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Finance Brief: Labor Department Seeks 18-Month Delay on Fiduciary Rule


Government Brief

  • The Labor Department said in a court filing that it was seeking an 18-month delay on the fiduciary rule, which requires financial advisers to act in retirement savers’ best interests. The agency filed the document as part of a lawsuit in the U.S. District Court for the District of Minnesota, in which it said that it was proposing to push the compliance date to July 1, 2019, and loosening some of the rule’s restrictions. (Investment News)
  • Four senators sent letters to Wells Fargo and National General Insurance asking for more information about allegations that the two companies sold car loan customers auto insurance they did not need. Two Democrats and two Republicans on the Senate Committee on Commerce, Science and Transportation, including Chairman Sen. John Thune (R-S.C.), called for the companies to disclose when they learned of the charges, their relationship to each other and their plans for preventing similar incidents. (Law360)
  • The judge overseeing Puerto Rico’s bankruptcy proceedings approved an agreement to resolve sales tax revenue claims in the commonwealth by the close of the year. U.S. District Judge Laura Taylor Swain gave competing creditor classes General Obligation bondholders and COFINA bondholders, which together hold about half of the territory’s $72 billion debt, until Dec. 15 to settle their dispute before she issues a ruling. (Reuters)

Business Brief

  • The U.S. attorney’s office in Manhattan charged three former Transmar Commodity Group Ltd. executives with hundreds of million dollars in alleged fraud. The executives were taken into custody earlier this week amid accusations that they falsely represented Transmar’s financials to qualify for loans. (The Wall Street Journal)
  • With the price of one bitcoin hitting a high of $3,500 this week, some investors are worried that a bubble is about to burst. Dozens of new cryptocurrencies have popped up in 2017 via initial coin offerings, driving anxiety about their effects on the nearly unregulated market. (Reuters)
  • Kaspersky Lab, the Russian cybersecurity company, agreed to drop its antitrust complaint against Microsoft in Europe after the U.S. software giant agreed to change how it delivers security updates to Windows users. Kaspersky originally filed its complaint in June, claiming that Microsoft disabled its anti-virus software during Windows upgrades. (The Verge)

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General

Puerto Rico’s biggest creditors envision solving key dispute this year
Nick Brown, Reuters

U.S. District Judge Laura Taylor Swain, presiding over Puerto Rico’s massive bankruptcy, approved an agreement between the island’s competing creditor classes on Wednesday aimed at moving forward with an effort to resolve claims on sales tax revenue. The deal between the two biggest creditor classes, General Obligation (GO) bondholders and COFINA bondholders, includes the appointment of an agent for each side who are charged with pursuing the best resolution for their debtor’s estate as a whole, as opposed to advocating for particular creditors of that debtor.

Europe Stocks Track Asia Losses; Dollar, Oil Climb: Markets Wrap
Samuel Potter, Bloomberg

Tension surrounding the Korean peninsula once again sapped global equity markets, with European stocks following their Asian peers into the red as the rhetoric continued and investors remained on edge. The Stoxx Europe 600 Index headed for a second day of declines after equity measures from Hong Kong to Tokyo to Sydney dropped and as U.S. index futures fell.

U.S. Charges Former Transmar Executives With Bank Fraud
Rebecca Davis O’Brien, The Wall Street Journal

Federal prosecutors on Tuesday charged three former executives of cocoa-trading house Transmar Group with an alleged scheme to conceal the troubled company’s finances from its bank lenders, according to an indictment unsealed in Manhattan federal court. The U.S. attorney’s office in Manhattan charged Peter G. Johnson, the former president and chief executive of Transmar Commodity Group Ltd., his son Peter B. Johnson, who had run operations for Transmar’s European affiliate, and Thomas Reich, a former vice president in Transmar’s finance department with counts of bank fraud, wire fraud and conspiracy.

Treasury sanctions eight Venezuelan officials
Sylvan Lane, The Hill

The Treasury Department targeted on Wednesday eight Venezuelan officials involved with a process widely seen as an attempt by President Nicolás Maduro to consolidate power in the South American country currently undergoing an economic crisis. Treasury’s Office of Foreign Assets Control (OFAC), which administers foreign sanctions, froze the United States-based assets of six members of Venezuela’s Constituent Assembly (Asamblea Constituyente) and two officials responsible for its establishment.

Kaspersky drops Microsoft antitrust complaint thanks to new Windows 10 changes
Tom Warren, The Verge

Kaspersky is withdrawing its European antitrust complaint against Microsoft today. The software giant has agreed to make changes to the upcoming Windows 10 Fall Creators Update that have appeased Kaspersky and help its anti-virus software provide notifications and alerts to renew virus definitions. Kaspersky originally filed its complaint back in June, claiming that Microsoft disabled its anti-virus software during Windows upgrades and that the software maker was using its dominance to “fiercely promote” its own Windows Defender software.

Banking

Goldman to use ‘personality test’ for hiring decisions
Olivia Oran, Reuters

Goldman Sachs Group Inc plans to begin using a “personality test” as part of the hiring process for positions in its banking, trading and finance and risk divisions, a senior Goldman executive said on Wednesday. The bank began will using the test on U.S. summer intern candidates in 2018, Matt Jahansouz, Goldman’s global head of recruiting, said in an interview.

Sens. Question Wells Fargo About Auto Insurance Practices
Adam Rhodes, Law360

Four senators with the U.S. Senate Committee on Commerce, Science and Transportation sent letters to Wells Fargo and National General Insurance on Wednesday seeking answers about allegations that they charged car loan borrowers for auto insurance they did not need. Committee chairman Sen. John Thune, R-S.D., and ranking member Sen. Bill Nelson, D-Fla., sent the letters along with Sen. Jerry Moran, R-Kan., and Sen. Richard Blumenthal, D-Conn., the chairman and ranking member, respectively, of the subcommittee on consumer protection, product safety, insurance and data security.

Big banks kick small-business lending into high gear
Andy Peters, American Banker

Some of the largest banks have decided they don’t want to be left out of the action when it comes to small-business lending. In recent months big banks have ramped up their efforts at making small-business loans, according to industry participants and new data on approval rates.

Financial Products and Investments

DOL seeks to delay fiduciary rule until July 2019
Mark Schoeff Jr., Investment News

The Labor Department is seeking to delay implementation of the remaining parts of its fiduciary rule for 18 months. In a brief filed in a Minnesota lawsuit Wednesday, the DOL indicated it had submitted to the Office of Management and Budget a proposal to delay the rule from Jan. 1, 2018, until July 1, 2019.

The CFPB Is Losing a Trial Court Ally in the US Justice Department
C. Ryan Barber, The National Law Journal

U.S. Justice Department lawyer Kent Kawakami was once the Consumer Financial Protection Bureau’s point man on the ground in Los Angeles. An assistant U.S. attorney in the Central District of California, Kawakami would vouch for CFPB attorneys looking to jump into the federal courts there.

National Planning Holdings CEO to advisers: No comment on LPL takeover talk
Bruce Kelly, Investment News

With speculation swirling about an imminent sale of the four National Planning Holdings Inc. broker-dealers, the network’s CEO, Scott E. Romine, last week took the extraordinary step to send an email to the 3,500 reps and advisers affiliated with the broker-dealers to say he would not comment about such rumors. On July 30, Financial Advisor magazine on its website published an article titled “LPL Seen As Front-Runner To Buy National Planning Holdings’ B-D Network” and cited “sources in the insurance industry” for attribution.

Housing and GSEs

Millennials prove their dependency on FHA loans is shrinking
Kelsey Ramirez, HousingWire

The youngest generation of homebuyers is depending less on loans from the Federal Housing Administration, according to the monthly Ellie Mae Millennial Tracker report. Millennials, defined as the generation born from the early 1980s to mid 1990s, are entering the housing market as first time buyers, and the latest report from Ellie Mae shows their dependency on government-backed loans continues to shrink.

Fannie and Freddie will stick with FICO formula for at least two more years

If you’ve been waiting for the long-anticipated news that the two dominant players in the home-mortgage arena — Fannie Mae and Freddie Mac — finally have decided to overhaul their outdated credit-scoring systems to expand homeownership opportunities for a broader range of consumers, sorry. Your wait just got a lot longer.

Debt limit debate complicated by Fannie, Freddie dividends
Ian McKendry, American Banker

The debate over whether Fannie Mae and Freddie Mac should be allowed to keep some of their profits and rebuild capital is occurring against the backdrop of a larger, arguably more consequential battle over the U.S. debt limit. Under the current arrangement with the Treasury Department, the government-sponsored enterprises give any profit to the U.S. government on a quarterly basis

Taxes

House to take up spending bills, then budget
Niv Elis, The Hill

The House will take up its final eight spending bills before taking any action on a budget with fast-track instructions for tax reform, according to a GOP source with knowledge of the matter. House Republicans intend to bring the package of appropriations measures to the floor upon their return during the first week of September.

Koch-backed group releases ads thanking lawmakers who support tax reform
Naomi Jagoda, The Hill

Americans for Prosperity (AFP) on Thursday announced that it’s rolling out new digital ads on tax reform — the latest effort in the multimillion dollar campaign on the issue from groups backed by wealthy GOP donors Charles and David Koch. The ads thank lawmakers who back comprehensive tax reform that’s in line with AFP’s goals of more economic growth and a fairer tax system.

Financial Technology

Buoyant bitcoin stirs crypto-bubble fears
Jemima Kelly, Reuters

The price of a single bitcoin hit an all-time high of above $3,500 this week, dragging up the value of hundreds of newer, smaller digital rivals in its wake. Now some investors fear a giant crypto-bubble may be about to burst.

Here’s What Goldman is Telling Big Money Clients about Bitcoin
Camila Russo, Bloomberg

Goldman Sachs Group Inc. is acknowledging that it’s getting harder for institutional investors to ignore the cryptocurrency market with total assets ballooning to $120 billion and bitcoin soaring more than 200 percent this year. “Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are), real dollars are at work here and warrant watching,” analysts including Robert Boroujerdi and Jessica Binder Graham wrote in a Q&A sent to clients.

HSBC takes tech route to end paper trail
Louise Lucas, Financial Times

Come 10.30am workers at HSBC’s suburban Hong Kong offices are to be found processing a freshly-delivered document deluge: prying out staples, tallying copies and endlessly slotting them into files. Forget fintech — this corner of banking in one of the world’s top financial hubs is carrying on much as it did a century ago.

Opinions, Editorials and Perspectives

There’s Still Too Much Risk in the Financial System
Mohamed A. El-Erian, Bloomberg

Intervening 10 years ago to contain the damage from the banking system’s excessive risk-taking in mortgage-backed securities, the European Central Bank initiated what has proven to be an exceptional and prolonged involvement in markets by central banks. Much has changed since then, yet too much remains the same.

The Finance 202: Wells Fargo mess may make it harder to roll back Dodd-Frank
Tory Newmyer, Washington Post

Wells Fargo can’t seem to find the bottom of its scandals. That’s becoming bad news for the entire banking industry. The fake-account mess that originally landed the bank in hot water turns a year old in September and still isn’t resolved.

Bond Bubbles Tend to Slowly Deflate, Not Burst
Ben Carlson, Bloomberg

Former Federal Reserve Chairman Alan Greenspan is worried about a bond bubble. “By any measure, real long-term interest rates are much too low and therefore unsustainable,” Greenspan said in a recent interview.

Research Reports

How Much Would Steve Bannon’s New Tax on Millionaires Raise?
Kyle Pomerleau, Tax Foundation

A few weeks ago, some reports claimed that Steve Bannon, the White House Chief Strategist, supports a top tax rate of 44 percent on taxpayers earning more than $5 million. While this proposal was quickly batted down by the White House, it is still worth taking a look at.