Overnight Finance

On The Money: Fed poised to cut rates as Trump keeps up pressure | Senate set for floor showdown over Trump border wall | Antitrust enforcers in turf war over Big Tech

Happy Tuesday and welcome back to On The Money. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL-Fed poised to cut rates as Trump keeps up pressure: The Federal Reserve is likely to cut interest rates this week, a move that comes amid growing pressure from President Trump and new uncertainties about the global economy.

The Fed is expected to announce Wednesday that it will cut its baseline interest rate for the second consecutive meeting. After cutting rates in July for the first time since 2008 during the recession, the Fed is almost certain to nudge down borrowing costs to counter rising fears of a global recession and slowing U.S. job growth.

But while lower interest rates may relieve some pressure on the U.S. economy, a moderate cut will likely do little to appease Trump as he scrambles to regain leverage in his trade war with China. I explain why here.

 

The conflict:

  • Trump has long complained about the Fed's refusal to tilt trade talks with China in his favor by boosting the economy and cheapening the dollar with lower interest rates.
  • Federal Reserve Chairman Jerome Powell and other Fed officials have disavowed any pressure to stray from their legal charter to remain politically neutral and fight Trump's trade battles.

 

The fallout: Trump's battle with China has created a series of daunting political and economic obstacles for the Fed as it seeks to extend a record-long stretch of U.S. growth. 

  • Though the U.S. still boasts unemployment near record lows and strong consumer spending, the Fed has sought to lower interest rates as a hedge against a dour economic outlook.
  • The Fed's slow and steady pace is likely to irk Trump, who has raged against the bank for not matching the near-negative rates of nations at the other end of his trade disputes. Trump last week in a tweet called for interest rates of "zero, or less."

 

ON TAP TOMORROW

  • The Securities and Exchange Commission (SEC) holds a meeting to discuss revisions to the Volcker Rule, 10 a.m.
  • The FOMC announces its September interest rate decision at 2 p.m., followed by a press conference with Federal Reserve Chairman Jerome Powell at 2:30 p.m.

 

LEADING THE DAY

Senate set for floor showdown over Trump border wall: A simmering fight over President Trump's border wall is poised to come to a full boil on the Senate floor this week. 

Senate Majority Leader Mitch McConnell (R-Ky.) said on Monday that he will start trying to move funding bills on the floor, forcing Democrats to decide whether to block the legislation.

  • The Senate would use the House-passed bills as vehicles for their own funding legislation.
  • The Senate Appropriations Committee passed its bill to fund the Pentagon as well as separate energy and water development spending legislation last week.
  • But the defense bill isn't expected to be able to get the 60 votes needed to ultimately pass after Republicans rejected including language that would require Trump to get congressional signoff before shifting Pentagon money toward the border wall.

The Hill's Jordain Carney explains what's going on here.

 

He said, he said: 

  • "Some of our Democratic colleagues have determined they would rather stage a political fight with President Trump than secure the resources that our uniform commanders need to do their jobs," said Senate Majority Leader Mitch McConnell (R-Ky.).
  • "It was a bold accusation considering it was the president and the Republican majority on the Appropriations Committee that proposed taking funding from the military to spend on the president's wall. That is what Democrats oppose," responded Senate Minority Leader Charles Schumer (D-N.Y).

 

Read more: Senate Democrats demand wall-free spending allocation

 

Trump administration asks Supreme Court to take up challenge to consumer bureau: The Trump administration and Consumer Financial Protection Bureau (CFPB) on Tuesday asked the Supreme Court to take up a lawsuit challenging the agency's constitutionality.

Top Justice Department and CFPB attorneys argued in a brief filed Tuesday that the structure of the powerful financial watchdog infringes on the president's executive authority. 

"The structure of the Bureau, including the for-cause restriction on the removal of its single director, violates the Constitution's separation of powers," wrote the administration's attorneys, asking the Supreme Court to take up the lawsuit, Selia Law vs. CFPB, from the Fifth Circuit Court of Appeals.

The lawyers urged the Supreme Court to take up a case that could have potentially fatal implications for the CFPB, halting or weakening its efforts to police the financial sector. I explain why here.

 

In a nutshell: 

  • CFPB critics argued that by making the bureau's director only fireable by the president "for cause," which is generally considered to be severe incompetence or misconduct, Dodd-Frank hindered the president's authority over the executive branch. 
  • The U.S. Court of Appeals for the District of Columbia Circuit ruled in 2016 that the controversial watchdog agency's structure was unconstitutional. But that decision, authored by eventual Supreme Court Justice Brett Kavanaugh, was overturned by the full court in 2018.
  • Current CFPB Director Kathy Kraninger has taken a more moderate hold of the agency than her predecessor, though her support for making her position fireable by the president at-will reflects the depth of GOP skepticism of its structure.

 

GOOD TO KNOW

  • The Senate Appropriations subcommittee on Financial Services on Tuesday advanced a bill that would require the Internal Revenue Service to return $26 billion to Americans who never cashed in their matured bonds.
  • The two federal agencies charged with investigating Big Tech are jockeying over how to divide up their responsibilities, setting up a messy showdown that could undermine the government's efforts to take on the Silicon Valley giants.

 

ODDS AND ENDS

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