Trump-Backed Spending Bill Fails in the House

Summary

WSJ What’s News: Trump-Backed Spending Bill Fails in the House
Episode Release Date: December 20, 2024
Host: Luke Vargas, The Wall Street Journal

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1. House Rejects Trump-Backed Spending Bill

In a pivotal development, the U.S. House of Representatives declined to pass a Trump-backed government spending bill, escalating the threat of a government shutdown mere hours before the deadline. The revised bill, introduced late Friday night, aimed to extend government funding for three months, allocating over $100 billion specifically for disaster relief and aid to farmers. However, it notably excluded several provisions, including new regulations on pharmacy benefit managers, 911 health care funding, and proposed to suspend the nation's borrowing limit for two years—key demands from former President Donald Trump.

Key Points:

• The bill fell short, failing to secure even a simple majority within the GOP-controlled chamber.
• A significant bipartisan effort was necessary to pass the bill through special fast track procedures, requiring a 2/3 majority, which the proposal did not achieve.
• Nearly all Democrats and 38 Republicans opposed the legislation, highlighting deep divisions within the party.

Notable Quote:

"Take this bill yesterday and congratulate yourself because it's shorter in pages but increases the debt by $5 trillion is asinine. And that's precisely what Republicans are doing. I am absolutely sickened by a party that campaigns on fiscal responsibility and has the temerity to go forward to the American people and say you think this is fiscally responsible."
— Rep. Chip Roy, Texas (02:01)

Speaker Attribution:

• Luke Vargas (Host): Provides the overview and context of the bill’s failure.
• Rep. Chip Roy: Criticizes the inclusion of debt ceiling language and the party’s fiscal responsibility claims.

2. Speaker and Leadership Reactions

Following the bill’s rejection, Democratic Senate Majority Leader Chuck Schumer welcomed the decision, advocating for a return to the previously derailed bipartisan funding agreement. Simultaneously, discussions emerged about a potential one-week funding extension to postpone a shutdown beyond Christmas, though such a move would require bipartisan support.

Notable Quote:

"It's unclear what the next steps for the bill will be."
— Luke Vargas (02:27)

3. Trump’s Tariff Threats Towards the European Union

In an assertive move, Donald Trump issued a warning to the European Union, threatening to impose tariffs unless the bloc increases its imports of American oil and gas. This stance underscores Trump's focus on addressing the U.S. trade imbalance with the EU. Despite the EU being the primary market for U.S. crude oil and liquefied natural gas, it continues to maintain a significant trade surplus, with exports to the U.S. exceeding imports by over $20 billion in October.

Notable Quote:

"Donald Trump is warning the European Union that it faces tariffs if it doesn't increase purchases of American oil and gas..."
— Luke Vargas (02:34)

Additional Insights:

• Omar Abdel Baki, WSJ Middle East Correspondent: Discussed U.S. diplomatic engagements in Syria, emphasizing the need for a non-sectarian governance process led by Syrians to maintain regional stability and counteract influences from hostile state actors like Iran and Russia.

Notable Quote:

"They are probably going to be discussing a list of expectations for how Syria should be governed in a non-sectarian way..."
— Omar Abdel Baki (03:45)

4. FDA Drug Shortage for Obesity and Diabetes Medications

The U.S. Food and Drug Administration (FDA) announced the termination of shortages for obesity and diabetes medications Zeppbound and Mounjaro, both manufactured by Eli Lilly. Consequently, companies that previously distributed generic versions of these drugs, including compounding pharmacies and telehealth firms like HIMS and RO, must cease their activities within the coming months. However, Wegovy and Ozempic, products from Eli Lilly’s competitor Novo Nordisk, remain on the FDA’s drug shortage list, with Novo Nordisk actively contesting their removal.

5. Market News and Financial Updates

• FedEx Spin-Off: Shares of FedEx surged in after-hours trading following the announcement of its plan to spin off its freight trucking division, which generated over $9 billion in revenue last fiscal year. The company aims to complete this carve-out within 18 months.

• Stock Futures and Government Shutdown Concerns: Stock futures are slightly declining as investors remain cautious about the impending government shutdown.

• Federal Reserve’s Inflation Gauge: The Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures (PCE) index, is expected to rise by 0.2% month-over-month, consistent with October's figures.

6. Wealth Management Shifts: UBS Targets Mass Affluent Market

In a significant strategic pivot, UBS, a leading global bank renowned for managing the assets of ultra-high-net-worth individuals, is attempting to democratize its wealth management offerings. This move targets the "mass affluent" segment, which comprises approximately 35% of U.S. households and controls 27% of investable wealth. This shift aims to capture a broader customer base beyond the traditional high and ultra-high-net-worth clients, who account for 10% of households but hold 70% of wealth.

Discussion Highlights:

• John Cindreo, WSJ Columnist: Explores the challenges and potential profitability of UBS’s strategy to cater to the mass affluent market. He discusses industry definitions of wealth categories, noting that while the mass affluent segment is substantial, it lags behind the wealthy in terms of total wealth control.

Notable Quotes:

"The mass affluent cohort is large, about 35% of U.S. households, according to Equifax, it accounts for 27% of investable wealth."
— John Cindreo (07:45)

"Right. It's a very bifurcated market. On the one side, increasingly, so is all digital automated. On the other side, it's all human contact."
— Financial Expert (09:16)

Insights:

• UBS's initiative reflects a broader industry trend where traditional banks face competition from robo-advisors like Wealthfront and Betterment, which offer automated financial planning and tax optimization services at lower fees.
• The challenge for UBS lies in balancing automated services with personalized human advisory, ensuring profitability despite lower fee structures compared to traditional wealth management models.
• The potential market disruption poses risks, as consumer preferences may favor lower-cost, automated solutions over higher-fee, advisor-led services.

Conclusion by John Cindreo:

"But for regular consumers, the fact that banks, I guess, are trying harder to compete for our business is ultimately a good thing."
— John Cindreo (10:34)

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Production Credits:
Today's show was produced by Kate Bullivant with supervising producer Christina Rocca.

Closing Remarks:
Luke Vargas wrapped up the episode by highlighting the ongoing efforts and challenges within the wealth management sector, emphasizing the benefits to consumers from increased competition and innovation.

Notable Quotes:

"Let's unify the entire wealth market. Let's grow there. It's a great market for them because wealth management does not have big capital requirements..."
— Financial Expert (10:47)

"John, fascinating stuff."
— John Cindreo (11:45)

"Thanks so much."
— Financial Expert (11:46)

"And that's it for what's news for Friday morning."
— Luke Vargas (11:47)

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Upcoming Episodes: Stay tuned for next week’s episodes, including the What’s News in Markets wrap-up on Saturday and the What’s News Sunday deep dive for more in-depth analysis on global and political developments affecting the markets.

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This summary provides an overview of the key discussions and insights from the December 20, 2024 episode of WSJ What’s News, ensuring listeners and non-listeners alike are informed of the critical events and analyses presented.

Transcript

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[Luke Vargas]

The House Rejects a Trump backed spending plan with a government shutdown just hours away dealing a blow to Speaker Mike Johnson.

[Chip Roy]

We will regroup and we will come up with another solution, so stay tuned.

[John Cindreo]

Plus, Donald Trump threatens the EU with.

[Luke Vargas]

Tariffs if it doesn't increase US Energy imports and why a wealth manager is heading down market in search of new business It's Friday, December 20th. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of what's news, the top headlines and business stories moving your world today. The US House of Representatives last night rejected a slimmed down government spending bill endorsed by President Elect Donald Trump. The revised legislation to avoid a shutdown just after midnight tonight, would have extended government funding for three months and allocated more than $100 billion for disaster relief and aid for farmers. It also stripped out a range of other provisions, including new rules on pharmacy benefit managers and 911 health care funding, and to address Trump's demands would have susp the nation's borrowing limit for two years. However, the bill came up far short of winning even a simple majority in the GOP controlled chamber, let alone the 2/3 supermajority needed to pass through special fast track procedures, with almost all Democrats and 38 Republicans voting against it. Among them was Texas Republican Representative Chip Roy, who criticized the last minute inclusion of language raising the debt ceiling, something that hadn't figured in weeks of talks as the legislation took shots shape to.

[Chip Roy]

Take this bill yesterday and congratulate yourself because it's shorter in pages but increases the debt by $5 trillion is asinine. And that's precisely what Republicans are doing. I am absolutely sickened by a party that campaigns on fiscal responsibility and has the temerity to go forward to the American people and say you think this is fiscally responsible.

[Luke Vargas]

It's unclear what the next steps for the bill will be. Democratic Senate Majority Leader Chuck Schumer said he welcomed the bill's defeat and encouraged a return to the bipartisan funding agreement that Trump torpedoed earlier this week. Separately, talk is circulating among lawmakers about a possible week long funding extension that would push a shutdown past Christmas, though that would also require bipartisan support. Meanwhile, Donald Trump is warning the European Union that it faces tariffs if it doesn't increase purchases of American oil and gas, citing the bloc's trade imbalance with the US as his apparent rationale for the threat, which he posted on Truth Social today. The EU is currently the main destination for American crude oil and liquefied natural gas. However, the bloc continues to export to the US significantly more than it imports, with the difference topping $20 billion in October. An EU spokesperson didn't immediately respond to a request for comment. For the first time since the fall of the Assad regime, US diplomats have arrived in Syria to hold talks with the country's new leaders, the rebel group known as hts. Journal Middle east correspondent Omar Abdel Baki explains how the US is approaching the visit.

[Omar Abdel Baki]

They are probably going to be discussing a list of expectations for how Syria should be governed in a non sectarian way and sort of that it should be a Syrian led process. The US and other Western states understand they need to be in the mix if they want to prevent a sort of unraveling of an already fragile status quo and also secure its own influence on the ground and make sure that they can counter other hostile state actors to the U.S. like Iran, like Russia. So they see it as an ample opportunity to position themselves diplomatically to make sure that they have influence in Syria.

[Luke Vargas]

US diplomats will also be seeking information on the whereabouts of Austin Tice, an American journalist who went missing in Syria 12 years ago. The US Food and Drug Administration says that a shortage of obesity and diabetes drugs Zeppbound and Mounjaro, made by Eli Lilly, has ended. As a result, companies that had been selling off brand copies of the drugs must stop doing so in the coming months. That includes so called compounding pharmacies and telehealth companies like HIMS and RO that had jumped into the market by selling cheaper versions of the drugs online. Meanwhile, Wegovy and Ozempic, which are made by Eli Lilly rival Novo Nordisk, remain on the FDA's drug shortage list, but the company is publicly fighting to be removed. And in market news Today, shares in FedEx have jumped in off hours trading after the delivery giant announced its plans to spin off its freight trucking division. The business brought in more than $9 billion in revenue in the last fiscal year, and FedEx said the goal is to complete the carve out within 18 months. Stock futures are edging lower as investors grapple with the possibility of a government shutdown this weekend. And the Federal Reserve's preferred inflation gauge is due this morning, with economists forecasting the Personal Consumption expenditures index rose 0.2% on the month, matching October's rate. Coming up, a bank known for helping the world's ultra rich manage their assets wants to democratize its offerings. But can it be a profitable gambit?

[John Cindreo]

Columnist John Cindreo takes on that question after the break.

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[Luke Vargas]

Are you ultra rich, rich or affluent? We're not trying to pry here. Instead we're asking because it's a question that the likes of UBS are curious to know your answer to as they try to scale up their wealth management businesses. Journal Heard on the street columnist John Cendreo has been looking into that pivot to cater to the so called mass affluent wealth market and he joins me now with more.

[John Cindreo]

John, before we get deeper into this, could we just start by defining some terms briefly? I've always kind of operated on the assumption that if you are a high net worth individual, you kind of know it because your bank's been bugging you, pitching all sorts of fancy services. But there are some common industry thresholds.

[Luke Vargas]

For this, are there not?

[Financial Expert]

So there's types of rich, for example, credit reporting agency Equifax, we could use their definition, which is pretty common. So they say that if you have between 100,000 and a million dollars, then you are mass affluent. If you're above that between a million and ten million, you're high net worth. And if you're more than 10 million, then you're ultra high net worth.

[Chip Roy]

Right.

[John Cindreo]

And you write that while this mass.

[Luke Vargas]

Affluent cohort is large, about 35% of U.S. households, according to Equifax, it accounts.

[John Cindreo]

For 27% of investable wealth. Sizable until you compare it with the.

[Luke Vargas]

High and ultra high net worth category, 10% of households, but which controls 70% of wealth.

[John Cindreo]

So you can see there why banks have traditionally focused on that top tier. So it's notable then that UBS signaled last week it wants to head a bit down market.

[Financial Expert]

Yeah, it's telling because they have a history of pivoting a little bit. So the previous CEO of ubs, Ralph Hammers, he was pretty obsessed with what he called the Netflix of finance. They wanted to create a rich digital environment for their wealth clients that would appeal to everyone. And as part of that, he announced in 2022 the purchase of Wealthfront, which is this US robo advisor.

[John Cindreo]

A robo advisor being not actually a person who's going to give you advice, but kind of an AI or something like that.

[Financial Expert]

Yeah, Betterment Wealthfront There are these upstarts that basically digitalize everything and automate everything. They do tax optimization, financial planning for you. So they're pretty sophisticated. And it also should be said that ubs, even though it's a huge player globally, the main 1 actually it has 12 profit margin. This is low, Right. Like you see even slightly smaller shops having better profit margins. And you know, just for context, the American wealth business of Morgan Stanley has a 29% pre tax profit margin. So the idea in wealth management is that as you scale up, it's easier to be more profitable.

[John Cindreo]

All right, so that's the idea.

[Luke Vargas]

But as you write in practice, there.

[John Cindreo]

Are risks to jumping on that bandwagon.

[Financial Expert]

Yes, it's a technological rat race. It's very expensive to be good in this area. And banks have traditionally not been great at this. Right. The moment that you move into the world of oh yeah, we could automate this for you. That's a dangerous one for banks. It's a very bifurcated market. Right. On the one side, increasingly, so is all digital automated. On the other side, it's all human contact. We're available 24 7. We're doing this for you in a bespoke way if you try and mix these things. The idea that banks who try and do this have always had is, well, we're onboarding younger, up and coming people who will then be very rich. If I attract them first through my digital offering, eventually I'll sell them this higher 1% fee service that involves financial advisors. So maybe this could work. But I think it's just as likely that at some point these people will be like, well, I was paying an 0.3%, 0.4% fee for a perfectly good robo advisor. Maybe for some bit of my wealth I will entrust the bank with this service, but most of my wallet will be split and it will be split in a lower fee service. So I think the scale might not deliver. But also be careful with showing how the sausage is made because people might prefer the robot doing it.

[John Cindreo]

I mean, it sounds like it's then a big open question whether this is going to ultimately pay off for the likes of ubs. But for regular consumers, the fact that banks, I guess, are trying harder to compete for our business is ultimately a good thing.

[Financial Expert]

It is a good thing, absolutely. And a big issue in wealth management from the consumer point of view is that, yeah, maybe the services get a bit better the more money you have. Do they get that much better to be paying out of a percentage of your assets? So that's why these upstarts have an ability to, I think, eat market share. The banks know this. So a reaction to this as well. Let's unify the entire wealth market. Let's grow there. It's a great market for them because wealth management does not have big capital requirements, unlike investment banking. And today's banking world is extremely regulated. So it's a very attractive business. But at the same time, it's also exposed to disruption, I would say. And that's a dangerous thing for a service that is still so traditional. So financial advisor led and so based on the idea that, yeah, we'll do it for you and we have this point of contact and that's why we charge you big bucks.

[John Cindreo]

I've been speaking to Wall Street Journal.

[Luke Vargas]

Heard on the street columnist John Cindreo.

[John Cindreo]

John, fascinating stuff.

[Luke Vargas]

Thanks so much.

[Financial Expert]

Thank you.

[Luke Vargas]

And that's it for what's news for Friday morning. Today's show was produced by Kate Bullivant with supervising producer Christina Rocca. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Otherwise, have a great weekend and thanks for listening.

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