President Donald Trump on Friday signed an executive action that establishes a framework for scaling back the 2010 Dodd-Frank financial-overhaul law, part of a sweeping plan to dismantle much of the regulatory system put in place after the financial crisis.
CBS This Morning journalists on Friday actually hyped the booming stock market, touting it breaking 25,000 as a “wow!” moment. Yet, while Congress, tax cuts and vague talk of deregulation got credit, Donald Trump’s name was never mentioned. Asked by co-host Norah O’Donnell for the cause, Hobson gushed, “Wow! That is all I can say. It’s quite a start! We broke through lots and lots of records last year. Started this year off strong.”
Going into specifics, she credited, “A lot of it has to do with the fact that corporate profits have been strong. Should only get better because of the recent tax cuts that Congress has delivered to them. Unemployment is really low.”
Surely, Congress passed the tax cuts, but did anyone else, like the President, have something to do with it? Hobson didn’t say. Instead, she added, “Some of these deregulation efforts will push a lot of industries to have — to make it easier for them to do business.”
Summing up, the financial analyst for the network spread the praise around: “So there is a lot that is conspiring to push the stock market up.” Perhaps this spin isn’t surprising as Hobson was a bundler for Barack Obama. She put together $131,200 for the Democrat in 2012 and personally donated $28,500 in 2008.
The CBS personality is married to George Lucas, a man who is worth $7 billion. Yet in 2014, she slammed rich CEOs as the problem.
In October, even the liberal journalists on NBC admitted that Trump has a “pro-business agenda.”
Later in the segment on Friday, Hobson said of wage growth: “I expect wage growth to really start to happen. I’ve been saying that for a while, but I really do think this is it.” The question is who will get the credit?
A transcript of the segment is below:
CBS This Morning
7:16:22 to 7:19:10
NORAH O’DONNELL: Stocks opened this morning in record territory after passing another big milestone. For the first time, the Dow passed 25,000 mark on Thursday. That is the third record high in the first three trading days of the new year. CBS News Financial Contributor Mellody Hobson is in Chicago. Good morning. What a start to the new year. What’s fueling this growth?
MELLODY HOBSON: Wow! That is all I can say. It’s quite a start! We broke through lots and lots of records last year. Started this year off strong. A lot of it has to do with the fact that corporate profits have been strong. Should only get better because of the recent tax cuts that Congress has delivered to them. Unemployment is really low. The economy, not just in America, but around the world is really strong. And not to mention the fact that some of these deregulation efforts will push a lot of industries to have — to make it easier for them to do business. So there is a lot that is conspiring to push the stock market up.
O’DONNELL: And yet I’m looking at the front page of The Wall Street Journal and they point out, though, that despite the surge, small investors have continued to yank their money out of funds that own U.S. stocks
HOBSON: Because they’re suffering from what I call post-traumatic stress disorder from the financial crisis. Small investors have mostly sat on the sidelines because the financial crisis really scared them. And so, as a result, they’ve missed a lot of this run on the direct ownership of stocks but they indirectly own it through their retirement accounts, like their 401k plans and pensions that they’ve had. So a lot of workers have still benefitted.
ALEX WAGNER: Mellody, what about average Americans who don’t own stocks and are looking to see economic increases in things like wages. Those have only increased less than three percent in the last year. How do you explain that discrepancy?
HOBSON: So, wage growth has been very, very slow, very low, and this is something that has confounded a lot of economists. A lot of this has to do with the fact, again, coming out of the financial crisis, unemployment surged, and people literally gave up looking for a job. They said, “I’m done.” As the economy started to come back, these people started entering the work force. They are willing to work for less. But now we have 18 states that have raised unemployment as of the first of this year. We have 13 states that have 40-year lows on unemployment. So in order to hire people, they are going to have to pay them more. I expect wage growth to really start to happen. I’ve been saying that for a while, but I really do think this is it.
WAGNER: It could also be a correction on the horizon somewhere down the line.
HOBSON: No one knows. This is the thing. I love when they say bull markets do not die of old age. That is not what happens. It’s something else. Everyone was pointing out it’s the second largest bull market in stock market history and if we go another ten months, it would be the longest. But, who knows? I would not be time the market here.
WAGNER: Mellody Hobson, thanks for that.
The actor opens up about the litany of troubles he’s faced over the last few years.
The House Financial Services Committee voted to advance a bill Thursday to repeal major parts of the Dodd-Frank law, enacted in the wake of the 2008 financial crisis.
The committee voted 34-26 in favor of the legislation, known as the Financial CHOICE Act, which will soon be up for a larger vote within the House of Representatives. The CHOICE Act rolls back about 40 provisions and regulations put in place on the financial sector under Dodd-Frank, including regulators’ authority to both wind down a financial institution perceived to be on the brink of failure and to identify an institution as a risk to the economy. Additionally, the new bill will allow banks to be exempt from existing Dodd-Frank provisions so long as certain criteria are met.
Thursday’s vote was split along party lines, a sign of the contentious nature of the debate over banking regulation. While Republicans consider Dodd-Frank an impediment to lending and economic growth, Democrats believe it is a key component of consumer protection and a necessary safeguard to prevent another economic crisis.
Dodd-Frank, which President Trump promised to give a “major haircut” to last month, is hundreds of pages worth of regulations imposed on banks that include preventing abusive lending practices and stopping institutions from becoming “too big to fail”. It has become a target of the Trump administration, with the president arguing the regulations “fail to hold Wall Street firms accountable” while issuing a review of regulators’ authority last month.
While the path to approval in the House could be achievable with the current Republican majority, a 60-vote approval will require some Democratic support in the Senate, which could prove significantly more difficult.
It appears as if the Trump administration is attempting to ram through major tax reforms at the same time as a vital bipartisan vote is required to avoid a financial catastrophe.
Treasury Secretary Steven Mnuchin has called for a “clean” debt ceiling increase, but after a meeting with the top Senate Democrat and Republican on Tuesday, talks appear to be at an impasse, threatening the U.S. with a major financial crisis in the coming months, according to multiple news reports.
The Treasury Department has said that “it would no longer be able to pay all of the government’s bills” unless Congress raises the debt limit. “A default would likely set off a major disruption to the world financial system, with a stock market crash and surging interest rates that could send the economy into a recession.”
The Senate and the House only have 12 days of working together before September 29, according to The Washington Post. Despite the impending deadline, the Republican-led House is currently in recess until after Labor Day.
It will be difficult for both parties to reach an agreement, “and neither GOP nor Democratic leaders have signed off yet on the Trump administration’s plan to raise the debt limit without attaching other policy sweeteners,”according to Politico. Politico elaborated on the hurried political negotiations:
Democrats, however, are not sure that Mnuchin and the White House can line up a significant number of GOP votes for any such debt boost.
Conservative Republicans frequently tried to use the debt ceiling increase during the Obama era to push for other spending cuts, though they faced stiff opposition from Democrats and former President Barack Obama. The 2011 debt limit showdown led to a downgrade in the U.S. credit rating.
“Democrats are going to have to make a political calculation whether they want to help this president and Secretary Mnuchin grow the economy,” Tony Sayegh, former Fox News contributor turned assistant secretary for Public Affairs at the U.S.Treasury, told Fox Business Network on Tuesday. “You can have legislation crafted by the committees of jurisdiction coming kind of in early September, moving through the House and the Senate through October bringing it to November, and at that time you’re also going to have the opportunity in Congress to address the debt ceiling, to address the budget.”
As recently as June, House Minority Leader Nancy Pelosi, D-Calif., expressed her support for a “clean” debt limit increase. However, Democrats are concerned with voting on a debt increase while President Donald Trump works with Republicans to pass tax reform measures out of fear they “will be trying to push through a tax cut package that could heavily favor wealthier Americans and increase the deficit,” Politico reported.
Sen. Orrin Hatch, R-Utah, bluntly rejected the Democrats’ idea of a red-line on taxes. “Tell them to grow up,” he said on Tuesday, according to Bloomberg News reporter Sahil Kapur. “I want to be able to do what I think is going to get us out of the problems we’re in,” Hatch added. Senate Majority Leader Mitch McConnell weighed in on his meeting with Senate Minority Leader Chuck Schumer, D-N.Y., and Mnuchin on Tuesday, saying the U.S. will “never, ever default.”
Pretty clear marker put down by Mitch McConnell today about the debt limit. The U.S. will “never, ever default.” His statement: pic.twitter.com/voF4MIlJuC
Sen. Ron Wyden D-Ore., has said that tax reform “should not lower taxes for the wealthiest few or add to the debt.” Corporate chief executives cheered on Trump’s tax plan when his administration released a one-page memo in April.
For their part, House conservatives, who have traditionally demanded spending cuts and budget caps in exchange for an increase in the debt limit are hardly fighting the Trump administration’s push for a “clean” raising of the debt limit as they did during the Obama administration. Suddenly, with massive tax cuts on the table, conservatives are all too happy to increase spending.
“I think they end up passing it with some reauthorization to get Democrats on board and 40 or 50 Republicans and get it done,” House Freedom Caucus Chairman Mark Meadows, R-N.C., told reporters last month.
It’s been a good run for the US stock market, but it couldn’t go on forever. On Feb. 2, stocks fell by more than 2%, dragging the market to its worst week in two years. The VIX, which measures volatility in the market, climbed. The Dow had its worst day since Brexit. Even tech darlings Google and Facebook saw their market capitalizations slashed by billions.
Just one week earlier, the S&P 500 closed at an all-time high. The market’s recent poor performance was sparked by the latest US jobs report, which showed wages were finally growing for American workers, and suggested higher inflation could soon follow. That could in turn make the cheap capital that has fueled the stocks boom harder to come by. In short, people are worried about interest rates.
Energy stocks led the selloff, with Chevron losing 5.6% and Hess Corporation down 5.5%. Technology stocks also performed poorly. Google parent Alphabet tumbled 5.3% a day after it missed expectations for fourth-quarter earnings, posting a loss of $3.02 billion due to changes to the US tax system; eBay fell 4.1% and even Facebook slipped 1.5%.
The stock market is widely believed to be overvalued, with the cyclically adjusted price-to-earnings ratio for the S&P 500 at its highest since the dot-com bubble. Many people think it’s due for a correction. The good news is that while Americans are saving less, their finances are in much better shape than they were in 2007, before the last recession.
Read next: Is a global recession led by a US stock market crash in the offing?
President Trump is taking his first steps aimed at scaling back financial services regulations.
The president signed an executive order Friday that will direct the Treasury secretary to review the 2010 Dodd-Frank financial oversight law, which reshaped financial regulation after the 2008-09 financial crisis.
“Today we’re signing core principles for regulating the United States financial system,”Mr. Trump said at the signing ceremony surrounded by his top aides.“Doesn’t get much bigger than that, right?”
A senior White House official outlined the measures in a background briefing with reporters Thursday.
Trump pledged during the campaign to repeal and replace the law, which also created the Consumer Financial Protection Bureau.
“Dodd-Frank is a disaster,” Trump said earlier this week during a meeting with small business owners. “We’re going to be doing a big number on Dodd-Frank.”
At the signing ceremony, Mr. Trump also gave a brief response to a reporter’s question about the fresh round of sanctions on Iran imposed Friday.
“They’re not behaving,” he said of Iran.
While Mr. Trump’s signed order won’t have any immediate impact, it directs the Treasury secretary to consult with members of different regulatory agencies and the Financial Stability Oversight Council and report back on potential changes.
That likely includes a review of the Consumer Financial Protection Bureau (CFPB), which vastly expanded regulators’ ability to police consumer products – from mortgages to credit cards to student loans.
The Trump administration believes that as written, Dodd-Frank, which was intended to avert another financial crisis, is another example of government overreach. Officials argue that it will not succeed in protecting Americans from more taxpayer-funded bailouts, a senior administration official said. The belief held by the White House is that the law just created more additional work and hundreds of new regulations that are stifling financial institutions.
The rule, which was set to take effect in April, will be delayed for 90 days while it’s reviewed.
The so-called “fiduciary rule” was aimed at blocking financial advisers from steering clients toward investments with higher commissions and fees that can eat away at retirement savings.
Critics argue the rule limits retirees’ investment choices by forcing asset managers to steer them to the lowest-risk options.
Warren Buffett’s company, Berkshire Hathaway, a conglomerate holding company, is buying 700 million shares in Bank of America, the second largest bank in the United States. This transaction makes Buffett the largest shareholder in two of the nation’s largest banks, the other being Wells Fargo. In 2011, billionaire investor, Warren Buffett, bought preferred shares in Bank of America for $5 billion dollars after shares tanked from the 2008 financial crisis. Proving to be a shrewd investment, Buffett’s company announced plans on Friday to exercise warrants in the bank to allow him to convert his preferred shares into 700 million common shares at only $7.14 as Bank of America is now trading at over $24 a share. This move was announced with Bank of America’s common shares paying out 48 cents, above the 44-cent equivalent in its preferred stocks. This amounts to a $12 billion profit for Buffett. Berkshire will now roughly have a 7% ownership stake, ahead of Vanguard Group, the second largest shareholder with 6.6% at 652.4 million shares. Just one year ago, Bank of America shares were sitting at $12 and now shares of Bank of America were up 16 cents at $24.48 in early trading on Friday, up 0.3%.
The last time Republicans controlled all the levers of power in Washington, the results were massive debt, administrative incompetence, failed wars, and a major financial crisis.
Regulators may be forced to impose even heavier restraints on lenders to prevent the property market triggering a financial crisis, an RBA executive says.