• House Democrats may seek to gain the support of at least five Republican representatives in order to use a discharge petition to bring a bill to raise the federal debt ceiling to the chamber floor for a vote, and an aide noted that Democrats can begin gathering signatures for the petition on May 16. House Minority Leader Hakeem Jeffries (D-N.Y.) told fellow Democrats in a letter that the discharge petition is an “important option,” though Rep. Brendan Boyle (D-Pa.), the ranking member on the House Budget Committee, acknowledged that it’s “a low-probability play.” (The Wall Street Journal)
• Morgan Stanley revealed that it is in talks with the Securities and Exchange Commission and the U.S. attorney’s office for the Southern District of New York to settle federal investigations into its block trading business. Regulators have been investigating whether the bank’s equity desk had given advance notice to investors to potential block trades, which can move markets, and Morgan Stanley also warned that it may face civil liabilities from investor lawsuits alleging that the bank caused a drop in share prices before executing block trades. (Financial Times)
• Trading in shares of PacWest Bancorp and Western Alliance Bancorp was halted yesterday due to spikes in volatility as investor worries over the stability of U.S. regional banks drove broader selloffs in the S&P 500, and according to a Goldman Sachs Group Inc. analyst, a bout of selling from hedge fund traders spurred selling even among long-only investors. (Bloomberg) PacWest and Western Alliance fell by more than 27% and 15%, respectively, while the KBW Regional Banking Index hit its lowest point since December 2020, falling 5.52%. (Reuters)
• Calling environmental, social and governance goals “ideological joyrides,” Florida Gov. Ron DeSantis (R), signed into law an anti-ESG bill that bans state officials from using public money to invest in ESG and prohibits ESG bond sales. Analysts noted that the new law could affect municipalities’ access to large pools of ESG-mandated capital, and managers at the state’s pension fund would now need to include disclaimers in some communications with its portfolio companies to make clear that ESG products do not reflect the views of Floridians, and without adequate disclaimers, those fund managers could face regulatory action. (Reuters)

Worth watching:

• The Federal Open Market Committee will conclude its two-day policymaking meeting with Chair Jerome Powell’s press conference at 2 p.m. Market watchers are expecting another quarter-point rate hike.
• Rep. Boyle and Mick Mulvaney, former White House chief of staff and former director of the Office of Management and Budget, will speak at the Milken Institute Global Conference in a session titled, “Countdown to Default? How to Stop Worrying About a Debt Crisis and Achieve Fiscal Sustainability.”
• The SEC holds an open meeting, with agenda items including share repurchase disclosure modernization and private fund reporting.

Visualizing the Assets and Liabilities of U.S. Banks

Visual Capitalist

Jeffrey Epstein Documents, Part 2: Dinners With Lawrence Summers and Movie Screenings With Woody Allen

Khadeeja Safdar and David Benoit, The Wall Street Journal

Schedules and emails show deeper relationships between the disgraced financier and a range of prominent people, including the former Treasury secretary and the filmmaker.

 

Activist investor Carl Icahn’s wealth plunged by $10 billion after a short-seller accused his company of running a ‘Ponzi-like’ structure

Huileng Tan, Insider Premium

Activist investor Carl Icahn’s wealth plunged by $10 billion on Tuesday after Hindenburg Research — a short-seller that took on one of Asia’s richest men earlier this year — targeted Icahn Enterprises with a scathing report.

 

Student-debt firm at the center of debt-relief battle is set to see revenue gains following forgiveness, analysis shows

Jillian Berman, MarketWatch

The organization at the core of the Supreme Court battle over student-debt relief is projected to increase revenue from its activities collecting student loans in the months following the cancellation, documents obtained through an open-records law suggest.

 

The 2023 crony-capitalism index

The Economist

Over the past 20 years, Britain’s capital was so welcoming to oligarchs that it became known as “Londongrad”. Many bought mansions from Highgate to Hyde Park; a couple bought into football clubs. After Russia invaded Ukraine in February last year, 48 oligarchs were placed under Western sanctions. The immense wealth of many of Vladimir Putin’s associates highlights the problem of crony capitalism and why more should be done to combat it.

 

Nearly half of college dropouts would ‘very likely’ reenroll if given student debt relief: poll

Lexi Lonas, The Hill

Forty-seven percent of people who did not finish their postsecondary degree say they would “very likely” go back to school if they got some student debt relief.

 

69% of people either failed or barely passed this Social Security quiz. 

Lorie Konish, CNBC

When asked to take a 13-question quiz on Social Security, most near-retirees ages 55 to 65 did not get a passing grade.

Is the Debt Limit Constitutional? Biden Aides Are Debating It.

Jim Tankersley, The Washington Post

As the government heads toward a possible default on its debt as soon as next month, officials are entertaining a legal theory that previous administrations ruled out.

 

Fed Should Pause Rate Increases After This Week, Former Vice Chair Says

Gabriel T. Rubin, The Wall Street Journal

Richard Clarida says recent bank failures have tightened financial conditions.

 

Lawmakers led by Democrats urge the Fed to halt rate hikes ahead of Wednesday’s announcement

Chelsey Cox, CNBC
A group of lawmakers, including Sen. Elizabeth Warren and Rep. Pramila Jayapal, urged the Fed to halt its rate hikes.

 

As Fed examines banking woes, small businesses already feel the crunch

Rachel Siegel, The Washington Post

Officials don’t know how significant the repercussions of recent bank failures will be as they convene on Tuesday and Wednesday

 

Help Still Wanted: Fewer Job Openings Won’t Faze the Fed

Justin Lahart, The Wall Street Journal

There was a big debate among economists and U.S. policy makers last year over whether job openings could come down without tanking the job market. Well, job openings are down and the job market is still strong, but the debate is hardly resolved. The Labor Department on Tuesday reported that there were 9.59 million unfilled jobs in the U.S. at the end of March, down from 9.974 million at the end of February, and 20% below the record 12.027 million logged in March of last year.

 

Workers have high expectations for raises this year. Their bosses have different ideas.

Ray A. Smith, The Wall Street Journal

Workers are anticipating bigger increases than last year while companies are pulling back on earlier projections

 

What a Fed Debate 17 Years Ago Reveals About Its Rate Deliberations Now

Nick Timiraos, The Wall Street Journal

After Federal Reserve officials likely agree to raise interest rates this week, their conversation will shift to a question weighing heavily on investors that they will find difficult to answer: Are they finished?

 

Why Is Inflation So Sticky? It Could Be Corporate Profits

Paul Hannon, The Wall Street Journal

Inflation has proved more stubborn than central banks bargained for when prices started surging two years ago. Now some economists think they know why: Businesses are using a rare opportunity to boost their profit margins.

 

‘People are having a hard time affording food’: Chobani CEO Hamdi Ulukaya suggests corporate margins are behind ‘troubling’ food inflation

Nicholas Gordon, Fortune

Chobani CEO Hamdi Ulukaya says he finds the persistence of food inflation “troubling,” despite a fall in food commodity prices.

 

Why debt ceiling deals often make America’s debt problem worse

Ben Werschkul, Yahoo Finance

Treasury Secretary Janet Yellen’s announcement Monday that a government default could come as early as June 1 raises the stakes for quickly finding a bipartisan solution to the debt-ceiling crisis. But debt watchers have a warning about negotiations scheduled to start next Tuesday. Both sides say they want to tackle the issue, but recent history is littered with bipartisan deals that actually made the deficit worse.

 

GOP’s best pals in debt talks: Manchin and Sinema

Burgess Everett, Politico 

While their Democratic colleagues insist on no negotiations until the borrowing limit is lifted, the duo is positioning themselves as potential players in any future Senate talks.

 

White House leaves door open to deal that resolves debt ceiling crisis

Jeff Stein and Marianna Sotomayor, The Washington Post

White House officials are leaving the door open to a compromise with House Republicans on government spending that also resolves the impasse over the federal debt ceiling — a strategy that could allow both parties to claim victory while averting a national economic catastrophe.

 

Summers Says Most Bank Trauma Over, More Worried About Debt Limit

Chris Anstey, Bloomberg

Former Treasury Secretary Lawrence Summers said he was less worried about continuing turmoil in the US banking sector than he is about the partisan impasse in Washington over raising the federal debt limit.

 

Druckenmiller Warns US Debt Crisis Worse Than He Imagined

Sonali Basak, Bloomberg

Stanley Druckenmiller, the hedge fund investor and long-time deficit hawk, said the current impasse over the debt ceiling is dwarfed by the dangers of unchecked future government spending.

 

How a more efficient IRS is speeding up the debt deadline

Brian Faler, Politico Pro

Because of its newfound efficiency, the government will run out of remaining funds to service its debts earlier than it expected.

Former CEOs of failed banks to testify before Senate panel

Stephen Grovers, The Associated Press

The former top executives of two failed banks will testify before Congress this month as lawmakers dig into what caused a series of collapses at mid-sized financial institutions. The Senate Banking Committee indicated Tuesday that it will hold a hearing May 16 with Silicon Valley Bank’s former CEO, Gregory Becker, as well as Signature Bank’s former chairman and co-founder, Scott Shay, and its former president, Eric Howell.

 

Three failed US banks had one thing in common: KPMG

Stephen Foley, Financial Times

Big Four auditor’s work for SVB, Signature and First Republic comes under scrutiny in aftermath of their collapses.

 

Wells Fargo CEO says regional banks are strong, but expects turmoil

Carolina Mandl and Svea Herbst-Bayliss, Reuters

Wells Fargo & Co. CEO Charlie Scharf said on Tuesday the banking industry is “extremely strong” but added he expects more volatility as market participants assess the health of financial institutions.

 

Top banking CEO warns of further volatility and predicts more U.S. rescues

Silvia Amaro, CNBC

A top banking executive highlighted a possible divergence in fortunes for the finance sector in both Europe and the U.S., suggesting that more rescues of American regional lenders are likely.

 

Goldman Sachs Descends on Dallas in Wall Street’s Latest Move West

Shelly Hagan, Bloomberg

The number of Dallas finance jobs has surged 33% in the past decade, more than double the national average.

LIBOR successor in home stretch for transition in giant US swaps market

Gertrude Chavez-Dreyfuss and John Mccrank, Reuters

A decade after a manipulation scandal turned global regulators and investors against the London Interbank Offered Rate (LIBOR) as the global interest rate benchmark, major clearing houses are in the final weeks of the nearly $50 trillion transition of the U.S. rate swaps market to its successor.

NYC Board Proposes Up to 7% Hike for Rent-Stabilized Apartments

Jennifer Epstein and Laura Nahmias, Bloomberg

Tenants in New York City’s 1 million rent-stabilized apartments could potentially face increases of 4% to 7% for two-year leases as a key panel offered preliminary support for price hikes.

 

CFPB proposes rules for clean energy home loans

Maria Volkova, National Mortgage News

The Consumer Financial Protection Bureau has relaunched efforts to put safeguards around clean energy loans, the agency announced Monday.

Commissioner Peirce calls out SEC rule-making pace, crypto approach

Courtney Degen, Pensions & Investments

Commissioner Hester M. Peirce criticized the SEC’s “staggering” rule-making pace and lack of regulatory clarity for digital assets at a Managed Funds Association event Tuesday.

 

Coinbase offshore exchange launches this week with Bitcoin and Ethereum futures

Ben Weiss, Fortune

Coinbase will launch its international exchange in the Caribbean nation of Bermuda this week, less than two weeks after the U.S.-based, publicly traded company obtained regulatory approval from the Bermuda Monetary Authority.

 

White House Pushes for Punitive Tax on Crypto Mining

Jesse Hamilton, CoinDesk

The Biden administration is campaigning for a tax first sought in a recent federal budget proposal, advocating that crypto miners pay an amount equal to 30% of their energy costs.