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Finance Brief: Mnuchin to Recommend New Asset Thresholds for Dodd-Frank Banking Rules

Washington Brief

  • House Speaker Paul Ryan (R-Wis.) reaffirmed that he thinks Republicans can tackle tax overhaul legislation this year. The House Ways and Means Committee held its first tax reform hearing on Thursday. (Politico)
  • Treasury Secretary Steven Mnuchin expressed concern that some scoring models of President Donald Trump’s tax plan won’t account for the potential economic growth the administration says will pay for the proposed tax cuts. (Reuters)
  • Mnuchin said Trump has decided who should lead the Office of the Comptroller of the Currency on a permanent basis. Mnuchin did not name the likely nominee, and his remarks came in response to Democratic criticism of the administration’s choice of a private-sector lawyer as the OCC’s acting head. (Bloomberg News)

Business Brief

  • Mnuchin said he’ll recommend that the administration exempt all banks with less than $10 billion in assets from Dodd-Frank rules. He also said he will call for raising the $50 billion asset threshold that prompts stricter bank scrutiny under the 2010 law, but he didn’t specify what the new threshold should be. (The Washington Post)
  • Mnuchin told senators he’ll ensure that hedge funds and other firms structured as pass-through entities — businesses taxed through owners’ individual returns — don’t take advantage of a lower tax rate if the administration’s tax plan is implemented. (Bloomberg News)
  • Bradley Linskens, the OCC examiner formerly in charge of Wells Fargo & Co., sued the agency seeking records related to his administrative leave in the wake of the bank’s consumer fraud scandal. (The Wall Street Journal)

Chart Review

Events Calendar (All Times Local)

Friday
U.S. Chamber of Commerce investment summit 8:30 a.m.
House Judiciary Committee hearing on antitrust enforcement 9 a.m.

 

General

U.S. consumer bureau faces fateful test in U.S. appeals court
Lawrence Hsieh, Reuters 

Oral arguments begin on May 24 in a U.S. appeals court case that could reshape the structure of the Consumer Financial Protection Bureau, or even determine the independent agency’s existence. A decision would not only affect the status of the current CFPB director, Richard Cordray, an Obama recess appointee whose term expires in July, 2018, but also the agency’s rulemaking agenda.

Mnuchin to Review Request to Provide List of Trump’s Business Contacts
Kate Davidson, The Wall Street Journal 

Treasury Secretary Steven Mnuchin said he would review a request by Senate Democrats to provide a complete list of all business contacts of President Donald Trump at a hearing on Capitol Hill Thursday. Sen. Sherrod Brown (D., Ohio), the top Democrat on the Senate Banking Committee, pressed Mr. Mnuchin to commit to turning over details of the president’s “financial entanglements,” which he requested in a March 2 letter to the secretary, adding that Americans are troubled by those business connections.

Stocks Steady After Volatile Week; Crude Rises: Markets Wrap
Benjamin Purvis et al., Bloomberg News

S&P 500 futures were up 0.3 percent. The benchmark index rose 0.4 percent on Thursday after plunging 1.8 percent in the previous session, its worst day since Sept. 9.

Banking

Treasury to call for rolling back banking regulations
Damian Paletta, The Washington Post 

Treasury Secretary Steven Mnuchin on Thursday said he would soon formally call for rolling back regulations on thousands of small and regional banks, arguing that major changes were necessary to help these companies make more loans and boost the economy. Testifying before the Senate Banking Committee, Mnuchin previewed two specific recommendations he plans to make in the first of several reports to President Trump next month.

Mnuchin Says Trump Has Made His Pick for Key Banking Regulator
Jesse Hamilton and Robert Schmidt, Bloomberg News

President Donald Trump has selected a candidate to be permanent head of a key Wall Street regulator, Treasury Secretary Steven Mnuchin said Thursday. Responding to criticism over the department’s appointment of a banking-industry lawyer as acting comptroller of the currency, Mnuchin told members of the Senate Banking Committee that Trump’s prospective nominee is going through what may be a lengthy vetting process.

Former OCC Examiner in Charge of Wells Fargo Sues Agency Seeking Records
Emily Glazer, The Wall Street Journal 

The former Office of the Comptroller of the Currency examiner overseeing Wells Fargo & Co. is suing the regulator for allegedly violating a Freedom of Information Act request made seeking records over his administrative leave. Bradley Linskens, who was until recently the so-called examiner in charge of Wells Fargo, sued the OCC this week for allegedly violating his request seeking documents and communications relating to his being placed on administrative leave in April and removal of Wells Fargo responsibilities.

Financial Products and Investments

Cooperman settles insider trading charges for $4.9m
Kara Scannell, Financial Times 

Leon Cooperman’s Omega Advisors has agreed to pay $4.9m to settle allegations he traded on inside information, ending a stand-off with US securities regulators. Under the settlement with the Securities and Exchange Commission Mr Cooperman will not admit or deny wrongdoing or be banned from the industry.

NYSE blasts Bats plan to compete for end-of-day NYSE stock orders
John McCrank, Reuters 

The New York Stock Exchange has urged its members to denounce a plan by rival exchange operator Bats to compete for end-of-day orders of NYSE-listed companies, saying it would make it harder to get trades done and would distort stock prices. Bats, the No. 2 U.S. stock exchange operator, said last week it plans to offer brokers a type of order that would give them the same prices as the closing auctions for NYSE- and Nasdaq-listed securities, but with lower execution fees.

Housing and GSEs

Trump Administration Could Support Government Backstop for Fannie and Freddie, Mnuchin Says
Andrew Ackerman, The Wall Street Journal 

The Trump administration could support a government backstop for Fannie Mae and Freddie Mac as part of a broad overhaul of the mortgage-finance giants, Treasury Secretary Steven Mnuchin told Senate lawmakers on Thursday. The Trump administration could support a government backstop for Fannie Mae and Freddie Mac as part of a broad overhaul of the mortgage-finance giants, Treasury Secretary Steven Mnuchin told Senate lawmakers on Thursday.

BofA opens debate on lowering mortgage down payments
Dan Freed and David Henry, Reuters 

The head of Bank of America Corp (BAC.N), the United State’s fourth-biggest mortgage lender, said on Thursday banks would be able to supply a bigger share of funding for home purchases if the standard down payment for buyers was cut to 10 percent from 20 percent. The vast majority of mortgages are underwritten to strict standards set by the U.S. government or quasi-government entities Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK).

Zillow advertising under CFPB fire sets real estate industry on edge
Andrea Riquier, MarketWatch 

Earlier this month, Zillow Group, the popular online real estate data provider, reported blowout earnings. Revenue rose 32% compared to a year ago, and online visits were up 18%.

Taxes

Mnuchin Warns Some Partnerships and LLCs Won’t Get Tax Break
Alexis Leondis and Saleha Mohsin, Bloomberg News

Treasury Secretary Steven Mnuchin cautioned that not all businesses currently classified as pass-through entities would see their rates slashed to 15 percent under the White House’s tax plan — an indication that hedge funds and other high-earning partnerships and limited liability companies might not get major breaks. “I assure you we are not going to allow all pass-throughs to get that rate,” Mnuchin said during a hearing before the Senate Banking Committee in response to a question from Senator Elizabeth Warren.

Treasury’s Mnuchin concerned about alternate scoring models of Trump tax plan
Lindsay Dunsmuir, Reuters 

U.S. Treasury Secretary Steven Mnuchin told lawmakers on Thursday that he has some doubts that what are known as alternate scoring models will give enough credit to the potential for economic growth when assessing the impact of the Trump administration’s tax plan. In late April, the administration put out a one-page overview of its tax reform plans, which would cut taxes for businesses to 15 percent, as well as cutting taxes and simplifying income tax brackets for individuals.

Ryan: Tax reform is happening in 2017
Rachael Bade, Politico 

Speaker Paul Ryan on Thursday doubled down on a vow to reform the tax code this year, an optimistic timeline that could face headwinds amid the ongoing Russia investigations. The Wisconsin Republican, a policy wonk eager to show voters that Congress is still focused on the GOP agenda, chafed at a question about whether tax reform would slip beyond 2017.

GOP’s Path to Tax Changes Slowed by Upcoming Budget Fight
Richard Rubin and Kate Davidson, The Wall Street Journal 

To advance a tax overhaul this year, congressional Republicans first must clear a tricky hurdle: They need to agree on a budget.

House GOP begins reform effort as Pence promises ‘most consequential tax cut’
Joseph Lawler, The Washington Examiner 

House Republicans kicked off the legislative effort to pass comprehensive tax reform legislation Thursday with a highly anticipated hearing in the Ways and Means Committee. As the Republicans used the meeting to highlight their goal of a permanent reform of the entire tax code that does not add to the government’s deficit, Vice President Mike Pence promised a historic tax cut in a speech at the U.S. Chamber of Commerce.

Financial Technology

Morgan Stanley technology executive Hickson leaves for fintech company
Olivia Oran, Reuters 

Euroloan Group Plc hired Morgan Stanley’s James Hickson as group president, the Helsinki-based financial technology company said on Thursday. Hickson, who worked at Morgan Stanley for 15 years, led efforts to help commercialize the bank’s internal technology through mergers and acquisitions, venture capital and selling intellectual property.

A Message from SIFMA:

The Department of Labor must delay its harmful fiduciary rule until the review directed by President Trump is completed. Up to 14.7 million consumers could face significant changes to their retirement and financial advice, and lose up to $109 billion over 10 years. American investors deserve better. DOL needs to take the time to get this right and review the entire rule. Protect the retirement savers. Delay the DOL rule.

Opinions, Editorials and Perspectives

Dick Durbin’s ‘Reverse Robin Hood’ Economics
Patrick Basham, Morning Consult 

Robin Hood took from the rich to give to the poor. A pivotal piece of legislation bearing the imprint of Democrat Richard Durbin suggests the Illinois senator, by contrast, is a fan of “reverse Robin Hood economics” — that is, taking from less fortunate consumers to boost the profit margins of the nation’s largest retail chains.

Cordray is Wrong About CHOICE
Meghan Milloy, American Action Forum 

Yesterday Richard Cordray, Director of the Consumer Protection Financial Bureau (CFPB), huddled with House Democrats at their weekly caucus meeting. And although the CFPB is supposed to be an independent agency, it should come as no surprise that Cordray met only with Democrats, as he has continuously used his agency to push forward the Democrats’ financial regulatory agenda.

What the GOP seems to be forgetting in fight for tax reform
Jake Novak, CNBC 

Politics in America has become all about President Donald Trump and his personal fortunes and misfortunes. But no matter how that plays out, leaders of both political parties have other core beliefs and agendas to promote, right?

A Message from SIFMA:

The Department of Labor’s fiduciary rule is harming retirement savers and it must be delayed for a minimum of 180-days. Recently, the DOL provided a 60-day delay of the rule, which temporarily helped prevent further service changes, customer confusion and market disruptions. However, this is not enough time to fully review the consequential impact of the entire rule, as requested by the president. Further delay is needed to conduct the review and protect retirement savers from additional harm and turmoil.

Research Reports

How Fast Can America Grow?
Committee for a Responsible Federal Budget 

Official projections show real economic growth will average less than 2 percent annually over the next decade. However, some policymakers have suggested economic growth could be restored to its historic average of above 3 percent per year or even increased to 4 percent or more per year.