Exclusive: Hensarling talks Trump, reform bill Presented by U.S. Bank

JEB HENSARLING EYES SEPTEMBER PLAY — The House Financial Services Committee chairman told POLITICO PRO’s Victoria Guida that he plans next month to formally introduce his sweeping legislation to overhaul financial regulations and scrap key parts of the 2010 Dodd-Frank Act. Important elements of the plan have already drawn fire from the nation’s biggest banks as well as Fed Chair Janet Yellen, and the bill has almost no chance of passing this year. Still, the measure carries weight because it could serve as a template for financial market reform if Republican nominee Donald Trump wins the presidency. Trump hasn’t endorsed the measure, but says he wants to end Dodd-Frank. He met with Hensarling to discuss a draft that was released in June. Notably, Hensarling and Trump’s running mate, Indiana Gov. Mike Pence, are close, which could create a further opening to advance the Texas Republican’s plan.

“I plan to mark it up in September, but I have noticed as chairman sometimes … schedules slip,” Hensarling told Victoria on Friday. He said that in the version of the bill he introduces there “will probably be minor modifications” from the June draft. Trump “understands that in order to get this economy moving, we have to repeal and replace Dodd-Frank, and we’ve got a plan to do that,” Hensarling said. “We haven’t spoken recently about it. I don’t want to put words in his mouth, but I think he was generally encouraged by it. There's a lot of common ground between what he wanted to accomplish and what we wanted to accomplish in terms of creating economic growth.”


The bill, among other things, would allow banks to opt out of many financial regulations if they agree to stricter capital requirements.

Once the bill is introduced, “we'd like to move it as a package,” Hensarling said. But he acknowledged it would be difficult to do so next year if Republicans lose the Senate or the presidency. If that happens, “we’re willing to negotiate pieces of it that can gain consensus in a divided government.”

DRIVING THE WEEK — The Federal Reserve’s annual Jackson Hole symposium begins on Thursday. This year’s theme is “designing resilient monetary policy frameworks for the future.” Yellen speaks there on Friday at 11am EDT. What she says will be combed for clues about whether the Federal Open Market Committee will raise interest rates at its next meeting, in September.

Goldman Sachs economists, writing in an Aug. 19 research note to clients, said: “We currently see a subjective 30 percent probability that the next move is a hike at the September meeting, and a 45 percent probability that it is a hike in December, for a 75 percent cumulative probability of at least one rate increase this year.”

FED’S FISCHER OPTIMISTIC ON GROWTH — Federal Reserve Vice Chairman Stanley Fischer on Sunday called for the government to play a bigger role in stimulating the economy and not rely on central banks to be the only game in town.

“The key to boosting productivity growth, and the long-run potential of the economy, is more likely to be found in effective fiscal and regulatory policies,” Fischer said, according to prepared remarks for a speech at a conference sponsored by the Aspen Institute in Colorado.

“Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he said in a footnote to his speech. The full text is here: http://bit.ly/2bGP5qr.

ELECTION UNCERTAINTY STIFLING GROWTH — The National Association for Business Economics (NABE) is publishing its latest economic policy survey. “A majority of respondents expects the Federal Open Market Committee to raise its target for the federal funds rate above the current 25-to-50 basis-point range by year-end 2016, but few expect the target to be raised beyond 75 basis points,” the survey said.

More than three-fifths of respondents believe that uncertainty about the national election is holding back U.S. economic growth. “As for which candidate would do the best job as president of managing the economy, a majority (55 percent) choose Democratic nominee Hillary Clinton, followed distantly by Libertarian nominee Gary Johnson (15 percent) and Republican nominee Donald Trump (14 percent). The remaining 15 percent said they ‘don't know.” Read the report here: http://bit.ly/2bKIJt3.

GOOD MONDAY MORNING — Ben White is still away, so the Pro Financial Services team will steal the show for another week. Please send tips to Pro Financial Services Editor Mark McQuillan: [email protected].

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES – Colin Wilhelm on Richard Cordray's response to a Senate attempt to get the CFPB to help small banks -- and to get Morning Money every day before 6 a.m. -- please contact Pro Services at (703) 341-4600 or [email protected].

SEN. MARK WARNER HITS ‘ACTIVIST INVESTORS’ — In embracing an economic narrative that is gaining steam with Democrats, particularly Hillary Clinton, the Virginia senior senator has concerns that companies are too often buying up their shares and paying dividends rather than reinvesting profits in their business operations.

In an interview with the Roanoke Times editorial board, published on Sunday, Warner said people are holding stocks for less time now than in the pre-internet era. “That, Warner says, values short-term profits over long-term investment. He blames so-called ‘activist investors’ — who in some cases might rejuvenate sleepy companies, but often simply cut costs (and workers) to squeeze out an immediate profit for shareholders without regard for the people or communities those decisions impact. … At one time, 50 percent of corporate profits were reinvested in the business. Now, 95 percent of corporate profits are going into stock buy-backs or dividends.” Read the full editorial here: http://bit.ly/2bnwAt7.

Quick notes: The Roanoke Times’s sharp words for activists hits them just after an advocacy group representing five activist-investor funds recently hired lobbyists. Clinton last year called for shedding more light on “excessive buybacks.”

STOCKS FLOURISH UNDER OBAMA — “The Obama years have been among the best of times to be a stock investor, going all the way back to the dawn of the 20th century,” writes the NYT’s Jeffrey Sommer. “Had you been prescient enough to buy shares of a low-cost stock index fund on Mr. Obama’s first inauguration day, on Jan. 20, 2009, you would now have tripled your money. Stock market performance of this level has rarely been surpassed.” http://nyti.ms/2bdX6Dw.

‘NEW NORMAL’ IS HERE TO STAY — “For much of the post-financial-crisis era, U.S. Federal Reserve officials have held to a belief that they could get back to their old way of doing things. Growth would resume at a modest pace, annual inflation would climb to 2 percent and interest rates would gradually rise from near zero to a normal level near 4 percent or higher,” writes the WSJ’s Jon Hilsenrath. “As they prepare to gather at their annual retreat in Jackson Hole, Wyo., officials are grimly coming to a view that it isn’t going to happen that way.” http://on.wsj.com/2byhrpr.

MEET MARCUS, GOLDMAN’S RETAIL LENDER — “After much internal discussion, the Wall Street firm has decided to call the retail banking operation Marcus — the first name of the company’s founder, Marcus Goldman,” writes the NYT’s Nathaniel Popper. “Marcus is expected to be officially unveiled when the bank is ready to roll out the offering, most likely in October, according to people who were briefed on the plans.” http://nyti.ms/2bHPKKY.

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