Overnight Finance: Dow down over 1,000 in biggest one-day point drop | GOP to play hardball with Dems on funding bill | Mulvaney reportedly freezes Equifax probe | Powell sworn in as Fed chair

Dow falls more than 1,000 in biggest daily point-drop ever: The Dow Jones Industrial Average fell by more than 1,179 points Monday, the biggest daily loss by points in its history.

The Dow dropped more than 1,500 points before recovering to close at 24,341, a 1,179-point loss. The plunge broke the Dow’s previous record for the largest daily loss by points, set on Sept. 29, 2008, when the index dropped 777 points.

President Trump was pitching the economic benefits of the GOP tax law in Cincinnati as the drop in the market intensified. The Dow fell 500 points while Trump tout rising wages and accused Democrats who refused to applaud him during the State of the Union of being “treasonous.”

{mosads}

All three major cable networks showed the falling stock ticker on screen during Trump’s speech, and Fox News cut into his remarks when the Dow slipped below 1,000.

The Dow lost 4.62 percent of its value, wiping out a month of gains that featured the quickest 1,000-point jump in the index’s history.

Still, despite the headline-grabbing numbers, Monday’s drop fell far short of the he record 22 percent loss set during the 1987 stock market crash.

Even so, Monday’s losses came after the worst week for U.S stocks in two years. The Dow fell 665 points Friday and closed more than 1,000 points lower than the previous week’s record-high close at 26,616. It was the biggest single drop in a day for the Dow since June 2016.

Analysts have long warned of a potential bubble in the stock market, which means that Monday’s drop could be the beginning of a correction.

That would be bad news for the Trump administration, which has repeatedly pointed to gains in the stock market to make the case that their policies are boosting the economy. I explain here: http://bit.ly/2FRtLMN.

 

GOP plans to play hardball on funding bill: House Republicans are moving to pair a full year of defense spending with a short-term measure to avoid a government shutdown on Friday, effectively daring Democrats in the Senate to block it.

Democrats have demanded that any increase in defense spending be matched with increases to nondefense spending. They also want to reach an immigration deal before they agree to a broader deal on lifting the budget spending caps.

But House GOP leadership’s decision puts Senate Democrats in an unenviable position.

Following last month’s government shutdown, House Republicans are betting that Minority Leader Charles Schumer (N.Y.) and his fellow Democrats in the Senate won’t have the nerve to force another closure by blocking the bill.

Senate Republicans need at least nine Democratic votes to beat back a Democratic-led filibuster.

Schumer declared the House GOP measure dead on arrival in a floor speech.

“Sending a cromnibus to the Senate, one that just funded defense and cut programs crucial to the middle class, would be barreling head-first into a dead-end,” Schumer said, referring to a cross between an omnibus spending bill and short-term continuing resolution (CR) to keep the government open.

Speaker Paul Ryan (R-Wis.) and other GOP leaders will pitch the plan at an emergency GOP conference meeting Monday night, GOP sources told The Hill. A vote on the floor could happen as early as Tuesday.

The Hill’s Scott Wong has the scoop: http://bit.ly/2FPq1vg.

 

Wells Fargo chief predicts Fed will lift penalties by year-end: Wells Fargo CEO Timothy Sloan said Monday he expects the Federal Reserve to lift penalties put on his bank by the end of the year.

Sloan on Fox Business called the Fed’s stunning decision to oust four Wells Fargo board members and freeze the bank’s growth “a disappointment,” but not a fatal blow.

“We expect to have this cap lifted because again, all of the activities that the Fed would like us to improve on are the same ones that we would like to improve on,” Sloan said. “And we believe it’s likely that the asset cap could get lifted by the end of the year.”

The Fed announced Friday that it will ban the bank from doing anything that would increase its total consolidated assets above their December 2017 levels. Wells Fargo will still be able to issue loans and take deposits, but is expected to lose hundreds of millions of dollars in revenue. http://bit.ly/2FNTvcU.

 

Mulvaney puts brakes on Equifax probe: Reuters: White House budget director and Consumer Financial Protection Bureau (CFPB) acting Director Mick Mulvaney has dialed back the agency’s investigation into a massive data breach at Equifax, Reuters reported Sunday.

Mulvaney has not sought subpoenas or sworn testimony as part of the investigation, Reuters reported, citing three unnamed sources. The bureau has also put on hold plans to test how Equifax protects data.

A CFPB spokesman told Reuters the agency is not allowed to acknowledge an open investigation.

Former CFPB Director Richard Cordray authorized a probe in September into how hackers were able to steal personal data from Equifax in a data breach that affected nearly 150 million Americans.

It was later discovered the company was charging individuals to find out if they’d been affected by a breach: http://bit.ly/2FPyDSE.

 

Happy Monday and welcome back to Overnight Finance. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@digital-stage.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

 

On tap tomorrow

• House Financial Services Committee: Hearing on the Financial Stability Oversight Council’s annual report with Treasury Secretary Steven Mnuchin, 10 a.m. http://bit.ly/2GHbJhl.
• Senate Banking Committee: Hearing on SEC and CFTC oversight of digital currency with SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo, 10 a.m. http://bit.ly/2DYdBoB.

 

Tuesday Preview: Mnuchin will likely be pressed on the debt ceiling and several other issues when he testifies before the House Financial Services Committee on Tuesday. Democrats will likely dig in on the Trump administration’s decision not to ramp up sanctions on Russia immediately, as well as on GOP efforts to reign in the Dodd-Frank Act.

The Treasury Department warned Congress that ramping up financial sanctions on Russia could restrain the country’s economy and force action against the United States, according to a memo reported on by Bloomberg.

The department wrote that increasing restrictions on financial trades involving Russian debt would lead to “Russian retaliation against U.S interests.”

“Expanding [U.S. sanctions] to include dealings in new Russian sovereign debt and the full range of related derivatives would likely raise borrowing costs for Russia,” department staff wrote, according to the memo.

The Treasury Department warned that further sanctions on new debt would “put downward pressure on Russian economic growth; destabilize financial markets,” and “increase strain on Russia’s banking sector.”

Lawmakers will also home in on regulating cryptocurrencies like bitcoin when the chairmen of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) appear before the Senate Banking Committee.

SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo will testify Tuesday on their increasing efforts to police fraud in cryptocurrency sales and investments.

 

Labor Department IG to investigate tip pooling rule: The Department of Labor’s Office of Inspector General announced Monday it will look into the agency’s rulemaking process in issuing its proposed tip-pooling rule.

The OIG on Twitter shared a memo it sent to Bryan Jarrett, acting administrator of the Labor Department’s Wage and Hour Division, on Monday.

“The Office of Inspector General is initiating an audit of the rulemaking process used by the Wage and Hour Division related to its proposal to rescind portions of its tip regulations issued pursuant to the Fair Labor Standards Act,” Elliot Lewis, assistant inspector general for audit, wrote.

The audit follows a Bloomberg Law report that senior agency officials hid an unfavorable economic impact analysis from the proposed rulemaking. The analysis reportedly showed workers could lose billion of dollars in gratuities if the agency rescinds an Obama-era ban on tip pooling: The Hill’s Lydia Wheeler reports: http://bit.ly/2FNT962.

 

Powell sworn in as Fed chairman: Jerome Powell was sworn in as Federal Reserve chairman on Monday, pledging to boost transparency and build on nearly a decade of financial stability.

Powell, a Republican first appointed to the Fed in 2012, succeeds Janet Yellen, the first woman to lead the central bank, who had served since 2014.

Powell said in a taped statement that he was “humbled and honored” to lead the Fed while it mulls how to reset monetary policy before an expected recession.

“As I begin my term, I want to stress my commitment to explaining what we’re doing and why we are doing it,” Powell said. “My colleagues and I at the Federal Reserve will put everything we have into serving you and our country with objectivity, independence, and integrity.”

Powell begins his term with a strong economy at the tail end of its recovery from the 2008 recession. Unemployment is close to 4 percent and wages are increasing in response to strong labor market. But inflation overall has lagged behind the Fed’s 2 percent target, and the bank is aiming to raise interest rates to a neutral level without shocking the economy: http://bit.ly/2FNTKoq.

 

Ryan challenger fundraises off deleted tweet on $1.50 pay hike: A Democratic challenger to Speaker Paul Ryan (R-Wis.) has raised more than $150,000 after Ryan deleted a controversial tweet highlighting a Pennsylvania woman’s $1.50 per week paycheck increase due to the new tax law.

The campaign for Democratic candidate Randy Bryce said it has raised that amount in the 48 hours since the tweet was deleted Saturday afternoon. 

Bryce, a union ironworker, encouraged supporters to donate $1.50, and about 5,800 of the contributions were of that amount. The campaign said it received donations from all 50 states and that the average contribution amount was $12.39.

“Speaker Ryan believes this tax bill will help him and other Republicans get reelected in November, but the overwhelming support we received shows that people across the country are unsurprisingly opposed to giving millions in tax breaks to billionaires,” said Bryce campaign spokeswoman Lauren Hitt said in a statement: http://bit.ly/2FRANBb.

DCCC blasts Ryan over tax tweet with Facebook ad: The Democratic Congressional Campaign Committee (DCCC) on Monday launched a Facebook ad campaign taking aim at a now-deleted tweet from Speaker Paul Ryan (R-Wis.) about the GOP tax law.

Ryan’s tweet, which has generated a significant backlash from Democrats, highlighted the story of a Pennsylvania woman who told The Associated Press that she was pleased to see her paycheck increase by $1.50 per week due to the new law. But the DCCC’s ad argues that wealthy Americans are seeing bigger tax cuts than the middle class.

“Speaker Paul Ryan just BRAGGED about a secretary getting a $1.50 tax cut from his tax scam,” the ad reads. “By comparison, he’s handing the richest 1-percent $1,000 PER WEEK! Hardworking Americans deserve to keep MUCH more of their paychecks.” http://bit.ly/2FPGRKw.

 

GOP turns Pelosi’s words into weapon for tax law: Republicans are putting House Democratic Leader Nancy Pelosi (Calif.) front and center in their messaging as they seek to use their tax-cut law against Democrats in the midterm elections.

President Trump, Vice President Pence and GOP lawmakers have repeatedly invoked Pelosi’s criticisms of the law, particularly her comments that the $1,000 bonuses companies announced following the tax law are “crumbs.”

Tying Pelosi to other Democrats is a time-tested strategy for the GOP, which has for years used the California liberal to attack Democratic candidates and paint the party as elitist.

But Democrats say they aren’t worried about Pelosi’s prominence in the tax debate, betting that popular opinion will ultimately be on their side.

“I think the No. 1 way to know that you’re effective at what you do is to get attacked,” said Pelosi spokesman Drew Hammill. The Hill’s Naomi Jagoda reports: http://bit.ly/2FP5h6M.