Inching Toward a Tax and Spending Compromise; The Fed’s Stock Trading Embarrassment

by Greg Valliere, AGF Management Ltd.

Inching Toward a Tax and Spending Deal; The Federal Reserve’s Stock Trading Embarrassment

TRENCH WARFARE: There are two fronts in the war to win passage of a massive social spending bill. Joe Biden indicated yesterday that he’s prepared to get involved in both battles.

THE OVER-RIDING ISSUE is the $3.5 trillion price tag and the inability to credibly pay for it. There’s widespread agreement, even among Democrats, that the bill will get a major haircut. Chuck Schumer and Nancy Pelosi have conceded in private that this social bill will get pared back; Biden knows it.

THE MEDIA HAS FOCUSED on moderate Sen. Joe Manchin, who wants no more than $1.5 trillion, but one other Democrat could scuttle the deal — moderate Sen. Kyrsten Sinema, who was profiled this morning in the Washington Post. She’s very engaged in negotiations but isn’t budging in her opposition to $3.5 trillion.

THE SECOND FRONT, which also may require active intervention by Biden, involves specific proposals that could stall the bill. We’re hearing that a deal can be reached on the state and local tax break, which will get hiked, and there’s a compromise brewing on the assumption of savings on Medicare drug costs.

BUT THERE ARE SEVERAL OTHER ISSUES — estate taxes, tobacco taxes, whether to fully extend the child tax credit, etc. — that will require extensive negotiations, which Biden will join. Our odds haven’t shifted: Chances of a $3.5 trillion bill, zero. Chances of a complete breakdown, 40%. Chances of a deal, with a major haircut, 60%.

* * * * *

JUST AS THE BIDEN ADMINISTRATION nears a decision on re-appointing Jerome Powell, the Fed Chairman faces a serious ethical issue — some Fed officials are active stock traders.

TWO FED PRESIDENTS, Eric Rosengren of Boston and Robert Kaplan of Dallas, said they would sell their holdings and asserted that their trading complied with Fed rules. If that’s accurate, then there may be a problem with the rules; some of Kaplan’s trades exceeded $1 million in value.

THE APPEARANCE OF A CONFLICT has Sen. Elizabeth Warren shocked — shocked !! — that there’s trading by Fed officials. She has demanded reforms, and now has a stronger case against the present leadership.

THIS CONTROVERSY IS THE LAST THING POWELL needs on his path to a second term. There’s an election next year, so members of Congress — on the left and right — will dig deep into stock trading by Fed officials. Powell has called for an internal investigation, and is still the favorite to get re-nominated, but frankly this is an embarrassment for the Fed and its squeaky-clean image.





The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit

©2021 AGF Management Limited. All rights reserved.

This post was first published at the AGF Perspectives Blog.

Previous Article

Tech Talk for Friday September 17th 2021

Next Article

What if Millennials and Baby Boomers are One and the Same?

Related Posts
Subscribe to notifications
Watch. Listen. Read. Raise your average.