Time for Fed to go quiet - Bernanke the Jedi master? - GOP pushes on mortgage comments

FIRST LOOK: TIME FOR FED TO GO QUIET ? AEI?s Steve Oliner, a former Fed official, in a blog post going up later this morning: ?Chairman Bernanke's testimony ? was yet another attempt to calm financial markets, which have been spooked by the prospect of the wind-down of the QE program.?His message on QE was the same as it has been for weeks. ? Now that Bernanke has had some success in conveying this message, it might be best to just stop talking.?Any changes to the QE program later this year will be determined by what the Fed learns about the economy between now and then.?Nothing more can be revealed now that will clarify the situation.?The market craves certainty about the future, but Bernanke can't provide that. The Fed can only wait for more data and then act on the game plan it has laid out.?

YEAH, ABOUT BERNANKE STAYING SILENT ? The chairman testifies before Senate Banking this morning at 10:30 a.m.

BERNANKE THE JEDI MASTER? ? Reuters Breakingviews? Jeffrey Goldfarb offers up a free BV subscription to the first MM reader to correctly identify the number of Star Wars references in this piece by Daniel Indiviglio: ?The Fed chairman implied during congressional testimony on Wednesday that his most important duty is to ensure markets understand where monetary policy is heading. The past month has shown how hard that can be when investors hear what they want to hear. Unless Yoda he is, tapering and rate hikes will cause painful lurches.? http://bit.ly/15n1mG6

GOP PUSHES BACK ON WARNER MORTGAGE COMMENTS ? A supporter of House Financial Services Committee Chairman Jeb Hensarling?s PATH Act to reform the GSEs emails MM regarding comments from Sen. Mark Warner (D-Va.): ?It?s more likely the Hensarling bill gets through the House before the bill supported by Warner gets through the Senate.?You pass your bill, senator.?We?ll pass ours. Then we?ll see you at conference.?That?s regular order.?

TOP TWEET ??Cato Institute?s @MarkCalabria on Warner?s remarks: ?There must be some other Hensarling mortgage bill out there, as the one I've read maintains a fairly large govt presence in mortgage market.?

FIRST LOOK II: BACK-TO-SCHOOL SPENDING EXPECTED TO HIT $73B ? Per the National Retail Federation: ?American families with school-age children will spend an average $635 this year, according to the National Retail Federation?s 2013 Back-to-School Survey. ? Total back-to-school spending is expected to reach roughly $27 billion, with back-to-school and back-to-college combined spending reaching $73 billion. Eight in 10 Americans surveyed said the economy will impact their shopping in some way. ? The back-to-school season is the second biggest sales time of the year for retailers, behind the winter holidays.?

FIRST LOOK III: WHY EVERYBODY LOVES TESLA ? Bloomberg Businessweek cover story, Why Everybody???s Tesla, by Ashlee Vance: ?Can Silicon Valley's favorite carmaker, Tesla, change the way we think about vehicles and win over the rest of the world? Elon Musk's rapidly expanding electric car empire has worked hard to overcome consumer objections ? including cost, resale value and battery life ? and with sales of the Model S luxury sedan booming, the company has finally turned a profit. The next phase of Tesla?s growth is going to be exponentially more challenging as it introduces lower-priced models and aims to simultaneously become the next Ford Motor and ExxonMobil ? to be a profitable, mass-scale manufacturer and fuel distribution network.? Story live at 6:30 a.m.: http://buswk.co/Tesla30 Cover image: http://bit.ly/150eIZX

RUBIO STUMBLES ? POLITICO?s Mike Allen and Jim VandeHei: ?The very issue [Marco] Rubio ? thought would be a game-changing, legacy-builder looks like a big liability for the Florida senator, at least right now. In the process, the self-confident presidential hopeful suddenly looks wobbly, even a little weak, as he searches for what?s next. Rubio spent six months working over Senate Republicans only to get stiffed by 70 percent of them. He has gone underground on the issue ever since, ducking reporters on Capitol Hill. ? His poll numbers in Iowa and nationally are falling among conservatives. And he clearly feels intense pressure to start acting more conservative ? and quick.

?One of his new, non-immigration pushes: Warning he won?t vote to fund the government unless Obamacare is thrown out. His latest speeches have made fiscal responsibility his new signature issue, including opposition to raising the debt limit unless Congress can pass a budget that balances within 10 years. And he plans to join other Republican senators in a push on abortion restrictions that will please the base, but has no chance of becoming law.? http://bit.ly/17mDeoi

FIRST LOOK IV: GSE REFORM PAPER ? AEI?s Tom White and Charlie Wilkins will present a paper on the Hill today entitled: ?A privatized multifamily financing market: GSE reorganization without guarantees.? From the paper: ?We strongly recommend against providing any special multifamily liquidity backstop.?By focusing on prime loans? and securities backed by ?prime loans?, the multifamily industry will be positioned to either wait out short-run liquidity events or take advantage of any more broadly based liquidity support provided by the Fed.??Paper: http://bit.ly/1bK80uR

THIS MORNING ON POLITICO PRO FINANCE ? Patrick Reis on Ben Bernanke?s trip to the Hill. ? To learn more about Pro's subscriber-only coverage ? and to get Morning Money every day before 6 a.m. ? please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD THURSDAY MORNING ? Be sure to catch B.I.?s Joe Weisenthal, aka @thestalwart, on CNBC?s Squawk Box from 7-9 a.m.. Guests will include, among others, House Majority Leader Eric Cantor at 7:30 a.m.. Joe will make Cantor commit to supporting the trillion-dollar coin. As always, send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.

DRIVING THE DAY ? Bernanke testifies before Senate Banking at 10:30 a.m. The chances that he makes news are slim. Senate Banking is also again scheduled to take up Rep. Mel Watt?s FHFA nomination ? President Obama offers remarks on the ACA at around 11:25 a.m. ? House OGR has a hearing at 11 a.m. on the IRS treatment of conservative group applications. Dems will get a chance to take shots at Treasury Inspector General J. Russell George over what they view as his failure to point out targeting of liberal groups ?

House OGR has another hearing at 2:30 p.m. on Dodd-Frank impact on community banking ? Initial jobless clams at 8:30 a.m. expected to drop to 345K from 360K ? Philly Fed survey at 8:30 a.m. expected to drop to 8.0 from 12.5 ? Index of Leading Indicators at 8:30 a.m. expected to rise 0.3 percent ?

ALSO TODAY: HOUSING REFORM CALL ? AEI?s?Ed Pinto, Peter Wallison and Alex Pollock are hosting a conference call at 10:30 a.m. on the three housing finance reform bills (PATH, Corker-Warner and the Johnson-Crapo Solvency Act). RSVP to?mediaservices@aei.org for a discussion on what will and won?t work with each of the reform bills.?

LAUNCHING MONDAY ? MORNING EDUCATION ? Looking for the best coverage of federal and state education policy? POLITICO Pro is launching its latest morning newsletter ? Morning Education ? on July 22. The newsletter will cover everything from student loans to K-12 federal policies to state-level education policy disputes, and much more. To sign up for the best education coverage in Washington, email info@politicopro.com.

** A message from the Investment Company Institute: Money market mutual funds are an essential cash-management tool for millions of investors and a key funding source for businesses, governments, and nonprofits. Washington must not impose changes that undermine the benefits of these funds for investors and the economy. Learn more at www.ici.org/mmf. **

RISING RATES SPARK CAUTION ? Per Morgan Stanley analysts on the Business Conditions Index: ?The substantial pullback in the credit conditions index suggests that the sharp back-up in rates in the past couple months after the Fed signaled a sooner-than-expected start to QE tapering has led to a bit more near-term caution about the outlook. The composite index slipped 4 points to 57 percent in July on the pullback in the assessment of credit conditions and lower results for the hiring and capex gauges. The business conditions expectations index was one of the bright spots in the July survey, as businesses remained optimistic about a turn higher in growth in the second half. It ticked up 2 points to 71 percent after retreating in June.?

IRS HEARING PREP ? POLITICO?s Rachael Bade and Lauren French: ?J. Russell George isn?t used to being on the hot seat, but that?s likely to change on Thursday. A House Oversight and Government Reform Committee hearing on the IRS scandal will give Democrats an opportunity to slam the Treasury inspector general, who helped fuel anger at the agency after releasing a report in May that described unfair scrutiny being applied to tea party groups.

?It?s George?s first time back on Capitol Hill after Democrats released documents last month that seemed to call the report ? and the inspector general?s credibility ? into question. ? Here are some questions George can expect to face and a preview of how he might respond. Why didn?t you mention IRS officials were also trained to flag progressive groups? ? Why did you fail to mention BOLOs aimed at liberal groups?? http://politico.pro/13yigyw

TOP STORY: JPM NEARS $500M SETTLEMENT ? NYT?s Ben Protess and Jessica Silver-Greenberg: ?JPMorgan Chase, the Wall Street giant whose reputation in Washington has eroded in a matter of months, is now moving to avert a showdown over accusations that it manipulated energy prices. The nation?s largest bank ? is seeking to settle with the federal agency that oversees the energy markets. ? The regulator, the?Federal Energy Regulatory Commission, found that JPMorgan devised ?manipulative schemes? that transformed ?money-losing power plants into powerful profit centers,? a commission document said.

?The potential deal, the people said, is expected to cost the bank about $500 million, a record for the commission, which has adopted a harder line with Wall Street over the last year. For JPMorgan, which reported a record $6.5 billion quarterly profit last week, the fine will hardly dent the bottom line.? http://nyti.ms/12MIT2D

GLOBAL REGULATORS AT ODDS ? WSJ?s Michael R. Crittenden and David Enrich: ?Global regulators are pursuing disparate approaches to protecting the financial system against future shocks, fracturing an agreement forged in the wake of 2008 financial crisis to adopt a coordinated response. Policymakers ? are disagreeing over proper capital levels for banks, derivatives regulation, criminal prosecutions of bankers and even the appropriate forum for brokering agreement on financial-services issues. ? Countries like the U.S., U.K. and Switzerland are demanding that banks build thicker capital cushions to absorb losses and bigger liquidity buffers than most other European countries are embracing. European and U.K. officials have shown a greater willingness than their U.S. counterparts to rein in bankers' pay and target bad behavior with criminal prosecutions.

?The U.K.'s banking supervisors also have urged some European and U.S. banks to restructure their U.K. operations and have pressured foreign branches of banks from many countries ? from crisis-hit countries like Cyprus to Switzerland and the U.S.?to stockpile additional funds in their British arms. ? The different approaches have led to cross-border sniping, with European Union officials threatening retaliation if the U.S. imposes its rules abroad. ? On Wednesday, U.S. Treasury Secretary Jacob Lew said in a speech that global coordination shouldn't come at the expense of tough rules.? http://on.wsj.com/14g8eII

LEW WARNS WALL STREET ? POLITICO?s Ben White: ?Treasury Secretary Jack Lew came to Wall Street on Wednesday and rejected financial industry arguments that the administration?s financial reform efforts are harming banks and slowing growth.

"?Dodd-Frank did not stifle economic growth. It did not halt lending activity. We are actually seeing just the opposite,? Lew said at the CNBC/Institutional Investor ?Delivering Alpha? conference at New York?s Pierre Hotel. ?Banks have more than doubled their capital on hand while achieving nine straight quarters of loan growth. And with Dodd-Frank signed into law, forward economic momentum has continued.?

?Lew, in his first major address to Wall Street, also said regulators would complete work by the end of the year on ?enhanced prudential standards for banks and designated nonbanks, capital and margin rules for derivatives, new simplified mortgage disclosure? and the Volcker rule. He also warned that the administration would look at efforts in the Senate to further regulate Wall Street, including a measure to re-impose the Glass-Steagall wall between consumer and investment banking. ?If we get to end of this year and cannot say we have ended to ?too big to fail? we will have to look at other options, Lew said.?

LEW GETS PROPS ? Better Markets? Dennis Kelleher: ?Lew?s strong support for financial reform today is welcome news to the American people as we approach the 5th?anniversary of the collapse of Lehman Brothers and the worst financial collapse since 1929.?He is right that the record earnings at the largest U.S. banks prove their non-stop ?sky-is-falling? complaints about financial reform have been baseless.? http://bit.ly/1bKcAJI

BERNANKE PLAYS DOWN IMPACT OF JOBLESS RATE ON PLANS ? WSJ?s Jon Hilsenrath and Victoria McGrane: ?Federal Reserve Chairman Ben Bernanke played down Wednesday the unemployment rate's weight in the central bank's calculation of when to start raising short-term borrowing costs, a fresh example of the challenge the Fed faces explaining its easy-money policies. ? Since last December, the Fed has been saying short-term interest rates ? now near zero ? won't go up at least until the jobless rate drops below 6.5 percent, and as long as inflation stays near 2 percent. But Mr. Bernanke suggested the Fed might keep rates near zero long after the jobless rate, which was 7.6 percent in June, falls below that 6.5 percent threshold. It is a point he has made before, but he placed new emphasis on it in the first of two days of congressional testimony about the economy and monetary policy ? possibly his last appearances before Congress since his term as chairman ends in January? http://on.wsj.com/1dG5u7b

WATT HANDICAPPING ? Compass Point?s Isaac Boltansky: ?The Senate?s deal to avert the ?nuclear option? did not directly impact Rep. Watt?s nomination as it was not part of the broader deal and the agreement did not result in any changes to the rules for considering nominees. Therefore, Rep. Watt?s nomination still needs 60 votes in order to block a potential filibuster. Our current vote count ? continues to show Rep. Watt five votes shy of the 60-vote threshold.

?Still, while the ?nuclear option? did not directly impact Rep. Watt?s nomination, the agreement has more broadly impacted all executive nominations in the near-term. Following a day of digesting and discussing the ?nuclear option? deal, it is clear that Republican opposition to executive nominees has softened somewhat. Senate Republicans appear cautious to provoke another nomination battle.?

ALSO FOR YOUR RADAR ?

QUICK CLICK: SCANDAL CALENDEAR ? Per release: ?The Society for Corporate Compliance and Ethics released today their 4th annual corporate scandal calendar, which tracks the dates of significant corporate fines, settlements and other penalties. This year's calendar saw the additional of?$30 billion?in such fines and penalties since the last year's calendar was published.? http://bit.ly/13PgIaH

TRANSITIONS: NEW FACES AT CITI ? Per interal memo from Candi Wolff, head of Global Government Affairs, and John Emling, head of Federal Government Affairs: ?Jim Johnson,?Director, Housing and Dodd-Frank Advocacy. Jim Johnson joins Federal Government Affairs as a Director focused on housing issues and advocacy efforts on Dodd-Frank. Jim started on July 15th?and reports to John Emling. Jim joins Citi from the American Securitization Forum (ASF) ?

?Kristin Solheim,?Director, Mobile Payments, Cyber, Card Issues. We also welcome Kristin Solheim, who will serve as a Director in Federal Government Affairs with a focus on mobile payments and cyber security, while supporting general credit card issues. Kristin will begin in August and will report to John Emling.?

GRAND BARGAIN NOT TOTALLY DEAD? ? National Journal?s Chris Frates: ?At least a dozen Republican senators are regularly meeting with President Obama?s top aides in an attempt to plot a way forward on the looming fiscal challenges facing leaders this fall. ? The meetings, which began after Obama hosted GOP senators for dinner earlier this year, are the first sign that Democrats and Republicans are in talks to strike a deal that would reduce the deficit and reform entitlements and taxes. ?

?White House chief of staff Denis McDonough runs point and has included Office of Management and Budget Director Sylvia Mathews Burwell in the discussions. ? The differences between the two sides, which helped kill a grand bargain between Obama and GOP House Speaker John Boehner last year, remain vast. Namely, Republicans want to see tax and entitlement reform while Democrats want more revenue.? http://bit.ly/15IUmTW

** A message from the Investment Company Institute: For more than four decades, money market mutual funds have played an essential role in the financial system and the economy. Today, 60 million individuals and thousands of institutions rely on these transparent, diversified cash-management tools ? which also provide critical financing for businesses, nonprofits, and governments.

In 2010, the Securities and Exchange Commission overhauled the rules to make money market funds more resilient. Now, regulators want to change the rules again. One proposal would require institutional prime and tax-exempt funds to ?float? their share prices. This policy threatens to increase costs and burdens ? and drive away investors.

The SEC can avoid this outcome. It can make money market funds stronger by dropping the ?float? and adopting other changes that address regulators? concerns without undermining the benefits that money market funds deliver. Find out how at: www.ici.org/mmf. **

Source: http://www.politico.com/morningmoney/0713/morningmoney11179.html

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