Finance Brief: Cornyn Says House GOP’s Border Adjustment Tax Is ‘On Life Support’

Washington Brief

  • Speaker Paul Ryan (R-Wis.) emphasized the immediate need for a comprehensive tax overhaul as conservative group Americans for Prosperity intensified its criticism of the House GOP’s border adjustment tax plan. Senate Majority Whip John Cornyn (R-Texas) said the provision was “on life support.” (Bloomberg News)
  • The full U.S. Court of Appeals for the District of Columbia Circuit will rehear a challenge to the Securities and Exchange Commission’s in-house administrative proceedings, negating an August ruling in the SEC’s favor. (Reuters)
  • President Donald Trump’s labor secretary nominee, Alexander Acosta, may face questions at his confirmation hearing about his tenure as chairman of U.S. Century Bank, a Miami-area lender that hasn’t fully repaid Troubled Asset Relief Program funds it received during the recession. (The Miami Herald)

Business Brief

  • In the absence of a permanent labor secretary, Labor Department staffers are shaping how the agency handles the fiduciary rule, the Obama-era retirement advice measure that the White House ordered DOL to review. (InvestmentNews)
  • Trump expressed support for the Export-Import Bank, which has been hobbled by a Senate GOP backlog of necessary board members, in a private meeting with Rep. Kevin Cramer (R-N.D.) and a handful of other Republican lawmakers. (The Washington Examiners)
  • The largest U.S. banks want relief from certain anti-money laundering requirements that they say result in excessive paperwork, according to a report from The Clearing House. (Reuters)

Chart Review

Events Calendar (All Times Local)

Friday
SEC Miami office director speaks at panel discussion 1:45 p.m.

 

General

Trump’s labor pick is FIU law dean and a former Miami U.S. attorney
Jay Weaver et al., Miami Herald

Less well known about Acosta has been his tenure as chairman of troubled U.S. Century Bank — despite not having worked in the financial industry since a brief experience as a Lehman Brothers investment banker before law school. Doral-based U.S. Century nearly went under during the recession because of bad loans.

Trump’s Labor nominee oversaw ‘sweetheart plea deal’ in billionaire’s underage sex case
Josh Gerstein, Politico

President Donald Trump’s new nominee for secretary of labor, Alexander Acosta, could face a grilling in the Senate over claims that — while he was the top federal prosecutor in Miami — he cut a sweetheart plea deal in 2008 with a billionaire investor accused of having sex with dozens of underage girls.

Puzder Returning to Job as Fast-Food CEO After Failed Labor Bid
Leslie Patton, Bloomberg News

Andy Puzder, the controversial fast-food executive who dropped his bid to become U.S. labor secretary on Wednesday, will return to his job running the Carl’s Jr. and Hardee’s chains. “After a short break to recharge with his family, Andy will be getting back to work,” a spokesman for the executive said in an e-mailed statement on Thursday.

In private meeting, Trump signals support for Ex-Im Bank
Susan Ferrechio, The Washington Examiner

President Trump now may be in favor of the Export-Import Bank, according to Republican lawmakers who met with him privately Thursday, even though Trump once condemned the bank as corporate welfare. Rep. Kevin Cramer, R-N.D., said Trump spoke positively about reviving the trade bank, which has been hobbled thanks to Senate Republicans who have refused to approve a full board of directors.

Mnuchin seeks fraud case dismissal, sanctions
Kevin McCoy, USA Today

Treasury Secretary Steven Mnuchin has moved to dismiss a fraud lawsuit filed against him — and seek legal sanctions against the film financing company that filed the case. Attorneys for Mnuchin argued in court papers filed Tuesday that the lawsuit should be dismissed because RKA Film Financing “attempts to revive spurious fraud and negligent misrepresentation claims” that a New York Supreme Court justice in Manhattan dismissed in January.

Stocks Decline With Commodities as Pound Slumps: Markets Wrap
Robert Brand and Eddie Van Der Walt, Bloomberg News

Futures on the S&P 500 Index dropped 0.3 percent after the benchmark gauge fell for the first time in eight days, halting the longest rally since 2013.

Banking

Big U.S. banks to push for easing of money laundering rules
Joel Schectman et al., Reuters

America’s largest banks are to propose a complete overhaul of how financial institutions investigate and report potential criminal activity, arguing that rules imposed in the years after the Sept. 11, 2001 attacks and strengthened during the Obama administration are onerous and ineffective, sources said.

U.S. Century in Miami will need new chairman after latest Labor Secretary nomination
Allison Prang, American Banker

U.S. Century Bank in Miami may be looking for a new chairman. Alex Acosta, who has been the $1 billion-asset bank’s chairman since 2013, was nominated by President Donald Trump to serve as Labor Secretary.

Latest Dodd-Frank reversal bill would exempt a third of public companies from giving auditor warning
Francine McKenna, MarketWatch

The sweeping package to reform the Dodd-Frank bank reform law introduced in Congress has a provision that would curtail the reporting of accounting problems from about a third of issuers. Rep. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee, has modified his legislation that would uproot Dodd-Frank to raise the limit for companies to comply with the requirement for an outside auditor’s opinion on a company’s internal controls over financial reporting, or ICFR.

Wells Fargo to oppose nuns on review resolution: document
Ross Kerber, Reuters

The board of Wells Fargo & Co plans to oppose a resolution filed by shareholder activists led by the Sisters of St. Francis of Philadelphia seeking a review of the root causes of the bank’s unauthorized accounts scandal, according to a draft document seen by Reuters. The draft dated Feb. 10 states the board’s position on the measure, to be included in its forthcoming proxy for this year’s springtime shareholder meeting, is that because the bank has its own investigation and reforms under way, the concerns raised by the proposal are being addressed.

Financial Products and Investments

Awaiting new Labor secretary, staff takes on larger role in fiduciary rule’s fate
Mark Schoeff Jr., InvestmentNews

In Washington, it is often said that personnel is policy. When it comes the Labor Department’s fiduciary rule, the lack of Trump administration appointees at the agency is adding to uncertainty surrounding the rule.

U.S. court to rehear challenge to SEC judges
Lawrence Hurley, Reuters

A U.S. appeals court on Thursday said it would rehear a challenge to the Securities and Exchange Commission’s use of in-house judges. The order issued by the U.S. Court of Appeals for the District of Columbia Circuit wiped out a three-judge panel’s August decision in favor of the commission.

The Acting SEC Chair is Using His Temporary Powers
Robert Schmidt, Bloomberg News

Serving as acting chairman of a federal agency is the Washington equivalent of being all dressed up with nowhere to go. The temporary position doesn’t entail much aside from keeping the seat warm until the new boss arrives.

A Little Birdie Told Me: Playing the Market on Trump Tweets
Nathaniel Popper, The New York Times

Analyzing Twitter for market-moving information has been a business for years. High-frequency trading firms have even built such analysis into their trading strategies.

‘In Trump We Trust’ Is Market Mantra as Turmoil Besets White House
Oliver Renick and Brian Chappatta, Bloomberg News

Follow the money: it’s a classic Washington catchphrase. And if you follow the money on Wall Street right now, it’s hard to see how all that chaos in the White House you’ve been reading about adds up to much for the financial markets.

Hunting for Dirty Deeds in the $34 Trillion U.S. Futures Market
Matthew Leising, Bloomberg News

At the cash-strapped regulator of the U.S. derivatives market, even an iPhone’s worth of data is too much to handle. Every day, just a bit after 4 p.m., about 50 gigabytes of data are transmitted from the Chicago office of CME Group to the Commodity Futures Trading Commission in Washington.

Housing and GSEs

JPMorgan moving mortgages online to please paper-weary customers
David Henry, Reuters

JPMorgan Chase & Co (JPM.N) is gradually introducing a digital mortgage platform where customers can apply online and track applications by mobile phone. The tools will allow customers to submit and sign documents online and exchange messages with bank staff and real-estate agents so loans can close more quickly and easily, consumer mortgage chief Mike Weinbach said in an interview.

Kushner’s Use of U.S.-Backed Apartment Loans Poses Conflict Risk
Joe Light, Bloomberg News

Jared Kushner relinquished control of his family’s multibillion-dollar real-estate business in January to eliminate conflicts of interest when he became a top White House adviser to his father-in-law, President Donald Trump. Yet Kushner Cos. has apartment buildings from New Jersey to Maryland with more than $500 million in government-backed mortgages financed by Fannie Mae and Freddie Mac.

Taxes

Ryan Makes Emphatic Plea for Tax Plan Seen ‘On Life Support’
John McCormick et al., Bloomberg News

Not long after House Speaker Paul Ryan offered a full-throated affirmation of his tax-overhaul plan, an influential conservative group announced a grassroots campaign against it and a Senate leader said a key part of the proposal is “on life support.” Senate Majority Whip John Cornyn was diagnosing Ryan’s plan to replace the U.S. corporate income tax with a new, “border-adjusted” levy on U.S. companies’ domestic sales and imports.

Tax cuts for banks (if they happen) may not go where you think
Kristin Broughton, American Banker

It’s hard for banks to resist the temptation to dream about money they don’t have in hand yet when the sum in question could exceed $30 billion. That is the kind of estimate that has been thrown around for how much banks could save if President Trump and Congress slash corporate tax rates, perhaps to as low as 15%.

Paulsen, emboldened by full GOP rule but skeptical of Trump, tries to shape federal tax reform
Allison Sherry, The Minneapolis Star Tribune

After eight years in Congress, U.S. Rep. Erik Paulsen finds himself for the first time in what should be ideal circumstances to finally accomplish big goals that have driven his political career: full Republican control of Congress, and a Republican in the White House. Instead, the Minnesota Republican is juggling the polarizing priorities of President Trump — who he didn’t vote for last fall — while also trying to help shape a major tax reform initiative, put forward by some of his own closest allies in Congress, that has him at odds with two of Minnesota’s most high-profile companies.

Financial Technology

NY state financial cybersecurity rules taking effect in March
Morgan Chalfant, The Hill

A New York state regulation intended to protect the financial services industry and its consumers from cyberattacks is taking effect in March. Gov. Andrew Cuomo (D) announced the regulation on Thursday, describing it as the first of its kind in the nation.

New York seeks to expand authority over fintechs
Lalita Clozel, American Banker

The New York State Department of Financial Services is hoping to expand its authority to marketplace lenders, brokers, merchant cash advance companies and others that previously could operate in the state without a license.

A Message from the National Black Chamber of Commerce:

Did you know the Durbin Amendment has made big box retailers $42 billion in profit? These corporations promised they would pass on profits made from lower debit transaction fees to consumers. But they have not kept their word and in many cases are charging consumers more.

Opinions, Editorials and Perspectives

Trump’s Labor Mulligan
Editorial Board, The Wall Street Journal

President Trump doesn’t have political capital to spare, so it’s good his new Labor nominee Alexander Acosta shouldn’t need much to be confirmed. The former U.S. prosecutor has been confirmed by the Senate three times and has a solid record that could even win Democratic votes.

Here’s why Trump’s pick of Acosta for labor secretary is a slam dunk
Jake Novak, CNBC

President Donald Trump’s choice of Alexander Acosta to replace fast-food CEO Andy Puzder as his choice for Secretary of Labor may be the biggest slam dunk of his presidency so far.

No Need to Fear the Border-Adjustment Tax
Stuart Leblang and Amy S. Elliott, American Journal of Transportation

“Border adjustments” have quickly gone from the hottest idea in U.S. business-tax reform to one of the most reviled. One reason for the rising skepticism is the fear that border-adjusted taxes—simply described as a tax on imports and a subsidy for exports—would increase prices for American consumers. But they don’t have to.

GOP Anti-Import Border-Adjustment Tax is Protectionist Garbage
Nick Gillespie, Reason

For a number of reasons, I’m not a fan of border-adjustment taxes. For starters, the scheme is incredibly complicated and does nothing to effect the simplification of taxes, which should be part and parcel of every tax reform.

Fiduciary Path is the Right One, With Rule or Without
Ray Ferrara, The Wall Street Journal

For most registered investment advisers, who were already legally bound by the Securities and Exchange Commission to put their clients’ interests before their own, the rule meant minor tweaking to policies and procedures. For the broker-dealer and insurance industries, which hadn’t previously operated under a fiduciary standard, it’s been a much more exhaustive process.

Yellen Gives Conservatives Something to Cheer
Donald Luskin, The Wall Street Journal

With the announcement that Daniel Tarullo will retire in April from the Federal Reserve Board of Governors, President Trump will have the chance to fill three of the board’s seven seats. Next year the president could also promote two of his new governors to chairman and vice chairman, since Janet Yellen’s leadership term ends in January 2018 and Stanley Fischer’s is up in June.

A Message from the National Black Chamber of Commerce:

Enactment of the Durbin Amendment has led to $42 billion in extra profit for giant retailers. These corporations said they would pass on the profits to consumers in the form of lower prices, but they’ve broken that promise, pocketed the money and in many cases are charging consumers even more.

Research Reports

US Trade Policy Options in the Pacific Basin: Bigger is Better
Jeffrey J. Schott, Peterson Institute for International Economics

Schott explains why a regional deal like the TPP is far more likely to yield larger US gains with fewer US concessions than the administration’s favored bilateral approach. He reexamines the TPP deal and recommends ways it could be improved, including by adding enforceable currency manipulation provisions to the main trade deal and omitting the investor-state dispute settlement provision.

A New Paradigm: Redesigning the U.S. AML/CFT Framework to Protect National Security and Aid Law Enforcement
The Clearing House

The current AML/CFT statutory and regulatory framework is outdated and thus ill-suited for apprehending criminals and countering terrorism in the 21st century. In particular, the following are core problems with the current AML/CFT regime that must be resolved.

Briefings

Finance Brief: Week in Review & What’s Ahead

Andrew Puzder withdrew his nomination for secretary of labor after increased scrutiny from senators on both sides of the aisle. Trump’s new nominee, Alexander Acosta, is Florida International University’s law school dean, chairman of U.S. Century Bank and a former member of the National Labor Relations Board.

Load More