Finance Brief: Ex-AIG Chief Greenberg Settles 12-Year-Old Accounting Case

Washington Brief

  • Treasury secretary nominee Steven Mnuchin is considering senior Goldman Sachs Group Inc. banker Jim Donovan as his deputy secretary and former Morgan Stanley banker Justin Muzinich for another senior position at the Treasury Department. The Senate is expected to confirm Mnuchin today. (Politico)
  • Four people have rejected offers or withdrawn from consideration for two top Treasury Department posts: undersecretary for terrorism and financial intelligence and assistant secretary of tax policy. A dearth of personnel atop the department has created confusion over policy moves such as Russian sanction amendments. (Bloomberg News)
  • National Economic Council Director Gary Cohn is playing a key role in the Trump administration’s handling of economic issues. The former Goldman Sachs president is the administration’s point person on growth, jobs and business in the absence of other top economic officials. (The New York Times)

Business Brief

  • Former American International Group Inc. Chief Executive Hank Greenberg agreed to pay about $9 million to settle a 12-year-old accounting fraud case with the New York attorney general’s office. (Reuters)
  • Trump’s order to the Labor Department to review its fiduciary rule has created chaos in the retirement advice industry. The review is expected to delay the rule’s implementation, currently scheduled for April. (InvestmentNews)
  • The U.S.’s biggest foreign creditors are pulling back from Treasury debt, a move analysts attribute to Trump-fueled uncertainty. In Japan, the largest holder of treasuries, investors in December dropped them by the most in almost four years. (Bloomberg News)

Chart Review

Events Calendar (All Times Local)

Monday
No events scheduled
Tuesday
Fed Chair Yellen testifies before Senate Banking Committee 10 a.m.
House Ways and Means Committee markup 10:15 a.m.
Wednesday
SEC Advisory Committee on Small and Emerging Companies meeting 9:30 a.m.
Fed Chair Yellen testifies before House Financial Services Committee 10 a.m.
House Ways and Means Committee hearing on the geography of poverty 10 a.m.
Tax Foundation event on taxes and startups 11 a.m.
Thursday
Crain’s New York Business event with NYC regulators 8 a.m.
Brookings Institution event on regulation 9 a.m.
Andy Puzder confirmation hearing before Senate HELP Committee 10 a.m.
House Financial Services Committee hearing on covered agreements 10 a.m.
Friday
SEC Miami office director speaks at panel discussion 1:45 p.m.

 

General

Mnuchin looks to Wall Street to fill key Treasury roles
Ben White, Politico

Treasury Secretary nominee Steven Mnuchin, likely to be confirmed by the Senate on Monday, is reaching into the Republican establishment and Wall Street to fill out senior leadership roles in his department. Senior Goldman Sachs banker Jim Donovan is under strong consideration for deputy Treasury secretary and could serve as Mnuchin’s number two if confirmed by the Senate, people familiar with the matter said.

Treasury Leadership Vacuum Leaves U.S. Open to Policy Mix-Ups
Saleha Mohsin, Bloomberg News

A leadership vacuum at the Treasury Department is beginning to weigh on key areas of American economic policy, such as currency, sanctions and budget issues. Three weeks after President Donald Trump took office, the Senate is still debating his pick for Treasury Secretary, Steven Mnuchin, leaving what lawmakers say has been the longest gap between administrations at the department, though Mnuchin is considered likely to be confirmed in a vote set for Monday.

Trump’s Economic Cabinet is Mostly Bare. This Man Fills the Void.
Kate Kelly, The New York Times

A few weeks after the election, Gary Cohn, the president of Goldman Sachs, was summoned to Trump Tower for a discussion about the economy. It would be the first of many such meetings with President-elect Donald J. Trump.

Trump undertakes most ambitious regulatory rollback since Reagan
Juliet Eilperin, The Washington Post

President Trump has embarked on the most aggressive campaign against government regulation in a generation, joining with Republican lawmakers to roll back rules already on the books and limit the ability of federal regulators to impose new ones. After just a few weeks in office, the new administration is targeting dozens of Obama-era policies, using both legislative and executive tactics.

These Countries Could Be Trump’s Next Trade War Targets
David Tweed, Bloomberg News

India, Indonesia, Malaysia and Vietnam have largely escaped U.S. President Donald Trump’s glare on trade, but he may yet come looking. The U.S. runs trade deficits with all of them, in some cases quite big ones.

Global Stocks Keep Climbing as Treasuries Decline: Markets Wrap
Adam Haigh and Samuel Potter, Bloomberg News

Stock investors pushed the S&P 500 Index higher for a third week, while Trump’s promise of a “phenomenal” tax plan snapped the longest losing streak for the Bloomberg Dollar Spot Index since 2010.

Banking

Tarullo says Trump’s Wall St principles ‘good starting point’
Barney Jopson, Financial Times

Dan Tarullo, the powerful Federal Reserve governor who was a key architect of post-crisis financial reforms, says the principles that President Donald Trump set out for an overhaul of Wall Street regulation are a “perfectly good starting point”. Mr Tarullo, an Obama appointee and scourge of big banks who announced last week that he would step down, told the Financial Times that despite Mr Trump recently calling the Dodd-Frank reforms a “disaster”, it was too early to judge the future of US financial regulation.

Here Are 4 Possible Trump Picks to Succeed Departing Dodd-Frank Enforcer
Ronald Orol, TheStreet

The Federal Reserve’s top bank supervisor, Daniel Tarullo, submitted his resignation Friday, clearing the way for President Trump to place a candidate of his choosing in a key Wall Street regulatory role. Tarullo, 64, a central bank governor since 2009, oversaw the Fed’s annual stress tests, set up in the aftermath of the 2008 financial crisis to ensure banks big enough to threaten the U.S. economy if they failed could withstand severe downturns.

IMF ‘mindful’ on Trump’s attempt to repeal Dodd-Frank banking law, Lagarde says
Arjun Kharpal, CNBC

International Monetary Fund (IMF) managing director Christine Lagarde on Sunday urged financial regulators not to undo the framework put in place after the 2008 financial crisis, insisting that supervision of big banks should not be loosened and governments must prevent another meltdown. Lagarde told attendees at the World Government Summit in Dubai that the fund was “mindful” of President Donald Trump’s attempts to roll back the Dodd-Frank Act, a regulatory reaction to the worldwide financial pandemic triggered by the housing market downturn.

Did Dodd-Frank really hurt the US economy?
Ben McLannahan, Financial Times

Jeb Hensarling did not hold back last week, when asked on CNBC about the flaws of Dodd-Frank. “It clogs the arteries of capitalism in our system. It hurts working people. It hurts consumers. It needs to go,” said the chair of the House Financial Services Committee, about the signature piece of financial regulation of the Obama era.

Small banks have most to gain from Trump
Jeremy Nobile, Crain’s Cleveland Business

Some recent executive orders setting wheels in motion for deregulation in financial services may be the harbinger of regulatory relief that financial institutions have longed for since the inception of the Dodd-Frank Act. Proponents of deregulation maintain that a lighter regulatory burden would free up lending and grow bank margins.

Deutsche Bank Under Scrutiny in Russia Over Tax Practices
Steven Arons and Anna Baraulina, Bloomberg News

Deutsche Bank AG, which last month settled charges that it helped investors launder money through its business in Moscow, remains under scrutiny in Russia over its tax practices. “As part of an ongoing routine audit, Deutsche Bank is working with Russian tax authorities on matters relating to standard business operations that follow normal industry practice,” the Frankfurt-based lender said in an emailed statement on Monday.

Financial Products and Investments

Trump’s DOL fiduciary directive triggers chaos
Mark Schoeff Jr., InvestmentNews

Some would say that less than a month into his presidency, Donald J. Trump has unleashed mayhem on the retirement advice industry; others would say he has saved it from a terrible mistake. One thing everyone would agree on: All hell has broken loose.

America’s Biggest Creditors Dump Treasuries in Warning to Trump
Brian Chappatta, Bloomberg News

In the age of Trump, America’s biggest foreign creditors are suddenly having second thoughts about financing the U.S. government. In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finance’s most recent figures show.

Tapping Private Sector for Roads and Bridges Poses Hurdles for Trump
Mark Niquette and David Carey, Bloomberg News

One alternative asset manager raised $14 billion for infrastructure deals last year — the biggest such fund ever. About six months later, another manager topped it, raising $15.8 billion.

Munis Could Be Caught Up in Revised CHOICE Act’s Mandated SEC Reviews
Jack Casey, The Bond Buyer

House Financial Services Committee Republicans have floated a revised version of their Financial CHOICE Act that would require the Securities and Exchange Commission to review municipal market and other self-regulatory organizations’ inefficiencies as well as reform its enforcement process.

Housing and GSEs

After 12 years, ex-AIG chief Greenberg settles accounting fraud case
Karen Freifeld, Reuters

Maurice “Hank” Greenberg, the former American International Group Inc (AIG.N) chief executive, has reached a settlement that ends his 12-year battle with the New York attorney general’s office, which accused him of orchestrating sham transactions at the insurer. “After over a decade of delays, deflections and denials by Mr. Greenberg, we are pleased that Mr. Greenberg has finally admitted to his role in these fraudulent transactions,” New York Attorney General Eric Schneiderman said in a statement.

Taxes

Ryan’s ‘border adjustability’ draws GOP, business concern
Nicole Duran, The Washington Examiner 

House Speaker Paul Ryan, R-Wis., thinks he has a simple way to raise roughly $1 trillion to pay for his long-sought overhaul of the tax code, but many businesses — and even some Republican lawmakers — are wary of his plan to change how the U.S. treats imports and exports. Ryan first floated “border adjustability” in the “better way” plan he unveiled last summer outlining how the GOP would do everything from repealing and replacing the Affordable Care Act to roll back federal regulations to revamping the tax code.

Profitable Pickups May Be in Cross Hairs of Trump Border Tax
Bill Vlasic, The New York Times

There are many reasons for the steady success of the three major American automakers in recent years, but none are bigger than the surging sales of full-size pickup trucks. General Motors, Ford Motor and Fiat Chrysler dominate the segment in the United States market, and they rely on pickups for a sizable portion of their earnings in North America as a whole.

Congressman Peter Roskam addresses tax reform, the Affordable Care Act, and future sanctions on the Iranian government
Jasmine Cooper, WGN Radio

Republican U.S. Rep. Peter Roskam of Wheaton joins the show. Republicans are facing increasing pressure to explain how they’ll replace the Affordable Care Act, also known as ObamaCare, as well as what they plan to do on tax reform.

Financial Technology

Wells Fargo sets up artificial intelligence team in tech push 
Anna Irrera, Reuters

Wells Fargo & Co has created a team to develop artificial intelligence-based technology and appointed a lead for its newly combined payments businesses, as part of an ongoing push to strengthen its digital offerings. Wells Fargo’s AI team will work on creating technology that can help the bank provide more personalized customer service through its bankers and online, the bank said on Friday.

U.S. trial set over bitcoin exchange linked to JPMorgan hack probe
Nate Raymond, Reuters

A Florida software engineer and a New Jersey pastor are expected on Monday to face trial in a case stemming from an investigation into a bitcoin exchange and a data breach at JPMorgan Chase & Co (JPM.N). Jury selection is set to begin in Manhattan federal court in the case of Yuri Lebedev, who authorities call the architect of bitcoin exchange Coin.mx’s electronic platform, and Trevon Gross, a pastor and ex-chairman of a now-defunct credit union.

Cyberattacks on International Banks Show Links to Hackers Who Hit Sony
Robert McMillan, The Wall Street Journal

Cybersecurity specialists have found evidence suggesting that recent attacks on institutions in Poland are part of an international hacking effort targeting financial institutions in the U.S., Mexico and the United Kingdom—an attack that shares traits with the 2014 attack on Sony Corp. The hacks began late last year, installing unauthorized code on websites belonging to financial regulators, then using those to attack computers belonging to a select list of global financial institutions, according to researchers who have examined the attacks at security vendors Symantec Corp. and BAE Systems PLC.

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

Hank Greenberg’s Vindication
Editorial Board, The Wall Street Journal

The taxpayers of New York State should be furious. After 12 years of chasing former AIG CEO Hank Greenberg by three state Attorneys General, current AG Eric Schneiderman settled on Friday for $9 million and the legal equivalent of a lousy T-shirt.

Retirement Advice in the Trump Era
Editorial Board, The New York Times

If Mr. Trump were smart, he’d see the judge’s decision as a warning that he chose an ill-advised course on Feb. 3, when he sided with Wall Street, and against savers and retirees, by calling for a review and possible rollback of the rule, which is slated to take effect in April. As Judge Lynn’s decision makes clear, the rule is solid, and those behind the rollback effort, which was spearheaded by Gary Cohn, Mr. Trump’s top economic adviser and, until recently, president of Goldman Sachs, would have a difficult time asserting otherwise.

Washington Protects Wall Street at Ordinary Citizens’ Expense
Alan S. Blinder, The Wall Street Journal

President Trump seems to be looking for places to direct his ire. Among his recent targets were consumers of financial services. That includes anyone with an individual retirement account, a bank account or a credit card.

Don’t Reform the CFPB — Shut it Down
Editorial Board, Investor’s Business Daily

The problem child of the Dodd-Frank reforms, the misnamed Consumer Financial Protection Bureau, may soon get the ax. Congressional Republicans have a plan to substantially reform it. Our advice: Just get rid of it.

The Watchdog Protecting Consumers May Be Too Effective
Gretchen Morgenson, The New York Times

In its promise to roll back the Dodd-Frank financial reform act of 2010, the Trump administration hasn’t provided many details. It’s a safe bet, however, that the Consumer Financial Protection Bureau, the federal agency charged with protecting consumers from financial miscreants, will be a target.

The wonkless White House
The Economist

Before Donald Trump took office, many commentators hoped that he would immerse himself in high-quality policy advice, rather than govern from his gut. The haphazard first few weeks of his presidency have done little to encourage those hopes.

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

Borrowers with less-than-perfect credit are giving up trying to get a mortgage
Laurie Goodman et al., Urban Institute

The traditional way to measure mortgage credit availability suggests that it’s easier to get a mortgage now than it was before the housing crisis, but we know this is not the case. We introduced a new way to measure denial rates in 2014 that confirms that it’s harder to get a mortgage today than it was before the crisis.

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.

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