Wall Street pines for Bloomberg

WALL STREET PINES FOR BLOOMBERG — POLITICO’s Ben White: “In the bar of the Four Seasons Hotel off Park Avenue one recent evening, the talk among senior bankers turned, as it often does these days, to the prospects of former New York Mayor Michael Bloomberg making a run for the White House. … The group, which included a senior private equity banker and a top executive from a blue-chip investment bank, sipped cabernet and broke down the chances. The consensus view: Bloomberg doesn’t have a shot. ‘Unless it’s Bernie versus Trump,’ one titan in attendance said.

“Only if the self-avowed Democratic socialist Bernie Sanders were to cop the Democratic nomination and square off against reality-TV star Trump could these would-be Bloomberg supporters imagine him making the race — and even then, there were doubts. ‘The mayor doesn’t play to lose. I see a very unlikely scenario of him entering the race unless he has calculated that he is going to win,’ said Anthony Scaramucci, managing partner of investment firm SkyBridge Capital and a backer of former candidate Jeb Bush.

‘That means in my mind that non-establishment players have to be the nominees of both parties and he has to have a really good sense that there is a path up the middle that can get him a win and that means an Electoral College win.’

DOESN’T WANT TO BE “THE GUY WHO ELECTED TRUMP” — “This caveat is often offered by Wall Streeters who dismiss the idea that Bloomberg could run against Trump or Texas Senator Ted Cruz as the GOP nominee and former Secretary of State Hillary Clinton as the Democratic nominee and force the race into the House of Representatives. Under this very unlikely scenario, many bankers say, the conservative GOP House would hold its nose for Trump or Cruz rather than select a pro-gun control, pro-choice environmental activist as the next president.

“‘If he runs with Hillary in the race he could wind up being the guy responsible for making Donald Trump president and he doesn’t like Trump at all — I don’t think he wants to go down in history as being the guy who elected Trump,’ said one senior investment banker at a bulge bracket firm. ‘But he’s got more than enough money to move forward now and buy himself the option to run if there appears to be a real window for him.’” 

RUBIO TO GET JEB MONEY? — One top Bush fundraiser emails: “Not clear Jeb support and money all goes to Marco. Kasich gets a chunk, some sits on sidelines and some actually goes to Cruz.”

A SECOND JEB DONOR however emails that “just about all” of Bush’s financial industry support will move to Rubio.

INSIDE THE JEB FAIL — POLTICO’s Eli Stokols: Jeb Bush, the Republican establishment’s last, best hope, began his 2016 campaign rationally enough, with a painstakingly collated operational blueprint his team called, with NFL swagger, ‘The Playbook.’ On page after page kept safe in a binder, the playbook laid out a strategy for a race his advisers were certain would be played on Bush’s terms — an updated, if familiar version of previous Bush family campaigns where cash, organization and a Republican electorate ultimately committed to an electable center-right candidate would prevail.

“The playbook, hatched by Sally Bradshaw, Mike Murphy and a handful of other Bush confidants in dozens of meetings during the first half of 2015 and described to POLITICO by some of Bush’s closest and most influential supporters, appealed to the Bush family penchant for shock-and-awe strategy. … The plan roundly underestimated threats: Bradshaw, his closest adviser and longtime defender … told at least one campaign aide that Marco Rubio wouldn’t challenge Bush. … Most critically, the playbook, people who have read it tell POLITICO, contained nothing about Donald Trump, who would spend the next excruciating year turning Bush into his personal patrician piñata” 

MM STATE OF THE RACE — Clinton’s win in Nevada (and likely victory in South Carolina this Saturday) put her back on track as the likely nominee. Sanders has a chance in a couple of the Super Tuesday states (Vermont, Colorado, Massachusetts and Minnesota) but Clinton is likely to start stacking up an insurmountable delegate lead. On the GOP side, it’s a three-person race between Trump, Rubio and Cruz. The trouble is neither Cruz nor Rubio is likely to get a clean shot at Trump — where they could beat him — anytime soon, if at all. Cruz needs to win his home state Texas on Super Tuesday to stay in the race. But will he drop out even if he loses there? He’s not exactly friendly to the party establishment.

Rubio’s biggest test comes March 15th when Florida votes. If he can’t beat Trump in his home state it’s hard to see him ever knocking off the billionaire real estate mogul. John Kasich will also keep hanging around through at least March 15th when his home state of Ohio votes, denying establishment votes to Rubio. And Ben Carson seems unlikely to ever leave the race despite having no chance of winning. And sure, the race could go all the way to convention but if Trump has a clear delegate lead, how could the GOP deny him the nomination without guaranteeing Trump runs as a third party candidate, handing the race the Clinton?

DRIVING THE WEEK — Nevada GOP caucuses on Tuesday. Nobody really knows what’s going to happen (more on which below) but Trump probably wins … Treasury Secretary Jack Lew travels to Shanghai, China for the G-20 Finance Ministers and Central Bank Governors Meeting on February 26-27 … House Ways and Means has a hearing at 10:00 a.m. Wednesday on the Global Tax Environment in 2016 and Implications for International Tax Reform … House Financial Services subcommittee has a hearing at 10:00 a.m. Wednesday on “The Impact of the Dodd-Frank Act and Basel III on the Fixed Income Market and Securitizations” … SEC has a meeting at 9:30 a.m. Thursday on small and emerging companies … House Agriculture subcommittee has a hearing at 10:00 a.m. Thursday on review the G-20 swap data reporting goals … House Natural Resources Committee has a hearing Thursday at 10:00 a.m. on “The U.S. Department of the Treasury’s Analysis of the Situation in Puerto Rico” … Case-Shiller home prices at 9:00 a.m. Tuesday expected to rise 0.9 percent … Consumer confidence at 10:00 a.m. Tuesday expected to dip to 97.3 from 98.1 …

ALSO THIS WEEK: MILLENNIALS AND MONEY — Edelman hosts an event Wednesday at 8 a.m. on millennial finances

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES  Patrick Temple-West on the SEC’s defense of its in-house court  and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 info@politicopro.com

THIS WEEK ON OFF MESSAGE — “If Don King had been born white he’d be Donald Trump … ” Rev. Al Sharpton talks with Glenn Thrush about what drives Donald Trump in today’s episode of the Off Message podcast. Sharpton also discusses Bernie Sanders’ Brooklyn roots and his record on race, and what it’ll take for one of the candidates to receive his endorsement. Plus: he weighs in on Black Lives Matter and evaluates the Obama administration on criminal justice. Listen to the full interview and get every episode by subscribing to the podcast on iTunes http://apple.co/1PVPVeq or SoundCloud 

MORE MARKET MADNESS AHEAD? — Mohamed A. El-Erian on Bloomberg View: “Last week, global equity investors got a much-needed reprieve from volatile, loss-inflicting markets. But rather than signaling the start of a calmer market phase, this may well prove a prelude to renewed unsettling volatility in the weeks ahead. … [C]orporate earnings will be further challenged by continued signs of spreading global economic weakness and a persistent inability by governments to deliver the required policy responses. …

“[T]he continued ability of central bank to repress financial volatility is now subject to increasing doubt … [I]t would appear from data about the flow of funds that markets still need to reprice considerably lower to find the anchoring inflow of significant patient capital. Until these three factors change, occasional periods of market calm … are likely to prove frustratingly short”

** A message from the Insured Retirement Institute: Washington can make the difference so that all Americans can achieve a secure and dignified retirement. The time has come to adopt a comprehensive retirement security agenda that promotes access to financial advice, workplace retirement plans, and retirement income that cannot be outlived. Learn more at http://irionline.org/agenda. **

NEVADA COULD BE A MESS — POLITICO’s Elena Schneider: “[O]n the eve of Tuesday evening’s GOP caucus, no one has a firm sense of who’s winning here. And worse, there’s an undercurrent of nervousness about the prospect of a caucus calamity. … Republican campaigns and state operatives point to a number of factors creating the cloud of confusion: a cash-poor state party in disarray, a public unaccustomed to the caucus process and a state that’s notoriously difficult to poll” 

WHY DOESN’T RUBIO TALK ABOUT HIS RETIREMENT PLAN? — Slate’s Helaine Olen: “Rubio has one very good, potentially very effective financial idea — one that he barely discusses. That would be opening up the federal government’s Thrift Savings Plan to Americans who lack a workplace retirement plan of their own. … It is one of the most efficient savings plans in America. … Rubio’s suggestion is such a good idea that it actually has some bipartisan support.” 

BORIS BACKS BREXIT — WSJ’s Jenny Gross: “Boris Johnson, London’s mayor and one of the U.K.’s most prominent politicians, said he would campaign for a British exit from the European Union, delivering a blow to Prime Minister David Cameron as he ramps up his push to keep the U.K. in the bloc. The move by Mr. Johnson — a popular figure long thought of as a contender to become prime minister one day — makes him the most high-profile politician to back the ‘leave’ campaign ahead of a referendum, now set for June 23, on the U.K.’s membership in the 28-country bloc.

“Mr. Johnson said Sunday that his decision to break with Mr. Cameron, a fellow Conservative, involved ‘a great deal of heartache.’ But he said that ultimately the EU was eroding Britain’s sovereignty and that the prime minister’s deal hadn’t fundamentally changed the country’s relationship with the EU. ‘I want a better deal for the people of this country: To save them money and to take back control’ Mr. Johnson said outside his London home.” 

FED GETS TOUGH ON STRESS TESTS — FT’s Ben McLannahan: “The biggest US banks are bracing for a tougher round of stress tests from the Federal Reserve, which could crimp their plans for higher dividends and share buybacks. The two-part exam … is designed to assess whether banks have enough loss-absorbing capital to keep trading through a shock to the system similar to the collapse of investment bank Lehman Brothers in 2008. The basic framework for this year’s test was toughened up last month, with the Fed assuming bigger falls in unemployment, a deeper trough in Europe and negative short-term interest rates throughout the nine-quarter planning horizon.

“The chief US bank regulator then said last week it would look more critically at operational risks, assuming bigger hits from events such as class-action lawsuits, a rogue trader or a major cyber security breach. As a result, banks are likely to be wary when asking the Fed for permission to return capital through dividends and buybacks … The stress tests have become the Fed’s main tool for keeping the big banks in check, forcing them to put every part of their books through the same drill.”

BIG WEEK FOR THE FED — Reuters: “With next week’s calendar full of economic data releases and speeches by economic policymakers, investors have been poised to watch the Federal Reserve for clues about the U.S. central bank’s next move, but an unexpectedly hot reading on inflation on Friday will further sharpen that focus. After coming into 2016 with an expectation of three or four interest rate hikes through the year, market participants recently were viewing the Fed as likely raising interest rates once, if at all, in light of weak inflation and global volatility.

“But Friday’s data showed the core consumer price index (CPI ) … rose in January by the most in nearly 4-1/2 years to a 2.2 percent annualized rate. It drew particular attention as the number was above the Fed’s 2.0 percent target, though it is not the central bank’s benchmark inflation measure. The uptick in price pressures has already shifted the market’s expectations on the Fed’s next move. .. The dollar rose alongside Treasury yields shortly after the data, as markets saw the higher inflation as nudging the Fed toward tightening policy. The euro hit its lowest since Feb. 3.”

BANKS BOOST TREASURY HOLDINGS — Bloomberg: “Wall Street’s biggest banks boosted their Treasury holdings to the highest level in more than two years, and one of them says that’s a warning sign for the market. The 22 primary dealers including Goldman Sachs Group Inc. and Citigroup Inc. that underwrite the U.S. debt and make a market in the securities held $113.5 billion of Treasuries in the week ended Feb. 10 … . The amount is the most since October 2013. The figures suggest investors are unloading securities on to the Wall Street banks, which are having trouble reselling the bonds, according to Nomura Holdings Inc., one of the dealers.” 

LEW CHINA TRIP PREP — Treasury Under Secretary Nathan Sheets on Medium: “We have long known that China’s move from an economy dependent on manufacturing and investment toward one more reliant on services and household consumption would not be easy. But the transition is necessary for the economy to rebalance toward more sustainable engines of demand.

“We continue to believe that if China implements the market-based economic reforms it has committed to, it has the necessary tools to support domestic demand and succeed in this economic transition. It is important for the Chinese to follow through on those commitments and to clearly communicate their actions as they do” 

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** A message from the Insured Retirement Institute: Americans are living longer, which often means needing to fund a longer retirement. At the same time, they are more responsible for planning and saving for their retirement years. These challenges are placing a squeeze on American families, but Washington can make the difference so that all Americans can achieve a secure and dignified retirement. The time has come to adopt a comprehensive retirement security agenda that protects access to financial advice, preserves tax incentives for retirement savings, expands access to workplace retirement plans, and promotes retirement income that cannot be outlived. Learn more at

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