WSJ What’s News - Trump-Backed Spending Bill Fails in the House

Episode Date: December 20, 2024

A.M. Edition for Dec. 20. Most Democrats and several dozen Republicans join ranks to reject a revised spending measure, putting the U.S. on course for a government shutdown at midnight. Plus, Donald Trump threatens the EU with tariffs if it fails to increase U.S. energy imports. And Heard on the Street columnist Jon Sindreu explains the difference between being ultrarich, rich or merely affluent … and why that matters for banks trying to make their wealth-management offerings more inclusive. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Amazon Q Business is the generative AI assistant from AWS because business can be slow, like wading through mud. But Amazon Q helps streamline work so tasks like summarizing monthly results can be done in no time. Learn what Amazon Q Business can do for you at aws.com slash learn more. The House rejects a Trump-backed spending plan with a government shutdown just hours away, dealing a blow to Speaker Mike Johnson. We will regroup and we will come up with another solution, so stay tuned.

Plus, Donald Trump threatens the EU with tariffs if it doesn't increase U.S. 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 U.S. 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 9-11 healthcare funding, and to address Trump's demands, would have suspended 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 two-thirds 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 shape. To take this bill yesterday and congratulate yourself because it's shorter in pages, but increases the debt by five trillion dollars is asinine. And that's precisely what Republicans are doing. I'm 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. 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 U.S. 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 U.S. 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, U.S. 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.

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 a 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 US, 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. U.S. diplomats will also be seeking information on the whereabouts of Austin Tice, an American journalist who went missing in Syria 12 years ago. The U.S. Food and Drug Administration says that a shortage of obesity and diabetes drugs

ZepPound and MoundJarro, 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 Roe that had jumped into the market by selling cheaper versions of the drugs online. Meanwhile, Wegovi 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 November 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? Columnist John Sindreo takes on that question after the break. This is an ad from BetterHelp. This holiday season, do something for a special person in your life. You. Give yourself the gift of better mental health. BetterHelp online therapy connects you with a qualified therapist via phone, video, or live chat. It's convenient and affordable and can be done from the comfort of your own home. Having someone to talk to is truly a gift, especially during the holidays.

Visit BetterHelp.com to learn more and save 10% off your first month. That's BetterHelp, H-E-L-P dot com. 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 Cendrejo has been looking into that pivot to cater to the so-called mass affluent wealth market, and he joins me now with more. John, before we get deeper into this, can 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 for this, are there not? 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 a hundred thousand and a million dollars,

then you're mass affluent. If you're above that, between a million and 10 million, you're high net worth. And if you're more than 10 million, then you're ultra high net worth. Right. And you write that while this mass affluent cohort is large, about 35% of US households, according to Equifax, it accounts for 27% of investable wealth, sizable until you compare it with the high and ultra-high net worth category, 10% of households, but which controls 70% of wealth. 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. 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. A robo-advisor being not actually a person who's going to give you advice, but kind of an AI or something like that? 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 one actually, it has a 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. All right, so that's the idea, but as you write in practice, there are risks to jumping on that bandwagon.

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 bifurcating market, right? On the one side, increasingly so,

it's 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 it's the scale might not deliver, but also be careful with showing how the sausage is made because people might prefer the robot doing it. 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 businesses, ultimately a good thing. 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 is, 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. I've been speaking to Wall Street Journal, heard on the street columnist, John Sindreo. John, fascinating stuff. Thanks so much. Thank you.

And that's it for What's News for Friday morning. Today's show was produced by Kate Bulevent 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. Thanks for watching!