Happy Tuesday and welcome back to Overnight Finance, a systemically important financial newsletter. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
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THE BIG DEAL: The Senate on Tuesday took its first step toward passing a major bipartisan rollback of the tough banking rules enacted by former President Obama after the 2008 financial crisis.
Senators voted 67 to 32 to take up a motion to start debating a bipartisan bill to exempt dozens of banks from parts of the Dodd-Frank Act, passed in 2010 to make the financial system safer and stronger.
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Republicans and a coalition of moderate Democrats voted to move ahead with the bill they call an overdue fix to Dodd-Frank that would help smaller firms boost rural and struggling economies.
The bill has stoked deep divisions among Democrats. Moderates backing the measure say it’s a major bipartisan achievement that can help restore the American people’s faith in Congress. Liberals have panned any talk of bipartisanship, pledging to make the process as painful as they can for supporters.
Reactions
- “A bank worth a quarter-trillion dollars is not a community bank and shouldn’t be regulated like a community bank.” — Sen. Elizabeth Warren (D-Mass.)
- “I am not going to let this legislative history get papered with misstatements about this bill.” — Sen. Heidi Heitkamp (D-N.D.).
- “Why should we have to roll back rules for the largest banks in Switzerland in order to help out community banks or credit unions in Ohio?” — Sen. Sherrod Brown (D-Ohio).
- “If we miss the opportunity, it has dramatic, negative impacts on rural Americans.” — Sen. Jon Tester (D-Mont.)
Where Senate Republicans are: Sitting pretty for now. They get to watch Democrats bloody themselves over a huge issue within their party while passing the biggest changes to Dodd-Frank since its 2010 passage. The bill is almost certain to pass the Senate, and by then the damage to Democrats will already be done.
Where House Republicans are: Mulling their options. The lower chamber already passed the CHOICE Act in 2017, a much more conservative bill revamping Dodd-Frank that had no chance of making it through the Senate.
The Crapo bill lacks many of the provisions House Republicans say are essential to rolling back Dodd-Frank. It does nothing to the Consumer Financial Protection Bureau, maintains a hard threshold for enhanced Federal Reserve oversight, and maintains a key backstop for failing banks — all loathed by Republicans.
But several House Republicans told The Hill on Tuesday that they could soften their stance in order to pass the last, best chance to roll back Dodd-Frank. We’ll have more on that tomorrow.
What comes next: The bipartisan Senate coalition backing the bill is negotiating with House Financial Services Committee Chairman Jeb Hensarling (R-Texas) on adding measures that passed both chambers with near-unanimous support. Those measures are intended to add more Republican votes in the House without upsetting the tenuous balance in the Senate.
Senate Democrats were clear Tuesday that overzealous changes from the House would stop the bill from passing the upper chamber again.
ALSO A BIG DEAL: Gary Cohn, the director of the White House National Economic Council, is resigning over Trump’s plan to impose tariffs on steel and aluminum.
Cohn, Trump’s top economic adviser and the former COO of Goldman Sachs, was rumored to have been broken with the president over the tariffs. He is expected to stay in the job for several more weeks.
Follow the breaking story here.
In Cohn’s words: “It has been an honor to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform,” he said in a statement.
“I am grateful to the president for giving me this opportunity and wish him and the administration great success in the future,” he said.
Trump on Cohn’s exit: “Gary has been my chief economic advisor and did a superb job in driving our agenda, helping to deliver historic tax cuts and reforms and unleashing the American economy once again,” Trump said in a statement.
“He is a rare talent, and I thank him for his dedicated service to the American people.”
More reaction: Goldman Sachs CEO Lloyd Blankfein praised Cohn and said he was “disappointed” to see him leave the White House.
And a Democratic lawmaker trolled Trump after the news, citing the president’s claim that everyone wants to work in his White House.
And there’s already speculation about a replacement: From CNBC Washington correspondent Eamon Javers on Twitter: “Administration source tells me top two candidates to replace Cohn will be Peter Navarro and Larry Kudlow – two men with VERY different views on trade.”
ON TAP TOMORROW
- House Financial Services Committee: Hearing entitled: “Legislative Review of H.R. 5059, the State Insurance Regulation Preservation Act”
- Joint Economic Committee: Hearing on the White House economic report with Council of Economic Advisers Chairman Kevin Hassett, 2 p.m.
House Financial Services Committee: Hearing entitled: “Legislative Proposals to Reform the Current Data Security and Breach Notification Regulatory Regime,” 2 p.m.
LEADING THE DAY
GOP steps up battle against Trump tariffs: House and Senate Republicans are pleading with President Trump to focus his tariffs on specific goods that are unfairly traded, not steel and aluminum across the board.
Senate Majority Leader Mitch McConnell (R-Ky.) broke his silence on the proposed tariffs, saying he and other Republicans have “genuine concern” the administration could start a trade war.
He added that GOP senators are concerned the floated tariffs on imported aluminum and steel could “metastasize into a larger trade war” and are “urging caution” as the administration continues to finalize its plan.
Speaker Paul Ryan (R-Wis.) on Tuesday urged the Trump administration to take a more “surgical” and “targeted” approach to its plan to impose tariffs on steel and aluminum imports, and zero in on abuses from China.
Senate Finance Committee Chairman Orrin Hatch (R-Utah) on Tuesday sent a letter to the president urging him to refocus his efforts on opening markets for U.S. exports without hurting domestic businesses and consumers.
And House Ways and Means Committee Chairman Kevin Brady (Texas) and Ways and Means Subcommittee on Trade Chairman Dave Reichert (Wash.) argued that slapping sweeping tariffs on all imported steel and aluminum would undermine the potential economic gains generated by the tax-cuts law.
Republicans argue that passing such expansive tariffs would undercut everything else Trump has done to boost the economy, their main focus going into the 2018 elections. Trading partners have already pledged to retaliate, though Treasury Secretary Steven Mnuchin said today Canada and Mexico would not face tariffs if the North American Free Trade Agreement is negotiated to Trump’s liking.
More money, more problems: The House could pass a $1 trillion omnibus next week to give the Senate extra time to approve the massive spending package before funding for the government runs out on March 23, Majority Leader Kevin McCarthy (R-Calif.) told colleagues in a private meeting Tuesday.
“There was no formal guarantee but it was suggested as a possibility” that the omnibus vote would be next week, said one GOP lawmaker who attended the closed-door conference meeting.
McCarthy told rank-and-file Republicans he wants the House to act early to “beat the shutdown clock,” said another GOP source in the room. The Hill’s Scott Wong and Mike Lillis take us inside the plan.
The legislation could well be the last major bill to pass Congress before the midterm elections. That’s led Washington insiders to dub the bill the “last train leaving the station,” and an ideal target to load-up with policy riders. The Hill’s Megan R. Wilson tells us what D.C. is trying to throw into the bill.
MARKET CHECK: Lethargic: The three major U.S. indexes posted minor gains Tuesday, closing far before Cohn announced his departure from the White House. The Dow Jones Industrial Average finished with a meager 0.04 percent gain, while the Nasdaq and S&P 500 ended the day with 0.6 and 0.26 percent increases each.
GOOD TO KNOW
- The House on Tuesday easily approved a bipartisan bill requiring financial regulators to more frequently conduct comprehensive reviews of their banking regulations.
- The former CEO of a payday lender that was investigated by the Consumer Financial Protection Bureau (CFPB) pitched herself as a candidate for the agency’s director position, the Associated Press reported Tuesday.
- The European Commission has drawn up a list of retaliatory tariffs that would target about $3.5 billion worth of American goods, according to Bloomberg News.
- Conservative groups and some GOP lawmakers are pushing for more oversight of IRS rules as the agency works to carry out President Trump’s new tax law.
ODDS AND ENDS
- Morning Consult and Prudential Financial teamed up to gauge how Americans view success for workers.