How an undocumented immigrant rose at Goldman — Yellen beats back audit questions — DHS battle continues

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FIRST LOOK: HOW AN UNDOCUMENTED IMMIGRANT ROSE AT GOLDMAN — Bloomberg’s Max Abelson has a big piece in latest BusinessWeek about Julissa Arce who “had a lucrative career at Goldman Sachs in derivatives, climbing the ranks from intern to vice president. Arce’s colleagues had no idea she was an undocumented Mexican immigrant, living in constant fear that her green card and Social Security number would be revealed as fakes — she had bought them for a few hundred dollars in a stranger’s living room in Texas. …

“Arce, 31, was undocumented from the age of 14, joined Goldman Sachs in 2005, and succeeded in finance due to her talent and fierce determination. Despite background checks by one of the world’s most sophisticated companies, her secret went undiscovered” … When asked for comment on Arce’s story, Goldman Sachs CEO Lloyd Blankfein sent this statement: “Wouldn’t it be great if we could give a home to more of the talented young people who come to this country for an education and want to apply their energy and skills to supporting our economy?’ … Live at 6:30 a.m. http://bloom.bg/1DTVIzV

RAHM IN RUNOFF — POLITICO’s Kyle Cheney: “Despite a multi-million-dollar ad campaign and a last-minute boost from the president, Chicago Mayor Rahm Emanuel fell short of an outright win in his reelection battle Tuesday, emerging ahead of a crowded field but without the majority support he needed to avoid an April 7 runoff. … Instead, he’ll fight for his political career for six more weeks, when he faces fellow Democrat Jesus “Chuy” Garcia in a head-to-head contest.

“The result isn’t just a blow to Emanuel but to President Barack Obama, for whom Emanuel served as White House chief of staff. The president visited his hometown last week to try to pull Emanuel across the finish line. Obama also watched as Illinois’s Democratic governor, Pat Quinn, was defeated in November, and then-Hawaii Gov. Neil Abercrombie — a close family friend — was ousted in last year’s Democratic primary.” http://politi.co/1zGzKtJ

YELLEN BEATS BACK AUDIT QUESTIONS — As M.M. predicted, Janet Yellen did not have a terribly tough time addressing questions about auditing the Fed. Here’s how she started: “Audit the Fed is a bill that would politicize monetary policy, would bring short-term political pressures to bear on the Fed. In terms of openness about our financial accounts, we are extensively audited … I brought with me the — this volume, which contains an independent outside auditor’s, Deloitte and Touche’s, audits of our financial statements. So in the normal sense in which people understand what auditing is about, the Federal Reserve is extensively audited.”

THEN SHE HIT THE HISTORICAL NOTE — “I would remind you that in the early ‘70s, when inflation built and became an endemic problem in the U.S. economy, history suggests that there was a political pressure on the Fed that interfered with its decision-making. It was in the late 1970s that Congress put in place the current feature of law that exempts monetary policy, deliberations, and decisions for one area that’s exempted from GAO audits, and I really wonder whether or not the Volcker Fed would have had the courage to take the hard decisions that were necessary to bring down inflation and get that finally under control, something I think has been very important to the performance of the U.S. economy.”

WEIRDEST EXCHANGE — Sen. Bob Corker (R-Tenn.): “So I hate to ask this question, but I’ve read some quotes lately, and I’d just like for you — not by you, but by Audit the Fed advocates. While you may issue an updated balance sheet each week, how do we know those securities actually exist?

Yellen: “Well, we have — we have an outside accounting firm, an independent auditor, currently Deloitte and Touche, that does a thorough review of our balance sheet, and that’s what’s contained in our annual report … ”

Corker: “So they do exist.”

Yellen: “They do exist, Senator.”

ASIA RISES — Reuters/Tokyo: “Asian stocks rose on Wednesday, taking their cues from Wall Street’s gains after … Yellen suggested the Fed would not rush into raising interest rates. Shares extended gains after a survey of Chinese factory activity eked out a rise to a four-month high in February, though export orders shrank at their fastest rate in 20 months … Because Yellen gave no sign of an imminent rate increase, investors piled back into U.S. Treasuries, sending two-year yields to 2-1/2-week lows … overnight and reducing the appeal of the dollar.” http://reut.rs/1JKMkCd

COMING SOON: ANARCHY IN THE UK — Bloomberg: “The only dependable prediction for the outcome of the U.K.’s May 7 election is this: chaos. All of the opinion polls are clear: Instead of a decisive winner, there will be hobbled aspirants, each cajoling as many as seven smaller parties to give up their independence and prop up a minority or coalition government … Forming a government could take a while. It will without doubt be untidy. And unlike in 2010, when David Cameron succeeded in rapidly conjuring up a two-party coalition that survived a full term, there’s a very real possibility that nobody will manage to repeat the feat this time.” http://bloom.bg/1LFKkcc

NEW NOMINATION AT TREASURY — President Obama on Tuesday nominated Amias Gerety to be Assistant Secretary for Financial Institutions. Per a former Treasury colleague: “Well deserved recognition for Amias Gerety — one of the stalwarts of the Geithner-Lew Treasury Department. Amias has now been at Treasury for 6+ years working closely with Neal Wolin, Mary Miller, Gene Sperling and Michael Barr on the full range of financial regulatory issues. Will be plenty busy between his new day job and a new baby at home — the couple’s third.” http://politico.pro/1FVt8Pk

DHS BATTLE CONTINUES — POLITICO’s Manu Raju and Jake Sherman: “[McConnell and Boehner] are staring at a Friday deadline to avoid a shutdown of DHS, but are struggling to balance the demands of immigration hardliners with Republicans who fear political and practical fallout from DHS shutting down. McConnell’s … new proposal on Tuesday — to extend DHS funding through September while advancing a separate plan to block a portion of Obama’s immigration proposal — signaled that he’s nervous a shutdown could damage his party politically. Twenty-four GOP senators are up for reelection next year.

“Boehner is in an even tighter jam: Any sense that he is caving to the White House could further erode confidence in his leadership among the far right, which is furious at Obama’s immigration push. Boehner has not directly addressed whether he’d put a standalone funding bill on the floor, and several Republican leadership sources say they favor several short-term measures to try to keep heat on the White House.” http://politi.co/1MPNzPF

M.M. SIDEBAR — Stop us if you think you’ve heard this one before. These cliff fights are almost always the same: Hardliners push Boehner not to cave to the White House, whispering if he does his speakership could be in danger. Boehner eventually caves to the White House and passes a (relatively) clean funding bill. His speakership is fine. No reason to think this time will be much different with the question just how long the funding bill will keep the DHS lights on.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Team coverage of the Tuesday Senate hearing with Fed Chair Yellen and what’s to come today when she appears in the House [ http://politico.pro/1wlVdwl] … For Pro’s subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or [email protected].

**A message from JPMorgan Chase & Co.: The Financial Solutions Lab, a $30 million, five-year initiative managed by the Center for Financial Services Innovation with founding partner JPMorgan Chase, is designed to identify promising innovations to help Americans improve their financial health. Learn more about the Lab here: http://bit.ly/1vXUhOC **

GOOD WEDNESDAY MORNING —

DRIVING THE DAY — Yellen continues her two days of testimony before House Financial Services at 10:00 a.m. in which could be a decidedly less decorous affair, given the wide range of committee personalities … President Obama heads to Miami for an immigration town hall and interview with MNSBC … Treasury Secretary Jack Lew this afternoon meets the Amir of Qatar … Treasury this afternoon hosts a public meeting of the Financial Literacy and Education Commission (FLEC) … New home sales at 10:00 a.m. expected to drop to 470K from 481K …

OBAMA’S VETO ERA BEGINS — POLITICO’s Adam B. Lerner: “Despite all the bad blood between Congress and the White House … Obama has rarely made use of the chief executive’s most direct tool to rebuke the legislature — the presidential veto. Until Tuesday, President Obama had vetoed only two bills, and neither was controversial. … But all that changed with his veto of a bill that would have allowed the construction of the Keystone XL pipeline.

“Though Obama’s three vetoes is thus far a record low since James Garfield’s 200-day presidency, experts expect Obama’s final two years to be packed with high-profile veto showdowns. … The new arrangement has a benefit for Democrats in heavily Republican states — now they will be more free to vote for legislation that pleases their constituents knowing that Obama will just veto what he doesn’t like” http://politi.co/1Es1uI2

YELLEN LAYS GROUNDWORK FOR HIKE — WSJ’s Jon Hilsenrath: “Federal Reserve Chairwoman Janet Yellen, sounding upbeat about the economy, laid the groundwork for interest-rate increases later this year. … If the economy continues to strengthen as the Fed anticipates and officials become more confident that low inflation will rise toward their 2 percent goal, she said, the central bank ‘will at some point begin considering an increase in the target range for the federal funds rate.’ With that assessment, Ms. Yellen took an incremental step, shifting the central bank away from promises that interest rates will stay low and toward a discussion of when and how fast they will move up.

“Her comments before the Senate panel signaled the Fed still doesn’t expect to raise its benchmark short-term rate from near zero at its March or April meetings. Many Fed officials have said in recent weeks that a midyear rate increase should be on the table, though not certain. Ms. Yellen sought to put the Fed’s shifting pronouncements about rates into perspective.” http://on.wsj.com/1zF7fgd

WARREN GOES ALL WARREN ON YELLEN — Sen. Elizabeth Warren (D-Mass.) used the hearing to rip Fed general counsel Scott Alvarez for allegedly delaying a leak inquiring and making comments to the ABA critical of the swaps pushout rule. Video: http://wapo.st/18iXq0W

JPM TO CHARGE FOR DEPOSITS — WSJ’s Emily Glazer: “J.P. Morgan Chase & Co. is aiming to reduce certain deposits by up to $100 billion by the end of the year and is preparing to charge large institutional customers for some deposits, thanks to new rules that make holding money for the clients too costly. The newest fees will vary by client, depending on a variety of factors, including their overall relationship with the bank and the size of the account, the bank’s chief financial officer said … Investors welcomed the deposit changes as well as other cost-cutting initiatives rolled out by the bank in response to the continued tough environment of low interest rates and high legal and regulatory costs. …

“The move is the latest in a series of steps large global banks have been discussing in recent months to discourage certain deposits due to new regulations and low interest rates. J.P. Morgan’s steps are among the most detailed and widespread. Among other points, Chief Financial Officer Marianne Lake and Corporate and Investment Bank head Daniel Pinto stressed alternatives customers affected by the deposit moves can use for their excess cash. … The plan won’t affect the bank’s retail customers, but some corporate clients and especially an array of financial firms, including hedge funds, private-equity firms and foreign banks, will feel the impact” http://on.wsj.com/1w9YRng

FCC TO REGULATE INTERNET AS A PUBLIC GOOD — NYT’s Jonathan Weisman: “On Thursday, the Federal Communications Commission is expected to vote to regulate the Internet as a public good. On Tuesday, Senator John Thune, Republican of South Dakota and chairman of the Senate Commerce Committee, all but surrendered on efforts to overturn the coming ruling, conceding Democrats are lining up with President Obama in favor of the F.C.C. … In the battle over so-called net neutrality, a swarm of small players, from Tumblr to Etsy, BoingBoing to Reddit, has overwhelmed the giants of the tech world, Comcast, Verizon and TimeWarner Cable, with a new brand of corporate activism — New World versus Old” http://nyti.ms/1BaxXl8

CLINTON SEES “HUMAN COST” TO TECHNOLOGY — FT’s Hannah Kuchler: “Hillary Clinton has warned there is a ‘real human cost’ to technology, using a speech at the heart of Silicon Valley to stress its potential to automate jobs away and put pressure on the wages of ordinary people. In her first public speech so far this year, Mrs Clinton called for better representation for women in the boardrooms of technology companies, while also talking about better working rights for the company’s security guards and hourly workers … Mrs Clinton stressed her roles as a mother and a grandmother, in a new tactic designed to woo women and create excitement about the prospect of having the first ever female US President.” http://on.ft.com/1BQ3pqi

ALSO FOR YOUR RADAR —

HEWITT TO MODERATE FIRST DEBATE — POLITICO’s Nick Gass: “Radio talk-show host Hugh Hewitt will moderate the first Republican presidential debate as part of a partnership between Salem Media Group and CNN. The debate will take place Sept. 16 at the Ronald Reagan Presidential Library in Simi Valley, California.” http://politi.co/1LB9w1A

CBO TURNS 40 — Per the Peterson Foundation with a nifty graphic featuring all the CBO directors: “This February marks 40 years since the establishment of the Congressional Budget Office (CBO. Since its inception, CBO has earned a well-deserved reputation as an impartial budget referee, widely respected for its independence and effectiveness in providing information and analysis to lawmakers … CBO has a highly-skilled staff which numbers about 235, most with backgrounds in public policy or economics” http://bit.ly/1wlJhuv

WELLS FARGO ADDS CYBER EXPERT TO BOARD — Per Wells Fargo: “Wells Fargo & Company … said … that its board of directors has elected Suzanne M. “Zan” Vautrinot, a retired Major General and Commander in the United States Air Force, to the company’s board of directors, effective immediately. Vautrinot will serve on the board’s Audit and Examination Committee, and her election increases the size of the company’s board to 16 directors” http://bit.ly/1FqnUaF

CUSHMAN & WAKEFIELD FOR SALE — WSJ’s Peter Grant: “The Italian family that controls Cushman & Wakefield Inc., one of the world’s largest real-estate services firms, is putting the company up for sale as rising property prices push up the value of rivals, according to people familiar with the matter. Exor SpA, the investment arm of the Agnelli family, has approved management’s hiring of Goldman Sachs Group Inc. and Morgan Stanley to help look for a buyer for Cushman … Exor prefers a privately held buyer and wouldn’t consider selling to a direct competitor, the people said. Commercial real-estate analysts say Cushman & Wakefield could fetch as much as $2 billion. The family paid $565.4 million for a 67.5 percent stake in Cushman eight years ago and has since boosted that to 81 percent.” http://on.wsj.com/1DQBvez

JPM FIGHTS BACK AGAINST BREAK-UP CALLS — NYT’s Nathaniel Popper: “JPMorgan Chase executives began their annual investor day on Tuesday morning by fighting back against recent suggestions that the bank may need to break up. JPMorgan’s chief financial officer, Marianne Lake, said that the bank, the nation’s largest, benefited from its size and would do what it takes to keep its current business model. ‘We are the size we are because it’s what our clients want,’ Ms. Lake said … The Federal Reserve is rolling out new regulatory requirements that officials there have said are most likely to come down hardest on JPMorgan because of its size and complexity. These rules are expected to force JPMorgan to hold more loss-absorbing capital than its competitors” http://nyti.ms/17VjgX1

**A message from JPMorgan Chase & Co.: Managing household finances on a tight budget is a costly challenge faced by tens of millions of Americans. The Financial Solutions Lab, managed by the Center for Financial Services Innovation with founding partner JPMorgan Chase, seeks smart, technology-enabled solutions for this challenge.

MEET-UP: The Financial Solutions Lab competition will bring together entrepreneurs and innovators from the technology, business and nonprofit communities to tackle the challenge of managing household cash flows. Competition spurs innovation, and collaboration feeds it. Learn more about the Financial Solutions Lab here: http://bit.ly/1vXUhOC **

A previous version of this alert misidentified the Peterson Foundation.