Balance of Power: Tillerson Flap Bad Timing for Iran Decision

(Bloomberg) -- Signs of friction are again plaguing Donald Trump's White House at a pivotal moment for his policy agenda.

Secretary of State Rex Tillerson's team spent yesterday disputing a report he referred to Trump as a moron and was on the verge of resigning over the summer, only to be talked off the ledge by Vice President Mike Pence and others.

The timing couldn't be worse — it comes as Trump needs to project unity within his administration, especially as he appears set to break with international opinion once again, this time on the 2015 Iran nuclear deal. 

While Trump has publicly attacked the accord, Defense Secretary James Mattis told senators this week the Obama-era deal was “something that the president should consider staying with.”

White House officials who have left or been fired include Trump's chief strategist, national security adviser and communications director. Even his legal team isn't playing well together. 

The consequences of such disarray, compounded by a lack of secretaries for Homeland Security as well as Health and Human Services, could mean more trouble for Trump's efforts to gain traction on his policy goals nine months into his presidency. 

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Global Headlines

Municipal bond turmoil | Trump's suggestion the U.S. might simply wipe Puerto Rico's $74 billion debt touched off a wild day for the nation's $3.8 trillion municipal bond market. It sent the island's benchmark bonds plummeting and prompted MKM Partners analyst Harry Fong to speculate this could be “the end of the municipal bond market as we know it.” Meanwhile, Puerto Rico's troubles have been compounded by states moving slowly to provide assistance.

Russia-Saudi rapprochement | King Salman is in Moscow for a first-ever visit by a Saudi monarch, bringing a symbolic end to decades of rancor between the two big oil producers. But while they appear to see eye-to-eye on extending the deal to support crude prices with production cuts and are touting investment deals, there's still plenty of tension over issues like Syria and Iran.

Europe beware | After the shock of the Brexit vote and the crisis over Catalonia's bid to leave Spain, another potential rupture is sneaking up on Europe — between the western democratic core led by Germany and France and populist authoritarians in the former communist east who dislike Brussels. As Bloomberg Editor-in-Chief John Micklethwait writes, the mix of pent-up anger over issues such as immigration and short-term political maneuvering can deliver surprises few business and political leaders anticipate.

No mediation for Catalans | Spanish Economy Minister Luis de Guindos ruled out any sort of mediated talks with separatist leaders. What's more, he said in a Bloomberg TV interview, lenders in Catalonia have signaled they may move out of the region if the independence push continues, revealing how “insane” the secessionists' plans are. Watch the full interview here. 

Gun control progress | Cracks in the otherwise solid Republican wall of opposition to gun control have emerged since Monday's mass shooting in Las Vegas. Top Republican senators say they'd consider legislation to restrict devices that allow a semi-automatic rifle to mimic the rapid-fire of an automatic weapon. “It bears our review,” said John Cornyn, the chamber's No. 2 Republican. Yet Democrats are demanding much stronger action, and Trump deflected questions about gun control when he met yesterday with survivors.

And finally... British Prime Minister Theresa May's “reset” speech to the Conservative Party conference yesterday could hardly have gone worse. It was interrupted by a prankster and punctuated by coughing fits, while a part of the slogan on the wall behind her literally crumbled. Even her jewelry drew the wrong kind of attention. Pundits were quick to point out that her bracelet featured images of Mexican artist Frida Kahlo, a fervent communist who had an affair with Leon Trotsky.

To contact the author of this story: Kathleen Hunter in London at khunter9@bloomberg.net.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net, Caroline Alexander