Biden’s economy is steady. Americans don’t believe he’ll keep it that way.

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The U.S. has somehow dodged a recession despite a backbreaking sequence of Federal Reserve rate hikes, upheaval at regional banks and a sharp sell-off in the stock market last fall. If President Joe Biden wants credit for avoiding the worst — at least, for now — Americans aren’t giving it to him.

A new poll from Gallup this morning found that just 35 percent of all Americans have confidence in Biden’s handling of the economy, down five percentage points from last year. Nearly half have “no confidence” in his abilities when it comes to the economy. Faith in Fed Chair Jerome Powell as well as Democratic and Republican congressional leaders also tumbled below 40 percent — the first time that’s happened since Gallup began polling this question in 2001.

“None of these leaders engenders much confidence now,” wrote Gallup’s senior editor Jeffrey Jones. While their marks could improve if the economy stays afloat, they could also erode further if the economy falls into a recession later this year, Jones added.

A downturn appears likely as banks curtail loans following the failures of Silicon Valley Bank, Signature Bank and First Republic over the last two months. Shares of other regional banks — whose balance sheets are less reliant on flighty uninsured deposits — have fallen sharply in recent weeks.

Those wobbles were bound to effect credit markets, and the latest survey of lending standards by the Fed — which only accounts for activity through the end of March, before First Republic fell — found that banks are tightening their purse strings as demand slackens for new financing. There is still “heavy concern across Wall Street and among many economists that the Fed’s rapid and intense campaign of rate hikes meant to battle inflation will slam the brakes on the economy hard enough to create a recession,” Ben White reported on Monday.

Another factor, of course, is the debt limit. Big banks and financiers have been clanging alarms about what would occur if markets lose faith in the government’s ability to pay its debts for months. The so-called X-Date for when that would happen could arrive as soon as early June, the Bipartisan Policy Center reported early this morning. Treasury and the researchers at several big banks have published similar estimates.

Biden will meet with House Speaker Kevin McCarthy (R-Calif.), Senate Majority Leader Chuck Schumer (D-N.Y.), Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader Hakeem Jeffries (D-N.Y.) later this afternoon to kick off negotiations. If policymakers don’t broker a deal before the end of the month, each passing day will become a game of “Russian Roulette with the full faith and credit of the United States,” said BPC’s Director of Economic Policy Shai Akabas.

“Neither we nor Treasury can know with any certainty when the X-date will arrive, even a couple days in advance,” Akabas told reporters in a briefing Monday.

IT’S TUESDAY — What should we be looking out for with debt limit meeting? Send tips, gossip and suggestions to Sam at [email protected] and Zach at [email protected].

Driving the day

Federal Reserve Board Governor Philip Jefferson will address the Atlanta Black Chambers at 8:30 a.m. … Deputy Assistant Secretary of State for China and Taiwan Rick Waters will speak at a Chamber of Commerce event about China at 9:30 a.m. … The American Enterprise Institute hosts an event on the banking turmoil at 10 a.m. … New York Fed President John Williams speaks at 12:05 p.m. …

You figure it out — Bloomberg’s Steven Dennis: “Senate Republican leader Mitch McConnell warned he won’t come to President Joe Biden’s rescue on the debt limit by breaking a partisan deadlock as a catastrophic US default looms.”

— Our Nancy Vu: “The White House has a new line of attack against the House GOP’s debt bill: that it would worsen the fentanyl crisis.”

What killed the TD’s First Horizon deal? — The WSJ’s By Justin Baer and Vipal Monga: “Toronto-Dominion Bank’s handling of suspicious customer transactions was behind regulators’ refusal to bless the Canadian lender’s $13.4 billion bid to buy First Horizon, people familiar with the matter said … The regulators’ concerns stemmed from the way TD handled unusual transactions in recent years, and the speed at which some of them were brought to the attention of U.S. authorities.”

ICYMI — From me and Ben White: “‘Really weak option’: Wall Street sours on DeSantis as Trump challenger”

— Have any more gossip about how Wall Street is thinking about 2024? My tip line is open.

Regulatory Corner

Golden State bank supervision — Our Lara Korte: “Regulators missed some of the warning signs that led to the collapse of Silicon Valley Bank, according to a report released Monday by the California Department of Financial Protection and Innovation.”

MFA: Don’t ban shorts — The Managed Funds Association on Monday doubled down on claims that a temporary prohibition on short selling bank stocks would do more harm than good.In a letter to SEC Chair Gary Gensler, the Washington-based industry organization urged caution before moving forward with a ban that would “increase market volatility, hurt price discovery, and delay a recovery in regional banks’ prices.”

Bank groups have been calling on the agency to take a hard look at short sellers’ role in the sector’s downturn. Agency officials have told POLITICO that the SEC isn’t considering a ban on short sales at this time.

In the meantime, pressure on regional banking stocks appears to have subsided after last week’s barrage from short sellers. PacWest Bancorp and Western Alliance, two of the banks at the center of the storm, climbed on Monday.


More pressure on Gensler over private funds — Congressional Black Caucus Chair Steven Horsford (D-Nev.) has written a new comment letter urging Gensler to redo is cost-benefit analysis of a wide-reaching private funds rule that would force buyout firms and hedge funds to provide regular fee and expense reports to their investors. The letter, which is being circulated by the private equity lobby, notes that lawmakers already included language in last year’s $1.7 trillion government funding bill encouraging the agency to reexamine how the rule could impact smaller investment managers, particularly those owned by women and minorities.

Blueprint — Better Markets CEO Dennis Kelleher sent MM an advance look at the progressive group’s 10 point policy framework to strengthen the financial system. Point one? Bolstering capital requirements.

Crypto

Coinbase — Bloomberg’s Sidhartha Shukla, Manus Cranny and Yueqi Yang: “Crypto exchange Coinbase Global Inc., at loggerheads with regulators in the US, is considering the United Arab Emirates to be an international hub. “We are looking for a home to set up an international hub that could serve the long tail of countries in the world,” Chief Executive Officer Brian Armstrong told Bloomberg TV.”

Slowdown — Meanwhile, Bloomberg’s Shukla and Suvashree Ghosh report that Binance – the world’s largest crypto exchange and current subject of a CFTC enforcement action — had to suspend Bitcoin withdrawals twice late Sunday and early Monday.

— The WSJ’s Peter Santilli, Caitlin Ostroff and Dave Michaels: “U.S. Exchanges List More Than a Dozen Cryptos the SEC Says Are Illegal to Sell”

Apollo’s crypto play — Coindesk’s Ian Allison reports that the private equity firm Apollo Global Management is participating in a bid to acquire the bankrupt cryptocurrency lender Celsius.