OVERNIGHT FINANCE: Yellen sounds warning on stock prices

TOMORROW STARTS TONIGHT: JANET YELLEN SOUNDS THE ALARM. My take for the hometown paper: “Federal Reserve Chairwoman Janet Yellen warned Wednesday about the ‘potential dangers’ of soaring stock prices.

Three quick points:

1.) WHAT SHE SAID: “Equity market valuations at this point are generally quite high,” Yellen said at a forum in Washington. “There are potential dangers there. “They are not so high when you compare the returns on equities to the returns on safe assets like bonds, which are also very low,” she added.

2.) WHY IT MATTERS: Trading on Wall Street dipped following her remarks, which played into fears that stock prices have peaked in recent months, outpacing the economic recovery. Yellen’s comments come as Fed policymakers are grappling with when to raise interest rates, which have remained at zero percent since the financial collapse. Most economists predict the rate increase could come as early as June or as late as early next year.

{mosads}3.) YELLEN TAKES ON BIG BANKS: “Too often financial institutions encouraged the behavior that resulted in such excessive debt,” Yellen said. “Financial institutions have the potential to inflict harm on society. Instead of promoting financial security through prudent mortgage underwriting, the financial sector prior to the crisis facilitated a bubble in the housing market and too often encouraged households to take on mortgages they neither understood nor could afford.”

She didn’t comment about the recent scandal brewing regarding possible Fed leaks of confidential, market-moving information…

THIS IS OVERNIGHT FINANCE. If you want your mother to receive a gift / card by Sunday, you need to make sure it’s shipped / mailed by tomorrow morning. If you don’t know why you should send your mother something by Sunday then you’ve got bigger issues. Tweet: @kevcirilli; email: kcirilli@digital-release.thehill.com; and subscribe: http://digital-release.thehill.com/signup/48. Back to work…

BAD DAY: TOM BRADY. AP with today’s top talker: “An NFL investigation released Wednesday concluded New England Patriots employees likely deflated footballs used in the AFC Championship and that quarterback Tom Brady was ‘at least generally aware’ of the rules violations.” http://apne.ws/1P0Puob

SPRING TRAINING: JEB BUSH, via WaPo: “Ron Kaufman, a former Romney adviser who is uncommitted, observed that Bush has a steeper ramp-up than Romney, whose 2012 bid came four years after his first White House run. ‘Jeb has not run in 14 years and he’s getting his sea legs. Even if you’re Roger Clemens, if you were retired for 14 years, it’s hard to come back and immediately pitch in the World Series,’ Kauffman said.” http://wapo.st/1byuK4J

BERNIE SANDERS INTROS BREAK UP THE BIG BANK BILL. Pete Schroeder: “Sen. Bernie Sanders (I-Vt.) on Wednesday unveiled a tough bill targeting Wall Street, reminding liberals pining for a loud voice on the left as a presidential candidate that he is available. In one of his first legislative moves since announcing his presidential run, Sanders unveiled a bill that takes square aim at the biggest names on Wall Street. His legislation would require federal regulators to determine which financial institutions pose a risk to the economy thanks to their size and complexity, and give those firms a simple message: Break yourselves up, or the government will do it for you.” http://bit.ly/1E9Urk1

— WHY HE DID IT, via HuffPo: “With the help of a crew of former aides to President Barack Obama, Sen. Bernie Sanders’ (I-Vt.) campaign has raised $3 million in four days for his presidential campaign.” http://huff.to/1AFBvbo

DAYS UNTIL EX-IM SHUTS DOWN: 54. Former Texas Gov. Rick Perry (R) shook-up this divisive Republican policy debate when he reversed his position late last night and said he opposes reauthorizing the 80-year-old bank, which shuts down June 30 unless Congress extends his charter. Read my report on Perry’s flip-flop and why he did it (hint: 2016) here: http://bit.ly/1OYYeew

TEXAS BUSINESSES HIT PERRY ON EXIM FLIP-FLOP: Texas business leaders — many of them Republicans — hit Perry hard for his flip-flop.

— William Schubert, president of International Trade & Transportation Inc. and a GOPer: “Shame on Governor Perry for turning his backs on workers in Texas.” 

— Tyler Schroeder, financial analyst, dubbed it “deeply disturbing. “If Governor Perry truly cared about ‘moral credibility’ he would take into consideration the good of all businesses, not just large companies that easily feed his justification.”

— Joint Statement from Chris Wallace, president of the Texas Association of Business, and Tony Bennett, President of the Texas Association of Manufacturers: “Ex-Im is too important for our country to allow political ambitions to come before the companies and employees who rely on Ex-Im for jobs at home.”

WHAT REPUBLICANS ARE READING: DODD-FRANK HURTS WAGES. Tim Devaney: “The Dodd-Frank financial reform law created in the wake of the 2008 Wall Street collapse is costing the average worker $334.60 each year in lost wages, according to a new study. The conservative American Action Forum found that the banking regulations will depress the nation’s gross domestic product by about $895 billion over the next 10 years.” http://bit.ly/1zBRKeu

WARREN WATCH – – IS HER TRADE ARGUMENT ROOTED IN FACT? William Maudlin for WSJ: “Backers of free trade admit it’s conceivable — though a stretch — to change the Dodd-Frank rules through a deal with the EU. ‘It sounds like another in the parade of horribles that opponents are trotting out -– bizarre scenarios that ‘could’ happen but almost certainly won’t. But because the probability is not zero, they’re hard to defend against,” said Bill Reinsch, president of the National Foreign Trade Council.” MUST READ: http://on.wsj.com/1JR7uh8

SAN FRAN WANTS HOLLYWOOD? Steven Davidoff Solomon writing in DealBook: “Snoop Dogg is raising a venture capital fund to invest in the marijuana industry. That’s not a headline from The Onion. The hip-hop star is indeed putting together a $25 million fund to invest in marijuana-related industries, according to TechCrunch. He is part of a growing wave of celebrities – including Justin Bieber and Ashton Kutcher — investing in start-ups… The model now is Bono, U2’s lead singer, who invests without trying to leverage his celebrity to make that investment work…

“So laugh all you want. Celebrity V.C.s [venture capitalists] are a sign of a bubbling market. But they are also a sign that perhaps the skill-set most valued in Silicon Valley is not what you know, but who. It’s a skill that may work for now, but is something that dooms Silicon Valley to a cycle of booms and busts.” http://nyti.ms/1c7krVH

WHAT DO MICHAEL PHELPS AND PREZ CANDIDATES HAVE IN COMMON? via Tony Schwartz in DealBook: “Why does Michael Phelps keep returning to a brutal training regimen in the pool, long after he’s achieved every imaginable accolade as a swimmer? Why do men who have earned hundreds of millions of dollars, even billions, work relentlessly to earn even more, long after it could possibly make any material difference in their lives?

“Why does a substantial group of politicians with no remote chance of being elected president feel compelled to traverse the country campaigning 18 hours a day for more than two years? As little as these varied people have in common, their shared core hunger is for value. Once our basic needs are met, we human beings arguably crave value above all else.

“We each want desperately to matter, to feel a sense of worthiness. In a 2008 analysis of more than 200 studies, the highest rises in the subjects’ levels of cortisol — a hormone released into the body in response to stress — were prompted by what researchers summed up as ‘threats to one’s social self, or threat to one’s social acceptance, esteem and status.'” http://nyti.ms/1dO9f1p

ON-TAP FOR TOMORROW: BPC LAUNCHES EXECUTIVE COUNCIL ON INFRASTRUCTURE. From BPC:  “Senator Michael Bennet [D-Colo.] will provide opening remarks, followed by a panel discussion between four chief executives who have joined the Council: Doug Peterson, President & CEO of McGraw Hill Financial; [as well as others] will offer their experiences and insights on the current barriers to private investment and how we might get billions of dollars of available capital off the sidelines. The event will be at BPC (1225 Eye Street, NW Suite 1000) and is open to press. It is expected to run from 9:30 a.m. – 10:30 a.m.”

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