Kudlow vs. Mnuchin (White House Divided Over Stimulus?)

This is my stimulus update for Friday, July 17th.

Second Stimulus Drama

We know that next week, the Senate is back in session, and we hope that Mitch McConnell will unveil the Republican stimulus relief bill next week so we can compare and contrast it to the Democrat’s HEROES Act that passed the House in May.

In terms of new stimulus news, is this drama that’s reportedly happening within the walls of the White House right now with respect to the next stimulus relief bill.

We know there’s been drama previously with Peter Navarro pointing out that $2 trillion dollar figure, and then some in the White House saying, “No, Navarro’s speaking for himself. He’s off his rocker.”

Well, apparently now, there is some drama between Treasury Secretary, Steven Mnuchin and White House Economic Advisor, Larry Kudlow.

Now, there was an article in Fox Business published by Charlie Gasparino yesterday.

Personally, I think it’s a little bit over the top. Mnuchin himself thinks it’s over the top. I’ll show you a tweet he tweeted just this morning later, but I want to go over this article first and just kind of set some context here.

Kudlow vs. Mnuchin Article

So yesterday, in Fox Business, Charlie Gasparino published this article titled, “Mnuchin, Kudlow in epic clash over next stimulus package.”

Apparently, he has sources for people with direct knowledge of the matter, anonymous sources, who have told him that a civil war is taking place inside the White House, pitting Treasury Secretary, Steven Mnuchin against National Economic Council Chief, Larry Kudlow, over stimulus.

According to this article, you have Kudlow in one corner championing payroll tax cuts, and we know that Trump wants payroll tax cuts as well.

In fact, just yesterday, a White House spokesperson said that the president has called on Congress to pass a payroll tax cut and he believes it must be part of any phase for stimulus package.

But apparently, you have Kudlow backing the payroll tax cuts here, along with the president, in one corner, and then you have Mnuchin in the other corner, who thinks that payroll tax cuts, that’s too extreme for Nancy Pelosi and won’t pass. So he’s just talking more about the Democratic things, like unemployment and stimulus checks.

This narrative is consistent with what we talked about a few weeks ago, when we talked about how many Republicans in Congress think that Steven Mnuchin, Treasury Secretary, plays a little bit too soft with Pelosi and the Democrats, which is why they thought that maybe Mike Pence, who plays a little more hardball in their opinion, would be better suited to lead the White House negotiations on the stimulus talks.

It doesn’t look like that happened. It looks like Steven Mnuchin is still the White House’s main guy with respect to stimulus negotiations.

According to this article, Mnuchin has been telling people he has to focus on a policy that Pelosi will agree to for the bill to ultimately pass and get funded. One GOP lobbyist poorly said, “This is getting a little personal.”

Kudlow looks at Mnuchin as a Wall Street type who hasn’t fought the good fight over tax cuts as he has since the Reagan years.

Mnuchin thinks Larry is being unrealistic, because there’s no way Nancy Pelosi will pass a tax cut and give the president that type of victory before November.

Mnuchin is seen as having something of an advantage, because he has the support of Ivanka Trump and Jared Kushner, while Kudlow seems to have more support from more hard nosed Republican members of Congress, like Tom Cotton.

Mnuchin has blocked out next week to be with lawmakers and hammer out a bill that could be voted on as soon as next Friday.

Now, this article seems a little bit over the top. It seems like it’s wanting to portray something.

It might even seem like a little bit of click baity, especially in light of this tweet that Steven Mnuchin just tweeted out this morning.

Steven Mnuchin tweeted “Larry Kudlow and I have been good friends and colleagues for years and work closely together. The idea that we are in a “civil war” is truly absurd.”

However, I do think that there is probably something of a riff going on, some of these factions within the White House.

I think Mnuchin is a lead negotiator on the deal and has to think about what the Democrats are going to say, while Kudlow can just wear his economist hat and just talk about an ideal world, because he’s not the one negotiating with Democrats, while Mnuchin has to deal kind of in reality what’s actually going to pass in the stimulus relief bill. That’s my take on this.

Wilbur Ross on Fox Business News

Well, Fox Business News talked to the Secretary of Commerce this morning about this issue. Here’s the clip.

Wilbur Ross: First of all, the important thing is that both Larry and Secretary Mnuchin agree we need to do more. The exact details, how much, what form, and how it goes, much less important than the agreement we must do more because a lot of things are coming to an end. The $600.00 supplemental unemployment, for example, is about to end. Well, we need to do something to replace that, and I think it’s a fine tuning detail whether it’s tax cuts or it’s direct paycheck to people.

The important thing is, the president knows we need more stimulus. He’s going to work very hard to achieve more stimulus to get the economy back to where it was, back to his great successes pre-Coronavirus.

Stuart: Commerce Secretary, Wilbur Ross, thanks very much for being with us this morning. We appreciate it always.

Wilbur Ross: Thank you, Stuart.

Now, something kind of weird in the statement by the Commerce Secretary is that “the exact details in the next stimulus bill, how much, what form, how it goes, is much less important than the agreement we must do more because a lot of things are coming to an end.”

I think that’s kind of a nonsense statement.

I think everybody agrees there should be more stimulus. The discussion about the details, how much, what form, is not less important than the agreement that we have to do something.

In fact, that’s what matters here, right? The devil’s in the details here.

Now, about the Mnuchin/Kudlow issue, he kind of leaves it open. He doesn’t really deny that Mnuchin and Kudlow are having some kind of a little brawl.

He just says, “First of all, the important thing is that both Larry and Secretary Mnuchin agree we need to do more.” Okay. He doesn’t deny that they disagree on things. He’s like, “Well, they both agree to do more.”

So this kind of hints to me that there is something going on between Kudlow and Mnuchin though. It doesn’t seem that it’s that severe as what the Fox Business News article would imply.

They probably just want the clicks.

Automatic Forgiveness for PPP?

Speaking Mnuchin, this morning, Mnuchin was testifying before the House Small Business Committee and he appeared to back a proposal from U.S. banks and others, who said that the PPP Program should see loans under $150,000.00 automatically turn into grants, i.e automatic forgiveness.

That would account for 86% of the roughly $4.9 million PPP loans issued to date, so that’s interesting.

That would be an interesting proposal. I mean, I would love it.

I got a PPP loan. It’d be great if it was just automatically forgiven.

My loan was under $150,000.00. I think that would help a lot of small businesses right now.

I don’t know if Democrats would necessarily go for this, because I know they think that there’s a lot of abuse in the PPP program, apparently not only among big businesses, but also maybe among small businesses, because they weren’t happy that all Mnuchin gave them was the names of businesses that got PPP loans of $150,000.00 or more.

Those beneath the $150,000.00, various demographic data was given, but not the specific names of the businesses themselves. So we’ll have to see what happens there, but maybe Democrats have a point with the PPP.

Yesterday, a 40 year old California man was arrested in Las Vegas after fraudulently obtaining $8.5 million dollars, $8.5 million dollars, and fraudulently obtained PPP loan money.

He spent it on risky stock trades and gambling in Las Vegas.

If some random dude can swindle the government out of $8.5 million dollars in this PPP program, maybe a little more oversight is needed.

Mortgage Rates

A little bit of economic news. So yesterday, Freddie Mac said the average rate on a 30 year fixed fell to 2.9%, its lowest level in the 50 years we’ve been keeping records on mortgage rates.

So that’s pretty spectacular. I know banks are being pretty tight fisted right now, but if you got a refi or a home purchase coming up, that could be some good news for you.