The Hill’s Morning Report — Fed hikes rates; Trump watch continues
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The nation’s central bank on Wednesday described the rough equivalent of determinedly rowing a boat in unpredictable economic waters, uncertain of the distance to shore or whether the vessel will hit sand or boulders.
Federal Reserve Chair Jerome Powell said the Federal Open Market Committee unanimously agreed to continue battling inflation with higher interest rates, including a 25 basis-point hike announced on Wednesday, with the caveat that achieving its 2 percent inflation goal “in time,” compared with the current 6 percent, remains an endeavor filled with uncertainty and somewhat perplexing data (The Hill).
Will the Fed pause its relentless rate hikes? “Some additional policy firming may be appropriate,” the central bank said in its statement about pursuing the 2 percent goal. Powell said the key words in that phrase were “may” and “some” — in other words, pausing rate hikes hasn’t been ruled out but was not the central bank’s choice this month. The Fed this year does not expect to roll back higher rates. Its forecast for this year is 5.1 percent.
“Rate cuts are not in our base case, and that’s all I can say,” Powell added.
Would the Fed stop hiking at 5.1 percent? “It’s going to depend,” he added.
Stronger-than-anticipated economic indicators, including high employment, robust consumer demand and stubbornly high prices, could be impacted as a result of this month’s turmoil in some banks, but “it’s too soon to tell” whether demand will sag with tightening credit and help drive down prices, akin to the impact of an interest rate hike, Powell said.
The New York Times: Some analysts say that the banking industry tumult has slowed the economy as banks pull back on lending.
Could a potential recession have a snowballing effect on job losses? “Recessions are hard to model,” Powell replied. Is a soft landing after continued rate hikes still a possibility amid a roiled banking sector? “It’s too early to say whether these events have had much of an effect,” the chairman noted, adding that the question is “how long this period will be sustained.”
Powell offered one assurance: The U.S. banking sector is “sound and resilient,” he said. “I think depositors should assume their deposits are safe” (The Hill)
The Hill: The five most important things Powell said about recent banking turmoil.
What went wrong with Silicon Valley Bank’s supervision? “I want nothing else than for us to find out what happened and why,” the chairman said, noting that an internal Fed review is underway. The Fed will “welcome” independent investigations of what occurred before the collapse of SVB and Signature Bank, he added, noting a “100 percent certainty” that outside probes, including on Capitol Hill, are expected.
▪ The Hill: Powell says the banking system is sound following the SVB collapse.
▪ The Hill: SVB tripled loans to insiders in months before its collapse.
Sens. Rick Scott (R-Fla.) and Elizabeth Warren (D-Mass.) are promoting Federal Reserve oversight legislation (The Hill). The bipartisan measure would require a presidentially appointed and Senate-confirmed inspector general to the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau.
“After the Federal Reserve’s failure to properly identify and prevent the shocking failures of Silicon Valley Bank and Signature Bank, it’s clear we can’t wait any longer for big change at the Fed,” Scott said in a statement.
Warren wants a vote on legislation to reverse a 2018 rollback of post-financial crisis restrictions that small- and medium-sized banks lobbied Congress to change, The Hill’s Alexander Bolton reports. However, any such vote would be a problem for Democrats who backed the 2018 bill, including Sens. Jon Tester (D-Mont.), Joe Manchin (D-W.Va.), Kyrsten Sinema (I-Ariz.), and Tim Kaine (D-Va.). Senate Majority Leader Chuck Schumer (D-N.Y.) says he favors legislation but is signaling he won’t bring any banking measure to the floor absent bipartisan backing.
Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said on Wednesday he envisions efforts to restore faith in the banking sector coming primarily from regulators. “We don’t rule out doing some things legislatively,” he added, noting that there could be bipartisan support for new laws to reform the system of deposit insurance administered by the FDIC (MarketWatch).
Treasury Secretary Janet Yellen, who testified on Wednesday to members of the Senate Appropriations Committee, said government regulators were not focused on lifting the FDIC’s $250,000 insurance cap to backstop more bank deposits. “[We’ve] not considered or discussed having anything to do with a blanket insurance or guarantees of all deposits,” she said in response to a question.
But the secretary pledged that federal bank regulators would do whatever it takes to “ensure that depositors’ savings remain safe” in U.S. banks (CNBC). Yellen said that if there’s a contagious bank run, the Treasury would likely pursue an exception that would permit the FDIC to protect all depositors of the failed banks. This would be considered on a case-by-case basis, she told senators (Barron’s).
▪ The Hill: The Federal Reserve projects the U.S. unemployment rate will climb from 3.6 percent in February to 4.5 percent by the end of the year. “That’s an estimate of what will happen. It’s a highly uncertain estimate,” Powell told reporters.
▪ Fortune: “Already past the point of no return”: JPMorgan says the U.S. is probably headed for a recession as economic “engines are about to turn off.”
▪ Fox News: Manchin and 21 colleagues led by Sen. John Barrasso (R-Wyo.) support legislation introduced on Tuesday that would cut off the Chinese Communist Party from multilateral development banks.
▪ The Hill and CNBC: Democratic Sens. Cory Booker (N.J.) and Raphael Warnock (Ga.) press big bank CEOs to pause overdraft fees after SVB failure.
▪ The New York Times “The Daily” podcast: Former Rep. Barney Frank (D-Mass.) on his role in the banking crisis.
LEADING THE DAY
Former President Trump set off a frenzy a few days ago when he declared based on news accounts that he would be arrested on Tuesday, but the alleged hush money case against him in Manhattan has yet to turn up an indictment, lending an air of mystery to what comes next. The grand jury hearing evidence in the probe did not convene on Wednesday, and although Manhattan District Attorney Alvin Bragg (D) has taken a series of steps in recent days interpreted to be pre-indictment, his office has been mum (The Hill and The New York Times).
“I’m a little confused by all the speculation about why the Manhattan DA’s indictment is delayed,” Noah Bookbinder, president of Citizens for Responsibility and Ethics in Washington, tweeted Wednesday. “He never said he would indict today, or at all, so there is no delay. For such a high-profile case, they’ll want to get it right. They’ll move if and when ready, not a moment before.”
▪ The Hill: Senate Majority Leader Chuck Schumer (D-N.Y.) declines to state confidence in Manhattan district attorney.
▪ BuzzFeed News: Indictment looms, but Trump keeps posting.
▪ NBC News: “War room” mentality pervades Mar-a-Lago with possible Trump indictment looming.
▪ Politico and The Washington Post: In the ongoing federal investigation of Trump’s possession of classified documents and possible obstruction of justice, a panel of three judges with the U.S. Court of Appeals for the D.C. Circuit on Wednesday ordered a lawyer for the former president to turn over evidence.
Florida Gov. Ron DeSantis’s (R) salvo targeting Trump’s character this week has been met with questions from corners of the GOP over its effectiveness as the world waits for a possible indictment. The Hill’s Al Weaver reports that DeSantis, who has yet to announce his expected presidential bid, this week came out swinging against his onetime ally, and Trump and his backers punched back. According to a pair of GOP operatives, however, DeSantis was both too late to respond and too weak in how he did it to be effective.
“The attacks from this week are too cute by half and come off as childish,” one GOP operative told The Hill. “What’s happening this week, the party thinks it’s wildly unfair and the way President Trump is being treated is a total joke, and they’re rallying around him — and that’s from a lot of people who love him, people who hate him who think he’s being treated unfairly… I don’t think they’ve helped [DeSantis]. If anything, they’ve helped Trump.”
▪ The New York Times: The DeSantis foreign policy: Hard power, but with a high bar.
▪ Politico: Never Don and Never Ron: The rest of the GOP field looks for a third lane.
▪ The Washington Post: DeSantis ignored Trump, then sided with him, then criticized him. Other GOP 2024 hopefuls are charting their own paths.
▪ Axios: The DeSantis administration moves to expand the “Don’t Say Gay” law in Florida.
▪ Miami Herald and The Daily Beast: After DeSantis tussle, Disney World will host a major LGBTQ summit.
Chicago’s mayoral race between Brandon Johnson, a progressive Black former Cook County commissioner, and Paul Vallas, a moderate white former CEO of Chicago Public Schools, spotlights the city’s long-evident racial divisions. As The Hill’s Cheyanne M. Daniels reports, Johnson secured support from predominantly Black neighborhoods, running on an agenda of education and police reform. Vallas, meanwhile, espoused tough-on-crime policies and urged middle-class and wealthier Chicagoans to “take back the city.” Vallas was the only white candidate in this year’s election and his rhetoric won the support of many voters in the North and Southwest neighborhoods, predominantly white areas home to wealthy families and police officers and firefighters.
“Chicago has always been a city that has been very explicitly divided by racial politics,” explained Twyla Blackmond Larnell, associate professor of political science at Loyola University Chicago and faculty affiliate for the school’s Institute for Racial Justice.
In Texas, new legislation is heating up the long-running cold war between the state’s relatively progressive cities and its GOP-dominated legislature, writes The Hill’s Saul Elbein. The bills are part of a broader push by conservative groups to take their conflicts with progressive cities up with state legislators, rather than cities themselves, said Bennett Sandlin, executive director of the Texas Municipal League, a trade group for the state’s cities.
“It’s coming out of national think tanks in the last years,” he said. “You go straight to the state government and don’t have to go city by city.”
TikTok is fighting to justify its existence in the U.S. ahead of CEO Shou Zi Chew’s testimony today before the House Energy and Commerce Committee, where he’ll talk about the company’s privacy practices, the app’s impact on children, and its relationship with China’s government. On Tuesday, Chew posted a video to TikTok’s official account, addressing the company’s 150 million U.S. users. He said that he plans to tell Congress everything the company is doing to “protect Americans using the app,” which is owned by the Chinese company ByteDance.
Lawmakers aren’t so sure about that protection, with many saying they’re worried about the app sharing Americans’ data with its Chinese owners. Congress is scrutinizing its data and privacy practices; several bills have been introduced to regulate the company. The FBI and Department of Justice are reportedly investigating whether the app spied on U.S. citizens, including journalists, and Biden has explored possibly banning TikTok in the U.S. unless its Chinese owners sell their stakes (NPR).
▪ ABC News: TikTok updates rules; CEO on charm offensive for US hearing.
▪ Quartz: Chew wants to dismantle the idea that TikTok is a Chinese app.
▪ The Wall Street Journal: Who is the TikTok CEO trying to reassure America?
▪ NBC News: A 50 percent jump in active users on TikTok suggests the app has become even more entrenched in the U.S. over the nearly three years that Washington has grappled with how to rein it in.
▪ Reuters: TikTok lands its first major ally on Capitol Hill in Rep. Jamaal Bowman (D-N.Y.).
Defending parental rights in education has become a fan favorite state-level policy move among Republicans, and the GOP-majority House today is set to shine a national spotlight on the issue with a vote on the “Parents Bill of Rights Act.” The measure will receive neither time nor attention in the Democratic-controlled Senate, The Hill’s Lexi Lonas writes, but Republicans clearly think they’ve found a winning message.
“The pandemic brought to light for a lot of us moms and dads for the first time ever, we sat down and we saw what our children were being taught through the virtual classroom. And when we saw that, so many of us were disheartened with what we were viewing,” said Rep. Julia Letlow (R-La.), the lead sponsor of the bill. “Then we did the right thing, right? We went to our school boards and we voiced our displeasure. But we were turned away.”
The Main Street Caucus, one of the five most influential factions of Republicans in the House, is finding its footing in the new GOP majority. The Hill’s Emily Brooks reports that after something of a rebirth in the last Congress, Chairman Dusty Johnson (R-S.D.) and Vice Chairwoman Stephanie Bice (R-Okla.) are taking charge of the group of more than 70 members in the 118th Congress — starting with a push of support for House Speaker Kevin McCarthy (R-Calif.) during his drawn-out Speaker’s election. Johnson said the group’s goal is to bring “responsibility, reasonableness, sensibility” to major priorities.
“In the same way that we were at the center of the Speaker election, we will be at the center of all those must-pass bills,” Johnson said. Main Street Caucus Republicans bill themselves as a “pragmatic” group looking to be the adults in the room on legislating. But don’t call them moderates, they say, as the group’s members include ideological conservatives in deep red districts.
▪ Politico: McCarthy’s newest challenge: Keeping the House GOP peace on war powers. It’s the rare topic that unites archconservatives and Democrats, but the Speaker needs to find a way to please the mainstream members of his conference, too.
▪ ProPublica: Rep. Jim Jordan (R-Ohio) issues sweeping information requests to universities researching disinformation.
IN FOCUS/SHARP TAKES
Russia on Wednesday blasted an apartment block in Ukraine with missiles and swarmed cities with drone attacks overnight, punctuating a display of force as President Vladimir Putin bid farewell to his visiting “dear friend” and Chinese counterpart Xi Jinping, who departed Moscow. Officials in Zaporizhzhia said at least one person was killed and 33 wounded by a twin missile strike (Reuters).
“Right now, residential areas where ordinary people and children live are being fired at,” President Volodymyr Zelensky tweeted. “This must not become ‘just another day’ in Ukraine or anywhere else in the world. The world needs greater unity and determination to defeat Russian terror faster and protect lives.”
▪ NPR: The leaders of China and Russia have finished talks. Here are some takeaways.
▪ The New York Times: Zelensky makes a morale-building visit to the war zone in the east.
▪ Politico EU: Ukraine sees no way to negotiate peace with Putin after war crimes warrant.
▪ The Washington Post: Xi’s delay of the Siberia pipeline signals limits to his embrace of Putin.
▪ Reuters: Russian missiles batter Ukraine, but Bakhmut offensive seen stalling.
Xi’s offer to negotiate peace between Russia and Ukraine — which he claimed as part of the reason for visiting Moscow in the first place — is widely viewed as a smokescreen amid Beijing’s deepening relationship with Russia. The proposed plan didn’t get much attention during the three-day visit. But Beijing recently achieved a nascent, diplomatic breakthrough between Saudi Arabia and Iran, and their offer to be a peace broker suggests Beijing is focused on flipping the world order away from the U.S., the West and other democracies (CNN).
▪ The Wall Street Journal: It wasn’t just Credit Suisse. Switzerland itself needed rescuing. Crisis threatened an economic model and national identity built on safeguarding the world’s wealth.
▪ The New York Times: French President Emmanuel Macron denounces violent protests, warning against “excesses.”
▪ Politico EU: Ahead of EU leaders’ summit, Germany and France steal the show — again.
▪ Reuters: “If not now, when?”: Emotional Australian prime minister advances Indigenous referendum.
The State Department has eased restrictions on employees with foreign ties. Critics have called the practice discriminatory, particularly to Asian American diplomats barred from working in countries such as China and Taiwan (The Washington Post).
■ Bankers attacked my views on regulation. But my “golden” idea could save them from themselves, by Saule Omarova, guest essayist, The New York Times. https://nyti.ms/3z307St
■ Trump’s indictment won’t win him votes, by Karl Rove, opinion columnist, The Wall Street Journal. https://on.wsj.com/40gkfg0
WHERE AND WHEN
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The House will convene at 10 a.m. The House Committee on Science, Space and Technology will hold a hearing at 10 a.m. about “Advanced Air Mobility: The Future of Unmanned Aircraft Systems and Beyond.”
The Senate meets at 10 a.m.
The president will receive the President’s Daily Brief at 9 a.m. Bidenwill host an anniversary event at 1 p.m. in the East Room to mark the enactment of the Affordable Care Act. Biden and first lady Jill Biden will depart the White House at 4:40 p.m. for travel to Ottawa, Canada, for a visit that concludes on Friday. They will be greeted upon arrival at the airport at 6:40 p.m. by Canadian Governor General Mary Simon and her spouse, Whit Fraser. The president and first lady at 8:25 p.m. will be welcomed to Canada by Prime Minister Justin Trudeau and wife Sophie Grégoire Trudeau at the prime minister’s residence and they will participate in a private reception.
Vice President Harris will participate at 1 p.m. in the East Room event for the Affordable Care Act tribute.
Secretary Yellen will testify before a House Appropriations subcommittee at 3 p.m. (👉The White House today released a statement of opposition to House Freedom Caucus budget ideas titled “Five Alarm Fire,” asserting that Republicans would harm U.S. seniors.)
Secretary of State Antony Blinken will testify at 2 p.m. before a House Appropriations subcommittee about his department’s budget.
Defense Secretary Lloyd Austin will testify about his department’s proposed budget at 10 a.m. before a House Appropriations subcommittee.
Health and Human Services Secretary Xavier Becerra will attend a White House event to mark the 2010 enactment of the Affordable Care Act.
Economic indicator: The Labor Department at 8:30 a.m. will report on claims for unemployment insurance filed in the week ending on March 18.
➤ HEALTH & PANDEMIC
More than 20 percent of transgender children and adolescents in the U.S. can no longer legally access gender-affirming health care because of new state laws that bar doctors from providing certain medications or services to minors, according to a Wednesday report from the Human Rights Campaign, a national LGBTQ advocacy organization.
Of the more than 300,000 transgender 13- to 17-year-olds currently living in the U.S., close to 1 in 4 — around 66,600 — have lost access to gender-affirming health care. With more than 100 bills targeting transgender health care under consideration in over half the country this year, an additional 28 percent of transgender children and teens may soon lose access to care considered medically necessary by most major medical organizations (The Hill).
▪ The New York Times: Medicare tries to combat fraud. Now insurers are fighting back.
▪ The Hill: Tainted eye drops linked to three deaths, vision loss.
▪ The Washington Post: Troubled U.S. organ transplant system targeted for overhaul.
▪ The Hill: Rising drug shortages pose national security threat, Senate panel says.
A deadly fungus spreading at an alarming rate in U.S. hospitals and clinics has exposed a broader problem of patient safety being jeopardized by underfunded and understaffed infection-prevention efforts, experts say (The Washington Post).
“Infection control within health care is extremely neglected,” Saskia Popescu, an assistant professor at George Mason University who is an expert in infection prevention, told the Post. “We expect hospitals to continuously respond to growing and emerging infectious-disease threats but don’t give them the resources to do so.”
The Wall Street Journal: Moderna to price its COVID-19 vaccine at $130 a dose.
Information about the availability of COVID-19 vaccine and booster shots can be found at Vaccines.gov.
Current U.S. COVID-19 deaths are 1,706 for the most recent week, according to the Centers for Disease Control and Prevention. (Data is reported on Fridays.)
Take Our Morning Report Quiz
And finally … It’s Thursday, which means it’s time for this week’s Morning Report Quiz! Inspired by the city we deep dive into every morning, we’re eager for some smart guesses about Washington, D.C.
Be sure to email your responses to firstname.lastname@example.org and email@example.com — please add “Quiz” to your subject line. Winners who submit correct answers will enjoy some richly deserved newsletter fame on Friday.
Building codes in the District specify that no structure may be built taller than ___?
- The Washington Monument
- 130 feet, as per the Height of Buildings Act of 1899 (amended in 1910)
- The Capitol
- Heights specified by Pierre Charles L’Enfant, the city’s original architect
In what year did the District undergo so-called retrocession and return some of the land ceded by the federal government for its construction to Virginia?
East-west streets in D.C. use letters. Which one doesn’t exist?
- L St.
- I St.
- J St.
- E St.
As the dividing center for all of the city’s quadrants, all roads really do lead to ___?
- The Capitol
- The White House
- The Washington Monument
- The Lincoln Memorial
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