Finance Brief: Coinbase to Hand Over Data on 13,000 Bitcoin Users to IRS


Top Stories

  • The cryptocurrency exchange Coinbase told customers that it will turn over the data of 13,000 users to the Internal Revenue Service in order to comply with a court order. Coinbase had pushed back against the IRS summons, which initially was aimed at all customers who bought bitcoin from 2013 through 2015 but is now limited to customers who completed transactions valued at more than $20,000 in a single year during that same period. (The Verge)
  • Left-leaning justices on the Supreme Court indicated they are skeptical of an American Express Co. requirement that bars contracted credit card merchants from promoting competing cards with lower fees. The Trump administration and some states governments have argued that the practice violates federal antitrust law. (Reuters)
  • President Donald Trump could unwind the government’s control of Fannie Mae and Freddie Mac as an alternative to bipartisan legislation that would overhaul the status of the government-sponsored enterprises, according to a group of experts from conservative think tanks. Trump could also name a new director of the Federal Housing Finance Agency who in turn could eliminate the GSEs by gradually lowering loan limits for mortgage securities that they package and barring them from buying certain types of loans, the analysts wrote in a paper slated for discussion today. (Washington Examiner)
  • A 37 percent plurality of U.S. consumers say Trump is taking the right approach to Washington’s economic relationship with China, while 35 percent disagree, according to a recent poll. Thirty-six percent of independents said the president is taking the wrong approach, compared to 12 percent of Republicans and 55 percent of Democrats who share that view. (Morning Consult)

Chart Review

Events Calendar (All Times Local)

Tuesday
NAHREP Housing Policy & Hispanic Lending Conference 8 a.m.
U.S. Chamber of Commerce’s Invest in America summit 8 a.m.
NABE economic policy conference 8 a.m.
SFIG conference in Las Vegas 9 a.m.
American Enterprise Institute event on GSE reform 9 a.m.
House Financial Services Committee hearing with Fed’s Powell 10 a.m.
FDIC community bank webinar 1 p.m.
House Ways and Means Committee meeting on FY 2019 budget 1:15 p.m.
Brookings Institution discussion with Janet Yellen and Ben Bernanke 2 p.m.
House Small Business Committee hearing on community banks and credit unions 2 p.m.
Wednesday
NAHREP Housing Policy & Hispanic Lending Conference 8:30 a.m.
SFIG conference in Las Vegas 9:15 a.m.
Brookings Institution event on Trump’s trade policy in Asia 10 a.m.
Brookings Institution event on wage growth 1 p.m.
CSIS event on U.S.-India trade 3 p.m.
Thursday
Senate Banking Committee hearing with Fed’s Powell 10 a.m.
Friday
WITA event on trade enforcement 9 a.m.

General

Trump’s Economic Policy Toward China Elicits Mixed Reviews From Americans
Ryan Rainey, Morning Consult

As a presidential candidate in 2016, Donald Trump pledged repeatedly that he would take a tough line on China. Now that he’s been president for more than a year, U.S. adults are divided over the state of economic relations between the two countries since Trump took office.

Amid fresh Trump tension, negotiators seek progress on NAFTA
Anthony Esposito and Sharay Angulo, Reuters

U.S., Mexican and Canadian negotiators met on Monday seeking to narrow disagreements on how to overhaul the NAFTA trade deal despite renewed signs of tension between Mexico and U.S. President Donald Trump over his planned border wall. The trade teams began a seventh round of talks on Sunday aiming to finish reworking less contentious chapters of the North American Free Trade Agreement in order to create space to broker agreement on the trickiest subjects.

Stocks Fall With Bonds; Dollar Steady Before Powell: Market Wrap
Eddie Van Der Walt, Bloomberg

European stocks and bonds slipped as investors await the first public comments from Federal Reserve Chairman Jerome Powell on Tuesday. Futures on the S&P 500 Index decreased 0.3 percent.

Banking

Banks increase CLO forecasts after Dodd-Frank court ruling
Kristen Haunss, Reuters

Banks are expecting increased US Collateralized Loan Obligation (CLO) fund issuance after a US court ruled that the funds will shortly be exempt from regulations that require managers to hold some of their deal.  Morgan Stanley increased its 2018 US CLO forecast by US$10bn to US$110bn following the decision and Deutsche Bank raised its forecast to US$120bn from US$110bn, according to reports this month.

Financial Products and Investments

U.S. Supreme Court liberals skeptical of American Express merchant fees
Andrew Chung, Reuters

Liberal U.S. Supreme Court justices on Monday sharply questioned American Express Co over its policy of forbidding merchants from encouraging customers to use rival credit cards with lower fees, a practice that some states and the Trump administration have concluded violates federal antitrust law. The high court heard about an hour of arguments in an appeal by the states, led by Ohio, of a 2016 ruling by a lower court in New York that cleared American Express of unlawfully stifling competition through its so-called anti-steering provisions in contracts with merchants.

CFTC Steps Up Enforcement Against Fraud, Market Manipulation
Gabriel T. Rubin, The Wall Street Journal

U.S. derivatives regulators are expected to file “more than 10” fraud and market-manipulation cases in the next weeks as the Commodity Futures Trading Commission chairman implements his back-to-basics approach, according to a person familiar with the CFTC’s enforcement operation. The stepped-up enforcement comes after the CFTC recorded a big drop in fines and enforcement actions during the fiscal year that spanned the transition from the Obama administration to the Trump administration.

MetLife Pension-Payments Executive Is Leaving Company
Leslie Scism, The Wall Street Journal

A senior MetLife executive in charge of a unit that failed to pay 13,500 retirees their pension benefits is leaving the company, according to an internal memo reviewed by The Wall Street Journal. Executive Vice President Robin Lenna will retire as of March 1 after 14 years at MetLife, according to the memo.

Bid to Prohibit Shareholder Lawsuits Blasted by SEC’s Jackson
Benjamin Bain, Bloomberg

The Securities and Exchange Commission’s newest Democrat pushed back against the Trump administration’s pro-business agenda by arguing it would be akin to “handcuffing” investors if regulators restricted shareholders from suing companies. The risk of having to pay out steep legal damages discourages companies from committing fraud, Robert Jackson Jr., who became an SEC commissioner in January, said during a Monday speech.

Insurer Lockton will no longer sell NRA-endorsed policies
Suzanne Barlyn, Reuters

Insurance broker Lockton, which has worked with the National Rifle Association on gun show and gun carrying policies, on Monday said it would no longer sell NRA-endorsed products. Privately held Lockton joins several other financial industry companies ending deals with the NRA in the wake of the shooting that killed 17 people at a Florida high school.

Housing and GSEs

Conservatives release blueprint for Trump to ‘eliminate’ Fannie Mae, Freddie Mac
Joseph Lawler, Washington Examiner

Conservatives who are pushing for the elimination of Fannie Mae and Freddie Mac on Monday gave President Trump a blueprint for phasing out the government-sponsored enterprises by himself. Analysts with the American Enterprise Institute and other right-of-center think tanks began rolling out a guide for how the Trump administration could “eliminate” Fannie and Freddie over the course of several years without any action from Congress.

Credit unions want to keep GSEs, but with an explicit guarantee
Brad Finkelstein, National Mortgage News

Most credit unions support the status quo when it comes to the government-sponsored enterprises because they are a primary outlet to get mortgages off of their balance sheets. Just under 60% of those surveyed by the National Association of Federally-Insured Credit Unions said they sold loans to Fannie Mae (39%), Freddie Mac (12%) or both (12%).

Housing industry calls on Senate to confirm Brian Montgomery as FHA commissioner
Ben Lane, HousingWire

It’s been nearly three months since the Senate Banking, Housing, and Urban Affairs Committee approved Brian Montgomery’s nomination to lead the Federal Housing Administration, but Montgomery’s name has not yet been put before the full Senate for a vote. That wait is more than enough for a consortium of housing industry power players.

Taxes

Trump’s Tax Cuts in Hand, Companies Spend More on Themselves Than on Wages
Matt Phillips, The New York Times

President Trump promised that his tax cut would encourage companies to invest in factories, workers and wages, setting off a spending spree that would reinvigorate the American economy. Companies have announced plans for some of those investments.

N.J. Senate Supports Property Tax as Annual Charitable Write-Off
Elise Young, Bloomberg

New Jersey took the first step toward allowing residents with the nation’s highest property taxes to circumvent a new federal limit on state and local tax deductions. The Senate voted 28-9 to allow municipalities to set up charitable funds to which homeowners would pay their annual levy.

Financial Technology

Coinbase tells 13,000 users their data will be sent to the IRS soon
Shannon Liao, The Verge

Coinbase told its customers on Friday that it plans to comply with a court order and hand over about 13,000 customers’ data to the IRS within 21 days. The IRS made the request back in November 2016, asking for the Coinbase records of all the people who bought bitcoin from 2013 to 2015 to seek out those who were evading cryptocurrency taxes.

Self-Proclaimed Bitcoin Inventor Accused of Swindling $5 Billion of Cryptocurrency
Jef Feeley, Bloomberg

Craig Wright, the self-proclaimed inventor of bitcoin, is accused of swindling more than $5 billion worth of the cryptocurrency and other assets from the estate of a computer-security expert. Wright, who claimed in 2016 that he created the computer-based currency under the pseudonym Satoshi ‎Nakamoto, allegedly schemed to use phony contracts and signatures to lay claim to bitcoins mined by colleague Dave Kleiman, another cryptocurrency adherent, who died in 2013, according to a lawsuit filed by Kleinman’s brother.

World’s largest asset manager says get ready to ‘stomach complete losses’ in cryptocurrencies
Evelyn Cheng, CNBC

Investors should only consider cryptocurrencies such as bitcoin if they are prepared to lose everything, BlackRock Investment Institute said in its weekly report Monday. “We see cryptocurrencies potentially becoming more widely used in the future as the markets mature. Yet for now we believe they should only be considered by those who can stomach potentially complete losses,” BlackRock Global Chief Investment Strategist Richard Turnill said in the note.

Crypto poised to take over gun sales if banks bow out
Nick Holland, American Banker

In the wake of the recent deadly school shooting in Parkland, Fla., there seems to be a more heightened degree of citizen activism to counter gun-rights lobbyists — and their voices are causing more banks and other companies to question their associations with the National Rifle Association and gun sellers. Over the last few days, a number of companies with NRA affiliations have publicly stated that they will no longer be doing business with the organization, including First National Bank of Omaha, which cited customer feedback as its reason to review and ultimately terminate its contract with the NRA.

Fintechs’ charter hopes may lie with new FDIC board
Rachel Witkowski, American Banker

Among federal bank regulators, the Office of the Comptroller of the Currency has been the most active on fintech chartering options. But another agency, the Federal Deposit Insurance Corp., may provide crucial guidance for fintechs in the shorter term.

A Message from the Electronic Payments Coalition: 

A majority of voters are concerned with data breaches, yet there are no national data security standards to protect consumers at checkout. It’s time retailers share responsibility for data security. Learn more from the Electronic Payments Coalition.

Opinions, Editorials and Perspectives

When It Comes to Banking, Size Does Matter
Steve Pociask, Morning Consult

Today, many of the new regulatory and compliance costs are being disproportionately borne by smaller banks and credit unions, compared to their larger counterparts, which ultimately affects consumer and small business access to capital. This is because larger banks can better absorb these costs through economies of scale.

US plan to roll back bank insolvency rules is fake deregulation
Patrick Jenkins, Financial Times

Up to now, the most solid evidence of President Donald Trump’s much vaunted deregulatory agenda has been in the appointments he has made to the key regulatory bodies. And the most those individuals have done is signal an intention to interpret elements of Dodd-Frank and other US financial rules less strictly.

The Real Game Trump Is Playing on NAFTA
Edward Alden, Politico

As the United States, Canada and Mexico head into the seventh round of the renegotiation of the North American Free Trade Agreement, there is a question increasingly looming over the talks: Why hasn’t Donald Trump pulled the plug already? The president has made no secret of his loathing for NAFTA, calling it during the campaign “the worst trade deal in history.”

Trump is tearing up the system that protects ordinary Americans from financial scams
Emily Stewart, Vox

Donald Trump ran for office promising to protect the “forgotten man and woman” and to Make America Great Again for Americans who feel left behind. “It’s not just the political system that’s rigged, it’s the whole economy,” he told supporters during a 2016 speech on the campaign trail.

A Message from the Electronic Payments Coalition: 

A dynamic data security strategy can help businesses protect consumers like you from data breaches. A recent report from EPC underscores why innovation is a key component to fighting fraud. Read why from EPC.

Research Reports

Derisking along the Southwest Border Highlights Need for Regulators to Enhance Retrospective Reviews
Government Accountability Office

“Derisking” is the practice of banks limiting certain services or ending their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering. The Southwest border region is a high-risk area for money laundering activity, in part, because of a high volume of cash and cross-border transactions, according to bank representatives and others.