Finance Brief: Senate Republicans Considering Alternative to House GOP Tax Plan

Washington Brief

  • Republican taxwriters in the Senate are considering their own tax reform package as an alternative to the House GOP proposal, which has sparked intraparty disputes because of its plan to tax imports. (The Hill)
  • The Senate Health, Education, Labor and Pensions Committee postponed the March 15 confirmation hearing for Labor secretary-designate Alexander Acosta until March 22 because of a scheduling conflict for Chairman Lamar Alexander (R-Tenn.). (CNN)
  • President Donald Trump told community banking leaders last week that there would probably be a political backlash if he were to fire Consumer Financial Protection Bureau Director Richard Cordray, and that there would be risks to restructuring the agency. (Bloomberg News)

Business Brief

  • The Trump administration fired Preet Bharara, the U.S. attorney for the Southern District of New York and a key figure in the prosecution of Wall Street crimes. Bharara’s dismissal came after he refused to comply with an order requesting the immediate resignation of 46 U.S. attorneys appointed during the Obama administration. (The New York Times)
  • The Securities and Exchange Commission denied an application for an exchange-traded fund linked to the cryptocurrency bitcoin. (Coindesk)
  • More than a dozen housing industry groups told congressional leaders that they support legislative efforts to ban the use of money raised from Fannie Mae and Freddie Mac’s guarantee fees for non-mortgage-related spending. (HousingWire)

Chart Review

Events Calendar (All Times Local)

Monday
Institute of International Bankers annual conference 7:30 a.m.
American Enterprise Institute event on trade with Sen. Lee 5:15 a.m.
Tuesday
Institute of International Bankers annual conference 8 a.m.
FIA International Futures Industry Conference in Boca Raton, Fla. 8 a.m.
Senate Finance Committee hearing for USTR nominee Lighthizer 10 a.m.
Senate Banking Committee hearing on flood insurance 10 a.m.
Wednesday
FIA International Futures Industry Conference 7:30 a.m.
House Financial Services subcommittee hearing on JOBS Act 10 a.m.
Senate Banking Committee hearing on Russia sanctions 10 a.m.
D.C. Blockchain Summit 1:30 p.m.
House Financial Services subcommittee hearing on de novo bank formation 2 p.m.
Thursday
FIA International Futures Industry Conference 7 a.m.
D.C. Blockchain Summit 8 a.m.
House Financial Services subcommittee hearing on monetary policy 10 a.m.
House Financial Services subcommittee hearing on flood insurance 2 p.m.
Friday
FIA International Futures Industry Conference 7:30 a.m.

 

General

Hearing delayed for Trump labor nominee because senator is going to Trump rally
Jill Disis, CNN

President Trump’s new pick for labor secretary will have to wait a bit longer before he gets a hearing. Alexander Acosta’s confirmation hearing, which was originally scheduled for Wednesday, was pushed back a week because the chairman of the committee overseeing his confirmation is traveling with Trump to a rally in Nashville.

U.S. Attorney Preet Bharara Says He Was Fired After Refusing to Quit
Maggie Haberman and Charlie Savage, The New York Times

The call to Preet Bharara’s office from President Trump’s assistant came on Thursday. Would Mr. Bharara, the United States attorney in Manhattan, please call back? The following day, Mr. Bharara was one of 46 United States attorneys appointed by President Barack Obama asked to resign — and to immediately clean out their offices.

Trump Said to Weigh Political Risks of Firing CFPB’s Cordray
Elizabeth Dexheimer, Bloomberg News

Since Donald Trump’s surprise election victory, he’s faced demands from Republican lawmakers to quickly oust the head of a controversial financial regulator. The president indicated this week that he’s proceeding cautiously.

Treasury secretary hires four top aides
Sylvan Lane, The Hill

Treasury Secretary Steven Mnuchin announced Friday the hiring of four top aides, split between Washington veterans and New York finance moguls. The Treasury Department announced that Dan Kowalski, Shannon McGahn, Justin Muzinich and Craig Phillips will all serve as Mnuchin’s counselors — advisers and policy experts who aren’t confirmed by the Senate.

White House civil war breaks out over trade
Shawn Donnan and Demetri Sevastopulo, Financial Times

A civil war has broken out within the White House over trade, leading to what one official called “a fiery meeting” in the Oval Office pitting economic nationalists close to Donald Trump against pro-trade moderates from Wall Street. According to more than half a dozen people inside the White House or dealing with it, the bitter fight has set a hardline group including senior adviser Steve Bannon and Trump trade adviser Peter Navarro against a faction led by Gary Cohn, the former Goldman Sachs executive who leads Mr Trump’s National Economic Council.

Ross: NAFTA talks could produce two separate bilateral deals or one trilateral
Inside U.S. Trade

The U.S. believes NAFTA could be renegotiated as two separate bilaterals or another three-way deal, though Mexico still hopes for trilateral discussions, Commerce Secretary Wilbur Ross and Mexican Economy Minister Ildefonso Guajardo Villarreal said Friday. The two appeared together to announce a new round of negotiations in a long-running sugar dispute and took questions from reporters about NAFTA timing and other issues.

Trump budget expected to seek historic contraction of federal workforce
Damian Paletta, The Washington Post

President Trump’s budget proposal this week would shake the federal government to its core if enacted, culling back numerous programs and expediting a historic contraction of the federal workforce. This would be the first time the government has executed cuts of this magnitude — and all at once — since the drawdown following World War II, economists and budget analysts said.

Stocks Advance, Dollar Weakens Before Fed and BOJ: Markets Wrap
Adam Haigh, Bloomberg News

Global stocks rose as Chinese shares surged in Hong Kong and a positive U.S. jobs report helped investors position for a week of central-bank policy decisions. Futures indicate the market is moving toward policy makers’ December projection of three rate increases in 2017.

Banking

Trump Wants Faster Growth. The Fed Isn’t So Sure.
Binyamin Appelbaum, The New York Times

For President Trump and his economic advisers, the strong February jobs report was a cause for celebration — and a first step toward delivering on the president’s promise of faster economic growth. For the Federal Reserve, it was the final confirmation that the time had come to raise interest rates to prevent the United States economy from overheating.

Fed has been doing a good job, Trump economic adviser says
Joseph Lawler, The Washington Examiner

President Trump’s top economic adviser issued a vote of confidence in the Federal Reserve on Sunday, expressing trust in the central bank as it aims to raise interest rates several times this year. The favorable commentary on the Fed from Gary Cohn, director of Trump’s National Economic Council, marks a major turnaround from Trump’s bitter campaign rhetoric about the central bank.

What’s behind the curious rise in bank auditing woes?
Kristin Broughton, American Banker

A half-dozen publicly traded banks, many of them once known for their squeaky-clean accounting and financial reporting practices, have been dinged by auditors for deficiencies. In recent weeks banks including Eagle Bancorp in Bethesda, Md., Central Pacific Financial in Honolulu, Banc of California in Irvine, and Webster Financial in Waterbury, Conn., have disclosed “material weaknesses” in their internal controls.

Four myths in the battle over Dodd-Frank
Kate Berry, American Banker

In their drive to revamp the Dodd-Frank Act, Republicans have repeatedly asserted that the 2010 financial reform law has increased the cost of consumer lending and cut off access to credit. “Thanks to Dodd-Frank’s red tape, consumers pay more for mortgages, credit cards and auto loans — that is if consumers can even get access to them,” House Financial Services Committee Chairman Jeb Hensarling said in a typical recent speech.

Financial Products and Investments

Ninth Circuit Weighs in on Dodd-Frank Whistle-Blower Protections, Deepening Circuit Split
Bloomberg BNA

The Dodd-Frank Act’s whistle-blower provisions continue to divide the federal courts on a key issue: should informants have to contact the SEC before they can claim anti-retaliation protections? The U.S. Court of Appeals for the Fifth Circuit says “yes,” the Second Circuit says “no.”

Jon Corzine Says He Never Suspected PwC’s Accounting for MF Global Was Wrong
Michael Rapoport, The Wall Street Journal

Former MF Global Holdings Ltd. CEO Jon Corzine testified on Friday that he was never given a reason to believe that PricewaterhouseCoopers LLP’s accounting for the brokerage firm was incorrect before MF Global spiraled into bankruptcy in 2011. The New York company’s risky European debt trades were the subject of intense internal scrutiny among executives and board members in the months before they helped trigger the brokerage’s collapse, Mr. Corzine said in federal court in New York.

Bulls galore! Has Trump unleashed America’s animal spirits?
Charles Riley, CNN

JPMorgan CEO Jamie Dimon says that stocks have rallied because President Trump has awoken the “animal spirits” of investors. Yeah, well, what does that mean exactly?

Housing and GSEs

Top trade organizations support barring use of Fannie, Freddie g-fees for federal spending
Ben Lane, HousingWire

A consortium of the housing industry’s top trade organizations declared their collective support for an ongoing effort in Congress to permanently bar the use of funds raised from Fannie Mae and Freddie Mac’s guarantee fees to cover federal spending in areas not related to mortgages. The support came via a letter sent recently to Rep. Mark Sanford, R-SC, along with Rep. Brad Sherman, D-CA, the sponsors of the Risk Management and Homeowner Stability Act of 2017, tagged in the House as H.R. 916.

Trump’s Plan on Fannie and Freddie? Clues May Emerge Soon
Gretchen Morgenson, The New York Times

Fixing Fannie Mae and Freddie Mac, the mortgage finance giants that still operate under government supervision, is nowhere near the top of the Trump administration’s to-do list. Since the election, administration officials, including Steven T. Mnuchin, the United States Treasury secretary, have said little about their plans for the companies.

Taxes

Senate Republicans eyeing alternative tax reform plan
Alexander Bolton, The Hill

Senate Republicans are exploring alternatives to Speaker Paul Ryan’s (R-Wis.) tax reform package, which hinges on a border adjustment tax proposal that is deeply unpopular in the upper chamber. Finance Committee Chairman Sen. Orrin Hatch (R-Utah) says he won’t proceed until the House bill hits a dead end, but senators are laying the groundwork for a new direction, expecting the House plan will either fail or require substantial revisions.

The White House really doesn’t want to tip its hand on a key House tax reform provision
Jacob Pramuk, CNBC

Two top White House economic advisors have taken pains recently not to hint at where they stand on a key piece of the House Republicans’ tax reform plan. Asked Friday about border adjustment, a House GOP provision that several senators and large retailers have opposed, Commerce Secretary Wilbur Ross stayed mum.

IRS Reorganizing Tax Exempt Bond Group in May
The Bond Buyer

The tax exempt bond office will be combined with the office of Indian tribal governments and headed by the ITG director.

Financial Technology

SEC Rejects Winklevoss Bitcoin ETF Bid
Stan Higgins, CoinDesk

The US Securities and Exchange Commission has denied a bid to list a bitcoin-tied exchange-traded fund (ETF), citing the risk of fraud and a lack of regulation among the world’s bitcoin markets. The decision caps a more than three-year quest by bitcoin investors Cameron and Tyler Winklevoss, who first sought to list the bitcoin-tied product in mid-2013.

Opinions, Editorials and Perspectives

The Obama recovery is about to make Trump look good
Matt O’Brien, The Washington Post

President Trump has inherited an economy that set a record Friday with 77 consecutive months of job growth, or, as put it, a “mess.” In Trump’s first full month in office, the economy added 235,000 jobs, the unemployment rate ticked down to 4.7 percent, and wage growth picked up a little to hit 2.8 percent over the past year.

Senator Warren’s ‘Trust the IRS’ Bill
Peter J. Ferrara, Investor’s Business Daily

The IRS proved during the 2012 Obama reelection campaign that taxpayers could not trust them. Indeed, the IRS bent over backwards to help Obama’s reelection, even to the point of committing openly illegal acts.

Trump is about to pull off one of the biggest transfers of wealth in history and Texas will lose
Richard Parker, The Dallas Morning News

For 30 years, Texas has been on the winning side of history, getting downright rich off the global trading system that arose after the Cold War. Now, that wealth is about to be taken away in one of the greatest smash-and-grabs in U.S. history. The Trump administration has drawn plenty of attention for plenty of reasons.

Research Reports

Why is Growth better in the United States than in other Industrial Countries
Martin S. Feldstein, The National Bureau of Economic Research

Although the official statistics imply that the rate of growth of real GDP in the United States has declined in recent years, it has still been substantially higher than the real growth rates in Europe and the other industrial countries, leading to higher real per capita incomes. This paper discusses ten reasons for the higher rate of real economic growth.

Briefings

Finance Brief: Week in Review & What’s Ahead

Senate Majority Leader Mitch McConnell (R-Ky.) said it is unlikely that Congress will pass a tax reform bill before the August recess. Senate GOP taxwriters are considering a tax proposal of their own that does not include the controversial border-adjustable tax on imports found in the House GOP’s blueprint.

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