Overnight Finance: Senators near two-year budget deal | Trump would ‘love to see a shutdown’ over immigration | Dow closes nearly 600 points higher after volatile day | Trade deficit at highest level since 2008 | Pawlenty leaving Wall Street group

Senate leaders zeroing in on two-year budget deal: Senate leaders on Tuesday said they are close to a two-year budget deal that could avert a government shutdown and set up a debate on immigration reform next week.

The deal would set spending levels for fiscal 2018 and 2019 and avoid the prospect of a second government shutdown Thursday when a stopgap spending measure expires.

Senate Majority Leader Mitch McConnell (R-Ky.) and Democratic Leader Charles Schumer (N.Y.) touted their progress after meeting in McConnell’s office Tuesday morning.

“I’m optimistic that very soon we’ll be able to reach an agreement,” McConnell told reporters, predicting that another shutdown this week is very unlikely.

“I don’t think that’s going to happen,” McConnell said of a possible shutdown. “I think we’re on the way to getting an agreement and on the way to getting an agreement very soon.”

Schumer said he also expected a deal soon that would set higher spending levels for defense and nondefense programs. 

“I’m very pleased to report my meeting with Leader McConnell went very well. We’re making real progress on a spending deal that would increase the caps for both military and middle-class priorities on the domestic side that my colleagues have been fighting for.”

Schumer said some “outstanding issues” remain, but stressed he is “very hopeful” for a deal.

 

Details on the emerging deal… Under the proposed deal, the Senate would approve as early as Wednesday a stopgap measure to keep the government open for six weeks. The legislation would also include budgetary ceilings for defense and nondefense spending that reflect the Schumer-McConnell agreement.

Defense spending would be raised more than nondefense spending, breaking the dollar-for-dollar link that Democrats have insisted upon. Lawmakers said the defense-spending budget cap for 2018 likely would be hiked by $80 billion, while the nondefense cap would be hiked by $63 billion.

While this would be a concession from Democrats, they also agreed to a deal last spring that broke the dollar-for-dollar link. And Democrats could also get money for community health centers and disaster relief as part of the stopgap, though some of those details are still under negotiation.

The Hill’s Alexander Bolton and Melanie Zanona have more on the talks here: http://bit.ly/2BKy3HX

 

Trump: ‘I’d love to see a shutdown’ if Dems don’t meet immigration demands: President Trump on Tuesday raised the stakes for the talks, saying he would “love” to see a government shutdown if Democrats do not agree to his demands on immigration.

“We’ll do a shutdown and it’s worth it for our country. I’d love to see a shutdown if we don’t get this stuff taken care of,” Trump told law enforcement officials and members of Congress at the White House.

During impromptu remarks at an event on immigration, Trump said Democrats must accept new border-security measures to keep out people trying to enter the country illegally.

“If we have to shut it down because the Democrats don’t want safety and, unrelated but still related, they don’t want to take care of our military, then shut it down,” the president added. “We’ll go with another shutdown.”

The Hill’s Jordan Fabian and Rafael Bernal report: http://bit.ly/2EnfbPV.

 

Trump’s remarks sparked pushback form one a Republican lawmaker…

 

GOP lawmaker criticizes Trump to his face for inviting shutdown: Rep. Barbara Comstock (R-Va.) criticized President Trump to his face on Tuesday for saying he would “love to see a shutdown” during a meeting with lawmakers and administration officials.

“We don’t need a government shutdown on this,” Comstock said during the White House meeting with Trump, according to a pool report.

But Trump interrupted her and doubled down on his willingness to have another shutdown over the immigration battle.

“You can say what you want; we are not getting support of the Democrats,” Trump insisted: http://bit.ly/2ErAznv.

 

The White House also tried to downplay the remarks…

 

White House: ‘We’re not advocating for a shutdown’ The White House on Tuesday said it is not advocating for a government shutdown shortly after President Trump claimed he’d “love” to see one if Democrats don’t agree to his demands on immigration reform.

“We are not advocating for the shutdown, that’s the fault of the Democrats not being able to do their jobs,” White House press secretary Sarah Huckabee Sanders said. “The president wants a long-term deal and he wants a deal on immigration and he hopes Democrats will come to the table and get that done.” http://bit.ly/2Er8v3C.

 

Happy Tuesday and welcome back to Overnight Finance. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@digital-release.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

 

Dow closes nearly 600 points higher after volatile day: U.S. stocks closed with strong gains Tuesday after a series of volatile swings threaten to extend a massive sell-off.

The Dow Jones industrial index closed 567 higher Tuesday after opening with a loss of more than 500 points. The Dow set a record Monday for the largest loss by points in the index’s history, plunging 1,175 points.

The Nasdaq closed 148 points higher Tuesday, while the S&P 500 ended with a 46-point gain.

All three major indexes spiked and dipped across the board Tuesday, frequently surging between notable gains and steep losses. The Dow opened 520 points lower, but recovered quickly to gains less than 30 minutes after open. The Nasdaq and S&P 500 also opened lower before turning positive, suffering 1-percent losses: http://bit.ly/2Enes19.

 

Mnuchin: Stock markets are ‘functioning very well’ Treasury Secretary Steven Mnuchin said Tuesday that stock markets are “functioning very well” amid wild volatility after a day of record-breaking losses.

Mnuchin, testifying before the House Financial Services Committee, said the Trump administration is monitoring the markets, but doesn’t see severe threats to the U.S. financial system.

“We are very focused on the long-term economic growth and we believe the policies we’ve enacted including tax reform are very positive,” Mnuchin said, noting the stock markets’ gains since President Trump’s inauguration.

“You’ve seen a normal market correction, although large,” Mnuchin said.

Mnuchin also said the volatility doesn’t pose a risk to the U.S. economy, though he admitted to checking the markets on his cell phone during the hearing.

“I don’t think these types of moves, given how much the market has rallied, pose systemic risk,” Mnuchin said. “You’ve seen a normal market correction, although large.” http://bit.ly/2EkxaXx.

 

White House spokesman: Trump has not focused on the stock market: A White House spokesman claimed on Tuesday that President Trump has not focused on the stock market, despite his repeated praise for Wall Street’s post-election rally.

“Obviously the president did tout the stock market, but I would hardly say he focused on it,” White House deputy press secretary Hogan Gidley said during a Fox Business network appearance.

Trump frequently took credit for gains in the stock market, tying them to his economic policies.

The president has tweeted half dozen times about stock prices in 2018 and more than 50 times since becoming president. http://bit.ly/2E7MB1H

 

Pawlenty departing Wall Street group: Tim Pawlenty is stepping down as the leader of the Financial Services Roundtable, the industry group announced on Tuesday, as speculation grows about his possible entry into the Minnesota governor’s race.

Pawlenty, a Republican who was named CEO of the trade association in 2012, will continue in the post until March.

“FSR is now poised to provide even more focused and effective service for our members going forward,” Pawlenty said in a statement. “Over the past 5 years, I have enjoyed leading FSR’s efforts to improve cybersecurity, retirement savings, consumer-friendly financial service technology, and financial literacy.”

As CEO, Pawlenty earned more than $2.6 million in salary and bonuses in 2015, according to the most recent tax forms available.

The Financial Services Roundtable recently underwent a massive overhaul, in which it purged its nonbank and smaller members, saving only banks with at least $25 billion in assets and payment companies like MasterCard and Visa. The move cut its membership roughly in half.

It had initially been rumored that Pawlenty was eyeing a run for the Senate seat left open when Democratic Sen. Al Franken (Minn.) stepped down, but he swatted down the idea.

Now reports indicate that he is talking with advisers about making another run for governor, a position he held from 2003 to 2011. At that time, he declined to seek a third term. Megan R. Wilson has more here: http://bit.ly/2shobBE

 

Republican agenda clouded by division: Republicans are divided over transportation, immigration and spending coming out of a retreat in West Virginia, clouding the prospect of legislative progress in 2018.

GOP leaders at the retreat focused on the accomplishments of last year more than the divisive issues in front of them as they hope to rally the rank-and-file members ahead of primary season and the November general election.

“Nothing’s going to get done this year,” acknowledged a senior Republican aide, noting divisions over President Trump’s proposed $1.5 trillion infrastructure package and immigration.

Internal divisions are a major reason why Senate Majority Leader Mitch McConnell (R-Ky.) is stressing the need to move bipartisan legislation this year: http://bit.ly/2EpED7G.

 

Regulators push for ‘coordinated’ approach to bitcoin trading: One of the nation’s top financial regulators pressed for greater coordination on regulating trading of cryptocurrencies at a hearing Tuesday.

“We should all come together, the federal banking regulators, the [Commodity Futures Trading Commission] and [Securities and Exchange Commission] — there are states involved as well — and have a coordinated plan for dealing with the virtual currency trading market,” Jay Clayton, chairman of the Securities and Exchange Commission (SEC), told the Senate Banking Committee.

Clayton testified alongside Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo, as lawmakers pressed them on steps they are taking to regulate bitcoin and other cryptocurrencies.

The hearing comes as interest in the currencies has boomed, with many coins reaching record highs before a recent slump in the market. The Hill’s Ali Breland tells you what you need to know: http://bit.ly/2EnzrRz.

 

Trade deficit hits highest level since 2008: The U.S. trade deficit surged to its highest level since 2008 during President Trump’s first year in office despite his vow to lower the gap and crack down on unfair competition. 

The nation’s trade gap in goods and services jumped 12.1 percent to $566 billion in 2017, up $61.2 billion from 2016, the highest level since the deficit hit $708.7 billion in 2008, the Commerce Department said Tuesday.

For the year, imports surged to $2.9 trillion, easily eclipsing the $2.3 trillion in U.S. exports.

Notably, the U.S. deficit in goods soared last year to a record-high $375.2 billion with China, a nation that Trump has both demonized and praised on trade during his tenure.

Trade gaps also increased with Mexico and Canada while the two nations continue working with the United States to update the North American Free Trade Agreement: http://bit.ly/2EmzGfD.

 

Lawmakers discuss extending expired tax breaks in spending bill: Lawmakers are discussing the possibility of extending expired tax breaks in future spending legislation.

A number of tax provisions, including some relating to renewable energy, motorsports and horse racing, expired at the end of 2016 and were not addressed in the sweeping tax-cut law Congress passed in December. Senators have expressed an interest in renewing the expired provisions, known as “tax extenders.”

Sen. Chuck Grassley (R-Iowa), a senior member of the Senate Finance Committee, said Tuesday he thinks Congress has to renew the extenders in either a stopgap spending bill lawmakers consider this week or in an omnibus spending bill down the line.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said he’s having conversations with Senate tax-writers about adding extensions of the expired tax breaks to the stopgap bill, but said “no agreement’s been reached yet and [there’s] no guarantee that will be included in the final product.” But some conservatives are opposed to the tax extenders. The Hill’s Naomi Jagoda explains: http://bit.ly/2ErBIeN.

 

Dem senator presses FTC to ramp up Equifax hack probe: Sen. Amy Klobuchar (D-Minn.) is urging the Federal Trade Commission to pour more resources into its probe of the Equifax data breach after reports that another agency, the Consumer Financial Protection Bureau (CFPB), is freezing its own investigation.

Reuters reported on Sunday that Mick Mulvaney, the CFPB’s acting director, has been dialing back the agency’s questioning of Equifax officials and has not sought any subpoenas or sworn testimony.

“In light of this concerning development, I urge the FTC to consider increasing the resources and manpower dedicated to its own investigation of the Equifax breach announced in September 2017,” Klobuchar wrote to the two sitting FTC commissioners.

“The FTC is well-positioned to investigate this matter and its effect on consumers and Director Mulvaney’s actions suggest that FTC may be the only independent federal agency left undertaking a thorough civil investigation.” http://bit.ly/2Eqbzg6.

 

Rand Paul calls for punishment if Congress can’t reach a long-term budget deal: No spending deal? No recess.

Sen. Rand Paul (R-Ky.) said Tuesday he likes the idea of canceling scheduled recesses as a punishment if Congress can’t reach a long-term deal to fund the government.

Alice Rivlin, a senior fellow in economic studies at the Brookings Institution, posed the idea at a Senate Homeland Security and Governmental Affairs Subcommittee hearing Tuesday afternoon on the impact of government shutdowns.

Rivlin was expressing support for Paul’s proposal to cut federal spending by 1 percent across the board every 90 days until Congress enacts a budget, when she made the additional suggestion, saying “it sounded gimmicky” when she first heard about it, but it could work: http://bit.ly/2Eqc3Ts.