Finance Brief: Community Banks Request Senate Hearing to Scrutinize Credit Union Tax Exemption


Top Stories

  • The Independent Community Bankers of America called for Senate Finance Committee Chairman Orrin Hatch (R-Utah) to hold a hearing on the tax-exempt status of credit unions as soon as possible, a request that follows Hatch signaling that he sympathizes with ICBA’s position that credit unions are growing beyond the nonprofit purpose that serves as a rationale for certain tax exemptions. Credit union groups, which have been locked in a long battle with ICBA over the tax-exemption issue, told Hatch that credit union structures haven’t changed. (The Hill)
  • Special Counsel Robert Mueller’s investigative team is looking into whether President Donald Trump’s former campaign chairman Paul Manafort promised a White House job to Federal Savings Bank President Stephen Calk in exchange for home loans valued at $16 million. Calk, whose bank is based in Chicago, was an economic adviser on Trump’s 2016 presidential campaign. (NBC News)
  • The now-defunct bitcoin exchange BitFunder and its founder, Jon E. Montroll, face charges from the Securities and Exchange Commission that they defrauded investors and ran an unregistered securities exchange. Montroll also faces federal perjury and obstruction of justice charges brought by U.S. prosecutors in New York for allegedly interfering with the SEC’s investigation. (CNBC)

Chart Review

U.S. Trade in Services with NAFTA Partners
Coalition of Service Industries

Events Calendar (All Times Local)

Thursday
No events scheduled
Friday
Chicago Booth U.S. Monetary Policy Forum 10:15 a.m.
WITA event on North American Free Trade Agreement 10:30 a.m.
CFR event with World Bank’s Jim Yong Kim 1 p.m.

New Report: How Americans & Investors Are Reacting To Market Volatility

Recent tumult in the stock market has triggered a wave of concerns about investor confidence and the possibility of sustained downturn. To provide a better understanding of the real-time reaction to this volatility, Morning Consult conducted a comprehensive survey of both consumers and market investors. See the full report.

General

CFPB seeks input on how best to engage the public
Kate Berry, American Banker

The Consumer Financial Protection Bureau is seeking comment on how to engage the public in field hearings and town hall meetings as part of a broad review of all of the bureau’s processes under acting Director Mick Mulvaney. The CFPB issued a request for information Wednesday on “external engagements,” referring to the variety of meetings and other functions the bureau hosts to gather feedback on agency policies.

U.S. Treasury Official Says Era of Congratulating China Is Over
Andrew Mayeda, Bloomberg

The U.S. is done applauding China for promising economic reforms and wants to see the Asian nation back up its professed support for open trade, according to a senior U.S. Treasury official. The world has woken up to China’s failure to open its economy to market forces, as Beijing promised when it won membership in the World Trade Organization in 2001, said David Malpass, the Treasury’s undersecretary for international affairs.

White House Reaches Out to Labor Unions on Trade Policy
Eric Morath, The Wall Street Journal

President Donald Trump sought input Wednesday from the largest labor unions in the U.S. on trade policy, including the talks to renegotiate the North American Free Trade Agreement. Mr. Trump met at the White House with Richard Trumka, president of the AFL-CIO labor federation, and the presidents of the Teamsters, the United Auto Workers, the United Steelworkers, the Communications Workers of America and the International Association of Machinists.

Stocks Under Pressure as Dollar Pauses; Pound Dips: Markets Wrap
Samuel Potter, Bloomberg

Global stocks took another leg down on Thursday in the wake of Federal Reserve minutes that painted a healthy picture of the world’s biggest economy, raising the prospect of tighter monetary policy. Futures on the S&P 500 Index rose 0.1 percent, the biggest advance in a week.

Banking

Banks call for hearing as war flares over credit union tax exemption
Sylvan Lane, The Hill

The long-running feud between banks and credit unions over the latter’s tax exemption flared again Wednesday with accusations of deception and a call for a Senate hearing. A top trade group representing community banks called on the Senate Finance Committee to hold a hearing over whether credit unions should still be exempt from corporate income tax.

Mueller asking if Manafort promised banker White House job in return for loans
Tom Winter et al., NBC News

Federal investigators are probing whether former Trump campaign chair Paul Manafort promised a Chicago banker a job in the Trump White House in return for $16 million in home loans, two people with direct knowledge of the matter told NBC News. Manafort received three separate loans in December 2016 and January 2017 from Federal Savings Bank for homes in New York City, Virginia and the Hamptons.

Elizabeth Warren takes aim at fellow Democrats over banking relief bill
Joseph Lawler, Washington Examiner

Elizabeth Warren criticized fellow Democrats in a fundraising email Wednesday, accusing them of working with Republicans to “gut” post-crisis regulations on big banks. The Massachusetts senator took aim at the 12 members of her conference who have signed onto legislation that would ease some rules, particularly for regional banks.

Americans prefer bank branches over mobile apps for opening new accounts
David Henry, Reuters

Mobile banking apps keep getting better, but 60 percent of Americans would still rather open a new checking account in person at a bank branch than on a phone, tablet or desktop computer, according to a new survey. Set for release on Wednesday by consulting firm Novantas, the survey also found that half of U.S. customers feel that online-only banks are “less legitimate” than those with branches.

Out With the Old Building, in With the New for JPMorgan Chase
Charles V. Bagli, The New York Times

JPMorgan Chase announced on Wednesday that it will demolish its headquarters on Park Avenue between 47th and 48th Streets and build a new 70-story world headquarters on the site for its 15,000 employees. The building would be the first skyscraper to go up under new zoning rules for the area surrounding Grand Central Terminal, which were designed to encourage the development of taller, more modern skyscrapers and ensure that Midtown remains one of the city’s premier business districts.

Financial Products and Investments

DOL fiduciary rule continues to take toll on annuity sales
Greg Iacurci, InvestmentNews

The Department of Labor fiduciary rule and the interest-rate environment delivered a one-two punch to annuity sales last year, pushing them down for the third consecutive year. Compared with the previous year, overall annuity sales dipped 8% in 2017, to $203.5 billion, according to the LIMRA Secure Retirement Institute, which tracks insurance data.

Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients
Mark Schoeff Jr., InvestmentNews

Brokers in Maryland would have to act in the best interests of their clients under a Senate bill making its way through the state legislature. Maryland investment advisers currently must meet such a fiduciary requirement.

EU official to U.S.: clearing plans won’t undermine bilateral pacts
Huw Jones, Reuters

European Union representatives have sought to reassure the United States that plans to tighten oversight of foreign clearing houses operating in the bloc will not disrupt transatlantic ties on market access that took years to agree. The EU has proposed giving its regulators stronger powers to supervise “systemic” or large foreign clearing houses handling transactions worth trillions of euros for investors in the bloc.

Housing and GSEs

NAMB seeks to ban credit bureau sales of trigger leads
Kelsey Ramírez, HousingWire

The National Association of Mortgage Brokers, an association that represents the interests of individual mortgage loan originators and small to mid-size mortgage businesses, announced it is seeking to ban the sale of trigger leads. NAMB said it is urging Congress to add legislative language for banning the practice to bills H.R. 4028 and S. 1982, or the PROTECT Act of 2017, which is the proposed congressional legislative action following Equifax’s data breach that exposed the personal information of more than 143 million Americans to hackers.

Taxes

As companies reveal gigantic CEO-to-worker pay ratios, some worry how low-paid workers might take the news
Jena McGregor, The Washington Post

A potentially embarrassing math calculation employers have long hoped to escape — one that pay experts thought was dead following President Trump’s election — can no longer be avoided. In recent weeks, a few public companies have begun disclosing a ratio, required for the first time this year, that compares the pay of their chief executive to the pay of their median employee.

This Florida City Shows How Trump Tax Cuts May Buoy Republicans
Michael Sasso and Steve Matthews, Bloomberg

Democrats counting on an angry, anti-Trump vibe to propel them to victory in November’s congressional elections may be in for a surprise as voters begin to see the effects of last year’s tax overhaul in their paychecks. In Homestead, Florida — a battleground city where Hillary Clinton trounced President Donald Trump by 16 points in 2016 — incumbent Representative Carlos Curbelo has been called “the most endangered Republican in Congress” by a hometown paper.

Financial Technology

SEC charges former bitcoin exchange and its founder with fraud
Kate Rooney, CNBC

The Securities and Exchange Commission charged former cryptocurrency exchange BitFunder and its founder with fraud Wednesday. The regulator alleged that BitFunder and founder Jon E. Montroll ran the operation as an “unregistered securities exchange” and defrauded users of that exchange, according to a SEC statement.

Inside Uncle Sam’s Secret Bitcoin Hoard
Jeff John Roberts, Fortune

When Alexandre Cazes hanged himself in a Thai jail cell in July, the 25-year-old left behind the trappings of a big-league drug dealer: villas, Lamborghinis, a Porsche, bank accounts in Liechtenstein and Switzerland. But Cazes, who authorities allege operated AlphaBay, the world’s largest black-market website for drugs and weapons, also left something else: Internet “wallets” holding millions of dollars’ worth of Bitcoin and other virtual currencies.

The Rise of Bitcoin Factories: Mining for the Masses
Stephanie Yang, The Wall Street Journal

Michael Poteat, an engineering student at Old Dominion University in Norfolk, Va., decided to start mining bitcoin four months ago. Using some of his bitcoin holdings, he purchased 20 “mining rigs,” computing boxes that solve complex equations to generate new coins.

Opinions, Editorials and Perspectives

Too sound to scrap
Christopher Beddor, Reuters Breakingviews

The U.S. Treasury’s view on what happens when big financial companies fail is about right. A long-awaited report recommends beefing up the bankruptcy code in case a large financial institution needs to be resolved, while keeping the door open to government intervention.

Confusion over Basel bank capital requirements fails us all
Simon Samuels, Financial Times

Asked recently about the impact of the latest proposals on bank capital requirements from the Basel Committee on Banking Supervision, the chief financial officer of Germany’s Commerzbank told investors that “the devil is in the detail”. It is 11 years after the start of the financial crisis and a decade since G20 leaders in Washington tasked Basel, as the global regulator, with working out how much capital banks need.

CFPB has opportunity to reinvent approach to innovation
Eric Mogilnicki and Michael Nonaka, American Banker

The new leadership of the Consumer Financial Protection Bureau has been initiating reforms at a breathtaking pace. One place where such reform would be most welcome would be to the agency’s broken “no-action letter” policy.

Research Reports

Most Americans in the Dark on Key Deductions and Rules
Erin El Issa, NerdWallet

Are you getting all of your deductions this tax season? According to a new NerdWallet survey, many Americans think some legitimate tax-reduction strategies are illegal, which could be leading them to miss out on money-saving deductions.