OVERNIGHT FINANCE: Yellen sinks social media stocks

TOMORROW STARTS TONIGHT: SILICON VALLEY VS. THE FED. With just two words — "substantially stretched" — Federal Reserve Chairwoman Janet Yellen sent social media stocks tumbling on Tuesday and stirred rampant talk of a “bubble” in the market.

The assessment in the Fed’s annual report to Congress was couched in technical language, and warned that “risk-taking” in the social media and biotechnology sectors appeared to have increased, unlike other industries where stock valuations have kept in with historical averages.

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But investors heard one thing: SELL! ... SELL! ... SELL! Tech stocks sank quickly after Yellen's remarks. Shares of Facebook and Twitter closed more than 1 percent down on Tuesday, while Yahoo, LinkedIn and Google all showed more modest losses. READ REPORT: http://1.usa.gov/1qcBNGF.

Two quick points:

1.) Political fallout? Likely. Yellen didn’t get any social media stock questions during her testimony before the Senate Banking Committee today. But tomorrow that could change when she testifies before the House Financial Services Committee. House GOPers have criticized the Fed in the past for sending mixed-market signals and overstepping... Yellen’s “substantially stretched” could prove to be their latest political piñata.

2.) Yellen echoing Greenspan? Some equated Yellen's remarks to when former-Fed Chairman Alan Greenspan's warned of a stock market bubble in a December 1996 speech, when he questioned the market's "irrational exuberance." It took about four years for that bubble to burst.

The better comparison to make is to Fed Governor Daniel Tarullo, who earlier this year warned in a speech that smaller tech firms’ valuations “do appear stretched.”

THIS IS OVERNIGHT FINANCE, where it’s almost Wednesday. Tweet: @kevcirilli; email: kcirilli@thehill.com; and subscribe: http://bit.ly/1jNxwa2.

Pick up the pace, we’re heading into the half-way point...

DAYS UNTIL EX-IM EXPIRES: 77. House Financial Services Committee Chairman Jeb Hensarling (R-Texas) hosted a meeting for Republican members today dubbed “Export-Import Bank 101 briefing for Members.”

A source familiar with the meeting emailed OVERNIGHT FINANCE:

“This is very similar to meetings [Hensarling] facilitated with Republican members when he was conference chair.  It’s merely a courtesy to members who have approached him essentially asking, ‘What’s this I keep hearing about Ex-Im?’ We expect only a few members today. But if there’s continued interest, Chairman Hensarling is willing to do more of these meetings.

“It’s called ‘Ex-Im 101’ for a reason. This meeting isn’t going to be a strategy session or debate club or temperature-taking effort. The information at the meeting is going to be about just the basics of Ex-Im and why the Chairman opposes reauthorization.”

Republicans aren’t the only ones infighting on Ex-Im...

GREEN VS. COAL DEMS ON EX-IM, Laura Barron-Lopez reports for the hometown paper: “Sens. Barbara Boxer (Calif.) and Sheldon Whitehouse (R.I.) are promising to fight any efforts to roll back Export-Import Bank restrictions on financing overseas coal plants — even those from a fellow Democrat.

“Sen. Joe Manchin (D-W.Va.) has pledged to include such language in the bill he is working on to reauthorize the Ex-Im Bank's charter, which is set to expire at the end of September.”

-- Boxer told Laura: "It's problematic. It really will set the world back ... and will lead to much worse climate pollution... It essentially says you can build any dirty, filthy coal power plant you wanted.” Read Laura’s story: http://bit.ly/1zGChqj.

HAPPENING TONIGHT: Manchin said he’s meeting with Democratic leadership Tuesday night to discuss the details of his Ex-Im reauthorization bill, which he has yet to introduce. He said he hopes to get a better idea of when he can push the bill after Tuesday's meeting.

MEANWHILE... GOVS RALLY FOR EX-IM: Thirty-one governors called on Congress to reauthorize Ex-Im in a letter sent today. See the letter: http://bit.ly/1zGL4Zq

HIGHWAY TRUST ISSUES: The Hill’s Cristina Marcos reports: “The House on Tuesday passed an extension of funding for the Highway Trust Fund through May 2015.

“Passed 367-55, the measure prevents the Highway Trust Fund from going bankrupt in August. The Senate has not yet voted on a similar bill.” http://bit.ly/1oFNZce

The White House has called for a four year transportation package, but endorsed the House’s temporary measure to prevent a fund bankruptcy.

Keith Laing reports: “The White House said Tuesday that it was encouraged that the Republican-led House was “about to do something” about federal transportation funding.

“Obama has spoken at length in recent weeks about his belief that Congress would rather sue him than take actions to address national priorities like transportation funding as the president has sought to generate excitement among Democratic voters ahead of the upcoming midterm elections. 

“White House press secretary Josh Earnest said Tuesday that the White House’s endorsement of the approximately $10 billion GOP transportation bill did not undercut Obama’s campaign message.”http://bit.ly/1rp295s.

-- Meanwhile, The National Association of Manufacturers (NAM) said it would score lawmakers’ votes on the bill to extend federal transportation funding into next spring. (Heritage, which opposes the bill, is also scoring the measure.) http://bit.ly/1nFpRdh.

HOW YELLEN’S REPORT PLAYED: Business Insider: “Fed takes dead-aim at social media company valuations” ...TheStreet.com: “Yellen Warns of ‘Stretched’ Social Media Valuations” ...Reuters: “S&P 500 dip on Yellen’s comments”...

GWEN MOORE CFPB AMENDMENT FLOPS, via Cristina Marcos: “Rep. Gwen Moore's (D-Wis.) amendment to the fiscal 2015 Financial Services appropriations bill would strike a provision that allows for transfers of funds from the Federal Reserve to the CFPB to be reviewed by appropriators.

“The amendment was rejected 170-244... Moore said it was necessary to keep Congress out of funding for the CFPB so that it would not be subject to politics.” http://bit.ly/1mfe4xp.

QUOTABLE, Treasury Secretary Jack Lew speaking earlier on cyber-security: "Disclosing security breaches is often perceived as something that could harm a firm's reputation. This has made many businesses reluctant to reveal information about cyber incidents." http://cnb.cx/1oXv27P.

FOR YOUR RADAR: APPROPS WATCH. The Senate Appropriations Defense subcommittee unveiled a $489.6 billion spending bill on Tuesday that bucks Pentagon proposals and prevents the retirement of the Air Force's A-10 fleet. Kristina Wong for The Hill: http://bit.ly/1qEODJr.

THE OTHER FED FIGHT – FSOC. Peter Eavis for The New York Times: “Soon after the financial crisis, Congress created an elite group to hunt down risks that might cause another global collapse.

“The group, a collection of regulators known as the Financial Stability Oversight Council, soon singled out money market funds, which played a central role in the crumbling of the financial system in 2008.

“The council, which includes the heads of the Treasury Department and the Federal Reserve, then proposed some tough-looking measures to deal with the systemic risks posed by the funds, which are big lenders to financial institutions.

“But after persistent lobbying by the mutual fund industry and opposition from within one regulator, the council is expected to settle for less than it wanted. And a compromise at this pivotal moment could unleash a fierce debate over whether the council has fallen short of what it was established to do.” http://nyti.ms/1rp4iOk.

 

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