YELLEN WARNS OF DIRE BREXIT CONSEQUENCES: Federal Reserve Chairwoman Janet Yellen on Tuesday warned of “significant economic repercussions” if Britain votes to leave the European Union.
Testifying before Congress, the central bank chief said the looming possibility of a “Brexit,” or British exit, is weighing on the Fed as it tries to steer the U.S. economy.
{mosads}”One development that could shift investor sentiment is the upcoming referendum in the United Kingdom,” she said, according to prepared testimony. “A U.K. vote to exit the European Union could have significant economic repercussions.”
The Fed decided earlier this month that it would hold off on raising interest rates, and Yellen said global uncertainty, highlighted by the upcoming British referendum on its status in the EU, was a major factor. Here’s more from The Hill’s Peter Schroeder: http://bit.ly/28KGx0Q.
LEW PRESSES SENATE DEMS TO BACK PUERTO RICO BILL: Treasury Secretary Jack Lew met with Senate Democrats on Tuesday, urging them to support a bill to help Puerto Rico restructure its debt.
The bill passed the House earlier this month with broad bipartisan support and the backing of the White House, House Speaker Paul Ryan (R-Wis.) and Minority Leader Nancy Pelosi (D-Calif.).
But Democratic senators are giving the bill a chilly reception ahead of a likely vote next week.
Lew met with Senate Democrats during their weekly policy lunch. He said he stressed that Puerto Rico can’t afford to wait for help dealing with more than $70 billion in debt it can’t pay and a collapsing economy. I’ll tell you what Lew told the Democrats here: http://bit.ly/28LQEl1.
BUSH LAWYER RIPS GOP FOR TRYING TO ‘INTIMIDATE’ IRS: George W. Bush’s former chief ethics lawyer is slamming congressional Republicans for trying to “intimidate” the Internal Revenue Service (IRS).
Richard Painter, who is now a professor at the University of Minnesota Law School, said the House should not pass a resolution to censure IRS Commissioner John Koskinen. The House Oversight and Government Reform Committee approved the measure last week on a party-line vote.
“This is essentially a dispute between the IRS and Members of Congress about the 501c4 organizations that further the objectives of political campaigns, including campaigns of Members of Congress,” Painter said in a letter to Oversight Committee members. The Hill’s Naomi Jagoda explains: http://bit.ly/28MvU1m.
HAPPY TUESDAY and welcome to Overnight Finance, where we’re hoping your inbox is isn’t as flooded as Rayburn. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
Tonight’s highlights include Yellen’s digs at Trump, some Brexit warnings and a look ahead at the second hearing to impeach Internal Revenue Service Commissioner John Koskinen.
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.
ON TAP TOMORROW:
- House Judiciary Committee: Second impeachment hearing for IRS Commissioner John Koskinen. 10:00 a.m., http://1.usa.gov/1sJQPGy.
- House Financial Services Committee: Hearing entitled “Monetary Policy and the State of the Economy” with Federal Reserve Chair Janet Yellen, 10 a.m. http://1.usa.gov/1UdMKRY.
- House Budget Committee: Hearing entitled “Congressional Budgeting: Making Budget Enforcement More Effective,” 10 a.m. http://1.usa.gov/1OuJXa3
- House Small Business Committee: Hearing entitled “Audits and Attitudes: Is the IRS Helping or Hurting Small Businesses?,” 10:30 a.m. http://1.usa.gov/1tAGRYT.
- House Foreign Affairs Subcommittee on the Western Hemisphere: Hearing entitled “Venezuela’s Crisis: Implications for the Region,” 1 p.m. http://1.usa.gov/1UnyuZ2.
- House Ways and Means Committee: Hearing on the Social Security Trustees Report, 2 p.m. http://1.usa.gov/1tudoPO.
IRS CHIEF IMPEACHMENT HEARING PREVIEW: From Naomi Jagoda: The House Judiciary Committee tomorrow is holding its second hearing to consider whether IRS Commissioner John Koskinen should be impeached.
At the hearing, four legal experts are expected to testify about whether Koskinen’s conduct meets the standards for impeachment. Some House Republicans believe that Koskinen should be impeached, claiming he didn’t comply with a subpoena and lied under oath during a House investigation into the political-targeting scandal.
Three of the witnesses’ written testimony has been posted on the Judiciary Committee’s website.
One of the witnesses, former federal prosecutor Andrew McCarthy, seemed open to impeachment.
Misconduct that was “merely potential” and was paired with “blatantly obstructive actions” was considered sufficient to impeach President Richard Nixon before he resigned, McCarthy said.
“It seems patent, then, that if established, actual misconduct in conjunction with blatantly obstructive actions would be sufficient to justify impeaching an unelected subordinate executive official responsible for administering the Internal Revenue Service,” he added.
But another witness, University of North Carolina law professor Michael Gerhardt, expressed caution. While it appears that some House members think Koskinen could be impeached for gross negligence, Gerhardt disagreed.
“It is a dangerous precedent for the House to adopt a lower standard of impeachment than the Founders intended and the House has ever used before,” Gerhardt said.
A third witness, Library of Congress legislative attorney Todd Garvey, provided a copy of a Congressional Research Service paper on impeachment that he co-authored last fall. The paper does not explicitly mention Koskinen.
Written testimony for the fourth witness, George Washington University law professor Joseph Turley, had not been posted on the Judiciary Committee’s website as of Tuesday afternoon.
YELLEN BLASTS TRUMP ON DEBT: Federal Reserve Chairwoman Janet Yellen blasted Donald Trump’s suggestion that he would renegotiate the nation’s debt if elected president, warning of “very severe” consequences.
Testifying before Congress, Yellen was asked indirectly by Sen. Bob Menendez (D-N.J.) what she made of Trump’s claims that the U.S. could load up on debt and “make a deal” with creditors if the economy soured.
The presumptive Republican presidential nominee was not mentioned by name in the exchange, but Menendez asked Yellen specifically what would happen if a U.S. president pushed creditors to accept less than full payment on U.S. debt obligations.
Yellen launched a strong defense of the sterling reputation of U.S. Treasury bonds in global markets and made clear she believes the U.S. should make full payment on its debt a top priority.
“U.S. Treasury securities are the safest and most liquid benchmark security in the global financial system,” she told lawmakers. “They play a critical role in our financial markets, and the consequences of such a default, while they’re uncertain, I think there can be no doubt that it would be in the long run harmful to U.S. interests. At a minimum, it would result in much higher borrowing costs.” Peter Schroeder takes us there: http://bit.ly/28MxgsV.
ECONOMIST LAFFER DEFENDS TRUMP ON TRADE: Prominent supply-side economist Arthur Laffer on Tuesday defended Donald Trump’s trade policy, even as he blasted politicians who believe trade has to do with jobs.
“Having spent time with him and virtually all of the other candidates, I would say that he has as firm a grasp of international trade as any candidate,” Laffer said a breakfast at The Podesta Group. “He clearly understands foreign investments, foreign locations, foreign businesses.”
The presumptive Republican presidential nominee has the “best chance of doing good trade policy,” added Laffer, who was an economic policy adviser to former president Ronald Reagan.
Earlier during the event, Laffer said he has “not seen a politician who understands trade,” particularly citing Democratic presidential candidates Hillary Clinton and Bernie Sanders.
“Trade has nothing to do with jobs,” he said. “Let me just say it really clearly. Anyone who talks about trade in terms of jobs does not understand trade. What trade is all about is diversity and specialization.” http://bit.ly/28QE4Bq.
COTTON VOWS TO FIGHT WHITE HOUSE PAYBACK FOR ‘BREXIT’: Sen. Tom Cotton (R-Ark.) is vowing that he’ll fight any attempt to punish the United Kingdom if it votes to leave the European Union this week.
Cotton spoke on the Senate floor Tuesday against politicians, including President Obama, and economists who have warned of dire economic consequences if the U.K. leaves the EU, called “Brexit.”
“The American people will stand with Britain, in or out of the EU, and will stand against punitive retaliation against the British people,” said Cotton, promising to defend the U.S. and U.K.’s close military and economic ties.
“Just as I’ll do everything in my power to preserve our special relationship against [European] meddling, so I’ll do the same with any administration who doesn’t fully appreciate that relationship,” he said. I’ll fill you in here: http://bit.ly/28L7U9k.
TAX OFFICIALS TO HELP WITH OBAMACARE OUTREACH: ObamaCare officials are partnering with the IRS to help drive down uninsured rates among young people.
For the first time, the federal tax agency is working with the Department of Health and Human Services (HHS) to reach out directly to taxpayers who paid the required fee last year because they lacked coverage.
About 45 percent of people who paid the fee — or claimed an exemption, like financial hardship — were under 35, according to HHS.
The planned mailings will lay out options for coverage and include details about how to qualify for federal subsidies. HHS will also again partner with the ride-hailing service Lyft, which will offer discounts to customers who attend open enrollment sessions. The Hill’s Sarah Ferris breaks it down: http://bit.ly/28T8Qe9.
GOP MEASURE COULD KEEP TUBMAN OFF $20 BILL: A Republican lawmaker has offered a measure to stop several planned changes to US currency that would put women on the $5, $10 and $20 bills.
Rep. Steve King (R-Iowa) has filed an amendment to a House spending bill that would block money from being spent to redesign any Federal Reserve note or coin, first reported by the Associated Press.
If passed, the measure could block the Treasury Department from putting Harriet Tubman on the front of the $20 bill: http://bit.ly/28KFjmg.
NIGHTCAP: As the senator from Arkansas reminded us today, lots of people have opinions about the Brexit. Here’s one from former Major League Baseball star Jose Canseco.
Write us with tips, suggestions and news: slane@digital-release.thehill.com, vneedham@digital-release.thehill.com; pschroeder@digital-release.thehill.com, and njagoda@digital-release.thehill.com. Follow us on Twitter: @SylvanLane, @VickofTheHill; @PeteSchroeder; and @NJagoda.