PLAYING DEFENSE ON TRADE: With NEC Director Gary Cohn headed for the exits, the only lines of defense against President Donald Trump’s protectionist trade tendencies appear to be Defense Secretary Jim Mattis and Secretary of State Rex Tillerson - both taking a different tack than free traders in the Administration and continuing to cite the impact tariffs would have with regard to our national security relationship with our strongest allies. While the Administration’s legal teams are working around the clock to prepare the 232 steel and aluminum tariff language, we’re hearing the measure won’t be ready until next week and will likely coincide with the heated special election in western Pennsylvania on March 13 (watch for signs of Trump’s resolve when he campaigns there tomorrow). With Republican leaders on Capitol Hill as the second line of defense, they are hopeful their message is getting through given the consequences to the economy and their midterm strategy, but are treading carefully with reports by Speaker Paul Ryan that Trump is not budging and their badgering will further agitate him. It’s anyone’s guess how this ends up, but our sense remains that Trump will take a more surgical or nuanced approach to the steel and aluminum tariffs with more impactful action on Section 301 lurking right around the corner. Lastly, it appears that Cohn’s last-ditch effort to mobilize outside voices from a multitude of industries to bolster the argument against tariffs will not even get a hearing tomorrow as originally planned.
COHN EXITS: Gary Cohn’s departure has been in the works for weeks and the dust-up over tariffs was the accelerant. Cohn has been a strong and stabilizing voice and force within a White House that lacks, well, policy discipline on economic matters and then some – with apologies to General Kelly. With the forthcoming legislative vacuum right around the corner on Capitol Hill, protectionists and conservatives are likely to gain even more influence in the coming months filling a void with policies that could undermine gains made over the course of the past 14 months on the tax and regulatory fronts. There are a number of names being floated to replace Cohn (Trump ally and free trader Larry Kudlow was seen leaving the West Wing last night) for this high-profile position, but the Administration has been hard pressed to fill a number of other critical vacancies with qualified talent and Cohn’s globalist shoes will be hard to fill.
BIPARTISAN SUPPORT FOR BANK BILL GROWS: With significant Democratic support, the Senate is forging ahead on a wide-ranging bank deregulation bill, S. 2155 The vote to begin consideration of the bill was 67-32, with 16 Democrats and Senator Angus King (I-ME) voting in favor of the move. Various amendments are under consideration with Senate Banking Committee Chairman Mike Crapo looking for bipartisan consensus on those measures (yes, you heard that right) before proceeding with his Manager’s Amendment likely to include student loan safeguards and legislation with bipartisan support in the House. Highlights are: relaxed mortgage regulations for small banks; broad exemptions from oversight for regional banks with up to $250 billion in assets; a mandate that the Federal Reserve tailor its rules for big banks, and easier capital and liquidity requirements for a number of the nation's largest lenders. Supporters of the legislation, including red-state Democrats facing tough reelection campaigns this year, argue that the legislation would help make it easier for small and mid-size banks to provide credit. The Senate is expected to pass the bill as soon as Friday, though word is it could take longer and trickle into next week: Senator Elizabeth Warren (D-MA) is offering over a dozen amendments focusing on consumers and what big banks stand to gain from the package. Tomorrow she is expected to hone in on "the history of deregulation efforts in Congress."
CALL REPLAY | IT IS A BRAVE NEW WORLD: POPULISM & TRUMP DRUG PRICING AND APPROVAL POLICY: Listen to our healthcare team discuss 2018 drug policy shifts including changes to Part B and D; opioid lawsuit and more. Find the replay here.
READ GENERAL DAN CHRISTMAN'S WEEKEND PIECE: ITALY | A BUNGA BUNGA RETURN? here.
ENJOY IT WHILE IT LASTS; FY18/19 DEFENSE BUDGET WILL BE HIGH WATER MARK: General Emo Gardner writes that FY18 Pentagon spending will be up 10.7% y/y at ~$671B and FY19 will +2.9% from there but growth in FY20 and beyond looks grim. His latest piece here.
ENERGY POLICY | VENEZUELA POLITICAL UPDATE: Replay of Joe McMonigle's call with Dr. Francisco Monaldi, a Fellow in the Latin American Initiative and Energy Economics at the Baker Institute at Rice University on the latest situation on the ground in Venezuela as well as the developing White House announcement of possible new sanctions. You can access it here.
