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The Finance 202: No, Trump will not face a challenge from Jamie Dimon




THE TICKER

Jamie Dimon will not be the next president of the United States. 

The JPMorgan Chase chief executive acknowledged this himself Wednesday, even as he made the seemingly off-the-cuff claim, which the bank quickly walked back, that he thinks he could beat President Trump. “I can’t beat the liberal side of the Democratic Party,” Dimon said.  

The admission got somewhat lost in the firestorm Dimon set off when he argued he’s “as tough” as Trump; “smarter than he is”; and more accomplished, in the sense that he “actually earned his money. It wasn’t a gift from daddy.” He was speaking at an event to unveil a new philanthropic effort by the bank.

Trump unsurprisingly slapped back at Dimon in a Thursday morning tweet:

Trump’s attack ignored Dimon’s statement, issued an hour after his initial comment, expressing regret: “I should not have said it. I’m not running for President. Proves I wouldn’t make a good politician. I get frustrated because I want all sides to come together to help solve big problems.”

Set aside that Dimon’s statement is precisely what a hopeful in his position would say: That he shouldn’t run because he just can’t help telling hard truths — and he’s sometimes too passionate advocating for the sort of leadership the nation is missing. 

There’s the fact that Dimon earlier this year agreed to remain at JPMorgan’s helm for another five years. More prohibitively, the party he still calls home is increasingly hostile to everything he represents. That means he isn’t now — and likely won’t ever be — a viable candidate for the party’s nod. It isn’t simply that Dimon is the chief executive of the largest Wall Street bank by asset size, though, as we noted here yesterday, voters in both parties remain deeply suspicious of financial services industry leaders. 

Dimon is also critical of the populist left that has quickly captured the party’s center of gravity. “The Democratic Party … they’ve got to get their act together in terms of understanding how society actually works,” Dimon said at the event Wednesday. “Because if they just keep on pounding away at business … I watch these ads on TV with all these people … they’re all running and they’re all going to [wags finger] … business where their place is. Well, okay, right that’s going to really work. That’s going to really succeed.”

The reaction online was swift and tough:

From Business Insider’s Josh Barro:

From CNBC’s Eamon Javers: 

From Wall Street critic Better Markets:

That Dimon would offer that critique ten years to the week after the Wall Street meltdown that precipitated the Great Recession suggests he’s more impolitic than he allowed. Helaine Olen, a self-described liberal Democrat and contributing opinion writer for The Washington Post, summarized the critique Dimon would face in a piece that offered a backhanded argument for him to run:

Let’s get a real banker up on the debate stage. Perhaps an opponent can ask Dimon how, if he’s so competent, the bank he runs needed to pay a settlement of more than $2 billion as a result his bank’s mishandling of mortgage servicing; more than $31 billion over claims the bank misled investors over the sale of mortgage securities that, they alleged, were less than advertised; $307 million over claims by the Securities and Exchange Commission and the Commodity Futures Trade Commission that it’s brokers improperly put wealth management customers in JPMorgan Chase-branded mutual and hedge funds when there were less costly and better options available; and $55 million to shut down an investigation into allegations it charged African American and Latino mortgage applicants higher interest rates than it offered to whites.

Dimon, to be sure, is widely respected by his peers. Ariel Investments CEO John Rogers — who got to know him when he served as a director of Bank One, which Dimon led until JPMorgan bought it in 2004 — tells me he’s a “true leader. He’s very decisive. He sets very clear priorities. He attracts terrifically talented people, and that’s one of his key hallmarks, which is a big weakness of Trump’s.”

But even if Dimon’s C.V. didn’t disqualify him among Democrats, his policy prescriptions would. They are heterodox: He said Wednesday he would tax the rich and fund infrastructure spending — and he appeared to endorse universal basic income. Yet as chairman of the Business Roundtable, the lobby group for top CEOs, he has been an outspoken advocate of free trade deals anathema to the base. He has praised the pro-growth effects of Trump’s moves to slash the corporate tax rate and regulations. And he has advocated paring post-crisis restrictions on big banks. 

His bank has prospered in the Trump era: Its stock is up by nearly half since Trump’s win, and it posted a record $8.32 billion profit last quarter. Dimon himself earned $29.5 million in total compensation last year, a 5.4 percent bump over the previous year — and his biggest pay package since the meltdown. Forbes estimates his net worth at $1.4 billion. When Lloyd Blankfein steps down as chief executive of Goldman Sachs at the end of this month, Dimon will be the last remaining big bank CEO who led his institution through the global financial crisis.

MARKET MOVERS

— Fed’s Brainard endorses rate hikes. The Wall Street Journal’s Paul Kiernan: “Federal Reserve governor Lael Brainard said recent tax cuts and government-spending increases have likely created a need for higher interest rates, saying the central bank should continue gradually raising rates for the next year or two. In remarks prepared for delivery Wednesday in Detroit, Ms. Brainard noted the U.S. economy and labor market have continued to strengthen this year, and financial conditions have remained relatively loose, even after the Fed raised its benchmark interest rates in March and June. … ‘With government stimulus in the pipeline providing tailwinds to demand over the next two years, it appears reasonable to expect the shorter-run neutral rate to rise somewhat higher than the longer-run neutral rate,’ Ms. Brainard said.”

Fed’s Bullard credits Trump. Reuters’s Ann Saphir: “St. Louis Federal Reserve Bank President James Bullard on Wednesday credited [Trump] with boosting U.S. economic growth in a way that may prove to be sustainable by lifting productivity. ‘I definitely think that the political change had an influence; I think that this is a pro-business administration that wanted to pursue strategies that were focused on economic growth,’ he told reporters after speaking at CFA Society Chicago, pointing to the reduction in corporate tax rates and improvements in business sentiment under Trump. The U.S. economy is likely to grow about 3 percent this year, Bullard said, the second year in a row of ‘quite strong growth by the standards of the post-crisis era.’”

— Analyst: Bear market is here. CNBC’s Thomas Franck: “U.S. stocks are already in the throes of a rolling bear market and could be paralyzed for the next several years as earnings growth decelerates, Morgan Stanley’s chief equity strategist, Michael Wilson, said in a note. Wilson said he expects the S&P 500 to trade in range between 2,400 and 3,000 for the next several years as higher borrowing costs replace strong earnings as the market’s primary focus. … ‘We view the rate of change in earnings growth as one of the most important drivers of equity prices broadly; so our belief that earnings growth is likely to slow more in 2019 than the market anticipates is important for our less optimistic view on equities,’ he added.”

Dalio: Downturn in two years.  Bloomberg: “Billionaire hedge fund manager Ray Dalio predicted the U.S. economy is about two years from a downturn, which will see the dollar plunge as the government prints money to fund a swelling deficit. As the impact of [Trump’s] tax cuts starts to fade about 18 months from now, the combination of rising interest rates and mounting costs from pension and healthcare obligations will put pressure on the budget, Dalio, the founder of Bridgewater Associates, said…  ‘We have to sell a lot of Treasury bonds, and we as Americans will not be able to buy all those treasury bonds,’ he said. ‘The Federal Reserve will have to print more money to make up for the deficit, will have to monetize more, and that’ll cause a depreciation in the value of the dollar.'”

— Middle-class income hits record. The Post’s Heather Long and Jeff Stein: “Middle-class income rose to the highest recorded levels in 2017 and the national poverty rate declined as the benefits of the strong economy lifted the fortunes of more Americans, the U.S. Census reported Wednesday. The median U.S. household earned $61,372 last year, meaning half of the families in the country brought in more income than this and half earned less. Crossing the $61,000 mark signals the American middle-class may have finally earned more than it did in 1999, although the Census Bureau cautions that median income last year was not statistically different from 1999 or 2007 … The Census Bureau also reported that the U.S. poverty rate declined modestly to 12.3 percent, the lowest level in more than a decade and a sign the economic devastation from the Great Recession is subsiding.”

— Producer prices decrease. The Associated Press’s Paul Wiseman: “U.S. wholesale prices fell unexpectedly last month for the first time since February 2017, pulled down by falling prices for transportation and warehousing services. The drop suggests that inflationary pressures may be easing despite the strength of the U.S. economy.”

— Was the Fed too successful? Reuters’s Howard Schneider: “U.S. Federal Reserve officials tout a decade of falling unemployment as among their major victories in fighting the economic crisis of 2007 to 2009. Now they are beginning to worry they have been too successful. When unemployment falls as low as it is currently, Boston Federal Reserve bank president Eric Rosengren said in a new paper released Thursday as part of a review of Fed policy, recession has inevitably followed, with the central bank showing no success in fine-tuning the economy to a stable rest at full employment… Since World War Two, periods in which joblessness has fallen below the estimated ‘natural’ rate of full employment inevitably have been followed by a recession, with only a half a percentage point rise in the unemployment rate needed to kickstart the slide.”

TRUMP TRACKER

TRADE FLY-AROUND:

— U.S. suggests new talks with China. WSJ’s Lingling Wei and Jacob M. Schlesinger: “The Trump administration is giving Beijing another chance to try to stave off new tariffs on $200 billion in Chinese exports, asking top officials for a fresh round of trade talks later this month… The invitation from Treasury Secretary Steven Mnuchin comes as some Trump officials said they sense a new vulnerability—and possibly more flexibility—among Chinese officials pressured by U.S. tariffs imposed earlier this year and threats for more.

“It also follows a steady rise in political pressure on [Trump] to ease up on trade fights—which have pinched consumers and prompted painful retaliation against U.S. exports—ahead of November elections in which his Republican Party risks losing congressional control. Given the difficult nature of the trade talks between the two countries over the past year, there is no guarantee the invitation will yield a meeting. On Thursday, China’s Commerce Ministry confirmed it received the invitation.”

U.S. businesses in China are hurting. The Post’s Danielle Paquette: “The largest American business groups in China issued a plea to [Trump] on Thursday: Please stop with the tariffs. A survey from AmCham China and AmCham Shanghai found that nearly two-thirds of more than 430 U.S. firms in China say the duties Trump placed on billions of dollars of Chinese imports this summer have hurt their businesses. Nearly half of respondents — who work in retail, food and manufacturing — say production costs have climbed, and 42 percent said they have noticed a decreased demand for their goods.

“Just 6 percent, meanwhile, said they would consider moving factories to U.S. soil.  AmCham chairman William Zarit said American business leaders in China want Trump to rethink the levies he has proposed on an additional $200 billion in Chinese imports, including many consumer goods.”

Stateside firms are pinched, too. WSJ’s Sarah Chaney and Sharon Nunn: “Businesses voiced concern regarding mounting trade tensions, as recently imposed and proposed tariffs force companies to grapple with rising input costs, according to a Federal Reserve report released Wednesday… Wednesday’s report showed that while businesses at large remained optimistic about the economic outlook, many expressed uncertainty over rising trade tensions. In some cases, climbing trade worries resulted in instances of postponing business investment.”

— Canada plays down deadline pressure. David Ljunggren and Adriana Barrera: “Canadian Foreign Minister Chrystia Freeland plans to return to Washington for more talks on NAFTA on Thursday but plenty of work remains before the two sides can strike a trade deal, a well-placed Canadian source said on Wednesday. Although the United States wants to agree on the text of a new deal on the North American Free Trade Agreement by Oct. 1, the source reiterated Canada’s position that it would take as long as needed. ‘I expect we’ll probably have several more sessions. This won’t get resolved in an afternoon,’ said the source, who declined to be identified given the sensitivity of the situation.”

— E.U. expects metal tariffs to remain. Bloomberg News’s Jonathan Stearns: “The European Union sees little chance of relief from controversial U.S. metal tariffs before mid-2019 while aiming for a narrow trans-Atlantic trade deal to avert any extra American automotive duties … The European Commission’s current talks with the U.S. to reduce trans-Atlantic market barriers for industrial goods should keep at bay [Trump’s] threat to impose levies as high as 25 percent on imported autos and vehicle parts … The commission, the EU’s executive arm in Brussels, is looking for an agreement with the Trump administration on a handful of trade-boosting measures such as in the area of industrial standards.”

MELTDOWN WATCH:

— Ross earned at least $27 million in 2017. The Post’s Steven Mufson: “Commerce Secretary Wilbur Ross was paid $6.1 million for giving up his accumulated stock incentive plan with Invesco Group when he was named to the Cabinet, and the firm separately paid him a $970,530 bonus, according to his latest government ethics filing. Ross said that in the two months of 2017 before becoming commerce secretary he also received a director’s fee of $189,744 from international steelmaker Arcelor Mittal. For the year, he earned at least $27.2 million, the low end of a broad reported range of capital gains and dividend income during 2017.”

— The economy flourishes; Trump’s ratings don’t.  Bloomberg News’s Alexandre Tanzi and Rich Miller: “Trump’s unpopularity is unprecedented given the strength of the economy. That’s according to a Bloomberg analysis of polling data. It shows that Trump is the first U.S. leader dating back to at least Ronald Reagan whose approval rating is consistently low and lagging consumers’ favorable assessment of the economy. ‘There’s a huge disconnect,’ said Karlyn Bowman, a senior fellow and public opinion polling expert at the American Enterprise Institute, a conservative think tank based in Washington. ‘The economy doesn’t seem to be dominating in a way that it often does in elections.’”

POCKET CHANGE

— AT&T eyes beefing up HBO to take on Netflix. WSJ’s Drew FitzGerald and Shalini Ramachandran: CEO Randall Stephenson “said the company may shift resources to HBO from other parts of its newly acquired Time Warner business to step up programming investments and use data on its customers’ tastes and habits to inform its content bets, part of a plan to compete with streaming giant Netflix Inc… Mr. Stephenson said HBO, which spent $3.7 billion last year on programming, is unlikely to spend anywhere close to the $11 billion to $12 billion in cash that analysts expect Netflix will spend this year on content, but he said that as a whole WarnerMedia, which also includes CNN and the Warner Bros. film studio, will roughly match Netflix. Mr. Stephenson, who said his favorite shows include ‘Game of Thrones’ and ‘Succession,’ said HBO’s existing lineup is ‘too Sunday night-centric’ and said AT&T plans to plow investment into the channel to produce more hit shows. ‘You’ve got to get a programming schedule that we think is a little more fulsome.'”

— McDonald’s employees to protest sexual harassment. AP’s David Crary: “Emboldened by the #MeToo movement, McDonald’s workers have voted to stage a one-day strike next week at restaurants in 10 cities in hopes of pressuring management to take stronger steps against on-the-job sexual harassment. Organizers say it will be the first multistate strike in the U.S. specifically targeting sexual harassment. Plans for the walkout — to start at lunchtime on Sept. 18 — have been approved in recent days by ‘women’s committees’ formed by employees at dozens of McDonald’s restaurants across the U.S. Lead organizers include several women who filed complaints with the U.S. Equal Employment Opportunity Commission in May alleging pervasive harassment at some of McDonald’s franchise restaurants.”

— Macy’s to hire 80,000 temporary workers. Reuters’s Uday Sampath Kumar: “Macy’s Inc said on Wednesday it would hire 80,000 temporary workers for the holiday season, in line with last year’s initial hiring, and deploy more hands to cater to the avalanche of online orders expected in the shopping period. The department store chain said 23,500 seasonal workers would be employed at its online fulfillment centers across the United States, 5,500 more than last year. … Macy’s online business clocked double-digit growth in the second quarter, with sales through its mobile app rising more than 50 percent in the first half of its fiscal year from a year earlier.”

MONEY ON THE HILL

Senate approves spending package. The Post’s Erica Werner: “The Senate passed a bipartisan spending package Wednesday paying for veterans affairs, military construction and other programs for 2019 — a big step forward as congressional leaders maneuver to avoid a government shutdown at month’s end. The vote was 92 to 5. The legislation is expected to pass the House on Thursday and then go to President Trump, who is expected to sign it. The measure would mark the first batch of spending bills for 2019 to be signed into law, and comes with time running out for Congress to finalize all the must-pass bills before government funding expires Sept. 30.”

And confirms a new IRS commissioner. The Post’s Jeff Stein: “The Senate confirmed the next commissioner of the Internal Revenue Service on Wednesday, giving the agency a new leader as it struggles to cope with steep funding cuts and execute the sprawling Republican tax law passed last fall. Charles Rettig, a California tax attorney, was chosen for the post by President Trump in February for a term that runs until 2022. He was confirmed in a 64-to-33 vote.”

DAYBOOK

Today

THE FUNNIES

— From the New Yorker’s Peter Kuper:

BULL SESSION

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