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Finance Brief: Equifax Reports Cyberattack Exposed 143 Million Consumers’ Data


Government Brief

  • Republican lawmakers say they are making progress on a tax policy framework, but the corporate tax rate may be a point of contention. House Speaker Paul Ryan said Thursday that House Republicans saw the mid- to low-20 percent range as an “achievable goal” but that President Donald Trump’s goal of a 15 percent rate would be difficult. (The Wall Street Journal)
  • Trump and Senate Minority Leader Charles Schumer (D-N.Y.) have what one person called a” gentleman’s agreement” to work on a permanent removal of Congress’ obligation to continually raise the debt ceiling. Trump has agreed to discuss with Schumer and House Minority Leader Nancy Pelosi (D-Calif.) a plan for the debt limit that would go into effect when the current three-month extension runs out, but any proposal would need to be approved by Congress. (The Washington Post)
  • Robert Cook, the Financial Industry Regulatory Authority’s chief executive, was aggressively questioned by House lawmakers during a Financial Services subcommittee oversight hearing, his first appearance before Congress since he became Finra’s leader in August 2016. Lawmakers expressed concerns over issues such as executive pay, the spending of fine proceeds and the regulator’s $1.6 billion reserve fund. (Investment News)

Business Brief

  • Equifax Inc., one of the three major credit reporting companies in the United States, said a data breach leaked names, birth dates, Social Security numbers, addresses and some driver’s license numbers for as many as 143 million consumers. The company said it discovered the breach July 29 and that 209,000 U.S. credit card numbers were obtained. (CNBC)
  • State Street Corp., one of the largest asset managers in the United States, agreed to pay more than $35 million to settle Securities and Exchange Commission charges that it had overcharged customers, generating $20 million in “improper revenue.” State Street, which earlier this year agreed to pay more than $64 million to resolve fraud charges with the Department of Justice, apologized for overcharging its clients. (Financial Times)
  • Pakistan’s Habib Bank has agreed to pay a $225 million fine to the New York State Department of Financial Services to settle charges that it did not comply with anti-money laundering and sanctions rules. The bank has also agreed to close its New York branch once it has properly wound down business. (Reuters)

Chart Review

Events Calendar (All Times Local)

Friday
FDIC fall research conference 8 a.m.

General

Trump, Schumer agree to pursue plan to repeal the debt ceiling
Damian Paletta and Ashley Parker, The Washington Post

President Trump and Senate Minority Leader Charles E. Schumer (D-N.Y.) have agreed to pursue a deal that would permanently remove the requirement that Congress repeatedly raise the debt ceiling, three people familiar with the decision said.Trump and Schumer discussed the idea Wednesday during an Oval Office meeting.

Crapo Urges Speedy Senate Approval as Panel OKs Quarles’ Fed Nomination
Ryan Rainey, Morning Consult

As the Federal Reserve faces a fourth vacancy on the seven-member board of governors, Senate Banking Committee Chairman Mike Crapo (R-Idaho) urged the full Senate to quickly confirm Randal Quarles, whose nomination to be the Fed vice chairman for supervision was approved by the panel Thursday. Before the committee voted 17-6 to approve Quarles’ nomination, Crapo cited the pending departure of Fed Vice Chairman Stanley Fischer, who on Wednesday announced his plan to resign for personal reasons in mid-October.

Interest in CFPB Commission Fades Even If Cordray Departs
Victoria Finkle, Bloomberg BNA

Richard Cordray continues to leave Washington guessing about whether he’ll resign from the Consumer Financial Protection Bureau to run for governor of Ohio, but there’s little mystery over whether he’ll be replaced by a single director or multiple commissioners.Republicans have seemingly abandoned years of effort to restructure the CFPB into a multi-member commission, and Democrats seem to have lost interest in the idea as a bulwark against a single director dismantling the consumer-friendly agency.

Dollar Tumbles as Yen, Euro Rally on Irma, ECB: Markets Wrap
Eddie Van Der Walt, Bloomberg

The dollar tumbled to its weakest level since the start of 2015 amid fading expectations of another U.S. rate increase this year. Futures on the S&P 500 Index fell 0.2 percent.

Banking

Pakistan’s Habib Bank to pay $225-million New York fine for compliance failures
Michelle Price, Reuters

The New York State Department of Financial Services on Thursday said Pakistan’s Habib Bank had agreed to pay $225 million to settle an enforcement action brought against it for infringing laws designed to combat illicit money transfers. The DFS said in a legal filing last month it was seeking to fine the bank, Pakistan’s biggest lender, up to $630 million for “grave” compliance failures over anti-money laundering and sanctions rules at its only U.S. branch.

Senate panel may again probe Wells scandals
Ian McKendry, American Banker

Wells Fargo’s continued missteps following revelations last year that the bank created millions of unwanted accounts for customers may lead to additional hearings on Capitol Hill. Democrats on the Senate Banking Committee sent a letter in August to panel Chairman Sen. Mike Crapo, R-Idaho, requesting a hearing on the bank.

A year later, Wells still struggling to repair tattered reputation
Kate Berry and Kevin Wack, American Banker

The other shoe keeps dropping at Wells Fargo. One year after the San Francisco megabank paid $190 million in fines and restitution to settle charges that thousands of employees opened millions of unauthorized checking and credit card accounts for customers, Wells remains mired in scandal and struggling to repair its once-pristine reputation.

Financial Products and Investments

Credit reporting firm Equifax says data breach could potentially affect 143 million US consumers
Todd Haselton, CNBC

Equifax Inc., which supplies credit information and other information services, said Thursday that a data breach could have potentially affected 143 million consumers in the U.S. The U.S. population was about 324 million as of January 1, 2017, according to the U.S. Census Bureau, which means the Equifax incident affects a huge portion of the United States.

State Street to pay $35m in SEC settlement over client charges, disclosures
Eric Platt, Financial Times

State Street, one of the largest asset managers in the US, will pay more than $35m to settle charges with the Securities and Exchange Commission that it fraudulently charged clients and omitted material information about how it operated its Treasury trading platform. The SEC said that company had generated more than $20m in “improper revenue” by overcharging customers.

House lawmakers grill Finra CEO Robert Cook on fine money, executive pay, transparency
Mark Schoeff Jr., Investment News

House lawmakers pressed Finra CEO Robert Cook on a host of concerns Thursday, including how fine money is spent, the regulator’s $1.6 billion reserve fund and executive pay. During a Financial Services subcommittee oversight hearing, Rep. Brad Sherman, D-Calif., expressed concern about the Financial Regulatory Authority Inc.’s practice of retaining fine proceeds rather than giving that money to investors who were harmed by broker malfeasance.

Congress likely to ‘push down’ the priority of killing DOL fiduciary rule
Greg Iacurci, Investment News

A main congressional opponent of the Department of Labor’s fiduciary rule said Thursday that Capitol Hill’s swelling political agenda will decrease the priority level of taking up legislation to kill the rule. “Right now, you’ve got a debt-ceiling vote coming up, a hurricane bearing down on us, … health care that hasn’t been done [and] tax reform … [The fiduciary rule] will get pushed down,” Rep. Phil Roe, R-Tenn., a member of the House of Representatives’ subcommittee on Health, Employment, Labor and Pensions, said.

Housing and GSEs

Wells Fargo Acquires $51 Billion in Mortgage Servicing Rights
Laura J. Keller, Bloomberg

Wells Fargo & Co., the largest U.S. home lender, bought about $51 billion in servicing rights from Seneca Mortgage Investment. The underlying mortgages are all guaranteed by Fannie Mae or Freddie Mac, San Francisco-based Wells Fargo said Thursday in a statement that didn’t include terms.

Ocwen fined $1 million for force-placed insurance issues
Ben Lane, Housing Wire

Ocwen Financial will pay a fine of $1 million for running afoul of the terms of the National Mortgage Settlement by not properly refunding force-placed insurance premiums to certain borrowers during the first quarter of 2017. The fine, which was first reported by Law 360, stems from Ocwen failing one of the National Mortgage Settlement’s servicing metrics related to force-placed insurance, which is applied to borrowers who cannot or do not provide evidence that they have homeowner’s insurance.

Can Fannie Mae make lenders happy while keeping risk in check?
Bonnie Sinnock, National Mortgage News

Andrew Bon Salle, executive vice president of Fannie Mae’s single-family business, oversees the policies of the largest buyer of residential mortgages in the U.S.; but there are limits to his power. Bon Salle is focused on overseeing policies designed to help mortgage lenders sell loans to Fannie so it can fulfill its affordable housing mission.

Taxes

GOP Cites Progress in Tax Talks; 15% Corporate Rate Is Doubted
Richard Rubin, The Wall Street Journal

Republicans pointed to progress Thursday in their negotiations to overhaul the U.S. tax code even though one of President Donald Trump’s top priorities, lowering the corporate tax rate to 15%, might not be achievable. Rep. Kevin Brady (R., Texas) said after a meeting of top negotiators in the Capitol that the GOP was making “real progress” toward a tax-policy framework, though he wouldn’t provide details.

Meadows Says Trump ‘Myopically Focused’ on Tax Reform
Eli Yokely, Morning Consult

Despite concerns about the deal reached between President Donald Trump and Democratic leaders to couple a hurricane relief package with a nearly three-month extension of the federal debt limit, the chairman of the House Freedom Caucus said he saw a bright side to the news for Republicans hoping for a longer-term plan. “The good news is that the president is myopically focused on trying to get tax reform done. That’s why he struck the deal,” Rep. Mark Meadows (R-N.C.) told reporters Thursday at a breakfast hosted by Bloomberg.

Ryan won’t commit to releasing tax plan this month
Colin Wilhelm, Politico

House Speaker Paul Ryan said Thursday that the timeline to pass an overhaul of the tax code remains the end of the year, despite an increasingly crowded legislative calendar for Congress. But Ryan, who is among a group of congressional leaders negotiating a plan with the White House, declined to commit to releasing a plan this month, saying instead that, “I’ll leave it up to the tax writers as to when they’ll release their template.”

Financial Technology

New bill would make small bitcoin purchases tax-exempt
Lalita Clozel, American Banker

Since the Internal Revenue Service declared virtual currency to be a form of property in 2014, all bitcoin transactions have become a tax reporting nightmare. Now, two Congressmen are proposing to make cryptocurrency more viable by easing up on those requirements. A bill introduced Thursday by Reps. Jared Polis, D-Colo., and David Schweikert, R-Ariz., would allow cryptocurrency users to make transactions of up to $600 without paying taxes. In addition, the legislation would require the Treasury Department to create a process for virtual wallets to report gains and losses directly to the IRS, just like stock brokers do for their clients.

$257 Million: Filecoin Breaks All-Time Record for ICO Funding
Stan Higgins, CoinDesk

Blockchain data storage network Filecoin has officially completed its initial coin offering (ICO), raising more than $257 million over a month of activity. Filecoin’s ICO, which began on August 10, quickly garnered millions in investment via CoinList, a joint project between Filecoin developer Protocol Labs and startup investment platform AngelList.

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

Make flood insurance reflect actual risk
The Editorial Board, USA Today

In 1968, in the wake of Hurricane Betsy, Congress decided it had enough. Flooding was destroying too many homes, leaving financial and physical devastation in its wake.

Donald Trump’s Fed
The Editorial Board, Bloomberg

Even more than before, President Donald Trump now has the chance to entirely reshape the Federal Reserve. Janet Yellen’s term as chair ends early next year, and her deputy, Stanley Fischer, has just resigned, citing personal reasons. Soon Trump will be able to appoint a new person to the top job and three other positions on the seven-member board — not counting the one he’s already given to Randy Quarles.

Trump’s deal with the Democrats saves us from disaster — but not for long
The Editorial Board, The Washington Post

When the best that can be said is that the nation can “breathe a sigh of relief,” as Senate Minority Leader Charles E. Schumer (D-N.Y.) put it Wednesday, that’s better than a dive over the cliff. The deal struck by President Trump and Congress to postpone until December a divisive battle over fiscal matters is hardly an ideal solution.

Ditching the debt limit is one of Trump’s best ideas yet
Heather Long, The Washington Post

America’s debt limit is close to dying. No one should mourn its demise. President Trump and Senate Democratic Leader Charles E. Schumer (D-N.Y.) have a “gentleman’s agreement” to scrap America’s debt ceiling, according to a report from The Washington Post.

Why the Return of Bigger Banks Means Bigger Risks for Everyone Else
The Editorial Board, The New York Times

Among the most appalling aspects of the financial collapse nine years ago was that no matter how reckless and predatory big financial institutions had been, they had grown so big and so interconnected that the federal government found itself forced to prop them up to avoid failures that would wreck the economy. The resulting bailouts, which included billions of dollars in bonuses for executives responsible for the fiasco, provoked deep public anger and became a rallying cry for populists on the right and the left.

Your Coming Tax Increase
David Leonhardt, The New York Times

A 19th-century economist named Adolph Wagner made a prediction that came to be known as Wagner’s Law: As societies became wealthier, their taxes would rise. They would rise because people would want more of the services that government tended to provide better than the private market, like national security, education, medical care and a guaranteed retirement.

US Treasury bill jitters lay bare investor angst
Gillian Tett, Financial Times

In normal circumstances, America’s Treasury bill market seems dull as ditchwater. This corner of government finance, after all, is supposed to be ultra safe; it is where stodgy asset managers park their cash.

Hurricane Irma likely to batter insurers on many fronts
Brooke Masters, Financial Times

As Hurricane Irma bears down on the continental United States, thoughts are rightly with the homeowners and rescue workers in its path. The storm is also likely to have profound consequences for insurers.

A Message from the Electronic Payments Coalition:

Four times as many voters trust financial institutions over retailers to create new, more secure ways to pay, which is just one reason why the payments industry is focused on innovation. Banks and credit unions are continuously working to provide consumers with the latest security features when they pay. Get the latest from EPC.

Research Reports

U.S. Efforts to Combat Narcotics-Related Money Laundering in the Western Hemisphere
United States Government Accountability Office

GAO was asked to provide information on U.S. efforts to impede illicit proceeds from drug trafficking from entering the financial systems of the United States and other Western Hemisphere countries. This report describes (1) U.S. agency oversight and monitoring of compliance with the BSA, including collaboration with counterparts in other Western Hemisphere countries, and (2) State’s and Treasury’s efforts to build capacity in other Western Hemisphere countries to combat narcotics-related money
laundering.

Fiduciary Rule: Initial Impact Analysis
The U.S. Chamber of Commerce

In an effort to monitor the impact of the rule on investors and those saving for retirement, the U.S. Chamber conducted a survey of industry participants that included 14 financial advisory companies collectively responsible for nearly $10 trillion in assets across 26 million investment accounts. The survey results shed light on the actions firms have taken to implement the rule, as well as the practical consequences those actions have had on retirement savings investors.