Finance Brief: Deutsche Bank to Pay $240 Million to Settle Libor Lawsuit


Top Stories

  • Deutsche Bank AG agreed to pay $240 million to settle a private antitrust lawsuit related to its alleged manipulation of the London Inter-bank Offered Rate. The deal makes Deutsche Bank, which denied any wrongdoing, the third lender to settle Libor allegations with “over-the-counter” investors, following Citigroup Inc.’s $130 million settlement in July 2017 and Barclays Plc’s $120 million settlement in November 2015. (Reuters)
  • JPMorgan Chase & Co. Chief Financial Officer Marianne Lake said the firm wants the Federal Reserve to update its process for calculating when banks are globally systemically important institutions, which require stricter capital rules. Failure to do so, Lake said, will make the current state of GSIB score calculation “a barrier to growth.” (Financial Times)
  • In a speech to credit union executives, Consumer Financial Protection Bureau Acting Director Mick Mulvaney said his agency will focus more on determining how businesses are affected by CFPB rules. Mulvaney, who promised there will be “more math” at the CFPB with him at the helm, also criticized the agency’s previous leadership, saying they did not focus on cost analysis. (The Wall Street Journal)

Chart Review

Events Calendar (All Times Local)

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

Mick Mulvaney Promises Accounting for Business Costs in Rule-Making
Yuka Hayashi, The Wall Street Journal

The business cost of complying with rules will receive increased attention at a consumer-finance regulator, the agency’s acting director said, faulting the Obama administration for not giving enough consideration to such factors. The Consumer Financial Protection Bureau, created in response to the financial crisis, has to consider the cost its rules imposed on industry as part of cost-benefit analyses required by Congress.

House GOP urges White House to complete NAFTA
Vicki Needham, The Hill

House Republicans on Tuesday called on President Trump to update the North American Free Trade Agreement (NAFTA) while urging caution on slapping tariffs on imports. Nearly 30 GOP members, including the House Ways and Means Committee, met with Trump at the White House to discuss a wide range of pressing trade issues as negotiations continue this week on NAFTA.

Wealth of Congress: Richer Than Ever, but Mostly at the Very Top
David Hawkings, Roll Call

The people’s representatives just keep getting richer, and doing so faster than the people represented. The cumulative net worth of senators and House members jumped by one-fifth in the two years before the start of this Congress, outperforming the typical American’s improved fortunes as well as the solid performance of investment markets during that time.

Stocks Slide After Powell; Dollar Steady With Oil: Markets Wrap
Robert Brand, Bloomberg

Shares in Europe fell as disappointing Chinese data added to a perceived hawkish tilt in U.S. Federal Reserve policy that weighed on equities in Asia. Futures on the S&P 500 Index increased 0.1 percent.

Banking

Deutsche Bank to pay $240 million to end Libor rigging lawsuit in U.S.
Jonathan Stempel, Reuters

Deutsche Bank AG has agreed to pay $240 million to settle private U.S. antitrust litigation accusing it of conspiring with other banks to manipulate the Libor benchmark interest rate. The preliminary settlement with the German bank was disclosed in filings on Tuesday with the U.S. District Court in Manhattan, and requires a judge’s approval.

JPMorgan urges Fed to loosen capital shackles
Ben McLannahan, Financial Times

JPMorgan Chase has urged the Federal Reserve to loosen capital shackles on the biggest global banks, saying that rigid rules drawn up in the wake of the crisis could become a “barrier to growth” in the world’s largest economy. Since the crisis global regulators have divided big global banks into brackets, according to how much damage their collapse could do; the bigger the impact, the thicker the buffer of equity capital these “systemically important” banks (GSIBs) are required to hold, above minimum levels.

Powell Backs Senate Plan to Raise Threshold for ‘Systemically Important’ Banks
Lalita Clozel, The Wall Street Journal

Federal Reserve Chairman Jerome Powell on Tuesday voiced support for a provision in a bipartisan Senate bill to raise the threshold at which banks are subject to tighter oversight. The bill, sponsored by Sen. Mike Crapo (R., Idaho), would raise the threshold for designating a bank as a “systemically important financial institution” to $250 billion in assets from the current $50 billion, but give some amount of discretion to the Fed for banks in the $100 billion to $250 billion range.

Goldman Sachs, Adviser to the Elite, Wants to Be Your Local Banker
Liz Hoffman and Peter Rudegeair, The Wall Street Journal

Goldman Sachs Group Inc. has come to Main Street. In a glass-walled tower in Utah’s capital, hundreds of Goldman employees are building what amounts to one of the world’s most ambitious consumer-finance startups.

Former White House aide Dina Powell rejoins Goldman Sachs
Lorraine Woellert, Politico

Dina Powell, who until January served as a top national security adviser in the White House, will rejoin Goldman Sachs as a member of the firm’s management committee, the company announced Tuesday. “Dina will focus on enhancing the firm’s relationships with sovereign clients around the world,” Goldman executives wrote in an email to employees.

Dems seek investigation of Chicago banker caught up in Russia probe
Kevin Wack, American Banker

Two congressional Democrats are investigating whether a Chicago banker was offered a job in the Trump administration in exchange for lending $16 million to the president’s former campaign manager. Reps. Elijah Cummings, D-Md., and Stephen Lynch, D-Mass., sent a letter to the Defense Department on Tuesday to ask about its contacts with Stephen Calk, the CEO of the $364-million asset Federal Savings Bank.

Financial Products and Investments

ETFs not ‘at the heart’ of U.S. market selloff: Fed’s Powell
Trevor Hunnicutt, Reuters

The U.S. Federal Reserve is “looking into” whether exchange-traded funds (ETFs) influenced the stock selloff earlier this month, but the investments were not likely “at the heart” of what happened, Chairman Jerome Powell said on Tuesday. The S&P 500 fell 10 percent from Jan. 26 to Feb. 8 in a decline investors linked to fears about rising bond yields and higher inflation.

Fiduciary advocate calls for immediate enforcement of DOL fiduciary rule
Mark Schoeff Jr., InvestmentNews

A leading advocate for the Labor Department’s fiduciary rule is calling on the agency to enforce the measure even while the regulation is undergoing a review. In a letter to DOL Secretary Alexander Acosta last Wednesday, the Consumer Federation of America cited a recent Massachusetts enforcement action against Scottrade Inc. for allegedly violating state laws and internal policies by conducting sales contests that failed to adhere to the DOL rule, which requires brokers to act in the best interests of their clients in retirement accounts.

Overdue US credit card debt hits 7-year high at $11.9bn
Alistair Gray, Financial Times

Overdue US credit card debt has reached a seven-year high, underlining the difficulties faced by many consumers in spite of the strong performance of the economy. Banking sector data show consumers were at least three months behind repayments or considered otherwise distressed on $11.9bn of credit card debt at the turn of the year, a rise of 11.5 per cent during the fourth quarter.

Housing and GSEs

Ocwen settles with Maryland, but settlement carries stiffer penalties than previous states
Ben Lane, HousingWire

In the last several months, Ocwen Financial has reached settlements with nearly every one of the 31 states that took regulatory actions against the nonbank last year over alleged escrow and other mortgage servicing issues. Ocwen continued that settlement streak this week, reaching a settlement with the state of Maryland.

Ben Carson’s HUD, Planning Cuts, Spends $31,000 on Dining Set for His Office
Glenn Thrush, The New York Times

Department of Housing and Urban Development officials spent $31,000 on a new dining room set for Secretary Ben Carson’s office in late 2017 — just as the White House circulated its plans to slash HUD’s programs for the homeless, elderly and poor, according to federal procurement records. The purchase of the custom hardwood table, chairs and hutch came a month after a top agency staff member filed a whistle-blower complaint charging Mr. Carson’s wife, Candy Carson, with pressuring department officials to find money for the expensive redecoration of his offices, even if it meant circumventing the law.

Taxes

Morgan Stanley revises earnings, boosts compensation after U.S. tax change
Catherine Ngai, Reuters

The new U.S. tax law has taken a bigger bite out of Morgan Stanley’s 2017 earnings than it initially expected and led its board to boost top executives’ deferred compensation from prior years, the Wall Street bank said on Tuesday. After further analysis of the law’s particulars, Morgan Stanley boosted its provision for income taxes by $43 million, the bank said in its annual 10-K securities filing.

Dimon Says He’ll Fight for Tax Breaks Amazon Gets for HQ2
Hugh Son and Jennifer Surane, Bloomberg

Jamie Dimon wants the Jeff Bezos deal. The CEO of JPMorgan Chase & Co., which employs more than 250,000 workers, said he’ll call the governor of whichever state Amazon.com Inc. picks for its second headquarters and try to get the same benefits.

Conservative groups urge Congress to oppose online sales tax bill
Naomi Jagoda, The Hill

A group of right-leaning organizations are urging Congress members to reject bipartisan legislation that would require out-of-state online retailers to collect sales taxes. The groups — including the National Taxpayers Union, Americans for Tax Reform and Heritage Action for America — are speaking out against a House bill called the Remote Transactions Parity Act (RTPA), as well as similar measures.

Nearly half of D.C. taxpayers would pay more in city taxes after federal overhaul
Fenit Nirappil, The Washington Post

The federal tax overhaul means nearly half of District taxpayers will pay more in local taxes, boosting city coffers by more than $50 million annually. That’s the finding of a new analysis released Tuesday by D.C. Chief Financial Officer Jeffrey DeWitt on what the new tax law means for District residents.

Financial Technology

Bitcoin-Futures Regulator Clears Employees to Trade Crypto Coins
Robert Schmidt, Bloomberg

The U.S.’s main commodities regulator recently told its employees that they are allowed to invest in cryptocurrencies, a determination that came weeks after the agency began overseeing Bitcoin futures. Under the Commodity Futures Trading Commission’s ethics guidance, workers can trade digital tokens as long as they don’t buy them on margin or have inside information gleaned from their jobs. Investing in the Bitcoin futures that the CFTC polices, however, is barred.

Fintech Startups Need Industry Partners to Thrive, Report Says
Julie Verhage, Bloomberg

Financial technology startups are seeing no shortage of venture dollars flowing their way, but there are increasing concerns over whether they can survive without partnering with the industry they’re seeking to disrupt. More than 75 percent of fintech executives surveyed in a new report said their primary business objective is to collaborate with traditional firms, such as banks and insurance companies.

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

Tax Season Another Reminder of the Need for Collaboration
Brian Tate, Morning Consult

With another tax season underway, criminals are ramping up their fraud attempts. As hardworking Americans file their taxes expecting refunds this year, fraudsters — who obtain stolen identities from those same Americans — are also eyeing the same tax returns millions of Americans are relying on to help them pay a bill, pay the rent or save for a rainy day.

Eliminate Fannie Mae and Freddie Mac
Tobias Peter, U.S. News & World Report

Fannie Mae and Freddie Mac’s recent request for a bailout from the U.S. Treasury (read American taxpayers) has brought back into the public’s eye the unresolved legal status of these two government sponsored enterprises. In this debate, the assumption is that the GSEs, or some replacement entities benefiting from a government guarantee, are necessary for an effective housing finance market.

Death knell sounds for risk retention in US mortgages
Robert C. Pozen, Financial Times

In the Dodd Frank Act, Congress directed the federal financial agencies to adopt risk-retention rules for originators of loans, such as mortgage brokers, which quickly sell them to pool sponsors who in turn sell securities based on those loan pools. Congress wanted these originators to retain approximately 5 per cent of the risk of the loans they quickly sold to have “skin in the game” — a monetary incentive to diligently check out borrowers before lending them money.

Bonuses and Bogosity
Paul Krugman, The New York Times

Why did Walmart raise wages? Partly because the labor market was tightening: unemployment had fallen more than 40 percent from its peak in 2009 (a decline for which the Obama administration’s stimulus and other policies actually do deserve some credit.)

For Trump 2020, The Federal Reserve Is The Blind Spot
Kenneth Rapoza, Forbes

President Donald Trump wants to run for office again in 2020. He might not make it beyond the mid-terms.

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

Are credit rating agencies discredited? Measuring market price effects from agency sovereign debt announcements
Mahir Binici et al., Bank for International Settlements

This paper looks at whether the information value of credit rating agency announcements relating to sovereign bonds has diminished since the Global Financial Crisis (GFC) of 2007-09. In particular, taking into account the prior credit status of the bonds, we measure how the response of credit default swap spreads (CDS) to such announcements has changed.