Overnight Finance: IMF chief warns against US-China trade war | Trump, Abe can’t strike deal on tariff exemptions | Republicans push Trump to rescind Gateway funds

by Sylvan Lane - 04/19/18 6:30 PM ET

Happy Thursday and welcome back to Overnight Finance, where we’re fawning over some precedent-shattering cuteness in the Senate. 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@thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

THE BIG DEAL: The managing director of the International Monetary Fund (IMF) warned Thursday that tensions sparked by a U.S.-China trade war could damage the driving forces behind global economic growth.

IMF chief Christine Lagarde said that billions of dollars in planned U.S. and Chinese tariffs would have a “not very substantial” direct impact on the global economy, but they could do serious damage in the long run by dampening investor confidence.

“When investors do not know under what terms they will be trading, when they don’t know how to organize their supply chain, they will be reluctant on investing,” Lagarde said at the IMF spring meeting in Washington, D.C.

“Growth is being driven by more investment than the previous years, and more trade. So why damage those two engines that are effectively working for growth?”

The IMF has projected the global economy to grow 3.9 percent of gross domestic product in 2018, a 0.2-point increase from its October prediction. But Lagarde said the IMF is “seeing more clouds on the horizon” and urged nations to steer away from protectionism. I’ll tell you why here.

Japan tariff exemption falls through: Hours after Lagarde’s remarks, Trump and Japanese Prime Minister Shinzo Abe announced they had failed to reach a deal to exempt Japan from the steel and aluminum tariffs, according the Associated Press.

Trump and Abe said that they instead began talks to secure a “free, fair and reciprocal” trade agreement.

LEADING THE DAY

Quarles returns to Congress: Federal Reserve Vice Chairman of Supervision Randal Quarles appeared before the Senate Banking Committee on Thursday, two days after he testified before the House Financial Services Committee. Here are a few highlights from his second appearance before a congressional panel since his confirmation.

Quarles on the bipartisan Senate bill to roll back Dodd-Frank: “Both I and the Federal Reserve as an institution are very supportive of efforts to tailor regulation particularly for community banks as exemplified in [the bill] and I do think the measures that are in that bill would still leave the Federal Reserve with full ability to ensure the safety and soundness of the financial system.”

On whether foreign banks would benefit from the Senate bill: “The Senate bill doesn’t have a practical effect for any foreign bank operating within the United States.” “We don’t have a secret plan in my satchel here for we’re going to do when this bill passes.”

On whether the Fed should step in when banks decide not to service gunmakers, per a question from Sen. John Kennedy (R-La.), Quarles said that it’s not appropriate for the Fed to tell banks what lines of business to conduct, but they’d have to step in if a law were being violated.

‘She wasn’t left twisting in the wind.’ Treasury Secretary Steven Mnuchin on Thursday defended the Trump administration’s backpedaling after U.S. Ambassador to the United Nations Nikki Haley incorrectly announced Russia would be subject to new sanctions for its role in a recent chemical attack in Syria.

Mnuchin told Fox Business Network that he and Haley were part of discussions last weekend to determine the administration’s strategy in Syria. He added that the White House hadn’t left her “twisting in the wind” over the remarks, despite one official saying she had been “confused” before later apologizing over the characterization.

“I’m not going to go through the specifics, but we refined the strategy after Nikki made that announcement,” Mnuchin said. “Between Saturday and Sunday and Monday, we refined the strategy, and we will continue to refine the strategy.” Here’s more from The Hill’s Brett Samuels.

GOP pushes Mulvaney, Trump to rescind Gateway funds: A group of House Republicans wants White House budget chief Mick Mulvaney to strip funding in last month’s omnibus spending package that could go toward a multi-billion dollar rail project in the New York metro region.

In a Thursday letter, 27 GOP members of the House ask the Office of Management and Budget Director to press President Trump to withhold the funds for the Gateway Program, a series of projects valued at $30 billion that includes restoring the Hudson River’s North River Tunnel.

“[W]e urge you to advise the president to include in his message rescissions of budget authority from the appropriations accounts in the Consolidated Appropriations Act (‘the Act’) that could provide funding for the Gateway Program,” the lawmakers wrote. The Hill’s Mallory Shelbourne tells us why.

NY comptroller pushes Wells Fargo to release details on pay incentives: The New York State Comptroller in a letter urged Wells Fargo shareholders to push the bank to reveal the details of incentive-based payment policies amid a slew of sales scandals.

Thomas DiNapoli said Wells Fargo should explain how it offers rewards to employees for reaching certain sales quotas.

DiNapoli, a Democrat, is the trustee of the New York State public retirement fund, which holds a $722 million stake in Wells Fargo. The comptroller asked fellow shareholders in a Tuesday letter to support a measure at the bank’s April 24 annual meeting that would force Wells Fargo to issue a report on its incentive-based compensation system.

“Incentive pay practices have been identified as contributing to the multiple crises at Wells Fargo,” DiNapoli said. “Investors need to know whether the company has taken steps to identify employees’ incentive-based compensation that could spur conduct that puts the bank, its customers and investors at risk.”

Just to recap: Wells Fargo has been under investigation by federal and state agencies after it opened millions of accounts for customers without authorization and sold thousands of other customers unnecessary insurance and interest rate-locking products.

The bank revealed last week that it’s preparing to pay a fine of $1 billion to the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC). The Wall Street Journal reported today that Wells could pay that fine as soon as tomorrow.

MARKET CHECK: Stocks dipped into red Thursday. The Dow Jones Industrial Average fell 0.34 percent, while the Nasdaq and S&P 500 dropped 0.78 percent and 0.57 percent each.

GOOD TO KNOW

Senate Finance Committee leaders are calling on the Trump administration to improve the tariff-exclusion process.

The Department of Housing and Urban Development (HUD) has reopened its investigation into whether Facebook violated fair housing laws, HUD Secretary Ben Carson said Wednesday.
The real-estate company run by Jared Kushner’s family in mid-March received a federal grand-jury subpoena for information related to paperwork the company filed regarding rent-regulated tenants, according to The Wall Street Journal.

Only 17 women won sexual harassment claims before the Financial Industry Regulatory Authority (FINRA), Wall Street’s self-governing watchdog, in 30 years, according to the Investigative Fund and The Intercept.

A partner at Ernst & Young was sexually assaulted and harassed by multiple colleagues at the company, which allegedly ignored the woman’s complaints and then retaliated against her, according to a complaint she filed on Wednesday against the firm, according to The Daily Beast.

New results from a global development experiment in Kenya have sparked a heated debate over whether lump-sum cash transfers have any long-term benefits for those who get them, or even do harm to neighbors who don’t.

ODDS AND ENDS

Nestle can’t get a break. A top EU legal expert Thursday recommended that the design of Kit Kat bars is not distinctive enough to warrant special trademark protection.