White House to revel in tax cut anniversary

 In Politics

WHITE HOUSE TO REVEL IN TAX CUT ANNIVERSARY — The White House is planning a big push on Friday to celebrate the six month anniversary of the tax cut bill. A number of senior officials including Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow will appear on “Mornings with Maria” on the Fox Business Network from the Treasury building.

Treasury also plans to launch its simpler 1040 Form. President Trump will mark the occasion with remarks at 12:15 in the East Room at event the White House says will feature “over 200 Americans positively impacted by this successful legislative accomplishment.”

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NO RECESSION AHEAD? — The U.S. should be due for a recession in the relatively near term given the length of the current expansion and the rock bottom jobless rate. Yet beyond a potentially brutal trade war, Wall Street economists are having a very tough time figure out what could knock the country out of its current groove.

Here’s JPMorgan’s Jim Glassman in his mid-year review: “Halfway through the year, the economy is experiencing a strong expansion. Average US household wealth has expanded to record levels, GDP growth is expected to speed up to 3 to 4 percent over the next few years, and the headline unemployment rate is at a five-decade low.

“In the past, when the economy reached full employment, an economic downturn shortly followed—so it’s natural to be concerned … Yet strong fundamentals are fueling growth in the US and abroad, inflation is tame and the financial imbalances that contributed to economic downturns in recent business cycles are notably absent. Although tariff threats continue to escalate between the US and China, pressure from the broader business community should keep global trade open as the stock market continues to climb.” Read more.

MM SIDEBAR — It’s fair to assume that SOMETHING is going to emerge to push the U.S. toward the next recession. Things always seem to turn up when Wall Street and everyone else seems to think that everything is awesome and the awesomeness will never end. Could be a trade war, could be an inflation hike and/or a big policy mistake. But it’s gonna happen. And probably sooner than later.

NEVER MIND Q1 GDP? — First quarter GDP got revised down to 2 percent from 2.2 percent but analysts pretty much blew it off, looking ahead to a blockbuster second quarter.

PNC Chief Economist Gus Faucher : “The economy is in much better shape than the headline number would indicate. … Gross domestic income, another measure of the size of the economy looking at income going to households and firms, was revised sharply higher, to 3.6 percent. PNC is forecasting annualized real GDP growth of about 3.5 percent for the last three quarters of 2018, well above its average during the current expansion.”

WHAT DOES SCOTUS FIGHT MEAN FOR FINANCE? — Via Cap Alpha’s Charles Gabriel: “The prospect of an even more conservative court could beget sugar plum dreams of Trump’s deregulation agenda reinforced and expanded via the courts. We could point to issues ranging from disparate impact in lending practices and the future of the CFPB to a directionally different tone on Obamacare, CAFE standards, and assorted disputes affecting the cost of U.S. labor.

But a nearer-term dividend could come simply from the president’s having something new to tweet about. Specifically, we now have new competition for trade in Trump’s daily reach for issues with which to dominate the news cycle and emotionally connect with his base. The more of a fight the Dems put up, the more POTUS will become engaged and distracted”

SPEAKING OF TRUMP AND TRADE — GeoQuant, which previously debuted the “Mueller Risk Index” to track the special counsel probe, is now launching the “Trade at Risk Index” “to determine likelihood of all-out trade wars with China, Canada, Mexico, and EU; predicts Q3 2018 will be a global bear market, driven by trade uncertainty”

FED FLUNKS DEUTSCHE BANK — POLITICO’s Victoria Guida: “The Federal Reserve on Thursday declared that some of the largest banks in the U.S. could run into problems during a new economic crisis, an assessment that will curb the lenders’ plans to hand out dividends and buy back their shares.

“The Fed flunked the U.S. unit of Germany’s Deutsche Bank outright in its annual stress tests because of concern about its ability to measure risk and plan for economic shocks. Deutsche will need the central bank’s approval for stock buybacks or dividend payouts.

“The central bank also warned Goldman Sachs and Morgan Stanley about their capital levels and will not allow them to pay out as much to shareholders as they had wanted. Instead, they will have to keep their dividend payouts and stock buybacks at the same levels as in recent years, ‘which will allow them to build capital over the next year,’ the Fed said in a press release. Boston-based State Street also got a warning.” Read more.

FIVE DEAD IN ANNAPOLIS NEWSPAPER SHOOTING — Baltimore Sun’s Kevin Rector and Nicholas Bogel-Burroughs: “At least five people were killed and several others were ‘gravely injured’ in a shooting Thursday afternoon at the Capital Gazette in Anne Arundel County, authorities said.

“The attacker had mutilated his fingers in an apparent attempt to make it harder to identify him, according to a law enforcement official … The official said investigators still managed to identify him, though it was not clear how.

“Police said a ‘long gun’ was used in the incident, but did not specify which kind. They said officers did not exchange gunfire with the suspect, who was now being interrogated. They said officers had recovered what appeared to be an ‘explosive device,’ and had ‘tactically secured’ the building” Read more.

GOOD FRIDAY MORNING — Heartbreaking news out of Annapolis and our thoughts and prayers are with all the victims and their friends, colleagues and families. Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Victoria Guida on the results of the Federal Reserve’s annual stress tests. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or [email protected]

** A message from Wells Fargo: Animal shelter worker Anna Johnson, 23, works daily to find homes for lost animals, but soon needed her own home to care for her adopted rescues. With help from Wells Fargo, Anna was able to receive down payment assistance to purchase her new one-bedroom condo in Denver. Read her story: https://stories.wf.com/ **

STRESS TEST REACTIONS —

Cowen’s Jaret Seiberg: “The test was more difficult than expected with Goldman Sachs, Morgan Stanley and State Street having troubles partly related to the impact of tax reform and Deutsche Bank’s intermediate holding company failing.

“Despite these issues, the results show a banking system that is awash in capital. … [T]he Federal Reserve was not so rigid as to punish banks for circumstances beyond their control such as the timing of when Congress enacted tax reform. This reinforces our broader view that the new team at the Federal Reserve will look for ways to reduce the burden on the banks, but they generally support the post-crisis regulatory regime and are more interested in common sense tweaks than wholesale repeal.”

Sen. Sherrod Brown (D-Ohio): “Instead of payouts to executives and wealthy shareholders, big banks should be reinvesting profits into workers, lowering costs for consumers, and taking steps to avoid more taxpayer bailouts. What’s worse is that the Federal Reserve wants to make life even easier for the big banks, by removing a key funding constraint and reportedly making next year’s tests even easier.”

Financial Services Forum President and CEO Kevin Fromer: “The CCAR results again demonstrate that the nation’s largest financial institutions are strong, resilient, and positioned to promote economic growth and job creation even in times of severe financial stress. …

“Our institutions have now completed eight years of the Federal Reserve’s capital planning review. We look forward to working with the Federal Reserve and other policymakers to develop sensible changes to CCAR.”

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