Finance Brief: GOP Lawmakers Seek More Details on Middle-Class Tax Breaks


Government Brief

  • Republican lawmakers said they want to see more details about their party’s tax overhaul plan, including on issues like raising the child tax credit. Rep. Chris Collins (R-N.Y.) said the plan will be easier to promote as a boon to the middle class if more information about the child tax credit is revealed. (Bloomberg)
  • According to government sources, the Treasury Department’s Office of Intelligence and Analysis has been illegally seeking private domestic financial data when it is supposed to collect overseas data for investigatory purposes. The Treasury Department denied that it is doing so, but the Treasury’s Office of the Inspector General said it has begun a review of the issue. (BuzzFeed News)
  • Legislation from Reps. French Hill (R-Ark.) and Ruben Kihuen (D-Nev.) would alter the Consumer Financial Protection Bureau’s “know before you owe” rule for boosted mortgage disclosures. The bill is aimed at improving the disclosure of title insurance fees. (HousingWire)

Business Brief

  • The Securities Industry and Financial Markets Association told Nevada’s securities regulator that it’s worried about the state’s move into regulating a fiduciary standard for investment advisers. Some states are taking up regulating fiduciary requirements on their own since a federal best-interest rule for retirement advisers is under review by the administration of President Donald Trump. (The Wall Street Journal)
  • The credit reporting bureau TransUnion disclosed that it’s hired cybersecurity lobbyists in the wake of the massive data breach at one of its main competitors, Equifax Inc. (Recode)
  • Global economic officials will converge on Washington this week for the International Monetary Fund’s fall meetings. They will confront the rare instance of growth in nearly all major developed and emerging economies, amid rising projections of economic expansion.  (The New York Times)

Chart Review

Events Calendar (All Times Local)

Monday
Columbus Day — no events scheduled
Tuesday
AEI event on monetary policy 10 a.m.
Wednesday
AEI/CRN conference on housing risk 7:45 a.m.
The Hill event on tax reform with CEA’s Hassett, Reps. Neal and Roskam 8 a.m.
Bloomberg Government event on digital payments 8 a.m.
Peterson Institute event with OECD chief economist 8:30 a.m.
CSIS event on MDBs 9 a.m.
House Financial Services markup 10 a.m.
SEC open meeting 10 a.m.
House Agriculture hearing with CFTC’s Giancarlo 10 a.m.
Bipartisan Policy Center event with Rep. Neal 10 a.m.
Financial Services Roundtable event on tax reform 11:30 a.m.
House Ways and Means subcommittee hearing on Pacific trade 2 p.m.
Peterson Institute on Europe’s preparation for future financial crises 3:15 p.m.
Thursday
AEI/CRN housing risk conference 8 a.m.
Speaker Ryan speech at Heritage on tax reform 8:45 a.m.
House Financial Services hearing with HUD’s Ben Carson 9:30 a.m.
SEC Investor Advisory Committee meeting 9:30 a.m.
Carnegie Endowment for International Peace event on 20th anniversary of Asian financial crisis 11 a.m.
Friday
FDIC consumer research symposium 9:15 a.m.
Brookings event on regional development banks 2 p.m.
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General

US Intelligence Unit Accused Of Illegally Spying On Americans’ Financial Records
Jason Leopold and Jessica Garrison, BuzzFeed News

The intelligence division at the Treasury Department has repeatedly and systematically violated domestic surveillance laws by snooping on the private financial records of US citizens and companies, according to government sources. Over the past year, at least a dozen employees in another branch of the Treasury Department, the Financial Crimes Enforcement Network, have warned officials and Congress that US citizens’ and residents’ banking and financial data has been illegally searched and stored.

The Economy Is Humming. Bankers Are Cheering. What Could Go Wrong?
Landon Thomas Jr., The New York Times

As central bankers, finance ministers and money managers descend on Washington this week for the fall meetings of the International Monetary Fund, they will confront an unusual reality: global markets and economies rising in unison. Never mind political turmoil, populist uprisings and threats of nuclear war. From Wall Street to Washington, economists have been upgrading their forecasts for the global economy this year, with the consensus now pointing to an expansion of more than 3 percent — up noticeably from 2.6 percent in 2016.

Wolfgang Schäuble warns of another global financial crisis
Guy Chazan, Financial Times

Wolfgang Schäuble has warned that spiralling levels of global debt and liquidity present a major risk to the world economy, in his parting shot as Germany’s finance minister. In an interview with the Financial Times, the Europhile who has steered one of the world’s largest economies for the past eight years, said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

‘Nudge’ theorist Richard Thaler wins Nobel economics prize
Niklas Pollard and Anna Ringstrom, Reuters

U.S. economist Richard Thaler won the 2017 Nobel Economics Prize for his contributions in the field of behavioral economics, showing how human traits affect supposedly rational markets, the Royal Swedish Academy of Sciences said on Monday. Thaler brought to prominence the idea of “nudge” economics, where humans are subtly guided toward beneficial behaviors without heavy-handed compulsion, the theme of a 2008 book he co-wrote which caught the eye of policymakers around the world.

Trump Twitter bombs and a negotiating standoff: How NAFTA talks could fail
Steven Mufson et al., The Washington Post

As nearly 700 officials gather next week to discuss overhauling the free-trade agreement between the United States, Mexico and Canada, participants and analysts say the negotiations are at an increasing risk of failure. President Trump’s Twitter bombs and rhetorical attacks on what he calls the “worst deal ever made” and his administration’s vague and confusing proposals have dismayed Canada, which is now exploring backup options.

European Stocks Rise Led by Spain; Sterling Gains: Markets Wrap
Cormac Mullen, Bloomberg

European stocks edged higher, led by equities in Spain after a weekend of mass demonstrations in Catalonia in favor of Spanish unity. Futures on the S&P 500 Index climbed 0.2 percent.

Banking

White House Wants a Fed Chief Willing to Revisit Financial Rules
Craig Torres et al., Bloomberg

The White House team leading the search for the next generation of Federal Reserve leaders is seeking contenders willing to roll back financial regulations, but also with experience in monetary policy and the consensus-building skills to run a large organization, according to three officials familiar with the process. President Donald Trump is working with a shortlist of five names for Fed chair: former Fed Governor Kevin Warsh, Stanford University economist John Taylor, current Fed Governor Jerome Powell, National Economic Council Director Gary Cohn and the current chair, Janet Yellen.

Transcript: WSJ Interview With Federal Reserve Bank of Atlanta President Raphael Bostic
Eric Morath, The Wall Street Journal

Federal Reserve Bank of Atlanta President Raphael Bostic sat down for an interview with The Wall Street Journal’s Eric Morath on Friday, Oct. 6, 2017 on the sidelines of a conference about workforce issues in Austin, Texas. They discussed the labor market, inflation and the impact of recent hurricanes on the economy, among other issues.

Financial Products and Investments

Securities Industry Pushes Back on Nevada’s Fiduciary Rule
Lisa Beilfuss, The Wall Street Journal

The securities industry is pushing back against a new Nevada law raising broker standards of care, highlighting industry concern that state rules could mushroom as the federal fiduciary rule hangs in limbo. In testimony Friday before Nevada’s securities regulator, a representative for the Securities Industry and Financial Markets Association—a trade group known as Sifma—expressed concern about a state-by-state approach to broker regulation and argued that any new fiduciary duties under Nevada’s law would violate an act of Congress passed 20 years ago to prevent patchwork regulation in financial markets.

Treasury mulls, but comes out against SEC, CFTC merger
Sylvan Lane, The Hill

The Treasury Department discussed a potential merger of the Securities and Exchange Commission and the Commodity Futures Trading Commission ahead of a Friday report floating several rollbacks of capital markets regulations. While the SEC regulates equities markets and the CFTC covers commodities and derivatives trades, the two agencies have often struggled to work together through jurisdictional overlap and duplicative efforts.

Former F-Squared CEO found liable in U.S. SEC fraud case
Nate Raymond, Reuters

A U.S. jury on Friday found that the former chief executive of F-Squared Investments Inc, once the largest U.S. money manager creating portfolios out of exchange-traded funds, violated federal securities laws. The federal jury in Boston sided with the U.S. Securities and Exchange Commission in finding that former F-Squared CEO Howard Present intended to defraud investors or was reckless in how he touted the history of his company’s flagship investment product.

Political Support Growing to Wipe Out Puerto Rico’s Wall Street Debt
Aida Chávez and Ryan Grim, The Intercept

President Donald Trump, Independent Sen. Bernie Sanders, and Illinois Democratic Rep. Luis Gutiérrez are all on the same page when it comes to how to handle Puerto Rico’s crushing debt load in the wake of Hurricane Maria: The hedge funds need to take the hit. “They owe a lot of money to your friends on Wall Street, and we’re going to have to wipe that out,” Trump said on Fox News this week. “You can say goodbye to that. I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”

Wall Street Firms Gambled on Puerto Rico. They’re Losing
Matthew Goldstein, The New York Times

A few days after Hurricane Maria leveled Puerto Rico, John A. Paulson, the billionaire hedge fund manager, boarded his company’s 23-seat Bombardier jet and flew to San Juan. Mr. Paulson and his firm, Paulson & Company, have invested hundreds of millions of dollars there as he, along with many of the best-known names on Wall Street, bet big on taking advantage of a long period of depressed prices for luxury properties and other real estate.

Housing and GSEs

Bipartisan push begins in Congress to change part of CFPB’s TRID rule
Ben Lane, HousingWire

In an increasingly rare moment of bipartisanship, two Congressmen from opposite sides of the political aisle are partnering to push for a change to the Consumer Financial Protection Bureau’s Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, or TRID. On the Republican side, the effort is being led by Rep. French Hill, R-Arkansas, who has been very vocal about his issues with the CFPB and the TRID rule in the past.

Taxes

Republicans Worry About Keeping Trump’s Middle-Class Tax Promise
Sahil Kapur, Bloomberg

Republican lawmakers in red and blue states are expressing unease over the limited details about middle-class relief in the tax framework their leaders released last month, which has raised difficult questions about how to prevent some middle-income Americans from paying more due to fewer tax breaks. As one example, the lack of specifics on how much to raise the child tax credit by has led to “frustration” among GOP lawmakers, said Representative Chris Collins, a New York Republican and ally of President Donald Trump.

Conflicts become clear as Republicans progress on tax reform
Joseph Lawler, The Washington Examiner

Tension is emerging between Republicans over their tax reform plan, as they made progress this week by passing a budget in the House and advancing a budget out of the Senate Budget Committee. Passing a budget is the first step in the tax reform sequence, because it unlocks the reconciliation procedure that will allow tax legislation to pass with only 51 votes in the Senate, bypassing the filibuster.

Wall Street strategists question whether GOP tax cuts will be good for the bull market
Thomas Franck, CNBC

A growing number of Wall Street strategists say the GOP tax plan is probably not good news for the bull market. “If tax relief is passed, there is a lot to be excited about,” wrote The Leuthold Group’s Jim Paulsen.

Cohn Cites Untapped U.S. Growth Potential to Sell Trump Tax Plan
Agnel Philip, Bloomberg

Tax cuts and deregulation can help the U.S. economy grow faster than the recent pace of about 2 percent, even with unemployment at a the lowest level since 2001, National Economic Council Director Gary Cohn said. “We’ve had a couple good quarters of GDP, but we’re still not on a sustainable level of growth that we should be and want to be,” Cohn said in an interview with Bloomberg Television on Friday.

Why the Fed Won’t Stand in the Way of Trump’s Tax Cuts
Greg Ip, The Wall Street Journal

As President Donald Trump ponders who should head the Federal Reserve, he no doubt wonders how the choice will affect his own agenda. Mr. Trump claims less regulation, reworked trade deals and tax reform can boost annual economic growth to 3% from around 2%.

Financial Technology

Equifax rival TransUnion has hired cybersecurity lobbyists in Washington, D.C.
Tony Romm, Recode

Credit-reporting agency TransUnion quietly hired a full slate of new cybersecurity-focused lobbyists in the nation’s capital roughly a month after one of its rivals, Equifax, reported a major data breach affecting 145 million Americans. In its filing, TransUnion revealed little about its political agenda.

NY Senate Plans Second Hearing on Equifax Breach
The Associated Press

Lawmakers in New York are planning a second hearing focusing on identity theft and personal data security following the massive breach at Equifax. The state Senate announced Friday that it will hold a hearing Oct. 24 in Manhattan focusing on the threat of identity theft and ways the state could help ensure consumers are protected.

Opinions, Editorials and Perspectives

Evidence Is Clear: U.S. Corporate Taxes Are High and It’s Hurting Our Companies
Joe Kennedy, Morning Consult

Republicans have issued a new framework for tax reform calling for, among other things, a significant reduction in the corporate tax rate. But opponents of corporate tax reform claim that all is well in that part of the code, arguing that, while the U.S. statutory rate may be high, the actual rate that companies pay is quite modest.

The CFPB Gets Its Payday-Lending Rule Right
Editorial Board, Bloomberg View

Payday lending has long done more harm than good to many cash-strapped Americans. At its second attempt, the Consumer Financial Protection Bureau has come up with a good way to reduce the damage.

The Trump administration’s tax plan is an atrocity
Lawrence H. Summers, The Washington Post

The Trump administration’s tax plan is not a plan. It is a melange of ideas put forth without precision or arithmetic.

Why Corporate Tax Cuts Won’t Create Jobs
Marcus Ryu, The New York Times

The tax cut framework recently put forward by President Trump relies on a central claim: that reducing taxes on corporations and wealthy individuals will open the wellsprings of entrepreneurship and investment, turbocharging job growth and the American economy. Were this premise true, reasonable people might countenance giving a vast majority of benefits to the very rich, as Mr. Trump’s plan does, in exchange for greater prosperity for all.

The GOP’s ‘Tax the Rich’ Temptation
Phil Gramm, The Wall Street Journal

Given that the top 10% of income earners in America pay more than 71% of federal income taxes and do most of the saving, investing and innovating that fuel America’s economic growth, it’s hardly surprising that a tax reform proposal to stimulate growth would reduce the marginal tax rates of high-income Americans. What is astonishing, however, is the difficulty advocates of tax reform seem to have in defending their proposal against the attack that it benefits the rich.

Trump and the CFPB
Ramesh Ponnuru, The National Review

The CFPB’s new rule on small-dollar loans will, as Iain Murray mentioned, draw opposition from Republicans who argue that it will only cut off access to credit for some individuals. It may also increase Republicans’ interest in reforming the agency and removing its director, Richard Cordray.

Kevin Warsh, Candidate for Federal Reserve Chair, Is Not Even an Economist
Ike Brannon, The Weekly Standard

Recent reports suggest that the contest for the next chair of the Federal Reserve is down to Jay Powell, a current member of the Federal Reserve board, and Kevin Warsh, a member of the board from 2006 to 2011. And the rumor mill suggests that it is Warsh—a former Wall Street denizen whose father-in-law Ronald Lauder is a good friend of Donald Trump—who is the odds-on favorite.

US brokers should fear Massachusetts AG’s probe
John Dizard, Financial Times

For all their complaints about the Trump administration, Wall Streeters have done quite well in getting a deregulatory agenda pushed through executive actions and appointments. With the (temporary) exception of the Consumer Financial Protection Bureau, the Treasury, Fed and other supervisory agencies are imposing fewer new rules and being more generous in their interpretation of old ones.

Research Reports

Do Americans Want to Tax Capital? Evidence from Online Surveys
Raymond Fisman et al., The National Bureau of Economic Research

A vast theoretical literature in public finance has studied the question of the desirability of capital taxation. Distinct from questions of the optimality of taxing wealth is whether it is politically feasible. We provide, to our knowledge, the first investigation of individuals’ preferences over jointly taxing income and wealth, via a survey on Amazon’s Mechanical Turk.