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Politico
20 hours ago
- Business
- Politico
What's next for DOT appropriations?
Presented by The Association of American Railroads With help from Pavan Acharya QUICK FIX — The Senate Appropriations Committee is gearing up to consider its DOT and HUD spending bill after a House panel cleared its own version last week. Here's the schedule. — The FAA's finalized request for companies' ideas on revamping the U.S. air traffic control system still isn't out. And the timeline moving forward is unclear. — There's a looming trade war with the EU, and aircraft are in the crosshairs. 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. 'If you leave today, I'll just stare at the way/ The orange touches all things around/ The grass, trees, and dew, how I just hate you/ Please turn those headlights around/ Please turn those headlights around.' 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 Week MOVING QUICKLY: The Senate Appropriations Committee will consider its fiscal 2026 DOT and HUD spending bill Thursday morning, skipping a subcommittee markup. (House appropriators approved their version of the annual legislation last week.) The race is on as Congress faces a Sept. 30 funding deadline, with limited days in session over the coming two months due to the August recess. WHAT TO WATCH: Will the panel aim to keep DOT's funding relatively steady — or even increase it? How will the FAA fare? And will transit or Amtrak see cuts? — Where and when: The meeting starts at 9:30 a.m. in Dirksen 106. But as a heads up, the Interior Department and EPA spending bill will also be considered. IS IT FRUITLESS? It's unclear whether Democrats will play ball in the Senate as appropriators seek to avoid another continuing resolution. Keep an eye on the floor as early as Tuesday, with a test vote anticipated for the upper chamber's first tranche of Republican spending bills, including possibly one for the VA and military construction. That will provide some indication of how things are shaping up. Democrats may have little incentive to help the GOP out as a government shutdown looms: Office of Management and Budget Director Russell Vought says the White House may send another rescissions package to Congress soon. GET THE RUNDOWN: Your MT team had full coverage last week of the House Appropriations Committee's fiscal 2026 DOT and HUD spending bill, which the panel advanced. You can read more here: — Sam has a breakdown of the text, including amendments adopted at a markup. — He also has a deep dive into Republicans' attempt to repurpose more than $4 billion in 2021 infrastructure law funds to use for parts of their new legislation. — Sam and Chris reported on the GOP's effort to block any appropriations from flowing to New York's congestion pricing program. — And there's much, much more. Aviation STILL NOTHING: The FAA noted Friday that a finalized version of its request for companies' ideas on how to undertake the Trump administration's planned overhaul of the U.S. air traffic control system is not ready yet. The agency 'is continuing to review feedback, assess, and refine,' reads an update on the federal government's contracting website. 'A new publishing [date] will be determined.' OOP: As MT readers will know, the FAA on July 11 reported that the updated request was anticipated to be released early last week, with proposals for the project set to be due Aug. 4. Now, it's unclear what the time frame is. A TIGHT WINDOW: DOT Secretary Sean Duffy wants to complete the endeavor in three to four years, a highly ambitious schedule. Republicans in their recent reconciliation package gave the FAA a $12.5 billion 'down payment' for the effort, but Duffy told the House Transportation Committee last week that he wants $19 billion more on top of that to complete the entire project. FIRST IN MT: A group of 12 Democratic senators, led by Sen. Ed Markey (D-Mass.), in a letter to FAA Administrator Bryan Bedford is requesting a slew of details about the state of the agency's staffing, citing the firing of probationary workers in February (who a federal judge ordered be reinstated) and the Trump administration's so-called deferred resignation program. The lawmakers want to obtain, among other things, an 'analysis conducted by the Office of Airports related to the impact of workforce cuts on its safety mission.' — The group also wants information about the FAA's use of artificial intelligence to analyze air traffic risks. ICYMI: DOT threatened Saturday to disapprove flight requests from Mexico if the country doesn't take action in response to the Trump administration's concerns over slot cuts and the forced relocation of U.S. cargo carriers out of Mexico City's Benito Juarez International Airport. Details can be found here. Trade A STRESSFUL SUMMER: President Donald Trump is threatening to impose a blanket 30 percent tariff on EU goods starting Aug. 1 if there's no trade deal with the bloc, and Boeing and Airbus are facing a devastating blow if European countries follow through on a potential retaliatory strike against almost €11 billion in U.S. aircraft and parts, Tommaso Lecca reports from Brussels. — 'A tit-for-tat tariff situation would put more pressure on the already fragile aviation supply chain,' said Marina Efthymiou, professor of aviation management at Dublin City University. 'Higher costs and delays in moving parts could slow down aircraft production and deliveries.' On The Hill LOTS OF MODES: It won't be as hectic this week when it comes to transportation issues on Capitol Hill, but lawmakers still have a lot on their plate. Aside from the Senate appropriations markup, here's what's on the schedule: — Tuesday: The Senate Commerce Committee's surface transportation, freight, pipelines and safety panel will hold a hearing about the trucking and commercial bus industries to discuss possible ways to adjust the FMCSA in the successor to the 2021 infrastructure law. At 2 p.m., the House Transportation Committee's Coast Guard and maritime subcommittee will host a hearing about the Federal Maritime Commission's fiscal 2026 budget request. — Wednesday: Three nominees for high-ranking DOT roles will face a Senate Commerce Committee confirmation hearing at 10 a.m. They are Seval Oz for assistant secretary for research and technology; Michael Rutherford for assistant secretary for multimodal freight infrastructure and policy; and Gregory Zerzan for general counsel. At 3 p.m., the Senate Environment and Public Works Committee's transportation panel will host a hearing about improving U.S. infrastructure. The witnesses are: Chad Orn, deputy director of planning at the North Dakota DOT; Marisa Jones, managing director of policy and partnerships at the Safe Routes Partnership; and Samantha Biddle, the Maryland DOT's deputy secretary. drones NONCOMMITTAL: Pavan caught up with Senate Commerce Chair Ted Cruz (R-Texas) late last week after some House members recently suggested they were interested in muscling counterdrone authorities legislation through Congress sometime before next summer's FIFA World Cup, which spans North America. Cruz said it's 'certainly an issue we're looking at very closely,' appearing to refer to his committee, and when asked if it's realistic that such a bill could get done prior to the soccer tournament, he would only say: 'Possibly.' Highways THOUGHTS, ANYONE?: DOT in a Federal Register notice says it's seeking ideas and comments from the public about the next surface transportation bill. NEW FACES WHO THEY ARE: Three DOT administrator nominees breezed through their Senate Commerce Committee confirmation hearing last week, and their initial questionnaires submitted to the panel are now available to the public. — Jonathan Morrison, the pick to run NHTSA, indicated that he might take an industry-friendly approach to the oversight of emerging software and hardware like automated driving systems, saying the agency must work to 'establish robust performance requirements that meet the need for motor vehicle safety in a way that does not hamper innovation.' He's a former Apple attorney and was the agency's chief counsel during Trump's first term, during which he tangled with Elon Musk's Tesla. — Derek Barrs, the choice to head the FMCSA, suggested that he wants to upgrade the trucking regulator's internal computer systems to 'ensure they can effectively support new technologies and withstand cyber threats.' He previously served as chief of the Florida Highway Patrol and is a school board member in the Sunshine State. — Paul Roberti, the prospective leader of PHMSA, who was the pipeline safety agency's top lawyer during the first Trump administration, wrote that it must 'rise to the challenge of streamlining regulations.' Shifting Gears — Jonathon Freye will head the Association of Value Airlines as executive director. He previously led government affairs for an aerospace division of Hyundai Motor Group. The Autobahn — 'Delta regional pilot makes 'aggressive maneuver' to avoid B-52 collision.' ABC News. — 'US judge sets August hearing on bid to end Boeing criminal prosecution.' Reuters. — 'NTSB chair says media reports on Air India crash are speculative, premature.' Reuters. — 'After years of tough rules on liquids and footwear, US air travel may be on the cusp of a new era.' AP. — 'JFK Lifts Ground Stop Caused by Disabled Aircraft on Runway.' Bloomberg. — 'Carmakers Face Uncertainty as Tariffs and Earnings Collide.' Bloomberg.
Politico
a day ago
- Business
- Politico
Trump's big fiscal dominance play
Presented by 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 Federal Reserve Chair Jerome Powell to consider the cost of the government's ballooning debt service payments when the central bank meets later this month. It's an enduring theme in his ongoing effort to pressure the Fed chair to lower interest rates. Powell 'is truly one of my worst appointments,' Trump posted on his social network, Truth Social, on Friday. 'We deserve to be at 1% [interest rates], saving One Trillion Dollars a year on Interest Costs.' Here's why that matters: The Fed's primary responsibilities are to keep prices stable and promote maximum employment. When central banks prioritize government borrowing needs over their core mission — economists call this 'fiscal dominance' — it often leads to cascading inflation. If bond investors and consumers assume that central banks lack the ability or political will to contain higher prices from stimulative federal spending, inflation expectations climb. The economic and political fallout can be massive; the subordination of monetary policymaking to accommodate fiscal expansion was a hallmark of recent out-of-control price surges in Argentina and Turkey, and it contributed to the collapse of the Weimar Republic in Germany. So what? While he isn't using the phrase, Trump is making arguments in favor of a form of fiscal dominance. And while there are structural and technical safeguards in place to prevent such an outcome, they are not impenetrable. The Treasury-Fed Accord of 1951 — struck amid rocketing inflation after a nine-year period when the central bank had agreed to keep rates low to help the government finance World War II and its aftermath — formalized the central bank's independence from Treasury with regard to setting borrowing costs. But as former Philadelphia Fed President Charles Plosser has noted, that accord is 'an institutional arrangement, not a legal agreement.' And while the Federal Reserve Act is specific when it comes to the central bank's monetary policy objectives, fiscal considerations invariably factor into how central bankers consider the overall health of the economy. And deficits are expected to climb over the next decade as Trump's 'big, beautiful bill' takes effect. 'It would be very difficult to follow the direction in the Federal Reserve Act — to promote low inflation and full employment — if the Federal Reserve were pursuing a mandate of keeping debt service costs low,' said Lael Brainard, a former Fed vice chair and top economic adviser to President Joe Biden. Still: 'It's not an explicit prohibition, per se, but the dual-mandate responsibilities of the Federal Reserve are explicit.' Another factor to consider: There's an argument emanating from Trump's orbit that the Fed and Treasury need to work hand-in-glove to manage the central bank's balance sheet — the Fed has been a major purchaser of government securities on the open market during periods of stress. That would invariably give the administration more say in decisions that affect interest rates. Kevin Warsh, the former Fed governor who's now a contender to succeed Powell, recently floated the prospect of a new Treasury-Fed accord that would allow the Treasury secretary and central bank chief to 'describe to markets plainly and with deliberation, 'This is our objective for the size of the Fed's balance sheet.'' As Warsh described it, since the Fed's holdings of government securities have a bearing on both fiscal and monetary policy, such an accord wouldn't breach the central bank's independence. Nevertheless, the prospect of a new Treasury-Fed accord would invariably raise questions about Trump's influence over policies that ultimately affect rates. And few expect markets to respond favorably if the president's pressure campaign ultimately undermines faith in the central bank's ability to stick to its mandate as deficits continue to climb. As Brainard told me, 'At the end of the day, it's investors who decide how much they need to be compensated to hold longer-term Treasury securities and longer-term debt more generally. If their view is that inflation is going to be high — and that the Federal Reserve's ability to control inflation has been undermined — they'll simply demand more compensation.' It's Monday — And it's another very busy week on the Hill. As always, send MM tips and pitches to me at ssutton@ Driving the Week Monday … The House Appropriations Financial Services and General Government Subcommittee holds a markup of the FY2026 Financial Services and General Government bill at 5:30 p.m. … The Senate Agriculture Committee holds a markup to vote on Brian Quintenz's nomination to be chairman and a commissioner of the Commodity Futures Trading Commission, along with other nominations … Tuesday … Powell and Fed Vice Chair for Supervision Michelle Bowman speak at the Integrated Review of the Capital Framework for Large Banks Conference, which kicks off at 8:30 a.m. … World Bank President Ajay Banga speaks at the Center for Global Development's conference on development economies at 9:10 a.m. … Senate Finance Committee meets at 9:45 a.m. to mark up the nominations of Joseph Barloon to be a deputy U.S. Trade Representative in the Geneva Office and Brian Morrissey Jr. to be general counsel at Treasury … The Securities and Exchange Commission holds a meeting of the Small Business Capital Formation Advisory Committee at 10 a.m. … Senate Finance holds a hearing on the nominations of Jonathan McKernan to be Treasury undersecretary and Alex Adams to be assistant Health and Human Services secretary for family support … Wednesday … House Financial Services has a second markup hearing scheduled for 10 a.m. … Senate Banking holds a markup to vote on the nominations of Ben DeMarzo to be assistant HUD secretary; Craig Trainor to be assistant HUD secretary; Jovan Jovanovic to be chairman of the Export-Import Bank; Francis Brooke to be assistant Treasury secretary; and David Peters to be assistant Commerce secretary at 10:30 a.m. … Thursday … New home sales data for June is out at 10 a.m. …. House Financial Services ranking member Maxine Waters (D-Calif.) speaks at a Brookings Institution event at 11:30 a.m. … Friday … The House Ways and Means Committee holds a field hearing on 'The One, Big, Beautiful Bill Delivering for American Economy' at 1 p.m. in Las Vegas In his ear — The WSJ's Brian Schwartz and Nick Timiraos reported over the weekend that Treasury Secretary Scott Bessent has been making the case to Trump that he should not try to fire Powell, citing political and legal obstacles as well as the turmoil that action could unleash in markets. — Trump, who's suing the Journal over its report on a birthday missive he allegedly wrote to disgraced financier Jeffrey Epstein, was not happy with the article. 'Nobody had to explain that to me,' he posted on Truth Social on Sunday. 'I know better than anybody what's good for the Market, and what's good for the U.S.A. If it weren't for me, the Market wouldn't be at Record Highs right now, it probably would have CRASHED! So, get your information CORRECT. People don't explain to me, I explain to them!' First in MM: Warren hammers Pulte — Federal Housing Finance Agency Director Bill Pulte has been one of Trump's biggest attack dogs with regard to Powell and has been pushing for the Fed chair's ouster for weeks. The FHFA chief's unusual social media presence — he's repeatedly suggested that Powell will resign — led Massachusetts Sen. Elizabeth Warren on Sunday to send a letter demanding more information about his X usage, his focus on Powell and his work at the housing agency. [Link: ] 'Your prolific activity on X and apparent decision to take time away from your duties as FHFA Director to draft a letter for President Trump to fire Chair Powell are abnormal,' Warren, the top Democrat on Senate Banking, wrote to Pulte. 'Your behavior raises significant questions about your judgment and commitment to operating FHFA in a responsible, competent, and lawful manner.' The FHFA did not respond to a request for comment. In the books— Trump on Friday signed the first major congressional overhaul of cryptocurrency rules into law, Jasper Goodman reports. The GENIUS Act creates bespoke rules for dollar-pegged stablecoins. — And as Declan Harty writes, the new law 'could clear the way for Americans to view crypto as not just a speculative investment but as a lightning-fast way to conduct transactions by circumventing traditional financial players like credit-card intermediaries.' At the regulators Warning — Outgoing Public Company Accounting Oversight Board Chair Erica Williams told Declan that the SEC's shakeup of the industry watchdog is coming as market volatility and a tight economy necessitate strict oversight of companies' audits. 'History tells us what happens when the economy is tight: People cook the books,' she said. Banks v. crypto — The banking lobby is urging the Office of the Comptroller of the Currency to hold off on applications by multiple crypto firms seeking national charters, Victoria Guida reports. In The Economy The grocery economy — The GOP megabill's cuts to the Supplemental Nutrition Assistance Program are poised to devastate independent grocery stores that are concentrated in Trump-friendly low-income communities, Rachel Shin reports. Dissent incoming? — In an interview with Bloomberg TV on Friday, Fed Gov. Christopher Waller hinted that he might dissent if his fellow central bank policymakers move to hold rates steady when they meet next week. Waller has argued that a slowdown in private sector hiring necessitates a cut. What a pisser — Per The Washington Post's David Lynch: 'The tariffs imposed to date also have had some presumably unintended effects. The U.S., for example, is now more dependent upon Russia for urea, a common fertilizer used to grow crops such as wheat, corn and rice.' Wall Street What's the bet? — The possibility that Trump may attempt to fire Powell has created a new trade for Wall Street investors. Here's a big one, per Bloomberg's Ye Xie: 'Buy two-year Treasuries and sell US 10-year notes.' 'Woke' political risk — Trump threatened to block a deal that would allow the NFL's Washington Commanders to build a new stadium in DC 'if they don't change the name back to the original 'Washington Redskins,'' POLITICO's Cheyanne Daniels reports. The team's owner Josh Harris — a co-founder of the private credit behemoth Apollo Global Management — said in February that the team wouldn't be changing its name anytime soon. 'Anti-woke' political risk — The NYT's Mike Isaac and Ryan Mac have a story about how the Silicon Valley venture powerhouse Sequoia Capital is facing blowback from partner Shaun Maguire's ultra-MAGA social media presence. Maguire's recent X post claiming that New York City mayoral candidate Zohran Mamdani is lying to advance 'his Islamist agenda' has been blasted by tech industry participants for being Islamophobic. Jobs report Wharton professor Christina Parajon Skinner, a former legal counsel at the Bank of England, has joined Treasury as a deputy assistant secretary for the Financial Stability Oversight Council, according to her LinkedIn.
Politico
4 days ago
- Business
- Politico
Weak dollar means worse tariff inflation
Presented by 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 The steady decline of the dollar under President Donald Trump has led to a lot of hyperventilating about its role as the global reserve currency and threats posed by alternatives like the euro or whatever the BRICs have cooking. That's a long-term problem (to the extent it's a problem at all). For now, the weak dollar means a lot of things are just a little more expensive. And that defies what had been anticipated by most economists – as well as Trump advisers like Treasury Secretary Scott Bessent and Council of Economic Advisers Chair Stephen Miran — when the president began ratcheting up tariffs shortly after taking office. 'One of the biggest surprises so far has been the weakness of the dollar. It was textbook: If you put in place tariffs, it's going to put upward pressure on the dollar,' said Ernie Tedeschi, a former Biden administration economist who is now a director at the Budget Lab at Yale. 'That has major implications for the passing through of tariffs to prices.' Tariffs were widely expected to push up consumer prices, of course, but a portion of those increases was expected to be offset by a stronger greenback. Bessent said he expected 10 percent tariffs to translate into a 4 percent appreciation of the dollar — in line with the research cited by Yale's Budget Lab. Miran also anticipated dollar growth would diminish the effect of higher prices. If Trump's tariffs are putting upward pressure on the dollar, it hasn't been enough to overcome the myriad factors that contributed to its decline over the last seven months. The dollar has fallen by about 9 percent year-to-date against other currencies. If the global demand for the greenback is down — and most global trade is transacted in dollars — that limits the likelihood that foreign companies will reduce prices for U.S. importers looking to offset the cost of Trump's tariffs. Wells Fargo economists Sarah House and Nicole Cervi put it this way in a research note on Thursday: 'The broad depreciation has likely incentivized foreign suppliers to bump up their invoice prices, as dollar-denominated revenues are not stretching as far when translated to their home currencies.' [Emphasis mine.] Of course, the subtle increase in import prices in June reported by the Labor Department on Thursday belies the decline in overall import prices that occurred over the previous year. There is evidence that certain exporters — particularly Chinese businesses— are absorbing some of Trump's tariff costs by slashing what they charge. (And, over time, a weaker dollar would be a boon to domestic exporters that the administration is aiming to support.) But the fact that import prices climbed at all last month has been interpreted by some economists as a sign that the dollar's relative weakness could reverse last year's trend. That means consumers are likely to feel more of a bite if tariff-related price increases persist. 'I would think in the rest of the year that import prices move up at a faster rate, largely due to the dollar,' said Michael Pearce, the deputy chief U.S. economist at Oxford Economics. 'That means you'll get more of a burden borne by either U.S. companies shrinking their margins or passing it along to consumers.' 'It's still very early days,' he added. 'The next few months are going to be noisy.' IT'S FRIDAY — As always, send MM tips and pitches to Sam at ssutton@ Driving the day Housing starts and building permits data for June will be out at 8:30 a.m. … The University of Michigan's preliminary consumer sentiment estimate for July is out at 10 a.m. The man, the myth, the X account — Federal Housing Finance Agency Director Bill Pulte has been at the forefront of the administration's efforts to oust Federal Reserve Jerome Powell. The real estate scion 'is rubbing some mortgage industry players and senior Trump administration officials the wrong way,' writes The WSJ's Gina Heeb. So that's the strategy — Outside lawyers have warned Trump that he would likely be on shaky legal ground if he attempts to fire Powell, Megan Messerly, Victoria Guida and Jake Traylor scooped on Thursday. 'Whether or not it's illegal, I don't know,' said one official, granted anonymity to speak candidly about the legal strategy. 'But is it a good thing to point out to damage this guy's image? Yeah.' Powell fights back — The Fed chair defended his handling of the costly renovation of the central bank's headquarters in a letter to White House Budget Director Russ Vought. Powell said the Fed has made only small changes to its plans since they were approved by the National Capital Planning Commission in 2021, Victoria reports. 'The Board does not regard any of these changes as warranting further review' by the commission, Powell wrote. — In a case that could have bearing for the Fed — and every independent federal agency — U.S. District Judge Loren AliKhan issued the order on Thursday saying that the Trump administration violated the FTC Act and protections under a 1935 Supreme Court precedent when it fired commissioner Rebecca Kelly Slaughter from her role at the Federal Trade Commission. Crypto Crypto blowout — The House voted overwhelmingly on Thursday to pass the first-ever major legislative overhaul of cryptocurrency regulations, teeing Trump up for a big signing ceremony today at the White House, the tireless Jasper Goodman reports. House lawmakers voted 308-122 to adopt a Senate-passed stablecoin bill known as the GENIUS Act, with more than 100 Democrats on board. The blowout vote is the latest sign of the industry's ascendence as a major political force in Washington. But the big surprise of the day was the vote tally on a second crypto market structure bill that is now headed to the Senate with more bipartisan momentum than expected. That bill, the CLARITY Act, drew 78 Democrats — a tally that topped the vote tally that a similar bill received on the House floor last year. The vote was a major win for the GOP leaders of the effort — namely House Financial Services Chair French Hill (R-Ark.), who has worked for years to win bipartisan buy-in on the proposal. They hope the tally propels the Senate to take the proposal up. 'The vote total in the House shows massive support across party lines,' said Rep. Bryan Steil (R-Wis.), who chairs a Financial Services subcommittee on crypto. 'To me, that's a sign that the United States Senate should pick up this legislation and move quickly.' Fed File Waller weighs in — Fed Gov. Christopher Waller doubled down on his call for a July rate cut, contending that the labor market is showing signs of weakness. 'While the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased,' he said in prepared remarks. 'With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate.' — Consumers are still showing signs of strength, however. Retail and food services sales climbed by 0.6 percent last month, according to Census Bureau data. Warsh's take — Former Fed Gov. Kevin Warsh, who like Waller is in the running to take over as Fed chair, reiterated his recent call to lower rates in an appearance on CNBC. Per The WSJ, he also said 'there needs to be an exit plan to get the Fed out of the fiscal business, to give powers back to Secretary Bessent,' he said. 'But it can't be done in a rushed way.' At the regulators A massive story in any other news cycle — Securities and Exchange Commission Chair Paul Atkins said he was open to merging his agency with the Commodity Futures Trading Commission, per Declan Harty. In an interview on FOX Business, Atkins said combining the SEC and CFTC is 'not the primary job that we have before us.' But he said he has supported the idea 'for years' and that it 'makes a lot of sense — especially with the potentially overlapping jurisdictions' between the two. On the Hill Profiles in courage — From Ari Hawkins and Daniel Desrochers: 'President Donald Trump's determination to barrel ahead with tariffs is forcing a growing number of Republican lawmakers to make an uncomfortable choice: defend the president's agenda or influential industries back home.' HUD budget advances — The House Appropriations Committee advanced its fiscal 2026 DOT and HUD spending bill, Sam Ogozalek reports. Davidson tees up outbound — Rep. Warren Davidson (R-Ohio) said Thursday that the Defense Production Act could be a vehicle for legislation that would restrict U.S. investments in China and other countries, writes Katherine Hapgood. At the White House Welp — Trump allegedly wrote a 'bawdy' letter as part of a birthday gift for disgraced financier Jeffrey Epstein. From The WSJ: 'The letter bearing Trump's name, which was reviewed by the Journal, is bawdy—like others in the album. It contains several lines of typewritten text framed by the outline of a naked woman, which appears to be hand-drawn with a heavy marker. A pair of small arcs denote the woman's breasts, and the future president's signature is a squiggly 'Donald' below her waist, mimicking pubic hair.' — Trump denied penning the letter and said he would sue the Journal. Meanwhile — Meredith Lee Hill reports that House Speaker Mike Johnson and Republicans 'are trying to forge a likely nonbinding resolution on the [Epstein] matter that could help fend off Democratic attacks that the GOP is showing a lack of transparency on the case.'
Politico
5 days ago
- Business
- Politico
Firing Powell would do nothing to help Trump on interest rates
Presented by 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 For a moment on Wednesday, it looked like President Donald Trump would finally attempt the improbable and fire Federal Reserve Chair Jerome Powell. But shortly after reports surfaced that Powell could soon be headed for the exits, Trump told reporters gathered in the Oval Office that the central banker's job is safe — at least for now. 'I don't rule out anything, but I think it's highly unlikely,' Trump said, adding that he would only fire Powell in the event of misconduct related to the Fed's costly headquarters renovation. He then reverted to his most frequent line of attack: 'I think he's not doing a good job. He's got a very easy job to do. Know what he has to do? Lower interest rates.' The battle over Powell's future at the Fed — and the future of the Fed itself — isn't going away. So, let's get this out of the way: Firing Powell for cause would do nothing to achieve Trump's goal to quickly lower borrowing costs. For one thing, Powell could mount a legal challenge to keep his job by arguing that the 'for cause' removal was actually a pretext for Trump's public opposition to his stance on rates. The Supreme Court has signaled that the president can't summarily dismiss central bankers over policy decisions, and Powell allies have noted that Trump often mixes critiques about the Fed's renovation with complaints about monetary policy. That could help Powell if he sought an injunction or court-ordered reinstatement to serve the remainder of his term as chair, which expires in May. 'There's no way that Donald Trump is going to intimidate Jay Powell into doing something he doesn't want to do,' former Fed Vice Chair Donald Kohn said Wednesday. In the meantime, investors and CEOs would have to wrestle with major questions about the White House's influence over rate decisions. The central bank's relative independence from political interference is fundamental to faith in U.S. markets and is widely viewed as a bulwark against inflation. Wall Street leaders are throwing up warning flags. As JPMorgan Chase CEO Jamie Dimon cautioned this week, 'playing around with the Fed can often have adverse consequences.' Stocks sank during the brief window on Wednesday when it appeared as though Powell's days were numbered. Perhaps more importantly for Trump, who has been open about his sensitivity to bond market fluctuations, the 10-year Treasury yield — a key determinant of financing costs charged to consumers and businesses — spiked. 'If your goal is lower rates, that may not be the most direct route,' said Mike Pugliese, a senior economist at Wells Fargo who covers monetary and fiscal policy. But suppose Powell acquiesced in this (hypothetical) firing, or lost a legal challenge related to that dismissal. It would still take time for Trump to nominate a replacement and get that person confirmed by the Senate. And given the value lawmakers from both parties place on Fed independence, that would represent a major political challenge against a confounding economic backdrop. Republican Sen. John Kennedy, a member of the Senate Banking Committee, told reporters that he doesn't believe 'a president, any president, has the authority to fire the Federal Reserve chair.' And Sen. Kevin Cramer (R-N.D.) – though highly critical of Powell's stewardship — told Jasper Goodman that firing Powell with less than a year remaining as chair could 'infuse chaos' at a time when Fed policymakers have already indicated they're looking to lower rates as soon as they can. Until a replacement is confirmed, members of the Federal Open Market Committee would be able to appoint their own chair. Over the last few weeks, many Fed officials — with the notable exception of Vice Chair for Supervision Michelle Bowman and Gov. Christopher Waller — have echoed Powell's assertion that the central bank is in no rush to lower interest rates until there's greater clarity around how Trump's new tariffs have affected prices and employment. This week's inflation report contained evidence that tariff-related price increases are starting to take hold — something Powell has warned as a possibility for months. After the report was released, Dallas Fed President Lorie Logan and Boston Fed President Susan Collins both said the central bank doesn't need to cut rates soon. What's more, while the Fed has already ceded ground to the White House on bank regulation — and aligned closer to Trump's priorities in areas like climate policy and diversity — there's far less institutional appetite to do the same with regard to rates. 'They already compromised on regulation. They've compromised DEI, climate change — all those things,' Kohn said. 'But monetary policy is the core.' IT'S THURSDAY — As always, send MM tips and pitches to Sam at ssutton@ Driving the Day Federal Reserve Governor Adriana Kugler speaks at a Housing Partnership Network symposium at 10 a.m. … Fed Governor Lisa Cook speaks at the National Bureau of Economic Research's Digital Economics and Artificial Intelligence Conference at 1:30 p.m. … House Financial Services ranking member Maxine Waters speaks at a Brookings event at 11:30 a.m. … Fed Governor Christopher Waller speaks at a Money Marketeers of NYU dinner at 6:15 p.m. … What's next – Powell's fate may hinge on the ability of Trump's top allies to convince the president that the Fed's insulation from political influence is a benefit to his own agenda, Victoria Guida reports. 'Having a Fed chair who is not simply a yes man is a way to help head off the kind of damaging inflation that sank Democrats in 2024,' she writes. 'That is, investors and businesses have to believe that the central bank is willing to do what's necessary to avoid inflation, even if that means higher rates.' Thune on Powell — 'I think the markets want an independent Federal Reserve. I think they want a central bank that isn't subject to the whims of politics,' Majority Leader John Thune of South Dakota said in an appearance on Fox News on Wednesday night, adding that he thinks Powell will serve out his term. 'My assumption is – based on what the president said today —that he is not going to do anything about this any time soon.' — Despite Trump's repeated attacks on Powell, the Fed chair's support among Republicans has actually increased since Trump returned to office, The NYT's Ruth Igielnik reports. Green light for crypto bills — House conservatives struck a late-night deal with GOP leaders on Wednesday to clear the way for the chamber to take up a slate of cryptocurrency legislation, our Jasper Goodman reports from Capitol Hill. The conservative hard-liners, who tanked a procedural vote on the crypto bills on Tuesday and then froze the House floor for much of the day Wednesday in opposition to the effort, backed down after GOP leaders agreed to attach a provision that would ban a central bank digital currency to a must-pass defense authorization bill later this year. The GOP rebels had been pushing to merge the CBDC ban bill with a sweeping crypto market structure overhaul, but that plan met resistance from the leaders of the House Financial Services and Agriculture committees. Most Democrats oppose a CBDC ban, and the chairs of those panels didn't want to kill off Democratic support for their market structure proposal, which they are hoping to send to the Senate with widespread bipartisan buy-in. The House is now set to vote in the coming days on Senate-passed stablecoin legislation that will then go to Trump's desk, Financial Services Chair French Hill's sweeping market structure bill and a third measure that would ban a CBDC. The deal to unfreeze the floor came together following a late-night meeting in House Speaker Mike Johnson's office. Trump called in at the very end and was briefed on the agreement, according to two people in the room granted anonymity to describe a private discussion. 'He's happy with it,' one of the people said. The Economy Mixed signals — The Fed's survey of regional business contacts found that economic activity 'increased slightly' in June. Still, 'Uncertainty remained elevated, contributing to ongoing caution by businesses.' The Fed's gauge for domestic industrial capacity and production reflected an expansion, improving on previous months. — And wholesale price inflation was flat in June, according to the Labor Department's Producer Price Index. Nevertheless, economists at Bank of America Global Research expect the core Personal Consumption Expenditures index — one of the Fed's most closely watched indicators — to climb to 3 percent by July. Wall Street A good quarter for Big Banks — Market turmoil triggered by fast-shifting tariff policies helped pump up trading businesses at Goldman Sachs and Morgan Stanley, according to The WSJ. Healthy consumer? — At BofA, which boasts a large consumer footprint, CEO Brian Moynihan told Bloomberg that consumers are 'continuing to spend more.' 'They've got money in their accounts, they're employed and the wage growth has been relatively strong. So they're in pretty good shape,' he said. We'll get an update on June retail sales from the Census Bureau at 8:30 a.m. On the Hill Short memories — Sen. Elizabeth Warren (D-Mass.) is warning that the GOP's policy mix of pro-crypto legislation and financial deregulation is drawing uncomfortable parallels to the events that led to the global financial crisis, Katherine Hapgood reports. Senate Small Biz markup — The Senate Small Business panel passed legislation out of committee that would double Small Business Administration 7(a) manufacturing loan limits to $10 million and double the statute of limitations on SBA COVID-era fraud to 10 years, Katherine reports. The bills passed by unanimous voice vote during Wednesday's markup. At the White House Never mind — Trump's immigration crackdown is starting to dent his approval ratings (and the supply of labor). Just 41 percent of Americans polled by Reuters/Ipsos supported the president's immigration agenda. The Epstein saga — From Jake Traylor: 'President Donald Trump on Wednesday trashed many MAGA members, condemning their ongoing push for files related to Jeffrey Epstein and bemoaning that they are playing into Democrats' hands.' Trade Softening — From Bloomberg: 'Trump has dialed down his confrontational tone with China in an effort to secure a summit with counterpart Xi Jinping and a trade deal with the world's second-largest economy, people familiar with internal deliberations said.' Big fish — The president also said he'll send letters to 150 smaller countries announcing their tariff rates, Doug Palmer reports.
Politico
6 days ago
- Business
- Politico
Crypto chaos crashes the House
Presented by 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 The House has been thrust into a sudden state of crypto chaos. Conservative hardliners staged an unexpected rebellion on the House floor that brought down a procedural vote to allow the chamber to take up a slate of digital assets bills, briefly hijacking a long-planned 'crypto week' from GOP leaders in a bid to avoid getting jammed by the Senate. And then, in a story that is becoming increasingly familiar about this House Republican conference, President Donald Trump swooped in and got the holdouts to flip. This time, he apparently made quick work of it. The president wrote on Truth Social late Tuesday that after a 'short' Oval Office discussion, the holdouts 'have all agreed to vote tomorrow morning in favor of the Rule,' referring to the procedural measure that the House must adopt to begin debate on legislation. The surprise vote on the floor Tuesday represented another setback in an increasingly fraught GOP-led legislative push to enact industry-friendly crypto regulations that has become rife with drama and intra-party tensions on both sides of the aisle. The main source of the GOP rebels' objection was ostensibly a move by House Republican leaders to accept a Senate-passed bill to regulate so-called stablecoins without changes. Some hardliners said they were concerned that the measure would become law without banning a central bank digital currency, which is a government-issued digital dollar that conservatives say would open the door to privacy invasions. But the move was also indicative of broader frustrations among House conservatives over getting repeatedly jammed by the Senate. Republicans in the upper chamber forced the House to accept their approach to the 'big, beautiful bill' and are eyeing changes to a House-passed rescissions package. 'The House is kind of used to not really being given any deference when we send things to the Senate. There are people that are sort of frustrated with that,' said Rep. Warren Davidson, an Ohio Republican who sometimes aligns with conservative hardliners but voted 'yes' on the procedural vote Tuesday. 'Some of it's just an anti-just-take-whatever-the-Senate-sends-you-and-do-it sentiment.' House GOP leaders, including Financial Services Chair French Hill (R-Ark.), considered packaging stablecoin legislation with a broader crypto market structure overhaul, but they opted to send the Senate's bill to Trump's desk as-is following a public pressure campaign by the president and Senate Republicans who want a quick win. The House is set to vote today on the Senate stablecoin measure, known as the GENIUS Act, according to a statement Tuesday night from House Speaker Mike Johnson. He added that the House will advance additional crypto legislation — which includes Hill's sweeping market structure bill and a CBDC ban bill — 'in the coming days.' (GOP leaders had initially planned to vote on the GENIUS bill Thursday and the other two measures today.) Now, all eyes will turn to House Democrats, who are expected to split over the bills. As your host reported Tuesday, GOP leaders are facing headaches with them, too. Hill's market structure bill, the CLARITY Act, is in danger of winning fewer Democratic votes than a similar GOP-led proposal earned on the floor last year, an outcome that could damage the measure's viability in the Senate. The GENIUS bill, however, is poised for a big bipartisan vote. 'Stablecoin has often been less controversial than market structure,' Rep. Ritchie Torres (D-N.Y.), who supports both measures, told MM. 'And Donald Trump has made market structure more controversial, not less.' IT'S WEDNESDAY — What do you make of this crypto mess? Let me know at jgoodman@ As always, send MM tips and pitches to Sam at ssutton@ Driving the day Fed Governor Michael Barr speaks at a Brookings Institution discussion on 'Booms, Busts, and Financial Regulation' at 10 a.m. … House Financial Services' National Security subcommittee holds a hearing on 'U.S. Policy on Investment Security' at 10 a.m. … Sen. Elizabeth Warren (D-Mass.) speaks at the Exchequer Club at 12:30 p.m. … The National Bureau of Economic Research holds its SI 2025 Digital Economics and Artificial Intelligence Conference beginning at 1:30 p.m. … House Financial Services' Housing and Insurance subcommittee holds a hearing on 'Modern Solutions to the Housing Shortage' at 2 p.m. … PCAOB chair to step down — Public Company Accounting Oversight Board Chair Erica Williams told staff in an email Tuesday that she is stepping down from the top U.S. audit watchdog after SEC Chair Paul Atkins asked for her resignation, Declan Harty reports. Williams, a former SEC staffer who took over as PCAOB chair nearly four years ago, will leave the board next week, according to the email, a copy of which was obtained by POLITICO. In her email, Williams wrote that while staff may have questions about what is next for the PCAOB, she does 'not have the answers you deserve.' Bessent wants Powell out next year — Treasury Secretary Scott Bessent suggested Tuesday that Federal Reserve Chair Jerome Powell should step down from the central bank's board when his term as chair is up in May 2026. Powell's term as a Fed governor isn't up until January 2028. 'Traditionally, the Fed chair also steps down as a governor,' Bessent said in an interview on Bloomberg TV. 'There's been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination. And I can tell you, I think it'd be very confusing for the market for a former Fed chair to stay on also.' Trade Concerns over Nvidia reversal — Lawmakers pledged to get answers after the Trump administration appeared to clear the way for reversing earlier curbs on the sale of some semiconductors from Nvidia and Advanced Micro Devices to China, per Ari Hawkins and Anthony Adragna. 'I'll be seeking clarification from Commerce regarding NVIDIA's statement,' the chair of the House Select Committee on the Chinese Communist Party, John Moolenaar (R-Mich.), said in a statement to POLITICO. 'I strongly supported the Commerce Department's decision earlier this year to restrict exports of the H20 chip to China.' Inflation up, Trump still wants rates down — Inflation rose in June as Trump's tariffs began to push up the prices of certain goods, undermining his attempts to pressure Fed Chair Powell to lower interest rates, Sam reports. Trump's tariff rush — Trump and Commerce Secretary Howard Lutnick are rushing to conclude an unprecedented number of national security tariff investigations, which is raising concerns among trade experts about the integrity of probes that could lead to levies on hundreds of billions of dollars' worth of imports in key sectors like commercial aircraft, microchips and medicine, per Doug Palmer. On The Hill Dodd-Frank turns 15 — House Financial Services Republicans continued to voice concern over the burdens that small and community banks face from restrictions under the Dodd-Frank law during a hearing exploring the past 15 years and the future of the law, Katherine reports. GOP members of the committee pushed for Congress to regain additional control over the CFPB and FSOC. The panel has put forward three dozen bills for consideration regarding Dodd-Frank. Small Business Democrats push against SBA policy changes — Small Business ranking members Sen. Ed Markey (D-Mass.) and Rep. Nydia Velázquez (D-N.Y.) pressed SBA Administrator Kelly Loeffler for answers on expected field office closures in 'sanctuary cities' and restricting 7(a) and 504 loans, and microloans exclusively to U.S. citizens. 'The combined loan-policy and office-closure actions are unacceptable and will hurt both immigrant communities and the U.S. economy,' the lawmakers write in the letter released Tuesday. Senate confirms Pettit to senior Treasury post — The Senate confirmed Luke Pettit, former senior policy adviser to Sen. Bill Hagerty (R-Tenn.), by a vote of 69-30 to serve as Treasury's assistant secretary for financial institutions, per Adam Behsudi. FSB chief Bailey backs Trump banking cop — The head of the Financial Stability Board is backing a former Trump-appointed banking regulator after a senior U.S. lawmaker called for him to be dismissed from the global financial watchdog, Kathryn Carlson reports. In a letter to U.S. Sen. Elizabeth Warren, obtained by POLITICO, FSB chair Andrew Bailey said Randal Quarles, who last month was chosen to lead a worldwide review of post-2008 financial crisis reforms for the body, is 'a highly regarded previous Chair of the FSB.' At the regulators DOJ and CFTC drop Polymarket probes — Federal authorities have dropped a pair of investigations into the betting market startup Polymarket — some of the last vestiges of a Biden-era crackdown against the high-flying industry of prediction markets, per Declan. The Justice Department and the Commodity Futures Trading Commission sent Polymarket formal letters saying they would be ending their probes into the company, according to a person familiar with the investigations who was granted anonymity to discuss the letters. Wall Street Dimon defends Fed independence — 'JPMorgan Chase CEO Jamie Dimon sounded Wall Street's clearest warning against the Trump administration's attacks on the Fed's Powell, describing the central bank's independence as crucial,' per the Wall Street Journal. 'I think the independence of the Fed is absolutely critical,' Dimon told media members in a call after the bank's earnings announcement. 'Playing around with the Fed can have adverse consequences, the absolute opposite of what you might be hoping for.' —Trump vibe check: When asked whether the Fed's headquarter renovation saga was a fireable offense, he said: '"I think it sort of is.' Jobs report Eric Morrissette, a former acting under secretary of Commerce overseeing the Minority Business Development Agency during the Biden-Harris administration, and Narda Jones, former chief of staff at the Federal Communications Commission, have joined the Joint Center for Political and Economic Studies as fellows.
