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Infrastructure plans inch forward — Despite tensions within the House Democratic caucus over how to proceed with two parallel efforts on infrastructure, both legislative vehicles look set to advance next week. Our Heather Caygle and Sarah Ferris report that the House plans to come back Monday night to vote to start debate on the Senate-passed bipartisan infrastructure bill, the party-line budget reconciliation package and a separate voting rights measure.
“The House is then expected to vote on passage of the $3.5 trillion budget framework and voting rights legislation Tuesday. But [House Speaker Nancy] Pelosi has no plans to bring the infrastructure bill up for a final passage vote next week, despite moderates’ demands, maintaining that she won’t do so until the Senate approves the massive social spending package through reconciliation. … The White House also went on the record Tuesday to say Biden ‘strongly supports’ Pelosi’s plan.”
Meanwhile, for crypto enthusiasts eager to see the Senate infrastructure bill’s new tax-reporting requirements for digital asset brokers amended, there are signs that changes might not be coming. But an open question is whether their allies in Congress will decide to actively pursue an amendment through the budget reconciliation process, where Rep. Peter DeFazio, chair of the House Transportation and Infrastructure Committee, has said he’s determined to see the House make its stamp.
“The Senate has had unilateral control over the infrastructure bill,” DeFazio, an Oregon Democrat, said in a letter to colleagues. “If we want House priorities to be considered, we cannot let the same thing happen in reconciliation.”
DeFazio says he will work to include in the budget resolution a number of priorities that were left out of the bipartisan bill: “I intend to focus on programs that reduce carbon emissions from surface transportation, aviation and ports, restore transit funding, reconnect neighborhoods, robustly fund high-speed rail, and ensure climate-resilient and affordable investments in our crumbling wastewater infrastructure.”
IT’S WEDNESDAY — Ben White is on vacation. It was fun hanging out with you all for the past few days. The newsletter will be in the capable hands of Katy O’Donnell for the rest of the week. Send her tips at [email protected] or @KatyODonnell_, and to Aubree Eliza Weaver at [email protected] or @AubreeEWeaver. And you can always reach me to talk economic policy at [email protected] or @vtg2.
10 a.m. Sen. Chris Van Hollen speaks at a Center for American Progress event about tax provisions in the budget reconciliation package … 2 p.m. Fed releases the minutes from its July policy meeting
CRYPTO FACES GROWING LEGAL CRACKDOWN — Our Kellie Mejdrich: “Federal regulators are pursuing cryptocurrency startups in court and striking a growing number of legal settlements for rule violations, triggering complaints from the industry and sympathetic lawmakers who say it threatens a growing sector of the economy.
“Over the past month alone, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Treasury Department announced more than $120 million in penalties aimed at digital currency exchanges and other service providers that officials said weren’t complying with federal markets regulations and anti-money-laundering requirements. Several states also escalated their own crypto enforcement crackdowns this summer.”
U.S. HALTED DOLLAR SHIPMENTS TO AFGHANISTAN — WSJ’s Kate Davidson and Ian Talley: “The Biden administration last week canceled bulk shipments of dollars headed for Afghanistan as Taliban fighters were poised to take control of the capital city of Kabul, part of a continuing scramble to keep hundreds of millions of dollars out of the hands of the terrorist group, according to people familiar with the matter.”
FED’S SUCCESS ON STATES AND CITIES? — Interesting new paper here from Roosevelt Institute’s Mike Konczal, which calls for preserving Fed Chair Jerome Powell’s legacy on monetary policy. It says, among other things, that the central bank’s emergency efforts last year might have actually helped states and cities more than a lot of critics think — perhaps even more than they helped corporations.
“There is still ongoing research on these topics, but an estimated 110 basis point fall in state credit spreads is nearly one and a half times the reduction of credit spreads that the private corporate bond market is estimated to have gotten from the Federal Reserve’s Secondary Market Corporate Credit Facility,” Konczal writes. This is notable because the municipal facility — which only lent money to two borrowers — has been a key point of criticism from progressive groups.
AMERICANS SPENT LESS IN JULY AS COVID SURGED — AP’s Joseph Pisani: “Americans cut back on their spending last month as a surge in Covid-19 cases kept people away from stores. Retail sales fell a seasonal adjusted 1.1 percent in July from the month before, the U.S. Commerce Department said Tuesday. It was a much larger drop than the 0.3 percent decline Wall Street analysts had expected.
“The report offers the first solid glimpse of how the spread of the delta variant of COVID-19 may have changed the spending habits of Americans. At the end of July, the U.S. Centers for Disease Control and Prevention began recommending that even vaccinated people start wearing masks indoors in public places.”
AS INVESTORS LOOK TO JACKSON HOLE, OPTIONS MARKETS SEE ‘A LOT OF NOTHING’ — Reuters’ Saqib Ahmed: “Traders in U.S. equity options do not expect the Federal Reserve’s symposium in Jackson Hole, Wyoming, later this month to spark big moves in stocks, even as a focus on the Fed’s taper timeline amplifies the buzz around the annual event, data and interviews with market participants showed.
“Investors typically place bets, or hedges, that would protect their portfolios around events that could generate market volatility. While there has been some hedging demand ahead of Jackson Hole, it pales in comparison with what was seen in the run-up to potentially consequential events in the recent past, such as last year’s presidential election, the Georgia Senate runoffs earlier this year and the Fed’s last monetary policy meeting, a Reuters analysis showed.”
STUDY: 15 PERCENT OF PPP COULD BE FRAUDULENT — NYT’s Stacy Cowley: “When the Paycheck Protection Program began last year to help small businesses that were struggling during the pandemic, the federal government was determined to get the relief money out fast — so it waived much of the vetting lenders traditionally do on business loans. The absence of those safeguards meant that fraud was highly likely. But just how much of the program’s $800 billion was taken illicitly? A new academic working paper released on Tuesday contains an estimate: Around 1.8 million of the program’s 11.8 million loans — more than 15 percent — totaling $76 billion had at least one indication of potential fraud, the researchers concluded.”
FIRST LOOK: SBA ANNOUNCES POLITICAL APPOINTEES — The Small Business Administration on Wednesday announced a slew of new staffers, including its senior leadership team. They include: Peggy Delinois Hamilton as general counsel, Arthur Plews as deputy chief of staff for policy, Scott Harriford as White House liaison and Diedra Henry-Spires as senior adviser for Covid programs.
Associate administrators include Patrick Kelley (capital access), Bibi Hidalgo (government contracting and business development), Kevin Wheeler (congressional and legislative affairs), Mark Madrid (entrepreneurial development), Natalie Madeira Cofield (women’s business ownership), Julie Verratti (field operations) and Bailey DeVries (investment and innovation).
WALL STREET SLIPS — AP’s Damian J. Troise and Alex Veiga: “Stocks are closing lower Tuesday, as data showed the coronavirus pandemic is still holding back the U.S. economy. The S&P 500 index fell 0.7 percent, the Dow Jones Industrial Average fell 0.8 percent and the Nasdaq composite fell 0.9 percent. Retail sales fell a seasonally adjusted 1.1 percent in July from the month before, the U.S. Commerce Department said Tuesday. It was a much larger drop than the 0.3 percent decline Wall Street analysts had expected. Shares of Home Depot fell 4.3 percent after the company told investors that sales were slowing compared to last year, when locked-down Americans undertook home improvement projects.”
STOCK MARKET ROUT KEEPS COMING AROUND THIS TIME EVERY MONTH — Bloomberg’s Lu Wang: “Forget the charts, the valuation analysis and macro inputs conventionally deployed to handicap the stock market. A humbler piece of data has piqued the interest of equity traders of late: that the S&P 500 often tumbles this time of month. It happened in July, when the biggest downdraft was its 2.7 percent slide over the three sessions through the 19th. In June, the share benchmark lurched 1.3 percent on the 18th, its largest fall of the month. May saw a three-day decline ending the 19th knock 1.4 percent off the index, though a plunge the week before was a bit bigger. And a 1.2 percent drop over two days ending April 20 was that month’s worst.”
KASHKARI SEES ‘A LOT OF SLACK’ IN LABOR MARKET — Reuters’ Ann Saphir: “Minneapolis Federal Reserve President Neel Kashkari on Tuesday said he still sees “a lot of slack” in the U.S. labor market, with some six million to eight million Americans out of work who would have been employed had the pandemic not hit. ‘There still is slack on the sidelines,’ said Kashkari at the Pacific Northwest Economic Regional Annual Summit in Big Sky, Montana. He said that recent high inflation readings are likely to be short-lived, and should subside as workers return to the labor force; still, he added, the Delta variant could slow the recovery.”
TREASURY MARKET LIQUIDITY SOURS AS TRADERS GIRD FOR TAPER CLUES — Bloomberg’s Liz McCormick: “The ability to trade in the world’s biggest debt market is deteriorating just as traders are on high alert ahead of the Federal Reserve’s Jackson Hole symposium next week for clues on the timeline for tapering stimulus. A key gauge of Treasury liquidity — market depth, or the ability to trade without substantially moving prices — has fallen to the lowest in more than five months, according to JPMorgan Chase & Co. data. Ten-year yields hover at about 1.25 percent, up from a six-month low of 1.13 percent touched on Aug. 4. Stronger-than-expected July payrolls released earlier this month gave some lift to yields though growth concerns triggered by surging coronavirus cases has since weighed on them.”
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