Finance Brief: Club for Growth Targets 4 Republicans Over Border Adjustment Tax

Washington Brief

  • The Club for Growth launched an ad campaign today pressuring four House GOP lawmakers to oppose the border adjustment tax plan supported by the chamber’s Republican leadership. The conservative group is targeting Budget Committee Chairman Diane Black (Tenn.), as well as Reps. John Culberson (Texas), Martha Roby (Ala.) and Tom Rice (S.C.). (Morning Consult)
  • The Supreme Court today will hear oral arguments in a case that could determine whether the Securities and Exchange Commission faces a five-year time limit on recovering illegal profits. (Reuters)
  • House Republicans want to expand capital formation for small businesses as part of an attempted Dodd-Frank rollback. Lawmakers plan to broaden the capital formation capabilities of small startups by expanding provisions in the 2012 Jumpstart Our Business Startups Act. (Bloomberg BNA)

Business Brief

  • Wells Fargo & Co. Chief Executive Timothy Sloan and Chairman Stephen Sanger bought a combined $5 million in the lender’s stock Monday. Their respective purchases of $2 million and $3 million were viewed as votes of confidence in the company’s future amid continuing fallout from the bank’s consumer accounts scandal. (CNBC)
  • Nevada extended its banking agreement with Wells Fargo until 2021. The extension follows moves by California, Illinois and Ohio to sever ties with the San Francisco-based bank. (Reuters)
  • The SEC is investigating Statim Holdings Inc., an Atlanta-based firm that guarantees investors in its main hedge fund won’t lose money. Georgia state regulators are also probing the firm. (Bloomberg News)

Chart Review

Events Calendar (All Times Local)

Tuesday
Hyman P. Minsky annual economic conference 8 a.m.
IMF/World Bank meetings in Washington 9 a.m.
Wednesday
Hyman P. Minsky annual economic conference 9 a.m.
IMF/World Bank meetings in Washington 9 a.m.
Heritage Foundation event on U.S.-U.K. trade relations after Brexit 10 a.m.
Peterson Institute webcast on fintech and financial stability 3:15 p.m.
Thursday
Global Finance Forum 8 a.m.
SEC officials speak at Global Privacy Summit 8 a.m.
American Enterprise Institute event on Europe and pro-growth agenda 8:30 a.m.
IMF/World Bank meetings in Washington 8:45 a.m.
Brookings Institution event with Bank of Mexico governor 9:15 a.m.
National Economists Club event with American Action Forum’s Doug Holtz-Eakin 12 p.m.
American Enterprise Institute event on postcrisis economics 5 p.m.
Tax Foundation “Tax Freedom Day” event 6 p.m.
Friday
IMF/World Bank meetings in Washington 9 a.m.

 

General

Japan Wants to Keep Trade Hardliner Wilbur Ross Away From Some Economy Talks
Isabel Reynolds et al., Bloomberg News 

Japan wants to keep Commerce Secretary Wilbur Ross out of an economic dialogue with the U.S. as it seeks to avoid disputes with the Trump administration over a weaker yen and trade imbalance, according to a Japanese official who asked not to be identified. Ross, seen as a hardliner on trade issues, is set to join Vice President Mike Pence in Tokyo on Tuesday as the nations kick off their exchange.

Trump Expected to Bolster ‘Buy American’ and ‘Hire American’ Directives
Eli Stokols, The Wall Street Journal 

President Donald Trump will sign an executive order in Wisconsin on Tuesday directing a government-wide review aimed at putting new teeth back into decades-old “Buy American” and “Hire American” directives. The 220-day review process, which could lead to additional executive orders and possibly legislation, will focus on preventing foreign workers with H-1B visas from, as one senior administration official put it, “undercutting American labor at less cost,” which the official labeled as “an abuse” of the current system.

The long, rough ride ahead for ‘Made in America’
Nick Carey, Reuters 

Mini motorcycle and go-kart maker Monster Moto made a big bet on U.S. manufacturing by moving assembly to this Louisiana town in 2016 from China. But it will be a long ride before it can stamp its products “Made in USA.”

Pound Rises as Election Called; Europe Stocks Drop: Markets Wrap
V Ramakrishnan, Bloomberg News

Goldman Sachs and BofA publish earnings today, with Morgan Stanley tomorrow. The bar has been set high after JPMorgan’s and Citi’s impressive trading gains.

Banking

Wells Fargo’s top two executives just gave the stock a $5 million vote of confidence
Lauren Thomas, CNBC

Wells Fargo’s new chief executive officer and its chairman together bought $5 million worth of stock on Monday, just days after shares skidded on mixed earnings results. Wells Fargo’s CEO Timothy Sloan scooped up nearly 40,000 shares in the bank valued at $2 million, according to a filing with the Securities and Exchange Commission.

Wells Fargo’s banking agreement with Nevada extended
Nikhil Subba, Reuters 

Wells Fargo & Co (WFC.N) said on Monday the State of Nevada had extended its banking agreement with the scandal-hit lender until 2021. Several states, including California, Illinois and Ohio, have severed ties with the bank following a sales scandal that cost former Chief Executive John Stumpf his job.

Wells Fargo exec was fired for not scamming N.J. customers, lawsuit says
Craig McCarthy, NJ.com

A Somerset County woman is suing Wells Fargo Bank alleging she was fired for refusing to participate in an alleged scheme similar to the bank’s widespread account scam that led to millions of dollars in federal fines. Melinda Bini, a former assistant vice president and regional private banker at the Highland Park bank’s branch, says in a recent lawsuit that supervisors instructed her to manipulate accounts and sell banking products or investments that were not the customers’ best interest or without their knowledge.

Powell’s Fed Sway to Widen in Trump Era of Less Dodd-Frank Rules
Rich Miller, Bloomberg News

In some ways, it was rehearsal for the 2008-09 financial crisis. An investment bank was in trouble. Policy makers were working intensely on a Sunday.

Financial Products and Investments

U.S. Supreme Court considers time limits for SEC recovery of ill-gotten profits
Sarah N. Lynch, Reuters 

The U.S. Supreme Court on Tuesday will hear oral arguments in a case that has the potential to scale back the Securities and Exchange Commission’s ability to recover illegal profits earned as a result of fraud or other wrongdoing. The case, which involves New Mexico-based investment adviser Charles Kokesh who was sued by the SEC in 2009, hinges on whether ill-gotten gains, in an agency recovery remedy known as “disgorgement,” are subject to a five-year statute of limitations.

SEC Probes Hedge Fund That Promises Investors No Losses
Simone Foxman et al., Bloomberg News

Statim Holdings Inc., an Atlanta-based firm that has guaranteed investors in its main hedge fund won’t lose money, is under investigation by the U.S. Securities and Exchange Commission, according to people familiar with the matter. The SEC inquiry into Statim comes as Georgia regulators examine the firm.

GOP Wants Capital Formation Bonanza in Dodd-Frank Overhaul
Rob Tricchinelli, Bloomberg BNA 

Republican lawmakers are taking an ambitious approach to further easing rules that make it easier for small businesses to raise money, even amid questions over whether current regulations effectively promote capital formation. House Republicans want to give small startups even more leeway by expanding some of the specific avenues to raise capital in the 2012 Jumpstart Our Business Startups Act.

SIFMA wants a ‘time out,’ seeking longer delay of DOL fiduciary rule
Mark Schoeff Jr., InvestmentNews

The biggest brokerage industry trade association is calling for a longer delay of the Labor Department’s fiduciary rule, while a consumer group concludes that that the Trump administration has already decided to revise or repeal the rule.

Housing and GSEs

JPMorgan tries TV stars, political muscle to regain mortgage footing
David Henry, Reuters 

After having to stomach $31 billion worth of bitter mortgage settlements with government agencies a few years ago, JPMorgan Chase & Co swore off a huge swath of the home loan market. Gone were borrowers with anything much less than pristine credit ratings.

Taxes

Club for Growth Hits Four Republicans Over Border Adjustment Tax
Eli Yokley, Morning Consult 

The Club for Growth is putting pressure on four House Republican lawmakers, warning them not to support a key portion of the House GOP leaders’ tax reform plan. On Tuesday, the conservative group launched ads against lawmakers such as House Budget Committee Chairman Diane Black (Tenn.) and Rep. John Culberson (Texas), an appropriations subcommittee chairman.

US admits Trump tax reforms will be hit by healthcare setback
Sam Fleming et al., Financial Times 

The US Treasury secretary has conceded that the administration’s timetable for ambitious tax reforms is set to slip following setbacks in negotiations with Congress over healthcare. Steven Mnuchin said the target to get tax reforms through Congress and on President Donald Trump’s desk before August was “highly aggressive to not realistic at this point”.

GOP Targets Trillion-Dollar Tax Breaks for Democratic States
Sahil Kapur, Bloomberg News

Conservative activists and House Republican leaders want to eliminate a trillion-dollar tax break that mostly benefits wealthy filers in Democratic states, a push that could further imperil President Donald Trump’s hopes of winning bipartisan support for a tax overhaul. Ever since the inception of the federal income tax in 1913, taxpayers have been allowed to deduct the state and local income taxes they pay from their taxable income.

Lesser-Known ‘Zombie’ Provisions Could Help Drive Overhaul Deal
Ryan Rainey, Morning Consult 

While much of the discussion over tax reform has focused on the border adjustment provision favored by House Speaker Paul Ryan (R-Wis.), in addition to pass-through business rates, corporate rates and the elimination of most itemized deductions, the lack of consensus on a comprehensive overhaul could create an opening for lesser-known items to help broaden support for an eventual deal. Below are key provisions to watch for, according to several tax experts.

Financial Technology

Top US Business Schools Are Racing to Incorporate Blockchain
Aaron Stanley, CoinDesk 

Top US business schools are working to incorporate blockchain and cryptography into curriculums to meet evolving employer and student demands. As commerce and finance become more digitized, schools say they are experiencing pressure from all angles to graduate students skilled in data science areas such as blockchain, while demand for the traditional MBA skill set subsides.

Opinions, Editorials and Perspectives

Don’t Appoint Clones to the Fed
Narayana Kocherlakota, Bloomberg View

Donald Trump has reportedly zeroed in on a candidate to be the top financial regulator at the Federal Reserve. Unfortunately, his choice lacks one of the fundamental requirements for the job: a background and perspective different from that of other Fed governors.

The Bureau of Resistance
Gary Rivlin, The New York Times 

Don’t expect Donald Trump to boast about any of these good deeds, which were all undertaken by the Consumer Financial Protection Bureau. Nor is he likely to tweet with gusto if the bureau issues more rules in the coming months.

Trump plans to reward tax cheats
Editorial Board, The Washington Post 

Attacking the IRS is a particularly expensive way to play to the crowd. It rewards tax cheats at everyone else’s expense.

Trump’s Deregulation Project
Editorial Board, The Wall Street Journal 

Health reform may be on life support and tax reform uncertain, but one part of the Donald Trump economic growth project is succeeding: deregulation. The question is whether the President will now rev up the effort.

Supporters of BATs and VATs are wrong about trade and taxes
Daniel J. Mitchell, Cato Institute 

Here’s a visual depiction of how the current system works. I include the possibility that that German products sold in America may also get hit by the US corporate income tax (if the German company have a US subsidiary, for instance).

What a New Glass-Steagall Wouldn’t Do
Mark Whitehouse, Bloomberg View

The Glass-Steagall Act, the Depression-era rule that separated plain-vanilla commercial banking from higher-octane investment banking, has come back into the spotlight as Trump administration officials suggest that they might try to reinstate it. A glance at where financial companies get their money, though, shows why the move wouldn’t address one of the system’s greatest weaknesses.

Paul Volcker stands tall against attacks from banking industry
Patrick Jenkins, Financial Times 

The fourth floor of the Rockefeller Center’s southern wing is a building site. Plasterboard walls have been ripped out. Cables, water pipes and a few bare lightbulbs hang from the ceiling. But not everyone has moved out. At the end of the corridor is a shabby door, with a broken doorbell and ragtag gold lettering announcing it as the office of Paul A Volcker.

Research Reports

American Made Coalition & Tax Avoidance
Americans for Affordable Products 

Today, as millions of hardworking, middle-income American households pay their taxes after years of economic hardship and wage stagnation, Americans for Affordable Products (AAP) – a collection of more than 400 businesses and trade associations seeking to stop the Border Adjustment Tax (BAT) – released new research showing American Made Coalition (AMC) members pay a very low tax rate, in fact, much less than the statutory level, while these same profitable, multi-national companies rake in billions in profits, as well as local, state and federal subsidies.

Fair Lending
American Bankers Association

The American Bankers Association and our members support fair, objective, and transparent enforcement of civil rights laws. The banking industry strives to make credit available to all qualified borrowers and in doing so we place emphasis on treating all similarly-situated applicants and borrowers alike.