Business & Economy

OVERNIGHT FINANCE: Castro preps for prime time

TOMORROW STARTS TONIGHT: Busy day up here on the Hill…

1.) STOCKS FALL as Iraq disintegrates. Al-Qaeda-inspired fighters marched through northern Iraq and toward Baghdad. President Obama told reporters he’s not ruling anything out – including air strikes.

{mosads}– Market reaction, via Bloomberg: “U.S. stocks retreated… as industrial and consumer-discretionary shares plunged after escalating violence in Iraq sent oil to an eight-month high while economic data missed estimates.”

2.) KEVIN MCCARTHY (R-Calif.) is now the frontrunner to succeed Majority Leader Eric Cantor (R-Va.), who lost in a primary earlier this week. House Financial Services chairman Jeb Hensarling dropped out earlier today. Rep. Pete Sessions (R-Texas) is making a play, but it looks like a longshot. The Hill’s lead story, via our Congress team:

WHIP LISTKeep count with The Hill on all of the House leadership races. Bookmark:

3.) CASTRO COURTS CONGRESS. San Antonio Mayor Julian Castro is meeting with members of the Senate Banking Committee ahead of his confirmation hearing next Tuesday to be secretary of Housing and Urban Development, several Banking Committee members told OVERNIGHT FINANCE this afternoon.

Because of rules changes invoked last year, the Senate is expected to confirm Castro.

But Tuesday’s 10 a.m. Banking hearing marks the first opportunity for Senate Republicans to put the rapidly rising Democratic star in the political hot seat. Many pundits list Castro as a potential 2016 veep candidate after his well-received 2012 speech at the Democratic National Convention.

More on Castro in a sec, but first…


THIS IS OVERNIGHT FINANCE, and tomorrow is Friday. Thank you for making us a part of your speed-reads. Suggestions? Tips? Rants? Tweet: @kevcirilli. And email: To sign up for our newsletter please click here.

(How nuts was the start of the Brazil-Croatia game?)

Back to work…


WHO MET WITH JULIAN CASTRO: Senate Banking Committee Chairman Tim Johnson (D-S.D.); ranking member Mike Crapo (R-Idaho); Sens. Bob Corker (R-Tenn.); Heidi Heitkamp (D-N.D.); Pat Toomey (R-Pa.); Richard Shelby (R-Ala.); Jon Tester (D-Mont.); Joe Manchin (D-W.Va.); and Sherrod Brown (D-Ohio).

–SHOT, Johnson: “It was a great meeting. He’s a brilliant guy.”

–CHASER, Shelby: “I never met him before until yesterday. I told him I’d see him at the hearing and I’m sure I’ll have a lot of questions for him. But you’ll just have to wait until the hearing to find out how that plays.”

Three points:

1.) Castro is unlikely to impact GSE reform timetable.  Johnson-Crapo, a bipartisan housing plan named after its authors, has stalled since Banking approved it on a 13-9 vote – not strong enough to convince Senate leadership to bring it to the floor.

That killed GSE reform’s shot at passing this Congress and caused more industry uncertainty for the fate of taxpayer-backed mortgage giants Fannie Mae and Freddie Mac.

But will Castro bring new energy to the debate?

“I doubt he’ll have any effect on it, to be candid,” said Corker, whose housing proposal was the foundation for Johnson-Crapo. Manchin echoed: “I don’t think he’s going to jump in on the political arena on that one.”

2.) GOPers are tight-lipped on how they’ll handle Castro. At 39-years-old, Castro is set to become the youngest Housing secretary in history, narrowly beating out New York Gov. Andrew Cuomo, who was 40-years-old when he took the HUD helms in 1997.

San Antonio mishandled the $8.6 million that HUD allocated for the city in 2012, according to an agency inspector general report. Another potential GOP sticking point: As mayor, Castro raised sales taxes to expand preschool for lower-income children.

Criticism of Castro’s political inexperience and ambitions have dogged him his entire career: At 26, he was elected as San Antonio’s youngest city councilman, while critics said he was only running to become mayor.

When he became mayor, critics said he was using it to launch a national political career. And now many speculate he’ll use the HUD post to audition for vice president.

3.) Castro’s housing policy is still unclear. Federal Housing Finance Agency (FHFA) chief Mel Watt directed Fannie and Freddie last month to expand home loan access to spur economic growth. Watt’s revving up Fannie and Freddie is a marked departure from his predecessor Edward DeMarco, which looked to wind ‘em down.

Whether Castro will opt to stay above the policy weeds remains to be seen. But if he does have national ambitions, his audience on Tuesday will include some of the most progressive lawmakers in the upper chamber: Warren and Brown, both of whom opposed Johnson-Crapo for not being liberal enough.

“I hope he finds ways of working with Treasury and Mel Watt to help fill those gaps where they’re not loaning enough to help with housing,” Brown said.

POP QUIZ: Are low-income workers more likely to be represented by a Republican or a Democrat in Congress? Keep reading…

HOYER ON CNBC URGES EX-IM PASSAGE: Vicki Needham recaps: “House Democratic Whip Steny Hoyer (D-Md.) on Thursday urged lawmakers to pass a bill reauthorizing the Export-Import Bank amid upheaval in Republican leadership.

“Hoyer said he has been able to muster Democratic support for issues that he and outgoing House Majority Leader Eric Cantor (R-Va.) have worked on together, including Ex-Im.”

HOUSE SUBPOENAS TWO MORE FROM CFPB, Trey Garrison for Housing Wire:

“The House Financial Services Oversight and Investigations Subcommittee will subpoena two more whistleblowers who allege they were witness to or victims of discrimination and retaliation at the Consumer Financial Protection Bureau.

“CFPB examiner Ali Naraghi and former bureau employee Kevin Williams asked the committee to be subpoenaed in order to protect their interests and guard against further retaliation by the Bureau.”

FLOOR WATCH – CONFIRMED: FISCHER, BRAINARD, POWELL. The Senate confirmed Lael Brainard (61-31) and Jerome Powell (67-24) to the Federal Reserve Board; and Stanley Fischer (63-24) was approved as Fed vice chairman.

QUOTABLE: ROBERT GIBBS, long-time Obama adviser to Julie Pace for the Associated Press: “This is the end of anything productive getting done legislatively in Congress either this year or maybe for the next several years.”

SPORTS BLINK – MICKELSON INNOCENT? Matthew Goldstein and Ben Protess for Dealbook: “Phil Mickelson, the famed golfer, did not trade in the shares of Clorox just as the billionaire investor Carl C. Icahn was mounting an unsolicited takeover bid for the company in 2011, say four people briefed on the matter.”

LEVIN TO SEC: HURRY UP ON DODD-FRANK, by Pete Schroeder: “Sen. Carl Levin (D-Mich.) has a message for the Securities and Exchange Commission: Pick up the pace.

“Levin said in a statement Thursday that the financial regulator should ‘stop procrastinating’ when it comes to writing rules implementing key pieces of the Dodd-Frank financial reform law.”

Meanwhile, on Twitter…

RT @BillGates: How would you give away $50K? It’s these students’ final project: via @dealbook

SMART READ – FED PAPER SPINS REVOLVING DOOR. A New York Fed paper released today adds a new spin to the “revolving door” theory of financial institutions luring federal regulators to go work for them on the other side.

The research found that regulators have an incentive to write extra-complicated rules so that they’re the only ones who know the details – and therefore increasing their potential earnings in the private sector. Read the paper:


“Low-income workers are more likely to be represented by a Republican in Congress than a Democrat, according to a new study that shows debates around the minimum wage and income inequality are not localized concerns.”

Wonder what Thomas Piketty thinks?

OUT: MARY MILLER AT TREASURY, by Pete: “Mary Miller, a top official at the Treasury Department who played a crucial role in steering the nation’s debt obligations during heated debt-limit fights, is stepping down.”

RETAIL SALES UP, via Vicki: “Retail sales ticked up in May but came in below expectations, although they are expected to accelerate for the rest of the year.”


–Study: CEO pay on steep rise while workers’ wages stagnate:

–New overtime regs coming in November:

–Jobless benefits ticked up 4,000 last week:


CONNECT WITH THE HILL’S FINANCE TEAM – Write us with tips, suggestions and news:;;;;

–Follow us on Twitter: @VickofTheHill; @PeteSchroeder; @elwasson; @BernieBecker3; and @kevcirilli.

Tags Bob Corker Carl Levin Eric Cantor Fannie Mae Freddie Mac Heidi Heitkamp Joe Manchin Jon Tester Mike Crapo Mike Crapo Mortgage industry of the United States Sherrod Brown Tim Johnson United States Department of Housing and Urban Development United States Senate Committee on Banking, Housing, and Urban Affairs

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