How Wall Street lost the veepstakes

Jul 16, 2024

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QUICK FIX

Establishment Republicans on Wall Street hoped Donald Trump would use his running mate selection to extend them an olive branch.

Instead, he elevated one of their chief antagonists.

The choice of Sen. J.D. Vance is the latest sign that a second Trump term could move the GOP further away from its traditional pro-business ethos in favor of a populist approach that’s more skeptical of corporate power.

Vance, a first-term Republican from Ohio, has emerged in his brief time in office as the Senate GOP’s top Wall Street critic, using his perch on the Banking Committee to chastise industry leaders and push legislation that would rein in the sector.

“Unfettered free-market capitalism is not something that sits well with Sen. Vance,” Travis Norton, a former Republican staffer now with the lobbying firm Brownstein, told our Eleanor Mueller.

The pick is likely to disappoint some old-guard party power brokers and donors on Wall Street who have long been skeptical of Trump. As our Alex Isenstadt reports in a must-read piece detailing how Vance got the nod, mainstream donors close to the other reported finalists in the veepstakes — North Dakota Gov. Doug Burgum and Sens. Marco Rubio and Tim Scott — were eager to undercut Vance. Citadel CEO Ken Griffin and former News Corp. chief Rupert Murdoch were among those who made it known to the Trump camp they were against the Ohio senator.

But thanks in part to Vance's ties to other fundraising bases — namely in Silicon Valley — he was able to overcome the establishment opposition.

A Yale Law School alum and Marine Corps veteran, Vance first rose to fame as a Trump critic in 2016 after the publication of his best-selling memoir, “Hillbilly Elegy.” But since embracing Trump during his successful 2022 Senate run, Vance has worked to cultivate an image as a new-age populist conservative who’s willing to take on big business.

He has pushed an array of legislation targeting the financial services industry, including a proposal with Sen. Elizabeth Warren (D-Mass.) after the collapse of Silicon Valley Bank that would penalize executives of failed banks. He has also praised President Joe Biden's FTC Chair, Lina Khan, who has led an aggressive antitrust crackdown.

Vance in recent weeks has also begun to insert himself in Capitol Hill’s debate over cryptocurrency regulation. He has been workshopping an industry-friendly crypto bill — and digital asset enthusiasts are cheering on his selection.

“Trump’s pick of Senator Vance as his next VP is a tremendous boost for U.S. innovation and the digital asset industry,” Cody Carbone, chief policy officer at the Digital Chamber, told Eleanor. “The choice highlights the campaign’s unwavering support for digital assets.”

To be sure, crypto is one of many key financial regulation issues on which Vance aligns with the mainstream of his party. He has joined other Republicans in fighting regulations that the financial services industry opposes, including a plan to increase capital requirements on large banks.

But he has suggested that the GOP’s support for lighter-touch regulation shouldn’t come for free.

“If you guys are going to use the financial power that you’ve accumulated to go to war against the values of our voters, impoverish our constituents who rely on cheap energy and destroy the jobs of people who work in the energy sector, why should [Republicans] listen to you when you come and ask us for a tax break or for reasonable regulations?” he said to bank CEOs testifying before the Senate last year. “I’m one Republican who wants to have a good relationship with you, but the more you guys [insert] yourself into these fights, the less good that relationship that will be.”

IT’S TUESDAY — What do you think about the possibility of VP Vance? Let me know at jgoodman@politico.com and @Jasper_Goodman. As always, send tips and suggestions to ssutton@politico.com and @samjsutton. If you’re in Milwaukee, say hey to Victoria Guida (vguida@politico.com) and Zach Warmbrodt (zwarmbrodt@politico.com). And if you can’t make it, be sure to catch their POLITICO Grill panels online.

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Driving the day

U.S. retail sales data for June will be released at 8:30 a.m. … Fed Gov. Adriana Kugler will speak at the 21st Annual National Association for Business Economics Foundation Economic Measurement Seminar at 2:45 p.m.

Housing

Biden unveils rent cap plan — Biden is rolling out a proposal to dramatically limit rent growth nationwide, in the latest push by the White House to ease voter concerns about the skyrocketing cost of housing, our Katy O’Donnell reports.

The plan — which would revoke a depreciation tax credit for large landlords who increase rent by more than 5 percent in a year — would require legislative action and is unlikely to get support in the Republican-controlled House.

“While the prior administration gave special tax breaks to corporate landlords, I’m working to lower housing costs for families,” Biden said in a statement. “Republicans in Congress should join Democrats to pass my plan to lower housing costs for Americans who need relief now.”

AT THE RNC

RNC first night roundup — Republicans say they are more united than ever before heading into November with Trump at the top of the ticket, our Olivia Beavers reports from Milwaukee: “The jubilation on the convention floor shines through a dark mark that will become a staple in U.S. history books: Trump surviving a close-call assassination attempt on his life days before he was set to be ratified as the GOP presidential nominee.

“The former president's iconic raised fist, bloodied face and 'fight' chants — just moments after a bullet clipped his ear — has only added to the energy among the Republican guard and its base."

“‘The President got hit, went down on his own and he came up. And that's a story that I think resonates with the American people, not just Republicans,’ said Rep. Dan Meuser (R-Pa.) on the convention floor.”

Wall Street

Earnings SZN — Sam reports that BlackRock Chairman and CEO Larry Fink and Goldman Sachs CEO David Solomon both kicked off their second-quarter earnings calls on Monday with pleas for unity in the aftermath of the attempted assassination of Trump. “It is a sad moment for our country,” Fink said. “We cannot afford division and distrust to get the better of us.”

— When asked about client activity around the unpredictable presidential election — particularly since last month’s debate — Solomon told analysts that he doesn’t “have a crystal ball.”

“I can’t see what the next 100 days leading up to our election will bring,” he added. “But I think we’re well positioned to serve our clients regardless of the environment. Clients are very active at the moment, and I think they’re going to continue to be very active.”

Trump trades — Yields on 10-year Treasuries spiked on Monday as markets continued to price in a greater likelihood of a second Trump administration, which many economists expect to generate looser fiscal policies and a higher likelihood of inflation.

A DJT surge in the markets — Donald Trump’s gains aren’t exclusive to the polls. In the first trading session since an assassination attempt against the former president, his social media company, Trump Media & Technology Group, jumped in trading by more than 30 percent, Declan Harty reports.

The company’s often wild stock, which trades under the ticker DJT, closed at $40.58 — its highest closing price in a month. The surge brings Trump’s ownership stake in the company behind Truth Social to more than $4.6 billion, though that money is still tied up for several more weeks.

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The Economy

Steady as she goes — Federal Reserve Chair Jerome Powell signaled that the central bank would hold rates steady at its upcoming monetary policy meeting. But he also said recent inflation data does “add somewhat to confidence” that price growth is starting to fall back into line with the Fed’s overall inflation target, The WSJ’s Nick Timiraos reports.

— Separately, he also said he plans to serve out his full term, which is scheduled to end in 2026, writes Bloomberg’s Steve Matthews.

Empty pockets — U.S. states are poised to cut spending by as much as 6 percent as pandemic-era stimulus and tax cuts fade, Bloomberg’s Nic Querolo reports. That would mark the steepest reduction in state spending since the recession.

Crypto

Hidden treasure — Benjamin Guggenheim reports that the Treasury Inspector General for Tax Administration has a new report that outlines the challenges the IRS faces in crypto tax enforcement.

Part of the report details how “Operation Hidden Treasure” — a 2021 campaign that ostensibly targeted taxpayers who failed to report crypto holdings — was actually limited to the acquisition of data analytics tools and training on virtual currencies.

Still, the IRS’s criminal investigation unit has expanded. The value of virtual asset seizures by IRS-CI increased by $1.5 million in FY 2018 to $7 billion in 2022. But civil enforcement will remain a challenge until new crypto reporting requirements take effect in 2025, TIGTA said.

“The IRS agrees that digital asset compliance enforcement can be improved. IRS compliance efforts are still recovering from years of underfunding,” said Heather Maloy, the IRS’s Chief Tax Compliance Officer, in response to the report.

Jobs report

Wind down — The Modern Markets Initiative, an industry group that advocated on behalf of high-frequency traders, is winding down, CEO Kirsten Wegner announced on Monday. Wegner said she will pursue new projects involving artificial intelligence policy, fintech and supporting women in those industries.

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