Overnight Finance: Banks close in on Dodd-Frank relief | Inflation reaches threshold for Fed rate hikes | Rubio undercuts GOP tax message | Closing arguments in AT&T trial

Happy Monday and welcome back to Overnight Finance, which spent White House Correspondents Dinner weekend binging on The Great British Baking Show. 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.

 

THE BIG DEAL: Banks are close to winning long-sought relief from strict regulations imposed after the 2008 financial crisis. 

Congress is near the passage of a bipartisan deal to exempt dozens of banks from parts of the Dodd-Frank Act of 2010. 

Federal agencies controlled by President Trump’s appointees are sprinting toward significant rollbacks of key Dodd-Frank rules meant to insulate banks from a disabling financial crisis.

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And the acting director of the Consumer Financial Protection Bureau (CFPB) is dismantling the aggressive regulatory and enforcement practices that enraged Republicans and banks while pleasing Democrats and financial sector skeptics.

Advocates for banks and credit unions are beaming as Washington starts to pick apart Dodd-Frank, following years of pressure and wishful thinking.

“This is the beginning of a complete change in attitude among the policymakers of Washington,” said Wayne Abernathy, an executive vice president for the American Bankers Association (ABA), the top lobbying group for U.S. banks.

“These are just the hors d’oeuvres. This is setting the stage for a lot more important things to come.”

I’ve got more on those efforts and how they’d reshape banking law right here.

 

Why it matters: Republicans have struggled in vain for almost a decade to loosen much of Dodd-Frank. The financial sector opposed the law from its inception for significantly expanding the federal power to supervise and penalize banks and lenders.

Democrats successfully defended the law, a pillar of former President Obama’s economic legacy, during his tenure. Republicans railed against the new rules but were powerless to repeal the regulations in the face of Obama’s veto.

Trump’s stunning 2016 victory, which came after he pledged to “dismantle” Dodd-Frank, changed that. Republican control of the White House and Congress made the law vulnerable for the first time since its passage.

Dodd-Frank’s critics spent much of 2017 laying the groundwork for its undoing. Trump filled his Cabinet with financial sector veterans devoted to reining in the law, while the House and Senate worked on bills to reshape it.

Reactions:

• “Leverage in and of itself shouldn’t determine the risk profile for the bank. In a particular situation, it shouldn’t control the determination of risk but rather be one of the factors to goes into evaluating.” — Bob Kurucza, a partner at Goodwin covering federal banking and securities law.
• “I can’t tell you exactly where the next step is, but it will be soon, and very soon, that this legislation will be moving forward.” — James Ballentine, ABA executive vice president of government relations. 
• “The Fed is shooting in the dark and they are going to hit some innocent bystanders,” — Karen Petrou, managing partner of Federal Financial Analytics.

 

What comes next: Currently, House Financial Services Chairman Jeb Hensarling (R-Texas) wants the Senate to consider other roll back provisions and has delayed acting on their bill. But House Majority Leader Kevin McCarthy (R-Calif.) said Monday that the lower chamber is “within a month” of sending the Senate bill to Trump’s desk. He controls the House floor, so his projections hold weight. But it’s also in McCarthy’s best interest to be optimistic, so we’ll keep a close eye on it.

 

ON TAP TOMORROW 

• Deadline for President Trump to grant exemptions from the steel and aluminum tariffs.

 

LEADING THE DAY

Inflation reaches key threshold for Fed rate hikes: Inflation for the first time in several years has increased to the Federal Reserve’s annual target, the Commerce Department reported Monday, reaching a key threshold for the future of U.S. interest rates.

The personal consumption expenditures (PCE) index, the Fed’s inflation barometer, increased 2 percent in the 12-month period ending in March, according to data released Monday.

Consumer prices stayed flat in the month of March itself, while consumer prices minus volatile food and energy rose 0.2 percent.

Consumer spending overall rose 0.4 percent in March after decreasing 0.2 percent in February.

Personal income increased 0.3 percent in March, the same rate from February. Wages and salaries increased 0.2 percent in March after increasing 0.4 percent in February.

With inflation reaching the Fed’s preferred level in March, the bank could increase interest rates further than its current projections. I’ll tell you why that matters right here.

 

Rubio blows hole in GOP tax-cut messaging: Sen. Marco Rubio (R-Fla.) told The Economist in a recent interview that “there’s no evidence whatsoever” that the corporate tax cut Republicans passed last year is overwhelmingly benefiting workers.

“There is still a lot of thinking on the right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers,” Rubio said in the interview, published late last week. “In fact they bought back shares, a few gave out bonuses; there’s no evidence whatsoever that the money’s been massively poured back into the American worker.” 

The comments are being highlighted by Democrats — including Senate Minority Leader Charles Schumer’s (D-N.Y.) office — who view the remarks as bolstering their case against the tax law.

Democrats have been hammering Republicans over the increase in stock buybacks that has occurred since the tax law passed. Republicans, though, have generally focused on the companies that have announced bonuses, wage increases and new capital investments. The Hill’s Naomi Jagoda digs in here.

 

Closing arguments made in AT&T-Time Warner merger trial: The two sides in the trial over the AT&T-Time Warner merger squared off in court for the final time on Monday, offering closing arguments in the landmark antitrust case.

The Justice Department said that the proposed AT&T-Time Warner merger would remake the television industry, giving the combined company the ability to use popular Time Warner content to hurt rival pay-TV providers.

Both sides mainly summarized the points they made over the past six weeks of trial. Judge Richard Leon pledged to issue a ruling by June 12 in order to beat a June 21 merger deadline that the companies are facing. The Hill’s Harper Neidig takes us inside the courtroom here.

 

MARKET CHECK: Stocks took a tumble Monday, with all three major indexes ending up with losses. The Dow Jones Industrial Average shaved off 148 points (0.61 percent), while the S&P 500 and Nasdaq dropped 0.82 percent and 0.75 percent each.

 

GOOD TO KNOW

• Sen. Jon Tester (D-Mont.), might be one of the only vulnerable incumbents getting support from the American Bankers Association and Sen. Elizabeth Warren (D-Mass.). ABA released an advertisement last week featuring bankers from his state praising Tester for his work on Dodd-Frank rollbacks. Warren sent out a fundraising email for Tester today defending him in response to Trump’s threats against the Montanan. The president is targeting Tester after the senator revealed stunning allegations about Adm. Ronny Jackson, the president’s pick to be VA secretary. Jackson withdrew his name from consideration last week.
• The New York Times checks in on our old pal, former Consumer Financial Protection Bureau director Richard Cordray, as he pursues the Democratic nomination for governor of Ohio against Dennis Kucinich. This is loaded with eyebrow-raising passages about both candidates.
• Politico looks at why Mick Mulvaney’s tenure atop the CFPB hasn’t been as “explosive” as expected.
• Chinese conglomerate HNA Group Co. is set to drop its pursuit of SkyBridge Capital, the investment firm founded by Anthony Scaramucci, amid resistance from the Committee on Foreign Investment in the U.S (CFIUS), according to The Wall Street Journal.
  

 

ODDS AND ENDS

• President Trump on Monday asked African nations to support a joint North American bid to host the 2026 World Cup, despite FIFA’s warning against political influence last week.