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Finance Brief: Senate Confirms Treasury Nominees for Tax, International Posts


Government Brief

  • The Senate confirmed several nominees for financial posts in the Trump administration, including five who will serve as Treasury Department officials dealing with tax and international finance. David Kautter was confirmed as the agency’s assistant secretary for tax policy, while David Malpass was confirmed as undersecretary for international affairs. (The Wall Street Journal)
  • The Consumer Financial Protection Bureau laid the groundwork for rules on checking accounts by releasing a study and a “prototype” form that banks can use to disclose fees to customers who want to enroll in overdraft accounts. Director Richard Cordray said the agency is in a pre-rulemaking phase and hasn’t decided whether it will propose regulations related to overdraft fees. (Morning Consult)
  • The ongoing disagreement in Washington over how to transition to a territorial tax system could be one of the major lobbying battles waged as Republicans move forward with plans to rewrite the U.S. tax code for the first time in more than 30 years. One GOP aide said the current ideas out there aren’t yet “well-formed,” with more resistance expected regarding how the GOP plan deals with foreign earnings when tax writers release a detailed proposal. (Financial Times)

Business Brief

  • Fannie Mae reported $3.2 billion in second-quarter profits. If the Federal Housing Finance Agency agrees to allow the government-sponsored enterprise to pay a dividend to the U.S. Treasury, that amount would be $3.1 billion and mark a total of $165.8 billion since the profit sweeps began. (The Associated Press)
  • A federal judge in Florida granted a request to allow the Justice Department  to file a brief that’s likely to defend mortgage servicer Ocwen Financial against CFPB claims that the firm engaged in widespread negligence. The Justice Department is expected to question the CFPB’s constitutionality, much like it did in a separate federal appeals court case brought by the firm PHH. (HousingWire)
  • Lobbyists and trade experts said they’re worried that the Trump administration could bungle its investigation of Chinese trade practices and precipitate a trade war with Beijing that would disadvantage U.S. companies. The administration is considering using a rarely used federal statute to hit Chinese products with tariffs. (Reuters)

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General

Senate Approves Treasury Nominees for Senior Tax and International Affairs Posts
Ian Talley, The Wall Street Journal

The U.S. Senate approved several top Treasury officials on Thursday, giving the administration’s tax, regulatory and international financial diplomacy agendas a boost. Among the five senior Treasury officials given the green light are former Bear-Stearns chief economist David Malpass to represent the U.S. Treasury as its top financial diplomat; David Kautter as assistant secretary for tax policy; and Christopher Campbell, a former Republican Senate Finance Committee staffer, to be assistant secretary for financial institutions.

Trump gives Ex-Im pick a chance to rescue nomination
Zachary Warmbrodt and Andrew Restuccia, Politico 

President Donald Trump is giving former Rep. Scott Garrett a chance to save his nomination to lead the Export-Import Bank just weeks after the president privately questioned the appointment amid intense pushback from business groups. The New Jersey Republican’s confirmation has been in doubt for months amid concern about his record in Congress, where he led efforts to try to kill the bank and took positions on LGBT issues that unnerved his corporate backers.

U.S. businesses fear Trump mishandling of China IP, trade probe
Ginger Gibson, Reuters

U.S. President Donald Trump’s threat to investigate China’s intellectual property and trade practices is valid, but his administration may not be up to the delicate task of carrying out a new China probe without sparking a damaging trade war, U.S. business lobbyists told Reuters on Thursday. The lobbyists’ fears that Trump could mishandle such an inquiry came as he searched for ways to increase pressure on China to do more about reining in North Korea’s nuclear and missile programs, with trade policy viewed as a useful lever.

Stocks Drift Before U.S. Jobs Data; Euro Advances: Markets Wrap
Robert Brand and Eddie Van Der Walt, Bloomberg

European and Asian stocks drifted and bonds were mixed as investors pondered the latest drama in Washington while they wait for new clues on the U.S. economy. Futures on the S&P 500 Index increased 0.1 percent.

Banking

CFPB Lays Groundwork for New Rules on Overdraft Fees
Ryan Rainey, Morning Consult

The Consumer Financial Protection Bureau this week published a new study on the status of checking account overdraft fees, in addition to rolling out prototypes for disclosure documents designed to help consumers better understand the results of opting into accounts that allow overdrafts. The study and the prototype documents come as the CFPB considers whether to propose rules setting out requirements for overdraft-related disclosures.

Why Volcker Rule reform won’t happen quickly
Lalita Clozel and John Heltman, American Banker

The Office of the Comptroller of the Currency’s move this week to solicit feedback on rolling back the Volcker Rule was only the first step in a long process, yet observers say it shows how fractured the five agencies tasked with implementing the proprietary trading ban have become. In theory, the regulators tasked with handling the complex rulemaking have all signaled they believe it’s too complicated and needs to be revised.

Financial Products and Investments

Senate votes to confirm slate of three CFTC commissioners
Sarah N. Lynch, Reuters

The U.S. Senate voted on Thursday to confirm two Republicans and one Democrat to serve on the Commodity Futures Trading Commission, the top U.S derivatives regulator. In a voice vote, the Senate approved the nominations of Republican Chris Giancarlo to serve as CFTC chairman, as well as Republican Brian Quintenz and Democrat Rostin “Russ” Behnam to serve as commissioners.

US control board to probe Puerto Rico debt, ties to crisis
Danica Coto, The Associated Press

A federal control board overseeing the finances of Puerto Rico’s government said Wednesday that it will investigate the causes of the island’s economic crisis as well as examine how its debt was issued and probe disclosure and selling practices. The announcement comes as government officials seek to restructure a portion of the $70 billion public debt in a process similar to bankruptcy following multimillion-dollar defaults that have angered creditors.

Housing and GSEs

Fannie Mae posts $3.2B profit in 2Q; to pay $3.1B dividend
Marcy Gordon, The Associated Press

Fannie Mae reported net income of $3.2 billion from April through June, up from a year earlier as the mortgage giant marked gains on its investments. The government-controlled company released its second-quarter results Thursday.

Fannie, Freddie Signal Possible Payment Delay as Debt Ceiling Looms
Andrew Ackerman, The Wall Street Journal

Fannie Mae and Freddie Mac this week signaled they might not make their quarterly dividend payment to the Treasury Department at the end of September—a move that could divert about $5 billion from federal coffers just as the government’s debt ceiling needs to be raised. The government-sponsored mortgage-finance firms currently send most of their profits to the Treasury every quarter as a dividend payment, under the terms of their federal bailout agreements, and they tend to make these payments at the end of the quarter.

DOJ will be allowed to join Ocwen’s challenge to constitutionality of CFPB
Ben Lane, HousingWire

Ocwen Financial could soon get a big boost in its fight against the Consumer Financial Protection Bureau from a once-unlikely source – the Department of Justice. In defending itself against the CFPB’s claims that Ocwen illegally foreclosed on borrowers, ignored customer complaints, mishandled borrowers’ money, and failed at the most basic of mortgage servicing actions, Ocwen asked a federal judge to declare the CFPB unconstitutional and toss out the CFPB’s lawsuit against the company.

Taxes

US tax reform hopes become mired in foreign cash piles
Barney Jopson and Sam Fleming, Financial Times

Republican attempts to make progress on tax reform after the party’s failure on healthcare are being undermined by a lack of consensus on handling US companies’ offshore earnings, an issue set to spark fierce lobbying and discord. The White House and Republican lawmakers want to scrap the US practice of taxing American companies on their worldwide earnings rather than domestic income alone, which is loathed by multinationals and marks the US as an odd one out globally.

Financial Technology

Broker-Dealer Renews Call for ICO Rules After SEC Release
Stan Higgins, CoinDesk

The U.S. Securities and Exchange Commission (SEC) has released new guidance on digital tokens and ICOs – but one industry stakeholder wants the agency to go a step further. As CoinDesk reported back in May, New York-based broker-dealer Ouisa Capital formally petitioned the SEC to release clear rules for issuing blockchain tokens.

‘Bitcoin cash’ potential limited, but a catalyst could be looming for it to take off
Arjun Kharpal, CNBC

“Bitcoin cash,” the cryptocurrency created as a result of a split in the bitcoin blockchain, may not have long-term potential, industry insiders told CNBC, but a key event down the road could give it more backing. To recap, the underlying bitcoin technology known as the blockchain underwent a “fork”, meaning it split to create a new digital currency.

Opinions, Editorials and Perspectives

How to Fix Libor Pains
Jerome Powell and J. Christopher Giancarlo, The Wall Street Journal

There’s a good chance your credit card, floating-rate mortgage, car loan and even the investment funding for the company where you work are all influenced by an arcane interest rate known to market professionals as Libor. Once called the London interbank offered rate, Libor is meant to reflect the interest rate that large banks must pay to borrow short term.

What Would It Take for Trump to Get His Corporate Tax Wish?
James B. Stewart, The New York Times

For President Trump, 15 is the magic number. That’s the percentage at which he wants to cap the corporate tax rate, a steep cut from the current top rate of 35 percent and much lower than the ordinary income rates paid by many partnerships and small-business entities.

Reagan Cut Taxes, Revenue Boomed
Phil Gramm and Michael Solon, The Wall Street Journal

A great advantage of having been present when history was made is that later you can sometimes recall what actually happened. Such institutional memory is important today in assessing the 1981 Reagan tax cuts, whose effect is now being relitigated in the debate on the Republicans’ proposed tax reform.

The GOP May Cut Taxes, but Don’t Call It ‘Reform’
Alan S. Blinder, The Wall Street Journal

The GOP’s seven-year effort to repeal and replace ObamaCare is finally over—at least for now. That’s terrible news for President Trump and congressional Republicans, but it’s good news for the tens of millions of Americans who won’t lose their health insurance.

Class-action lawsuits critical to shedding light on bank fraud
Heidi Shierholz, The Hill

Just two weeks after consumers got crucial legal rights restored by a new rule from the Consumer Financial Protection Bureau (CFPB), the U.S. House of Representatives voted July 25 to strip consumers of the ability to join together and hold large financial institutions accountable in court. Now it is up to the Senate to decide whether to move forward with repeal.

Research Reports

Data Point: Frequent Overdrafters
Consumer Financial Protection Bureau

Consumers with checking accounts sometimes attempt transactions for amounts that exceed their account balances. Financial institutions that offer checking accounts decide whether to allow such transactions to go through and whether to charge fees in connection with them.

Why Wall Street Loves Glass-Steagall
John Berlau and Daniel Press, Competitive Enterprise Institute

Debates over financial regulation often refer to “Wall Street” and “Main Street” as shorthand for, respectively, 1) investment banking and the trading of financial instruments and 2) commercial banking, including taking deposits and making loans to local residents and businesses. Politicians often like to claim they are championing the little guy by declaring their allegiance to Main Street.