Finance Brief: Hensarling Releases Dodd-Frank Replacement Bill, Sets Hearing Date

Washington Brief

  • House Financial Services Committee Chairman Jeb Hensarling (R-Texas) scheduled an April 26 hearing to discuss his Dodd-Frank replacement legislation, known as the Financial CHOICE Act. He also circulated the bill text. (The Washington Examiner)
  • House Speaker Paul Ryan (R-Wis.) said Congress will pass tax reform legislation this year. He said the end of summer is the earliest a measure would get passed, while noting that “if it needs to go a little longer, we’ll do that.” (Reuters)
  • Deputy Commerce Secretary nominee Todd Ricketts withdrew his nomination. His family’s business investments in companies such as TD Ameritrade created issues for the Office of Government Ethics, which reviews the financial disclosures of candidates for top administration posts. (The Chicago Sun-Times)

Business Brief

  • Seventy percent of the general public and borrowers of payday loans want the financial products to be regulated more strictly, according to a survey by the Pew Charitable Trusts. (Yahoo Finance)
  • Wells Fargo & Co. Chief Executive Timothy Sloan, whose company is still suffering from the fallout of its consumer fraud scandal, said a shareholder purge of the bank’s board at next week’s annual meeting would be “crazy.” He said none of the directors should be voted out. (Bloomberg News)
  • Goldman Sachs Group Inc. predicted tax overhaul legislation in Congress would not be enacted until the first quarter of 2018, citing delays due to a renewed Republican focus on replacing the 2010 Affordable Care Act. (CNBC)

Chart Review

Events Calendar (All Times Local)

Thursday
Global Finance Forum 8 a.m.
SEC officials speak at Global Privacy Summit 8 a.m.
American Enterprise Institute event on Europe and pro-growth agenda 8:30 a.m.
IMF/World Bank meetings in Washington 8:45 a.m.
Brookings Institution event with Bank of Mexico governor 9:15 a.m.
National Economists Club event with American Action Forum’s Doug Holtz-Eakin 12 p.m.
American Enterprise Institute event on postcrisis economics 5 p.m.
Tax Foundation “Tax Freedom Day” event 6 p.m.
Friday
IMF/World Bank meetings in Washington 9 a.m.

 

General

Cubs’ Todd Ricketts withdraws name for Trump’s Cabinet
Lynn Sweet, The Chicago Sun-Times

Unable to untangle his complex financial holdings to the satisfaction of the Office of Government Ethics, Cubs board member Todd Ricketts, tapped by President Donald Trump to be the Deputy Commerce Secretary, on Wednesday withdrew his nomination. Ricketts, a Wilmette resident who is a member of the billionaire Ricketts clan, was willing to divest his considerable personal portfolio of holdings, but that was apparently not enough.

Business groups silent on Trump’s Ex-Im nominee
Vicki Needham, The Hill 

Businesses that support the Export-Import Bank are silent on President Trump’s pick to helm the agency, former Rep. Scott Garrett. The New Jersey Republican voted to close the bank while in Congress, raising questions about how he would run the agency, which has been hobbled by partisan bickering.

Trump’s pick for rules czar would hand more power to Trump
Steven Mufson, The Washington Post 

Neomi Rao, a little-known law professor at George Mason University, could soon become one of the most powerful officials in Washington. President Trump has nominated the conservative lawyer to run the obscure but powerful Office of Information and Regulatory Affairs, a gateway through which federal regulations must pass.

Volcker to Trump: If you want to be useful, rationalize crazy U.S. financial regulatory system
Greg Robb, MarketWatch 

There would be no better use of President Donald Trump’s deregulatory zeal than to engineer a wholesale redesign of the crazy quilt of federal agencies that regulate Wall Street and the financial sector, former Fed Chairman Paul Volcker said Wednesday. While everyone complains about the fragmented structure of regulatory agencies, there is enormous resistance to change, Volcker said in a speech to the Bretton Woods Committee meeting in Washington.

Brexit’s unpredictable outcome poses risk to global stability, says IMF
Larry Elliott, The Guardian 

The International Monetary Fund has warned that Brexit’s unpredictable outcome poses a risk to global financial stability at a time when it is already challenged by heavily-indebted US corporations, China’s credit bubble and weak European banks. Warning that banks were likely to be the sector of the City hardest hit by Britain’s departure from the European Union, the IMF said the costs of doing business would rise and regulation would become more complex.

Dollar Declines as European Stocks Erase Advance: Markets Wrap
Adam Haigh and V Ramakrishnan, Bloomberg News

S&P 500 futures rose 0.3 percent. The underlying gauge slid 0.2 percent on Wednesday.

Banking

House GOP releases Dodd-Frank replacement bill, sets hearing
Joseph Lawler, The Washington Examiner 

House Republicans released their udpated bill to replace former President Barack Obama’s financial reform law Wednesday and set a hearing on the sweeping legislative package for next Wednesday. “Dodd-Frank failed to keep its promises to the American people, but we will work with President Trump to follow through on his promise to dismantle Dodd-Frank,” Financial Services Committee Chairman Jeb Hensarling said in announcing the hearing.

Wells Fargo CEO Says Ousting Majority of Board Would Be ‘Crazy’
Laura J Keller, Bloomberg News

Wells Fargo & Co.’s new chief executive officer, Tim Sloan, just survived his biggest test yet, when a board investigation found he wasn’t to blame for the bank’s notorious account scandal. But his next is just days away: Persuading investors not to expel much of the board.

The Toll of Wells Fargo’s Account Scandal
Gillian B. White, The Atlantic 

In general, buying a company’s stock is a vote of confidence, something investors do when they think a company is poised for great, money-making things. But when a company executive buys stock, particularly amid a corporate meltdown, it is often an attempt at reassurance or damage control. Wells Fargo’s top executives have recently made such a move.

FDIC’s Hoenig warns against scrapping a U.S. bankruptcy reform
Jonathan Spicer, Reuters 

A top U.S. financial regulator on Wednesday warned against scrapping, as some American lawmakers urge, the “Title II” part of the 2010 Dodd-Frank legislation that created an alternative insolvency process for large firms, saying further reforms would be needed to protect the economy. “I’d be very supportive of getting rid of Title II if I had confidence you could go through a bankruptcy, but I am not” confident, Tom Hoenig, vice-chair of the Federal Deposit Insurance Corporation, said at the Levy Economics Institute conference.

Financial Products and Investments

Americans want payday loans to be more regulated: Pew survey
Brittany Jones-Cooper, Yahoo Finance 

With their alarmingly high interest rates and unreasonable payment schedules, payday loans are a very expensive way for people to borrow money. While many who use these services don’t have other reliable options for short-term loans, a recent survey shows that consumers are getting frustrated with payday lending practices.

Morgan Stanley: New Retirement Rules No Hurdle for Brokerage
Michael Wursthorn, The Wall Street Journal 

Morgan Stanley isn’t sweating retirement rules set to take effect in June. The New York bank played down the effects of the U.S. Labor Department’s fiduciary rule, which requires brokers to put the interests of retirement savers ahead of their own, as it was delayed earlier this month after the Trump administration ordered an economic-impact review that may result in it being revised or rescinded.

America’s student loan giant Navient is about to get even bigger
Jillian Berman, MarketWatch 

A major player in the student loan market just got more dominant. Navient officials announced Tuesday that the company reached a deal with J.P. Morgan to purchase the bank’s $6.9 billion student loan portfolio.

New SEC Alums Swarm ‘Revolving Door’ to Financial, Law Firms
Andrew Ramonas, Bloomberg BNA 

More than half the high-ranking SEC officials who left the agency since January 2016 landed at law and financial firms, with Debevoise & Plimpton LLP leading the pack. Debevoise, private equity manager Blackstone Group LP and other firms hired 15 of the 26 Securities and Exchange Commission officials Bloomberg BNA tracked since their departures were announced in 2016 and 2017.

Housing and GSEs

California lenders reach settlement with HUD over unfair lending charge
Kelsey Ramirez, HousingWire

The U.S. Department of Housing and Urban Development announced Wednesday a group of California mortgage lenders resolved allegations that they discriminated against a Hispanic man due to his national origin. The complaint was made against American Financial Network, Benchmark Communities, Brigantino Enterprise and an employee of Benchmark Communities.

Taxes

House Speaker Ryan sees long battle over tax reform
William James, Reuters 

The United States’ first tax overhaul in decades may not pass Congress until well into 2017, House of Representatives Speaker Paul Ryan said on Wednesday, in a sign the timetable for the legislation has been pushed back. Revamping the U.S. tax code has become a new legislative test for President Donald Trump after a Republican push to repeal former President Barack Obama’s signature healthcare law failed last month in a humiliating defeat for the party.

Goldman Sachs sees tax reform pushed to next year as GOP health bill creates setbacks
Berkeley Lovelace Jr., CNBC

Goldman Sachs said Wednesday that it doesn’t expect tax reform until the first quarter of next year as Republicans continue efforts to pass health-care legislation. In a note to clients, the investment bank said GOP leaders appear intent on trying to pass a repeal and replacement of Obamacare.

The market is beginning to price in the death of Trump’s tax reform
Sue Chang, MarketWatch 

Rest in peace tax reform, we hardly knew ya. The much awaited tax overhaul promised by President Donald Trump may be dead before it even got anywhere.

Republican tax plan sets up battle with fiscal conservatives
Sam Fleming et al., Financial Times 

The Trump administration is placing faith in heavily contested growth assumptions as it seeks to settle on tax plans that would fulfil Donald Trump’s pledges of bold cuts without causing the deficit to balloon. Republicans are searching for ways to raise an extra $1tn via tax reform because a congressional plan for a revenue-raising import tax has been left on life support due to fierce opposition.

Trump eyes cap on charitable deductions
Alexander Bolton, The Hill 

The Trump administration is taking a serious look at capping tax deductions for charitable contributions, according to a source familiar with the discussions. Treasury Secretary Steven Mnuchin and Trump’s other senior advisers are mulling their next steps on tax reform, and the proposal to limit deductions for charitable giving hasn’t yet gained widespread acceptance, two officials said.

Poll: Voters support controversial border-adjustment tax
Jonathan Easley, The Hill 

A majority of Americans support a proposal to impose a new 20 percent tax on imports, according to a new poll. The Harvard-Harris survey found that 62 percent of Americans would support a 20 percent tax on all goods made outside the United States.

Financial Technology

Wells Fargo to launch pilot with Facebook Messenger
Hilary Burns, The Charlotte Business Journal 

Wells Fargo & Co. (NYSE:WFC) announced Tuesday it is launching a pilot to test an artificial intelligence-driven experience through Facebook Messenger. The San Francisco-based bank has hinted at incorporating financial services into third-party environments for a while now.

Opinions, Editorials and Perspectives

Small Merchants Want Interchange Flexibility and Value, Not Price Caps
Molly Wilkinson, Morning Consult 

Over the last few months, merchant lobbying groups have stormed Capitol Hill requesting two things: that lawmakers sink federal tax reform by opposing border adjustability and that they support federal price controls on debit interchange fees. On the latter, at least, Congress isn’t listening.

The US is at a critical juncture for financial regulation
Matthew Richardson et al., The Hill 

Financial regulation in the United States is at a critical juncture. Federal Reserve Board Governor Daniel Tarullo, the unofficial czar of financial regulation, has just resigned. A new draft of the Financial CHOICE Act, the leading proposal to replace the Dodd-Frank Act, will be introduced this month.

Free Trade With South Korea is Working
Editorial Board, Bloomberg View

On leaving South Korea this week, U.S. Vice President Mike Pence offered a warning: A landmark free-trade deal between the two countries is now under review. Since the deal took effect, he said, the U.S. trade deficit with South Korea has more than doubled.

Unfinished Preet Bharara Business
Editorial Board, The Wall Street Journal 

President Trump dumped Preet Bharara as U.S. Attorney for the Southern District of New York, and the celebrity prosecutor is conducting another media vindication tour. But a few problems from his tenure are left to resolve, including the ongoing legal crusade against David Ganek.

Research Reports

Payday Loan Customers Want More Protections, Access to Lower-Cost Credit From Banks
Pew Charitable Trusts 

Payday loans typically carry annual percentage rates of 300 to 500 percent and are due on the borrower’s next payday (roughly two weeks later) in lump-sum payments that consume about a third of the average customer’s paycheck, making the loans difficult to repay without borrowing again. They are characterized by unaffordable payments, unreasonable loan terms, and unnecessarily high costs.

Lessons Learned: Review of Supervision of Sales Practices at Wells Fargo
Office of Enterprise Governance and the Ombudsman, Office of the Comptroller of the Currency

The OCC did not take timely and effective supervisory actions after the bank and the OCC identified significant issues with complaint management and sales practices.

Briefings

Finance Brief: Week in Review & What’s Ahead

The Treasury Department recommended a significant curbing of authority at the Consumer Financial Protection Bureau, along with allowing the agency’s director to be fired at will, in a report required by an executive order President Donald Trump signed in February. While the report does not call for a full repeal of Volcker Rule limits on proprietary trading, it recommended exempting small institutions from the Dodd-Frank regulation.

Finance Brief: CFPB Proposes Changes to Prepaid Card Rule

The Consumer Financial Protection Bureau announced plans to make changes to its prepaid card rule, with public comments on the proposals due within 45 days. The CFPB’s proposals would adjust the rule to require consumers register any prepaid cards before filing a complaint, and would allow providers to send disclosure forms to consumers digitally in some cases.

Finance Brief: Warren Says Democrats Open to Loosening Regulations for Community Banks, Credit Unions

Sen. Elizabeth Warren (D-Mass.) said Senate Democrats are open to working with Republicans on “targeted” measures that would ease regulations affecting community banks and credit unions. Warren, who has shown little willingness to work with the GOP on loosening financial regulations, said she remains opposed to proposals that would limit consumer protections or weaken regulations for big banks.

Finance Brief: Treasury Department Recommends Changes to CFPB, Volcker Rule

The Treasury Department recommended a significant curbing of authority at the Consumer Financial Protection Bureau, along with allowing the agency’s director to be fired at will, in a report required by an executive order President Donald Trump signed in February. The report does not call for a complete repeal of Volcker Rule limits on proprietary trading but instead proposes exempting small institutions from the Dodd-Frank regulation.

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