Overnight Finance: Dow hits record after Yellen testifies | Trump pick for bank regulator withdraws | White House challenges CBO on healthcare | Bank to pay $5.5B fine over mortgage practices

Dow at record high after Fed pledges sell-off: The Dow Jones Industrial Average closed at a record high Wednesday after Federal Reserve Board Chairwoman Janet Yellen said the bank would soon start unloading part of the $4.5 trillion in securities it purchased during the financial crisis.

The Dow index, which has routinely set record highs over the past year, shot up 166 points, settling at 21,554 points by 10 a.m. It closed for the day at 21,532.

Stocks responded positively to Yellen’s prepared testimony to lawmakers.

Yellen said she anticipates the Fed will “gradually reduce” its securities holdings starting this year, though will maintain a larger balance sheet than it did before the financial crisis.

The Fed in June announced it would sell $6 billion per month of Treasury bonds it holds and $4 billion per month in agency debt and mortgage-backed securities. The bank will increase those caps by $6 billion every three months, until the bank is selling off $30 billion in Treasury bonds and $20 billion in debt each month. I’ve got more from her statement here: http://bit.ly/2sQXcsb.

 

Trump’s pick for banking regulator withdraws: President Trump’s pick to lead the Federal Deposit Insurance Corporation has asked the White House to withdraw his nomination, a spokeswoman for the president said Wednesday.

Politico reported that James Clinger, a top congressional staffer and former deputy assistant attorney general, pulled himself out of consideration to lead the key financial regulator, citing a family issue. A White House aide confirmed that Clinger asked Trump to withdraw his nomination.

Trump announced his intention to nominate Clinger as chairman of the FDIC on June 16. The FDIC is one of the federal government’s oldest and most powerful financial regulators, insuring bank accounts, gauging bank stability and testing the ability of major banks to weather financial crises.

Current FDIC Chairman Martin Gruenberg’s five-year term leading the regulator is set to expire later this year: http://bit.ly/2sRik1D.

 

Former WH economists warn against steel tariffs: Fifteen former Democratic and Republican White House economists are urging the Trump administration to forego imposing tariffs on steel imports.

The group of former heads of the White House Council of Economic Advisers said levying taxes on steel coming into the United States would cause economic harm and generate diplomatic tensions.

The Trump administration is soon expected to announce a decision as to whether steel tariffs are needed under Section 232 of a 1962 trade law that provides the president with the power to slap tariffs on imported steel over national security concerns.
“We urge the administration not to take this action,” the economists wrote in a letter to President Trump on Wednesday.

The economists noted that while U.S. steel imports come from more than 110 countries and territories much is sold to the United States by important allies such as Canada, Brazil, South Korea and Mexico. The Hill’s Vicki Needham explains: http://bit.ly/2sR7NTU.

 

House panel approves spending bill for energy, water programs: The House Appropriations Committee approved a $37.6 billion annual spending bill for Department of Energy (DOE) and water infrastructure programs on Wednesday.

The committee vote prepares the bill for possible final consideration by the House. The panel passed the bill by voice vote, without a recorded tally, though Democrats objected to numerous provisions contained in the measure.

The legislation for fiscal 2018 would reduce funding for the programs in its jurisdiction by $203 million compared with 2017 on an annualized basis.

But the bill is $3.2 billion above the drastic cuts that President Trump had sought as part of his effort to shift $54 billion from non-defense programs to defense ones. The Hill’s Timothy Cama breaks it down: http://bit.ly/2sRdxwV.

Happy Wednesday and welcome to Overnight Finance. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@digital-staging.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

 

On tap tomorrow 

• Federal Reserve Chairwoman Janet Yellen will testify before the Senate Banking Committee at 10 a.m.
• A Senate Appropriations subcommittee marks up the Military Construction, Veterans Affairs, and Related Agencies Appropriations Act, 2018 at 2:30 p.m.
• Transportation Secretary Elaine Chao will testify before a Senate Appropriations subcommittee on the Transportation Department budget for fiscal 2018 at 2 p.m.
• The Brookings Institution holds an event on “manufacturing under the Trump administration” at 9 a.m.

 

White House attacks accuracy of CBO: The White House on Wednesday released its own internal analysis of the Senate’s ObamaCare repeal and replace bill in an attempt to push back against the Congressional Budget Office’s (CBO) findings.

In a statement, the White House said the CBO estimates about the Better Care Reconciliation Act’s (BCRA) Medicaid impact “should be discounted because of the large errors made by the agency in estimating the toll of the Affordable Care Act (ACA).”

The analysis by the White House Council of Economic Advisors (CEA) could provide cover for congressional Republicans who may be hesitant to vote for a bill that CBO said would cut $772 billion from Medicaid and result in 22 million people losing their insurance coverage.

The statement from the White House emphasizes the CEA finding that spending would increase over the next decade relative to current levels. The statement also echoed a common GOP talking point that the Senate legislation doesn’t actually cut Medicaid. The Hill’s Nathaniel Weixel explains: http://bit.ly/2sRvITo.

 

Royal Bank of Scotland fined $5.5B over shoddy mortgage practices: The Federal Housing Finance Agency (FHFA) announced on Wednesday a multibillion settlement with the Royal Bank of Scotland Group over the sale of shoddy mortgages ahead of the 2008 financial crisis.

The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, said the Royal Bank of Scotland would pay a $5.5 billion fine over its subprime mortgage lending practices between 2005 and 2007. 

“Today’s announcement is an important step forward in resolving one of the most significant legacy matters facing RBS,” said Ross McEwan, the bank’s chief executive.

“This settlement is a stark reminder of what happened to this bank before the financial crisis, and the heavy price paid for its pursuit of global ambitions,” McEwan said in a statement. 
The British government took over Royal Bank of Scotland after the financial crisis that rocked the globe, and taxpayers still own 72 percent of the Edinburgh-based institution. Here’s more from Vicki Needham: http://bit.ly/2sRf7z2.

 

Steve King wants to build border wall with funds from Planned Parenthood, food stamps: Rep. Steve King (R-Iowa) is calling for using federal funding for Planned Parenthood and food stamps to help pay for President Trump’s southern border wall, the Washington Examiner reported Wednesday.

On Tuesday, the House Appropriations Committee introduced a spending bill that would allocate $1.6 billion toward building the wall separating the U.S. from Mexico. The funding is part of the total $13.8 billion for Customs and Border Protection.

King said he supports the spending measure, but he would prefer an additional $5 billion for the wall — and suggested taking the extra funding from Planned Parenthood and federal welfare programs.

“I would find half of a billion dollars of that right out of Planned Parenthood’s budget,” he told the Examiner. “And the rest of it could come out of food stamps and the entitlements that are being spread out for people that haven’t worked in three generations.”

“We’ve got to put America back to work, this administration will do it,” King said. The Hill’s Robin Eberhardt explains here: http://bit.ly/2sQWA5V.

 

Study: Trump budget would increase debt: President Donald Trump’s budget proposal would increase the nation’s debt burden, according to a study by the Committee for a Responsible Budget (CRFB) — far from the administration’s stated goals of cutting the national debt and balancing the budget.

While the White House claimed that its budget would lower debt from the current 77 percent of GDP to a sustainable 60 percent over a decade, the CFRB study estimated that debt would continue to rise to 80 percent of GDP instead.

Experts and economists had slammed the proposal for unrealistic economic assumptions and accounting tricks. 

“Even these estimates assume the implementation of deep unspecified discretionary spending cuts, a costless tax reform, and double-counted Medicaid savings,” the group wrote in a post on the subject: http://bit.ly/2sRdC3H.

 

Labor official: Trump has spent more time golfing than at NAFTA negotiating table: The president of the Michigan AFL-CIO is criticizing President Trump for spending more time golfing than working to renegotiate the North American Free Trade Agreement (NAFTA).

In a column published Tuesday in The Detroit News, Ron Bieber said deals like NAFTA have been a “total trainwreck for Michigan” and have destroyed tens of thousands of jobs.

“We need to rewrite NAFTA the right way — making it easier to export Michigan products instead of Michigan jobs,” he wrote.

“That means negotiating a new trade agreement through a transparent and democratic process, where working people have a seat at the table.”

Trump last year promised Michigan voters he would renegotiate NAFTA during his first 100 days in office, Bieber wrote: http://bit.ly/2sQI5PC.

 

Trump’s tax outline would cost trillions, benefit wealthy: analysis: A tax plan that’s consistent with the proposal the White House released in April would lower federal revenue by trillions of dollars over 10 years and largely benefit wealthy taxpayers, according to an analysis from the Urban-Brookings Tax Policy Center (TPC).

The tax cuts described in the administration’s outline would cost $7.8 trillion over 10 years under traditional budget scoring, and a plan that combines those cuts with possible revenue-raisers would cost $3.5 trillion, TPC said. The centrist think tank did not find significant changes to these estimates when they took into account the macroeconomic effects of the proposals.

TPC’s report comes as the White House is working with House and Senate Republicans to flesh out a tax plan and reach an agreement on a unified proposal. Administration officials have said they hope to release the more detailed plan in September: http://bit.ly/2sQRsio.

 

New job alert: From Jackson National Life Insurance Company: “Richard White has been appointed senior vice president of Government Relations for Jackson National Life Insurance Company (Jackson), responsible for the strategy and direction of the company’s government relations efforts at the local, state and federal levels. In this role, White will oversee Jackson’s public policy initiatives and assist in formulating the company’s position regarding policy direction, regulatory requirements and advocacy strategies.” He will be based in Washington, D.C.

 

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