OVERNIGHT FINANCE: Yellen stays the course

TOMORROW STARTS TONIGHT: No surprises this afternoon from the Federal Open Market Committee... Fed Chairwoman Janet Yellen appeared more comfortable at the mic, too. No gaffes.

-- WHAT HAPPENED: Fed stayed the course. Nothing happened to change expectations of first interest rate hikes happening early next year, and Fed officials announced another $10 billion taper. They also lowered 2014 GDP growth expectations from their March projection of 2.8 – 3 percent range to a 2.1 to 2.3 percent range. FOMC statement: http://nyfed.org/1iaHb9G. Fed projection: http://1.usa.gov/1kOsjbw.

-- UNEMPLOYMENT / 2016 WATCH: FOMC adjusted its 2014 unemployment projection to 6 – 6.1 percent, a tick down from their March projection of 6.1 percent to 6.3 percent. Next year, they expect unemployment to be at 5.4 to 5.7 percent, and in 2016 between 5.1 percent and 5.5 percent.

-- KEY QUOTE: "A portion of the decline we've seen in the unemployment rate probably reflects a kind of shadow unemployment or discouragement,” Yellen said during her presser. “Committee participants generally see the unemployment rate declining to its longer-run normal level by the end of 2016."

QUICK Q:Is 5.5 percent unemployment a new “normal level” for America’s economy?

QUICK A: Former President Clinton economic adviser ROBERT SHAPIRO, told OVERNIGHT FINANCE: “The new normal may involve lower growth and smaller productivity gains, which would also mean higher unemployment even when times are good.”

-- NEW NORMAL: 5 PERCENT UNEMPLOYMENT. “The Fed doesn’t believe the unemployment rate can fall below 5 percent in this cycle which, unforgettably, began with a financial collapse,” Shapiro said. “The cycles that follow those kinds of events usually involve slower growth, and thus higher unemployment.”

-- BLAME BOOMERS? Shapiro said: “The retirement of millions of baby boomers now and in coming years reduces the overall growth of the workforce, and since growth depends on increases in the workforce and increases in productivity, the boomers' retirements may also slow growth.”

RT NYT economics reporter @Neil_Irwin: “The Wait 'Til Next Year economy MT @BCAppelbaum: The US economy has basically become the Chicago Cubs.”

THIS IS OVERNIGHT FINANCE, where we’re always rooting for the greatest “wait ‘til next year” city in the world: Philadelphia. Tweet: @kevcirilli; email: kcirilli@thehill.com; and subscribe: click here.

Back to work...

QUOTABLE, House Oversight Chairman Darrell Issa (R-Calif.) on Fox News this morning re: the missing IRS emails: “I think back to the old black and white series with Lucille Ball when Ricky Ricardo would say, ‘Lucy, you got some ‘splainin’ to do.’ The IRS has some ‘splainin’ to do...’

“[The emails] located on servers that are either continuously backed up or backed up at least nightly. We believe these emails could be found unless... the IRS and Lois Lerner have made sure they can’t be found. We expect that forensics will get them. Right now, we’ve subpoenaed the hard drive in question.

“We’re tired of in fact being misled or lied to... If Lois Lerner’s the kingpin, so be it. But if we can’t see the connections in her emails fully, we won’t know all the people who worked with her to target unfairly Americans for what they believe, what they say and who they want to associate with.” Video: http://bit.ly/1lEBDyN.

DAILY DISTRACTION: Also on Fox News today  - - - > WILL.I.AM talking from the White House about 3D printing and youth entrepreneurship: http://bit.ly/1kOFKby.

FIRST LOOK -- WONK WARS, HOUSING EDITION: FSR vs. HERITAGE. Yesterday, we told you first about a new white paper from folks at the Tea Party-leaning Heritage Foundation that criticized the importance of the 30-year fixed rate mortgage in the housing industry.

The Financial Services Roundtable’s housing president John Dalton hit back hard tonight, with a report of his own – seen first in OVERNIGHT FINANCE:

“A paper released today by the Heritage Foundation regarding federal housing policy and the 30-year fixed rate mortgage is good theory, but the report’s dismissal of the importance of the 30-year fixed rate mortgage to modest income Americans is misguided...”

“Middle class Americans see their homes as an investment, not just debt.  Policymakers in Washington should not delay in enacting GSE reform that recognizes the realities of the private market, government policy and the market demands of millions of Americans who need access to a 30-year mortgage in order to afford a home.” Full report: http://bit.ly/1lDEGvv.

IN HER OWN WORDS – TWO YELLEN QUOTES FOR THE D.C. CROWD. Here’s what wonks will be yapping about inside the Beltway tomorrow:

1.) On Dodd-Frank implementation: “In putting regulations into place, we have tried to phase them in a way that gives long enough lead times to make sure that in strengthening the financial system, we don't produce a credit crunch. And by and large, my own assessment is that credit is broadly available in the economy.”

2.) On sluggish housing recovery: “Banks at this point are reluctant to lend to borrowers with lower FICO scores. They mention in meetings with us consistently their concerns about putback risk, and I think they are -- it is difficult for any homeowner who doesn't have pristine credit these days to get a mortgage. I think that is one of the factors that is causing the housing recovery to be slow.”

That sounds good to Steve Brown, president of National Association of Realtors, who told OF:

“Tight credit is keeping qualified buyers on the sideline, slowing economic growth. NAR will continue to support efforts to increase liquidity in the mortgage market. 

“Safe and affordable loan products, like the 30-year fixed mortgage, backed by an explicit government guarantee and sound underwriting standards should be the primary building blocks of a reformed secondary mortgage market.”

TRIA UNCERTAINTY CLOUDING MARKET. A report released earlier today by reinsurance brokerage firm Guy Carpenter & Co. LLC concludes that “the (re)insurance sector does not have the capital necessary to withstand certain high loss scenarios that involve nuclear, biological, chemical or radiological (NBCR) weapons.

“For example, a nuclear bomb detonated in Midtown Manhattan in New York City produces a modeled loss of approximately USD900 billion (assuming a 100 percent take-up rate for NBCR terrorism cover).” Read the report: http://bit.ly/1l3DiTl

The House is expected to kick its Terrorism Risk Insurance Act bill out of committee on Thursday. And while the Senate Banking Committee already approved its TRIA bill (which the report’s authors support). It’s unknown which chamber will act first on a floor vote.

Stay tuned...

EX-IM WATCH – MCCARTHY: ‘I’LL DEFER TO JEB.’ Pete Schroeder for The Hill: “House Majority Whip Kevin McCarthy (R-Calif.) said Wednesday he would defer to House Financial Services Committee Chairman Jeb Hensarling (R-Texas) on the Export-Import Bank if made majority leader.

“The commitment is a blow to the fate of the bank, which has served as a key point of contention between establishment Republicans and their more conservative counterparts.

“Hensarling has been a vocal advocate of killing the bank, which expires at the end of September, calling it ‘crony capitalism’ committed by the federal government.” http://bit.ly/1iaSEpT.

LUNCH BREAK: OBAMA GRABS A BITE WITH PAUL KRUGMAN. President Obama lunched with a group of economists including New York Times columnist Paul Krugman on Wednesday at the White House.

-- GUEST LIST: Harvard professors Claudia Goldin and Roland Fryer; MIT professor Erik Brynjolfsson; Alan Blinder, who served on President Clinton's Council of Economic Advisers; and Stanford professor Anat Admati. Justin Sink for the hometown paper: http://bit.ly/1qeEcNs.

MARK YOUR CALENDAR, per Senate Banking Committee spokeswoman Kate Cichy: Treasury Secretary Jacob Lew will give the Financial Stability Oversight Council’s annual report to Congress on Wednesday at 10 a.m.

SPORTS BREAK: U.S. PATENT OFFICE CANCELS REDSKINS TRADEMARK. The Hill’s Mario Trujillo: “The U.S. Patent and Trademark Office cancelled the trademark on the Washington Redskins name on Wednesday, calling it disparaging to Native Americans.

“The 2-1 Trademark Trial and Appeal Board decision would strip the NFL team of all legal benefits afforded to registering a trademark with the federal government if the cancellation goes into effect, though the team would still be free to use its nickname and Indian head logo.

“The football team quickly vowed to appeal the decision, and expressed confidence that the courts would toss out the decision to cancel trademarks on the team logos that include the ‘Redskins’ name just as they rejected an earlier Patent Office ruling against the Redskins.” http://bit.ly/1nhCcjI.

-- GAME OVER? NFL’S ‘CAPONE’ MOMENT: Elie Mystal for DeadSpin: “Don't let the legalese and the spin coming from Daniel Snyder and the NFL dull the excitement, this is a little bit like the Feds getting Capone on tax evasion. Yes, the Redskins will appeal.”

“Yes, the team will probably still be using a racial slur as a nickname this upcoming season. But this fight is essentially over… [The NFL] can continue to fight along all legal avenues against this, but at some point they are going to realize that they are standing in open court arguing for ownership rights over a racial epithet. A football team should know when it's beaten.” http://bit.ly/1qeFW9y.

HOUSE FINSERV CONTINUES WITH CFPB HEARINGS. Trey Garrison for Housing Wire: “Two more employees at the Consumer Financial Protection Bureau came forward Wednesday to tell of their experiences with financial mismanagement, operational incompetence, discrimination and retaliation in what was the third in a series of hearings on discrimination at the CFPB.” http://bit.ly/1ykh70x.


-- Markets rally as Fed stays the course: http://bit.ly/1nQ47KD.

-- IRS seeks more offshore accounts: http://bit.ly/1nkniul.

-- Anti-Internet tax bill heads to House floor: http://bit.ly/1sp1vIN.

-- Partisan CFPB feud heats up: http://bit.ly/1uDzqcr.


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