Niquidet, president of the BC Lumber Trade Council, which advocates for the Canadian lumber sector, said in a statement. 'It places unnecessary strain on forestry-dependent regions in Canada while driving up construction costs for American builders and families.' Context: The duties on Canada come as the Trump administration separately pursues a Section 232 probe that could lead to new tariffs on lumber from more countries. TRADE OVERNIGHT —After the trade war, a new essay in Foreign Affairs from former United States Trade Representative and Council on Foreign Relations President Michael Froman. — Foreign governments bet big to lobby Trump on tariffs. Most came up empty, POLITICO reports. — Intel CEO Singled Out by Trump to Visit White House on Monday, per the Wall Street Journal. — Canada courts Mexico as Trump escalates tariff fight, POLITICO reports. — WTO cuts 2026 trade forecast as Trump tariff hike takes hold, per POLITICO Pro. — Trump calls for Intel CEO to resign, per POLITICO Pro. — Coast Guard discloses role in probe of Chinese ship-to-shore cranes, per POLITICO Pro. THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@ ddesrochers@ and ahawkins@ Follow us @POLITICOPro and @Morning_Trade.
Politico
9 hours ago
- Business
- Politico
Black Hat and DEF CON offer lessons for Congress
With help from John Sakellariadis Driving the day — After a week in Las Vegas talking to some of the top cybersecurity professionals in the country, your host compiled three key takeaways from Black Hat and DEF CON for federal lawmakers. HAPPY MONDAY, and welcome to MORNING CYBERSECURITY! John and I are back on the East Coast after Black Hat and DEF CON. By the end, I successfully convinced a small group of reporters to go to The Rainforest Cafe with me. It was a real bonding moment. Anyone else get into any fun side quests? Drop me a line at dnickel@ Follow POLITICO's cybersecurity team on X at @RosiePerper,@johnnysaks130,@delizanickel and @magmill95, or reach out via email or text for tips. You can also follow @POLITICOPro on X. Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. On The Hill HIGHLIGHTS — Cybersecurity professionals converged on Las Vegas last week for the back-to-back Black Hat and DEF CON cyber conferences. Top cyber experts from the private and public sectors highlighted some of the biggest challenges and innovations in the industry today, from the scope of U.S. adversaries' cyber capabilities to how federal cuts are impacting the country's cyber posture. — No target is 'too small': During the conference, the cybersecurity community detailed that foreign adversaries such as China have the hacking capabilities to cast a wide net in cyberspace. And no entity involved in vital U.S. defense operations is too small to be considered an attractive target for foreign hackers, according to a top NSA official. 'China's hacking resources outnumber those of the U.S. and allies combined, and China has stolen more corporate data from the United States than any other nation in the world,' said Bailey Bickley, chief of defense industrial base defense at the NSA's Cybersecurity Collaboration Center, which helps U.S. defense contractors protect their networks. Bickley said during a Black Hat keynote that many of the 'small companies' in the defense industrial base often 'think what they do is not important enough' to be targeted by Chinese-backed hacking groups. 'But when you have the significant resources like that to conduct mass-scanning and mass exploitation, there is no company and no target too small,' she said. Cybersecurity experts have long warned that any device connected to the internet can be a key gateway for hackers to breach a network. At DEF CON on Sunday, officials from the U.S. Coast Guard disclosed last year's discovery of a little-known device that potentially left ports across the country exposed to Chinese hacking. Kenny Miltenberger, a lieutenant commander for a Coast Guard cyber protection teams, told John that many of the port operators weren't even aware of the devices, cellular modems embedded in cranes and support infrastructure made by a Chinese company. 'The good news story here is we're finding a lot of vulnerabilities on cranes, and our partners are mitigating those,' Miltenberger said on the Coast Guard's work to help operators find and plug cyber vulnerabilities. — 'Too close to the bone': Meanwhile, experts spoke out about the impacts of the Trump administration's cuts to federal cyber agencies, including CISA and the Pentagon's Cyber Command and Defense Information Systems Agency. 'You've cut assets at CISA and in other places … we're less able to make a government contribution to the collective welfare of the cyber ecosystem,' said Chris Inglis, former national cyber director, on the sidelines of Black Hat. Congress has previously examined how cuts to the federal cyber workforce and funding could hurt the country's ability to defend itself long-term. Inglis added that though he isn't aware of the specific number of positions cut from cyber agencies, 'I do think we should be concerned about cutting those capacities too close to the bone.' — AI everywhere: The role that artificial intelligence is playing in global cyber operations was one of the key topics of discussion. Michael Leland, field CTO of cyber firm Island, told your host at Black Hat that the U.S. and its adversaries see AI as 'the great force multiplier.' 'AI is going to be used as a tool, both by the [U.S. government], but the adversaries are leveraging it against us in the opposite way,' he said, highlighting reports of adversarial use of AI — including Russian-linked hackers using the tech to spread disinformation and Iranian-linked hackers using AI to ramp up the scope of phishing campaigns. At DEF CON on Friday, the Defense Advanced Research Projects Agency announced the winners of a years-long competition to build AI models to autonomously find and patch vulnerabilities in open-source code used across critical infrastructure networks. For experts like John Watters, CEO of cyber risk firm iCounter, entities will have to walk a fine line of embracing AI while also ensuring it is implemented securely. 'AI is being deployed everywhere by everybody, individually,' he told your host. 'AI [is being] fully embraced by adversaries, and defenders are still kind of looking at, 'What's the risk of doing it? And [how] should it be regulated?' At the Agencies COAST TO COAST — Hackers at DEF CON concentrated their efforts on attacking a 20-foot Coast Guard Auxiliary vessel, a self-driving Pentagon naval drone and software from the largest U.S. ports. John reported on Sunday that the decision to focus hacker efforts at the conference on maritime vessels and technology signals two pressing worries: that recreational boats, U.S. ports and commercial ships are increasingly hooked up to the internet, and that the U.S. military isn't prepared for the cyber assault many expect China to launch if it invades Taiwan. 'The South China Sea is where the next generation of autonomous warfare and homeland defense will be demonstrated,' said Duncan Woodbury, executive director of the conference's Maritime Hacking Village — which made its debut at this year's conference. — Boosting security: The demonstration at DEF CON comes as the U.S. Coast Guard implemented a final rule last month that requires U.S.-flagged ships and ports to beef up their network defenses. The Coast Guard also received an injection of $25 billion in Congress' recent reconciliation bill, which will enable it to ramp up its cybersecurity measures. Critical infrastructure TSUNAMI OF THREATS — A small army of hackers are coming together to protect one of the country's most vulnerable sectors: water systems. Jake Braun, former acting principal deputy national cyber director, unveiled a new group at this year's DEF CON to help beef up water systems' cyber defenses. 'We've both the urgency of the threat and the potential of a community-driven solution,' Braun, co-founder of the group, told your host. He added that the new group, known as DEF CON Franklin, was unveiled after a nine-month pairing period of DEF CON hackers with small water utilities across four states. Cyberattacks on water treatment facilities could lead to potentially fatal consequences, including shutting off water access completely to altering the chemical balance of the water. — Zoom out: Cyber experts have signaled that the water sector faces significant gaps in cybersecurity funding and expertise, which was demonstrated by cyberattacks against water facilities in the U.S. by Iranian-linked hackers in 2023. 'Protecting our nation's critical infrastructure isn't a want but a necessity, and for the nearly 50,000 water systems nationwide, they need the tools and resources to not only be cyber aware but cyber resilient,' said Matt Holmes, CEO of the National Rural Water Association. Hacked INFORMANTS AT RISK — Officials are worried that Latin American drug cartels are among the groups that obtained sensitive court information from a massive breach of the federal judiciary's case filing system. John and POLITICO's Josh Gerstein reported on Friday that judicial officials with knowledge of the cyberattack are concerned cartels could weaponize the stolen data to identify witnesses in cases the federal government has opened against them or gain insights on criminal investigations, such as arrest and search warrants. — Zoom out: As of Friday, at least a dozen district courts across the country are believed to have been directly impacted by the ongoing breach of the digital case filing system — known as CM/ECF. The incident is believed to be one of the most severe cyberattacks on a federal court filing system in years. While it's unclear if the cartels were directly connected to the breaches, it's possible that they could purchase data from the hackers with access to the system. Quick Bytes TROLL TOLL — Cybersecurity researchers unmasked a prolific scamming operation that involves the infamous unpaid toll or undelivered mail item texts, writes Zack Whittaker for TechCrunch. 'ANSWER MACHINE' — President Donald Trump's new AI search tool on Truth Social contradicts the president by saying the 2020 election wasn't stolen, and the Jan. 6, 2021, Capitol riot was violent and linked to Trump's 'baseless claims of widespread election fraud,' reports Drew Harwell for The Washington Post. PRIVACY PLEASE — Apple's AI ecosystem, known as Apple Intelligence, routinely transmits sensitive user data to company servers beyond what its privacy policies inform, cyber firm Lumia Security revealed, Greg Otto writes for CyberScoop. INVESTING IN THE CYBER TALENT POOL — The non-profit NobleReach foundation last week announced its second-ever cohort of public-interest cyber and emerging tech scholars. The 28 recent graduates and earlier-career professionals will take up one-year posts at places including the Department of Defense, city of Pittsburgh, and Oklahoma City, and the state of Maryland. Chat soon. Stay in touch with the whole team: Rosie Perper (rperper@ John Sakellariadis (jsakellariadis@ Maggie Miller (mmiller@ and Dana Nickel (dnickel@
Politico
9 hours ago
- Automotive
- Politico
Electric vehicle fees on the horizon
QUICK FIX — Congress may look to resurrect a fee on electric vehicles that didn't make it into the GOP megabill, as a way to help fix the dwindling Highway Trust Fund. — DOT's OIG is reviewing circumstances related to January's deadly midair collision between a military helicopter and passenger plane. The Army hasn't launched its own audit yet. — The FAA wants to extend limits on flights into Newark Liberty International Airport through late October next year, as construction on a major runway continues to cause delays. IT'S MONDAY: You're reading Morning Transportation, your Washington policy guide to everything that moves. We're glad you're here. Send tips, feedback and song lyrics to Sam at sogozalek@ Chris at cmarquette@ Oriana at opawlyk@ and Pavan at pacharya@ and follow us at @SamOgozalek, @ChrisMarquette_, @Oriana0214 and @pavanmacharya. 'Look out the left, the captain said/ The lights down there, that's where we'll land/ I saw a falling star burn up/ Above the Las Vegas sands.' Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. Driving the day FEDERAL EV FEE IN SIGHT: Republicans in both chambers are interested in resurrecting a new fee on electric vehicles that didn't make it into the GOP megabill (H.R. 1), as a way to help shore up the Highway Trust Fund's revenue deficit, Chris writes. There's a lot to be worked out, but both House Transportation Committee Chair Sam Graves (R-Mo.) and Senate EPW Committee Chair Shelley Moore Capito ( said they're interested in exploring some kind of fee on EVs (with Graves going farther, saying he's also interested in a fee on hybrids). THAT DOESN'T MEAN IT'LL BE EASY: A fee tailored to electric vehicles could be an attractive way for Republicans to raise money, especially if it can be messaged as making liberals pay their fair share for wear and tear on roads. But a broader fee that would have captured every car, even ones that use only gasoline, went down in flames. A narrower one could have a better chance, but some Republicans will balk at any fee. $64 BILLION: That's how much the Congressional Budget Office previously estimated would be collected through 2034 as a result of a fee on EVs and hybrids included in an early version of the megabill. But that's a far cry from the $150 billion the CBO estimated will be needed for the next surface transportation bill (absent spending cuts). Aviation MORE EYES: DOT's Office of Inspector General is looking into how the FAA manages the crowded airspace around Ronald Reagan Washington National Airport, Oriana reports. It's the latest effort by federal officials to understand why an Army helicopter and commercial airplane collided near Washington. The audit will focus on the process the FAA uses to allow some traffic to be exempt from a requirement to use a location-transmitting technology called ADS-B. — The audit makes good on half of a request Republican and Democrat senators made in June, when they asked the OIG's offices at DOT and Army to inspect the circumstances around the crash. The Army hasn't launched its own audit yet, which Sen. Maria Cantwell (D-Wash.) — ranking member of the Senate Commerce Committee — called out in a statement Friday. — FAA Administrator Bryan Bedford said in a statement that 'we welcome the scrutiny' and added the agency would 'cooperate fully' in the OIG's investigation and 'not hesitate to take action if we identify risk.' MORE LIMITS: The FAA wants to extend limits on departures and arrivals into Newark Liberty International Airport through late October 2026, according to a notice to be published in the Federal Register on Tuesday. The number of flights into the airport has been limited — to 28 departures and 28 arrivals per hour when construction is underway — since May, largely due to long delays prompted by intermittent construction on a major runway and technology issues involving air traffic control communication. — With the new update, departures and arrivals would continue to be reduced when construction on the runway is ongoing — but can include more flights outside of the construction period. DON'T BE THE NEXT NEXTGEN: In a letter response to the House T&I aviation subcommittee, the Modern Skies Coalition, an umbrella group for dozens of aviation industry groups including major U.S. airlines and some associated unions, last week outlined priorities for lawmakers to consider aside from funding a new air traffic control system. — Some of those priorities include forming detailed plans, ensuring FAA and contractors stick to timelines, and safeguarding 'continuity of funding' to execute the project. In all, the industry members stress that the oversight needs to be there in order for the air traffic control revamp to not end up like the NextGen program, which MT readers know has faced delays, cost overruns, and insufficient resources. Maritime DEFCON 2025: U.S. maritime was an unexpected center point of this weekend's DEFCON conference in Las Vegas, John Sakellariadis reports, where 30,000 of the world's best hackers gather to find flaws in complex hardware and software systems. Hackers at the conference spent hours finding software holes in commercial ships and U.S. ports (that are increasingly hooked up to the internet) that bad actors could exploit to commit crimes, such as redirecting the flow of goods away from the ports to which they are meant to go. — The U.S. Coast Guard has taken note of the threat of cybercrime, issuing a rule last month requiring U.S.-flagged ships and ports to beef up their network security (Congress also gave the Coast Guard an additional $25 billion in the 'One Big Beautiful Bill' Act to enhance cybersecurity). Automobiles KEEP ROLLING: Elon Musk's improving fortunes this August got a little bit better last week. Tesla can continue to have its robotaxis on Texas roads, even after state regulations related to autonomous vehicles change at the start of next month. According to a Texas government website, Tesla's Robotaxis are now licensed with the state, a requirement for all companies operating driverless vehicles in Texas moving forward. — Tesla began operating AVs in Austin, Texas earlier this summer. The city has been one of several nationwide to see a significant deployment of robotaxis. Trade TARIFF DELAYS: Though Japan and the U.S. appeared to reach a trade deal last month to lower tariffs across the board (including a decrease for autos from 27.5 percent to 15 percent), some of those changes didn't show when President Donald Trump's reciprocal tariffs went into effect last week (Japan says the U.S. will fix the 'regrettable' error). Delays in meeting the terms of these deals 'reduces the credibility' of any other trade agreements Trump reaches with other countries, Chris Douglas — a University of Michigan-Flint economist with expertise on tariffs — told Pavan. — If U.S. automakers start to lose faith in Trump's ability to strike and maintain deals, Douglas said they may have further motivation to pass on tariff costs to consumers — rather than eat those costs as they are doing right now in hopes agreements will be reached (GM took a $1 billion tariff hit in the second quarter; Ford paid $800 million in tariff costs during the same time). The Caboose ICYMI: DOT wants input on developing a strategic plan for fiscal years 2026 to 2030, according to a notice posted to the Federal Register on Friday. The plan is mandated by federal law, and each agency must update theirs at the beginning of new presidential terms. The department says it expects to post the finalized plan to its website around February of next year. The Autobahn — 'Boeing's $4.7 Billion Spirit AeroSystems Deal Cleared in U.K.' Wall Street Journal. — 'Delta and Alaska Air Square Off in Battle for Seattle.' Wall Street Journal. — 'Jaguar Land Rover Backs Guidance Despite Hit From Tariffs and EV Transition.' Wall Street Journal. — 'Lyft Bets on Robotaxis to Drive Revenue Growth.' Wall Street Journal. — 'Japan Says Trump to Correct 'Extremely Regrettable' Error in Tariff Order.' New York Times. — 'China's car sales growth slows in July, with weaker hybrid demand.' Reuters. — 'Drones Hover Over CATL Mine as Lithium Market Anxiety Rises.' Bloomberg. — 'The House Lawmaker With a Secret Helicopter.' NOTUS. — 'Coast Guard discloses role in probe of Chinese ship-to-shore cranes.' POLITICO Pro.
Politico
11 hours ago
- Business
- Politico
The trouble with Fannie and Freddie
Editor's note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 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. Quick Fix President Donald Trump wants to sell shares in Fannie Mae and Freddie Mac. And if you believe his Truth Social account, he wants to get a deal done before the end of the year. The structure of a Trump-led initial public offering of the housing-finance giants would be enormously consequential to a $9 trillion market for mortgage-backed securities that helps limit costs for American home buyers. And while an IPO could represent a major step toward ending Fannie and Freddie's 17-year-old federal conservatorship, pulling it off will force the White House to figure out how to make the companies attractive assets for Wall Street without jeopardizing arrangements that are critical to the mortgage market. 'It's a tricky, tricky balancing act,' said Karen Petrou, the managing partner of Federal Financial Analytics. Backing up for a second: Fannie and Freddie do not issue mortgages. Instead, they purchase home loans, package them as securities, sell them to investors and guarantee their payments. The presence of a massive, liquid market for low-risk mortgage-backed securities frees up resources for lenders to issue new mortgages and helps push down rates for home buyers. After Fannie and Freddie collapsed during the height of the global financial crisis, Treasury took ownership of the companies, and the Federal Housing Finance Agency assumed control of their operations. The government's direct role in assuring Fannie and Freddie's guarantees is a major source of confidence for investors in mortgage-backed securities. But that's also a big reason why pulling off an IPO will be challenging. The 2008 bailout of Fannie and Freddie and the accompanying federal conservatorship might provide assurances to the MBS market, but the government's control over the GSEs — and the fact that they're still collectively $195 billion short of hitting the capital thresholds they need to be released from conservatorship — could diminish their appeal to would-be investors. As former Freddie Mac CEO Donald Layton wrote earlier this year, 'raising equity during conservatorship is basically a non-starter.' 'Potential investors would reject becoming shareholders of F&F knowing that they would be totally disenfranchised,' he wrote, adding that would-be buyers could be turned off if they're unable to receive dividends or vote for board members. Of course, the government's guarantee of Fannie and Freddie's businesses might imply lower risk. But, lest we forget, the terms of their 2008 bailout both diluted the holdings of existing shareholders and assured that any 'existing preferred shareholders will bear any losses ahead of the government.' The administration's plans for the offering are still hazy, but The WSJ's initial reporting suggests it would value the two mortgage giants at about $500 billion and involve selling 5 percent to 15 percent of their stock. But if Trump is able to make that happen, it could open the door to future offerings that would simultaneously unwind the government's ownership stake in the GSEs — which may help deficits — and boost the GSEs' capital. But whether that results in changes to the MBS market is anyone's guess. 'They've got a ways to go,' Petrou said. 'But the more stock they sell, the more capital they raise.' It's MONDAY — For econ policy thoughts, Wall Street tips, personnel moves or general insights, email Sam at ssutton@ Driving the Week Monday … Tuesday … The NFIB's Small Business Optimism Index will be released at 6 a.m. … The Labor Department will release the Consumer Price Index for July at 8:30 a.m. … Richmond Federal Reserve Bank President Thomas Barkin speaks at 10 a.m. … Kansas City Fed President Jeffrey Schmid speaks on monetary policy and the economic outlook at 10:30 a.m. … Wednesday … The House Financial Services National Security, Illicit Finance, and International Financial Institutions Subcommittee holds a field hearing on 'Securing the Supply Chain: The Defense Production Act in Focus' in Dayton, Ohio, at 10 a.m. … Chicago Fed President Austan Goolsbee speaks at 1 p.m. … Atlanta Fed President Raphael Bostic speaks at 1:30 p.m. … Thursday … Labor will release the Producer Price Index for July at 8:30 a.m. … The Securities and Exchange Commission has a closed meeting at 1 p.m. … Friday … Labor will release import and export price data for July at 8:30 a.m … Retail sales data for July will be released at 8:30 a.m. … Industrial production data for July is out at 9:15 p.m. … University of Michigan's consumer sentiment survey will be released at 10 a.m. … Trade The way forward — Council on Foreign Relations President Michael Froman, who served as U.S. Trade Representative under President Barack Obama, published an essay in Foreign Affairs calling for 'a network of open plurilateral relationships—smaller and more flexible than the multilateral trading system.' 'From a purely economic point of view, this system would be suboptimal and less efficient than the global trading system was. But it might well be the most politically sustainable outcome that could—crucially—prevent unilateralism from spinning out of control.' Money gone — Foreign governments hired lobbyists from Trump world in order to avoid the president's punishing tariff rates. For the most part, that strategy hasn't paid off, Caitlin Oprysko, Daniel Desrochers and Ari Hawkins report. Confusing calculus — Trump's threat to impose 100 percent tariffs on foreign chips and semiconductors came with an important caveat: Firms that commit to producing more in the U.S. would be exempt. As The WSJ's Asa Fitch and Dan Gallagher report, that will create an incentive for companies 'to make just enough U.S. investment to appease politicians, then import whatever else is needed, especially considering the substantially higher cost of manufacturing in the U.S.' Slowdown — The World Trade Organization has reduced its forecast for global trade to reflect the Trump administration's tariff regime, Doug Palmer reports. What's more, the average U.S. tariff rate is now 17.4 percent, from just 2.8 percent before he took office. On The Hill First in MM: Dems press Trump regulators on bank capital — Sen. Elizabeth Warren and all 10 of her Democratic colleagues on the Senate Banking Committee are criticizing the Trump administration's proposal to scale back capital requirements for the largest banks, urging regulators to provide more robust analysis of its potential effects, Michael Stratford reports. In a letter to Fed Vice Chair for Supervision Michelle Bowman, Comptroller of the Currency Jonathan Gould and Acting FDIC Chair Travis Hill, the Democrats say the agencies' economic analysis so far was inadequate and should better detail the proposal's implications. (Banking regulators in June unveiled the plan to ease the 'supplementary leverage ratio' for the biggest banks, a top priority for Treasury Secretary Scott Bessent.) The lawmakers want more detailed information, including estimates of how the changes could affect the risk of a big bank failure, lending patterns and Treasury purchases. They also urged extending the 60-day comment period — set to end Aug. 26 — by 90 days after publishing their requested data. 'The economic costs of rushing through this type of proposal, and potentially getting it wrong, could be severe, and would be borne by American taxpayers, small businesses, and low- and middle-income households,' they wrote. The FDIC and OCC declined to comment. The Fed said it had received the letter and planned to respond. The Economy How Bowman sees it — The Fed's Bowman on Saturday said the central bank should start lowering rates closer to a neutral level. Bowman, who cast a dissenting vote for a quarter-point cut at last month's policy-setting meeting, told members of the Kansas Bankers Association that 'a delay in taking action could result in a deterioration in labor market conditions and a further slowing in economic growth.' The trouble with the data — After former Argentinian President Néstor Kirchner fired the government statistician tasked with compiling the country's consumer price index, official inflation data suggested price growth was slowing down. The opposite occurred. As The WSJ's Paul Kiernan writes, Argentina's experience is 'a useful lesson in what awaits the U.S. if new leadership politicizes economic data.' At the regulators So long — Trump removed Internal Revenue Service Commissioner Billy Long and named Bessent as the agency's acting chief, Nicole Markus and Brian Faler report. Big deal — Commerce Secretary Howard Lutnick is threatening to revoke lucrative patents held by Harvard University that were derived from projects that received federal funds, Juan Perez Jr. reports. Jobs report Big change — Bo Hines, the leader of Trump's crypto council, is stepping down to return to the private sector, he announced on X over the weekend.
