Finance

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May 3, 2021
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  • President Joe Biden is open to several possibilities to pass his $4 trillion combined infrastructure plans, including breaking up his proposals into multiple bills, according to a White House official. Biden will host both Republican and Democratic congressional leaders next week at the White House to try and sell his plans. (Bloomberg)
  • Treasury Secretary Janet Yellen emphasized on NBC’s “Meet the Press” this weekend that under Biden’s proposed $6 trillion in spending, no family earning less than $400,0000 will “pay a penny more in taxes,” while Sen. Rob Portman (R-Ohio) insisted on the same program that Yellen is “just wrong on that.” Appearing on CBS’ “Face the Nation,” White House chief of staff Ron Klain repeated the Biden administration’s pledge, saying that “many more Americans will see their taxes go down if the president’s plan is passed than see them go up.” (Politico
  • Greg Abel, vice chairman of Berkshire Hathaway Inc., will take over the company once Chairman and Chief Executive Warren Buffett is no longer leading it, Buffett confirmed to a media outlet. The news comes after Berkshire Vice Chairman Charlie Munger dropped a hint about the company’s succession plans at its annual meeting. (CNBC
 

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What Else You Need to Know

General
 

Biden’s Proposals Aim to Give Sturdier Support to the Middle Class

Patricia Cohen, The New York Times

Perhaps the most striking difference between the middle class of 50 years ago and the middle class today is a loss of confidence — the confidence that you were doing better than your parents and that your children would do better than you. President Biden’s multitrillion-dollar suite of economic proposals is aiming to both reinforce and rebuild an American middle class that feels it has been standing on shifting ground. 

 

GOP senators see path to narrower infrastructure deal

Myah Ward, Politico 

Sen. Bill Cassidy said Republicans and Democrats are “a lot closer than you might think” on a bipartisan path for President Joe Biden’s infrastructure plan, if the plan fits into a traditional definition of infrastructure. “If you’re talking about a scope which is roads and bridges and internet and tunnels and airports and waterways, we can be pretty close,” the Louisiana Republican said on “Fox News Sunday.”

 

Americans Can’t Get Enough of the Stock Market

Gunjan Banerji, The Wall Street Journal

Americans are all in on the stock market. Individual investors are holding more stocks than ever before as major indexes climb to fresh highs. 

 

Why Biden’s Plan to Raise Taxes for Rich Investors Isn’t Hurting Stocks

Matt Phillips, The New York Times

Investors have largely shrugged off President Biden’s proposal to raise taxes on investment income for wealthy Americans, as the stock market hovers near record highs after news of a strong economic rebound and blockbuster earnings reports from technology giants such as Apple and Amazon. The indifference is well founded, analysts say.

 

Wealthiest Americans Get $195 Billion Richer in Biden’s First 100 Days

Simon Hunt and Ben Steverman, Bloomberg

Joe Biden’s election has done little to slow the inexorable surge of wealth among U.S. billionaires. In the president’s first 100 days in office, against a drumbeat of calls for the rich to pay more in taxes, the 100 wealthiest Americans added a combined $195 billion to their fortunes, according to a Bloomberg analysis.

 
Fiscal Policy
 

Why a $10,000 Tax Deduction Could Hold Up Trillions in Stimulus Funds

Connor Dougherty, The New York Times

In 2017, congressional Republicans capped a tax break that benefits America’s highest-earning households and people with multimillion-dollar homes. Coastal Democrats have been trying to get it back ever since.

 

Biden’s Plan to Spend $4.5 Trillion Without Boosting Deficits Depends on Factors Beyond His Control

Kate Davidson, The Wall Street Journal

President Biden’s $1.9 trillion Covid-19 relief package was financed entirely with borrowed money. Now, he is proposing to spend another roughly $4.5 trillion on infrastructure and social programs—without adding to the red ink. “We can do it without increasing deficits,” Mr. Biden said in a joint address to Congress Wednesday night, detailing a series of tax increases on the wealthy and corporations to pay for programs ranging from building charging stations for electric cars to subsidizing child care.

 

What Business Thinks of Biden’s Plans on Infrastructure, Taxes

Ryan Tracy et al., The Wall Street Journal

Business leaders see much to like—and much that worries them—in President Biden’s first 100 days in office. Executives in manufacturing, automotive, construction and other industries say they see opportunity in the trillions of dollars Mr. Biden wants to spend to build infrastructure, boost domestic manufacturing, and curb greenhouse-gas emissions linked to climate change.

 

Biden’s Tax-and-Spend Plans Are Big, But Wealth Gaps Are Bigger

Katia Dmitrieva, Bloomberg

President Joe Biden’s promise to start narrowing income and wealth gaps underpins every part of his economic program, from almost $4 trillion in spending plans to the biggest tax increase in a generation.

 
Economy and Monetary Policy
 

Covid-19 Savings Stockpile Could Accelerate Economy—if Consumers Spend It

Paul Hannon, The Wall Street Journal

Households in wealthy countries have amassed an unprecedented pile of savings to spend as parts of the global economy thaw after a year in suspended animation. But it isn’t clear whether consumers will seize that opportunity with enthusiasm. 

 

Analysis: Biden, Powell paddling in same direction on policy front

Howard Schnieder, Reuters

Within a span of six hours last week, U.S. President Joe Biden and Federal Reserve Chair Jerome Powell embarked on a potentially historic course, pairing massive government spending and ultra-easy monetary policy in an effort not just to rescue the economy from a recession but to reset its trajectory. Powell’s motivation is to push the limits of a job market rebound as far as possible, a goal that is a step beyond what the U.S. central bank has done before and which he restated Wednesday in an emphatic pledge to get Americans back to work.

 

U.S. Household Income Surged by Record 21.1% in March

Sarah Chaney Cambon, The Wall Street Journal

Household income rose at a record pace of 21.1% in March as federal-stimulus checks helped fuel an economic revival that is poised to endure with an easing pandemic. The 21.1% March surge in income was the largest monthly increase for government records tracing back to 1959, largely reflecting $1,400 stimulus checks included in President Biden’s fiscal relief package signed into law in March.

 

Widespread Commodity Shortages Raise Inflation Fears

Alan Rappeport and Thomas Kaplan, The New York Times

In a normal year, Ron Whelan, vice president of Roger B. Kennedy Construction, receives one or two “Dear Valued Customer” letters from suppliers notifying him of price increases for certain materials. This year, a stack of 30 such warnings sits on his desk in Orlando, Fla., alerting him that things as diverse as lumber, drywall, aluminum and steel are going to cost 10 to 20 percent more. 

 

How the pandemic led to a rental car crisis just as Americans are ready to bust loose

David J. Lynch and Yeganeh Torbati, The Washington Post

Avis Budget Group’s stock price closed at an all-time high on Friday, a sign that rental car companies’ fleet-shrinking strategies are paying off financially — even as they leave consumers fuming. Major rental car operators last year sold off more than 770,000 cars as the pandemic crushed demand and kept Americans home, according to Jefferies Group, an investment bank.

 
Banking
 

Wall Street Bonuses at Risk Amid New Clamor to Finish Dodd-Frank

Daniel Avis and Jesse Hamilton, Bloomberg

Titans of finance, already threatened by President Joe Biden’s push for the biggest tax hike on wealthy Americans in decades, face another peril: Progressives are demanding action on a long-stalled requirement that Washington clamp down on Wall Street bonuses. Behind the scenes, consumer groups such as Public Citizen and Better Markets are reminding administration officials that the never-finished pay constraints are mandatory under the Dodd-Frank Act. Democrats — upset that the rules languished when Donald Trump occupied the White House — are also exerting pressure, arguing that years after the 2008 financial crisis, banks’ compensation practices continue to incentivize dangerous behavior.

 

What History Can Teach Banks About Making Change

Destin Jenkins, The New York Times

 Last year, amid protests over the murder of George Floyd, financial firms pledged billions of dollars to programs aimed at racial equity, including efforts to diversify their hiring and invest in Black businesses. And last month, Bank of America, BlackRock and Goldman Sachs were among hundreds of businesses and executives who signed a public letter opposing laws that would restrict voting across the country, especially for minority voters.

 

Hurt by Losses, Credit Suisse Faces Reckoning Under New Chairman

Kate Kelly and Jack Ewing, The New York Times

After Credit Suisse said it had lost nearly $5 billion over soured trades that a small unit of its investment bank made with Archegos Capital Management, worried employees peppered Thomas Gottstein, the chief executive, with questions. One wanted to know if bankers who weren’t involved would have to sacrifice pay over the losses. 

 

Wall Street Hiring Spree Puts Junior Bankers in Driving Seat

Jennifer Surane et al., Bloomberg

Twenty-somethings dreaming of Excel all-nighters are facing their best prospects in years. HSBC Holdings Plc this week became the latest global investment bank pledging to hire a flock of junior bankers to help analysts and associates avoid burnout amid an avalanche of deals. 

 
Financial Products and Investments
 

For Apollo’s New CEO, Insurance Is In—Racy Buyouts, Not So Much

Miriam Gottfied, The Wall Street Journal

Apollo Global Management Inc. APO -0.29% made its name scoring double-digit returns on debt-laden buyouts. Under new Chief Executive Officer Marc Rowan, the firm’s future will become increasingly about finding ways to eke out a few percentage points more than corporate and government bonds pay. 

 

TikTok Is the Place To Go for Financial Advice If You’re a Young Adult

Cheryl Winokur Munk, The Wall Street Journal

TikTok is the place to go for new dances, viral taco recipes—and, now, financial advice. The big benefit of TikTok is that it allows users to dole out and obtain information in short, easily digestible video bites, also called TikToks. 

 
Housing and GSEs
 

Many Black Homeowners Are Falling Further Behind on Their Mortgages

Orla McCaffrey, The Wall Street Journal

Black homeowners are having a harder time catching up on missed mortgage payments than other borrowers, new federal research shows. The share of Black homeowners in forbearance stood at about 11% in mid-April, more than double the overall rate and that of white borrowers, according to the Federal Reserve Bank of Philadelphia. 

 

Is the US headed toward a new housing bubble?

Sylvan Lane, The Hill

The staggering rise of U.S. home prices is forcing thousands of aspiring buyers into grueling, often risky bidding wars, raising questions about whether the torrid housing market could be in a bubble. For nearly a year, the combination of low mortgage rates, a flood federal stimulus, lockdowns and teleworking — all sparked by the coronavirus pandemic — has fueled a rapid increase in demand for houses.

 
Financial Technology
 

Robinhood’s Biggest Business More Than Tripled Amid Trading Frenzy

Peter Rudegeair, The Wall Street Journal

The stock-trading mania of early 2021 lifted revenue at Robinhood Markets Inc. to new heights. When its customers buy and sell stocks and options, Robinhood routes those orders to high-speed traders, which pay the startup brokerage for the right to execute many of those trades.

 

Crypto’s Shadow Currency Surges Past Deposits of Most U.S. Banks

Olga Kharif, Bloomberg

 Tether, the crypto stablecoin backed one-for-one by fiat currencies, surpassed $50 billion in circulation, a sum that’s more than the insured deposits at all but 44 of the thousands of U.S. banks. It’s a remarkable milestone for a token that enjoys wide use as a method of payment in the crypto ecosystem, even as the eponymous private company behind it has endured regulatory scrutiny for its opacity on where it holds the enormous sum of reserves that back the token.

 

Andreessen Horowitz plans $1bn cryptocurrency VC fund

Miles Kruppa, Financial Times

Third crypto vehicle from longtime supporter will be roughly twice the size of firm’s last one.

 

Ether Hits $3,000 as Bitcoin’s Crypto Dominance Declines

Joanna Ossinger, Bloomberg

Bitcoin’s domination of total cryptocurrency market value is declining as its next-biggest rival Ether reaches the $3,000 milestone. The rise of Ether suggests there’s room for more than one winner among digital tokens as the sector evolves. 

 

Europe’s largest banks plan joint attack on US payments giants

Olaf Storbeck, Financial Times

More than 30 lenders designing rival to take on PayPal, Mastercard, Visa and Apple.

 

Fidelity Halves Its Ant Group Valuation After Beijing’s Clampdown

Serena Ng and Jing Yang, The Wall Street Journal

U.S. mutual-fund giant Fidelity Investments has drastically changed its view of what Jack Ma’s Ant Group Co. is worth after China’s regulatory crackdown on the financial-technology giant severely dented its growth prospects. The Boston-based asset manager, which was among an elite group of global investors that bought into Ant three years ago, marked Ant shares in several of its funds at prices that implied a $144 billion valuation for the company at the end of February, according to regulatory filings.

 
Opinions, Editorials and Perspectives
 

Eliminating Tipped Wage Would Reduce Opportunity for Workers of Color

Warren Thompson, Morning Consult 

 The restaurant industry is one of our country’s greatest sources of upward mobility. While the pandemic forced many operators to hit pause in 2020, the industry will bounce back — as long as Congress does not enact a misguided minimum wage mandate that hurts the employees it is meant to help.

 

Fed framework holds central bank hostage

Mohamed El-Erian, Financial Times

 Balance of risks for monetary policy has flipped away from deflation to longer-term instability.

 

Biden’s Spending Binge Is Costlier Than Advertised

Steve H. Hanke, The Wall Street Journal

President Biden’s first three domestic spending programs will give taxpayers a $5.7 trillion sticker shock, with advertised costs of $1.9 trillion for Covid-19 relief, at least $2 trillion for infrastructure, and $1.8 trillion for family benefits. Not seen are the hidden costs and burdens that will accompany the tax increases he proposes. 

 






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