Finance Brief: Four Contenders for Labor Secretary After Puzder’s Withdrawal

Washington Brief

  • Now that Andy Puzder has withdrawn his nomination for labor secretary, the White House is considering four potential candidates: former National Labor Relations Board members Peter Kirsanow and R. Alexander Acosta; Michigan State University professor Joseph Guzman; and former South Carolina labor department chief Catherine Templeton. (Bloomberg News)
  • Federal Reserve Chair Janet Yellen told the House Financial Services Committee she’s uncertain how financial markets would respond to the House GOP border adjustment tax proposal, raising questions about whether the plan would bolster the dollar. (The Washington Examiner)
  • Sen. David Perdue (R-Ga.) introduced legislation that would put the Consumer Financial Protection Bureau’s budget under Congress’ purview, a longtime goal of Republican lawmakers. The measure already has 13 GOP co-sponsors. (The Hill)

Business Brief

  • President Donald Trump discussed tax reform with chief executives from retailers such as Best Buy Co. and Target Corp. who urged Trump to oppose the House GOP’s border adjustment proposal. (Reuters)
  • Securities and Exchange Commission Acting Chairman Michael Piwowar requested an examination of a provision that allows SEC lawyers to probe some firms and products without commissioners’ approval. (Bloomberg News)
  • Former SEC Chair Mary Jo White returned to her former employer, New York law firm Debevoise & Plimpton, as senior chairwoman. (The New York Times)

Chart Review

Events Calendar (All Times Local)

Thursday
Crain’s New York Business event with NYC regulators 8 a.m.
Washington International Trade Association event on U.S.-China trade 8:30 a.m.
Brookings Institution event on regulation 9 a.m.
Asia Society event on North American trade 9:15 a.m.
House Financial Services Committee hearing on covered agreements 10 a.m.
CFPB’s Cordray speaks at field hearing in West Virginia 11 a.m.
National Economists Club event on destination-based cash flow tax 12 p.m.
Peterson Institute for International Economics trade event 12:15 p.m.
Friday
SEC Miami office director speaks at panel discussion 1:45 p.m.

 

General

Trump Considers Contenders to Replace Puzder as Labor Nominee
Jennifer Jacobs and Josh Eidelson, Bloomberg News

President Donald Trump’s administration is considering several possible contenders as a quick replacement for Andy Puzder, who withdrew Wednesday as labor secretary nominee amid controversy over his personal life and private sector background. Potential candidates, according to a White House official, are former National Labor Relations Board members Peter Kirsanow and R. Alexander Acosta; Joseph Guzman, an assistant professor at Michigan State University; and Catherine Templeton, former head of the South Carolina labor department.

GOP senators unveil bill to give Congress control of consumer bureau budget
Sylvan Lane, The Hill

More than a dozen Republican senators are backing a bill to give Congress greater control and oversight of the Consumer Financial Protection Bureau (CFPB). Sen. David Perdue (R-Ga.) will introduce a bill Wednesday to let Congress control the CFPB’s budget, his office told The Hill on Wednesday.

Mary Jo White to Rejoin Debevoise & Plimpton
Elizabeth Olson, The New York Times

Mary Jo White, the former top government securities law enforcer, is returning to Debevoise & Plimpton, the New York-based law firm where she previously headed its litigation department. Ms. White, who announced plans in November to leave the Securities and Exchange Commission as its chairwoman, will serve as senior chairwoman of the law firm, focusing on counseling boards and representing clients on significant and delicate legal matters, including companies facing crises involving multifaceted government investigations and cases.

Steven Mnuchin’s OneWest Lieutenant Is Considered for Comptroller Job
Liz Hoffman et al., The Wall Street Journal

The Trump administration is considering naming a former OneWest Bank executive who was a lieutenant of Treasury Secretary Steven Mnuchin to run a federal banking watchdog, according to people familiar with the matter, a move that could spark renewed criticism from Democrats about the firm’s foreclosure practices. Joseph Otting, who worked for Mr. Mnuchin at OneWest Bank, is being vetted for the job of Comptroller of the Currency, a regulator of federally chartered banks including units owned by large firms such as Citigroup Inc., these people said. Mr. Otting was CEO of OneWest Bank before being fired by its acquirer, CIT Group Inc., in 2015.

OMB director pick likely to be confirmed, but his battles have just begun
Sarah Westwood, The Washington Examiner

Republican doubts about Rep. Mick Mulvaney, President Trump’s choice to lead the Office of Management and Budget, could foreshadow an internal administration struggle over priorities in the federal budget. Mulvaney is expected to attract the votes necessary for his confirmation on Thursday, despite early signs that a handful of senators were wavering on their support of the fiscal conservative.

Equity Rally Falters as Traders Turn to Havens: Markets Wrap
Eddie Van Der Walt and Blaise Robinson, Bloomberg News

Futures on the S&P 500 fell 0.1 percent after the benchmark index rose 0.5 percent on Wednesday.

Banking

Fed’s Tarullo Says Progress on Too-Big-to-Fail Will Be ‘Durable’
Elizabeth Dexheimer and Jesse Hamilton, Bloomberg News

Daniel Tarullo, the Federal Reserve’s point man on financial regulation, said the U.S. effort to ensure Wall Street banks aren’t too big to fail isn’t finished yet, but that he believes the progress regulators have made will stick even after the Trump administration replaces him. The Fed and other agencies have made major strides in creating structures that would allow big financial firms to be safely wound down after a failure, Tarullo said Wednesday in a Bloomberg Television interview with David Westin and Carol Massar.

Republicans Warn Yellen Not to Finalize Rules Until Fed Vacancies Filled
Tara Jeffries, Morning Consult

Republicans on the House Financial Services Committee, including the new chairman of its monetary policy subcommittee, warned Federal Reserve Chair Janet Yellen not to issue new rules before governor vacancies are filled at the central bank. “New Federal Reserve governors mean a new opportunity to examine the Fed’s unconventional monetary policies,” Rep. Andy Barr (R-Ky.), the new head of the committee’s monetary policy and trade panel, said in his opening statement at Wednesday’s committee hearing.

Financial Products and Investments

SEC Weighs Curbing Investigators’ Powers to Probe Wall Street
Benjamin Bain and Matt Robinson, Bloomberg News

The Securities and Exchange Commission’s interim chief has quietly initiated a review that could make it harder for government lawyers to open investigations into corporate wrongdoing, said three people with knowledge of the matter. Michael Piwowar, the Republican serving as the agency’s acting chairman, has requested an examination of what’s known internally as delegated authority, the people said.

Yellen in robust defence of proprietary trading ban
Ben McLannahan and Barney Jopson, Financial Times

Janet Yellen put up a robust defence of the ban on banks’ proprietary trading during testimony to lawmakers on Wednesday, saying there was no hard evidence that it had led to more volatile markets. The so-called Volcker rule has been a lightning rod for Republican opposition to Dodd-Frank, the sweeping package of reforms put in place after the financial crisis.

As Sen. Warren, White House Ratchet Up DOL Dispute, Advisers Are Caught in the Middle
Brian O’Connell, TheStreet

Add Senator Elizabeth Warren (D-Mass.) to the list of critics who oppose the Trump administration’s decision to vet the Department of Labor ruling on financial advisors and fiduciary duties. This week, Warren lashed out at a White House memorandum, released February 3, that opened up the possibility of delaying, altering or outright abolishing the DOL’s fiduciary rule.

Meet the Retirement Savers Who Oppose the Fiduciary Rule
Daisy Maxey and Veronica Dagher, The Wall Street Journal

Judith Friedlander, an 80-year-old retiree from Murrieta, Calif., doesn’t appreciate the government trying to regulate how she manages her roughly $400,000 individual retirement account. After the Labor Department last year approved the fiduciary rule, which generally requires advice on retirement assets to be conflict-free, Ms. Friedlander says her financial adviser suggested she transition from a commission-based account of the sort that could run afoul of the rule into a fee-only account.

Housing and GSEs

Crapo: ‘Toxic’ Senate will take time to address housing finance reform, Dodd-Frank
Ian McKendry, American Banker

Senate Banking Committee Chairman Mike Crapo said Wednesday that although he plans to begin working on housing finance reform and changes to the Dodd-Frank Act, the poor relationship between Democrats and Republicans will hinder any progress.

Taxes

Trump meets with retail CEOs to talk taxes, imports
Ginger Gibson, Reuters

U.S. President Donald Trump on Wednesday called tax code revisions a critical way to boost the nation’s economy as he kicked off a White House meeting with chief executive officers of Target Corp (TGT.N), Best Buy Co Inc (BBY.N) and six other major retailers. The retailers spoke with Trump about an overhaul of the corporate tax law and infrastructure improvements.

Yellen not sure GOP tax plan would boost the dollar
Joseph Lawler, The Washington Examiner

Federal Reserve Chairwoman Janet Yellen on Wednesday cast doubt on a key idea undergirding the House Republican tax reform plan: that the border adjusted tax in the plan would create a stronger dollar. “The problem is there’s great uncertainty about how in reality markets would really respond to these changes,” Yellen told lawmakers at a House hearing.

GOP senator: ‘Serious concerns’ about House border tax plan
Jordain Carney, The Hill

Sen. Tom Cotton (R-Ark.) is raising concerns about a House-proposed border adjustment tax a day after House Speaker Paul Ryan (R-Wis.) huddled with Senate Republicans. “Today I want to put on the record my serious concerns about a border adjustment tax. Many other senators share these concerns,” he said from the Senate floor.

Three Charts That Show Markets Aren’t Betting on GOP Border Tax
Luke Kawa, Bloomberg News

As executives of major retail chains voice their displeasure over a Republican proposal to tax U.S. businesses’ domestic income and imports while exempting their exports, financial markets are saying don’t worry about it. U.S. President Donald Trump’s stance on the plan, known as a border adjustment tax or BAT, is unclear — first, he deemed it “too complicated,” but then reportedly warmed to it as a potential way to help pay for a border wall with Mexico.

Trump Tax Cuts Could Boost Profit $12 Billion at Big U.S. Banks
Yalman Onaran, Bloomberg News

The six largest U.S. banks could see annual profit jump by an average of 14 percent if President Donald Trump delivers on his promise to cut corporate taxes. The lenders, which stand to benefit more than other industries because they typically have fewer deductions, could save a combined $12 billion a year, according to data compiled by Bloomberg.

Financial Technology

How software is eating the banking industry
Ari Levy, CNBC

Ethan Bloch was in junior high school in Baltimore during the dot-com boom. For his bar mitzvah — the ceremony that welcomes 13-year-old Jewish boys into adulthood — Bloch received $7,000 in cash.

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

The CFIUS Awakens: Will the Force Be With Foreign Investors Under Trump?
Israel “Izzy” Klein, Morning Consult

The Committee on Foreign Investment in the United States was created by Congress with the 1950 Defense Production Act. For decades, it was a sleepy intergovernmental coordinating body led by the Treasury Department that only a handful of Washington lawyers knew or even cared about.

Another Trump Casualty
Editorial Board, The Wall Street Journal

Andy Puzder withdrew his nomination for Labor Secretary Wednesday after a ferocious union and media assault, and is President Trump paying attention? This is what happens, sir, when a White House starts losing, losing, losing.

The Most Powerful Man in Washington You’ve Never Heard Of
Peter Conti-Brown, The Wall Street Journal

Amid last week’s tumult in President Trump’s Washington came a quiet announcement: Scott Alvarez, the Federal Reserve’s general counsel, is retiring after 36 years at the central bank. This won’t lead the news, but it should. Mr. Alvarez is one of the most important figures in government.

New Reforms Could Make Banks More Vulnerable
Erik Thedeen, Bloomberg View

Nobody disagrees on the goal or the main instrument: to strengthen financial stability through higher and more robust capital requirements. But achieving the objective of stability depends in part on getting the composition of capital requirements right. Unfortunately, current proposals fall short.

Apparently, Washington learned nothing from the Wells Fargo scandal
Tammy Duckworth, Crain’s Chicago Business

The fake-account scandal at Wells Fargo was disturbing, but it was far from surprising. Since Wells Fargo executives incentivized employees with bonuses for meeting unrealistic account creation goals, no one—especially not the executives who signed off on the incentive structure—should be surprised that those employees created countless accounts that clients never asked for and didn’t know about, costing families millions in unfair and improper fees. While the outrage at Wells Fargo was well-placed, it was too narrowly focused.

Gary Cohn is embarrassing Goldman Sachs
John Gapper, Financial Times

When Robert Rubin resigned as co-head of Goldman Sachs to join Bill Clinton’s White House in 1993, he found “a sort of rugby scrum to get up close to the president” in the Oval Office. Mr Rubin sat at a discreet distance: “I always liked to be away from the centre,” he wrote in his autobiography. Gary Cohn, who has made the same move from Goldman to become director of Donald Trump’s National Economic Council, has no such reticence.

Silicon Valley: It Is Time to Start Caring About Dodd-Frank
Sarah Nadav, The Huffington Post

There is so much noise around Trump’s executive orders, but when it comes to repealing Dodd-Frank Wall Street Reform and Consumer Protection Act there is a deafening silence. While I think that EVERYONE should care, I know that financial legislation is boring to most people. But you know who it shouldn’t be boring to- VCs and Fintech Startups.

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

The Presidency, Congressional Republicans, and the Future of Financial Reform
Peter Conti-Brown, Penn Wharton School of Business

While only the Affordable Care Act will be identified by the former President’s name—even Obama has embraced the Obamacare moniker—the Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank, will figure prominently in any assessment of Obama’s legacy. As with its older sibling, how Dodd-Frank is assessed will be a partial function of how much of it survives.

Briefings

Finance Brief: Week in Review & What’s Ahead

Senate Majority Leader Mitch McConnell (R-Ky.) said it is unlikely that Congress will pass a tax reform bill before the August recess. Senate GOP taxwriters are considering a tax proposal of their own that does not include the controversial border-adjustable tax on imports found in the House GOP’s blueprint.

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