Finance Brief: Senate to Vote Next Week on Bill to Ease Banking Regulations


Top Stories

  • The Senate is poised to consider legislation that is aimed at easing regulations on small and mid-sized banks. Majority Leader Mitch McConnell (R-Ky.) filed cloture on the measure, which is supported by many Republicans but has divided Democrats, meaning a procedural vote to end debate, with a subsequent vote on final passage, is likely next week. (Washington Examiner)
  • Richard Clarida, an economist at Columbia University and a managing director at Pacific Investment Management Co., is set to be President Donald Trump’s nominee for vice chair of the Federal Reserve, according to unnamed sources familiar with the deliberations. In 2011, Clarida (R) was reportedly a final candidate for a seat on the Fed’s seven-member board of governors, but he withdrew his name from consideration. (The Wall Street Journal)
  • Equifax Inc. disclosed in a regulatory filing that the card-payments industry might end the company’s access to data on customers, or impose fines, if Equifax does not adequately address deficiencies that led to last year’s massive data breach. Equifax said that if access is cut off, its ability to offer consumer products would be curbed. (Bloomberg)

Chart Review

Events Calendar (All Times Local)

Friday
WITA event on trade enforcement 9 a.m.

General

Trump’s steel shock drives wedge into sluggish NAFTA talks
David Ljunggren and Dave Graham, Reuters

Negotiators trying to rework the NAFTA trade deal on Thursday were hit by the prospect of conflict over U.S. steel tariffs that could complicate carmaking in North America, one of the most sensitive issues at the talks. U.S. President Donald Trump said he would impose the tariffs beginning next week, raising the risk of exacerbating tensions at negotiations already facing serious challenges.

Trump’s tariff war nudges Cohn toward White House exit
Ben White and Andrew Restuccia, Politico

Gary Cohn, President Donald Trump’s top economic adviser, has been rumored to be on the brink of leaving the White House for months but stayed for one main reason: to stop the president from imposing steep tariffs. By Thursday afternoon, Cohn had lost the fight.

Mulvaney unsure of when he will leave consumer bureau
Sylvan Lane, The Hill

The acting director of the Consumer Financial Protection Bureau (CFPB) said Thursday he thinks he could remain in charge of the agency for as long as another six months while waiting for President Trump to nominate and the Senate to confirm a new director. Mick Mulvaney, the Office of Management and Budget director, said he has “no idea” how much longer he’ll be the CFPB acting chief.

Elizabeth Warren Wants Wall Street to Have a #MeToo Moment
Benjamin Bain, Bloomberg

Senator Elizabeth Warren wants regulators to make sure Wall Street doesn’t dodge the #MeToo movement. Warren, the finance industry’s leading critic in Congress, asked the Securities and Exchange Commission what it’s done to ensure banks have established policies and disciplinary systems to prevent sexual harassment.

Mnuchin Blocks U.C.L.A. From Releasing Video of Students Heckling Him
Alan Rappeport, The New York Times

Treasury Secretary Steven Mnuchin was taunted with hisses, heckles and profanity during a lecture and moderated discussion at U.C.L.A. this week. Protesters were carried out by armed police officers. A sixth grader in the audience questioned him about the fairness of passing permanent tax cuts for companies and expiring cuts for individuals.

Kuroda Adds Gloom for Stocks Roiled by Tariff Talk: Markets Wrap
Robert Brand, Bloomberg

Headwinds mounted for global stocks on Friday, with Japan’s talk of an end to stimulus compounding investor concerns over a potential trade war and more hawkish Federal Reserve. Futures on the S&P 500 Index declined 0.3 percent.

Banking

Senate to vote next week on bipartisan bill to ease rules on banks
Joseph Lawler, Washington Examiner

The Senate will vote next week on a bipartisan bank regulatory relief legislative package that would be the biggest change to the 2010 Dodd-Frank financial reform law since it was signed. Senate Majority Leader Mitch McConnell filed cloture on the bill Thursday afternoon, meaning that the Senate will vote next week to cut off debate on the measure and then pass it.

Dem v. Dem: Infighting over Dodd-Frank relief bill escalates
John Heltman, American Banker

Democrats on the Senate Banking Committee showed sharp differences with each other Thursday over the pending regulatory reform bill, with Wall Street hawks framing it as a giveaway to big banks while moderate supporters called it a sensible recalibration of a complex law. The differing visions, which were offered during a hearing with new Federal Reserve Board Chairman Jerome Powell, demonstrated escalating tensions among Democrats as the legislation nears a possible full chamber vote next week.

White House Preparing to Nominate Richard Clarida as Fed’s No. 2 Official
Nick Timiraos and Harriet Torry, The Wall Street Journal

President Donald Trump is likely to nominate Columbia University economist Richard Clarida to become vice chairman of the Federal Reserve Board, according to people familiar with the matter. Mr. Clarida is a Republican economist whom colleagues describe as more of a pragmatist than an ideologue.

Fed chief says Wells Fargo needs to make ‘significant’ reforms before growth cap is lifted
Jim Puzzanghera and James Rufus Koren, Los Angeles Times

The new chief of the Federal Reserve said Thursday that a cap it placed on the growth of Wells Fargo & Co. after widespread consumer abuses would not be easily lifted — but the bank would not have to fully implement reform plans before it was removed. Fed Chairman Jerome H. Powell sparred over the matter with Sen. Elizabeth Warren (D-Mass.), one of the leading critics of Wells Fargo after its creation of millions of unauthorized accounts and the disclosure of other questionable practices.​​​​​​

Wells Fargo’s Wealth-Management Business Faces SEC Probe
Matt Robinson, Bloomberg

Wells Fargo & Co. faces an investigation by Wall Street’s top regulator into whether it inappropriately sold clients in-house investment services that may not have been in their best interests, said a person with knowledge of the matter. The U.S. Securities and Exchange Commission is concerned that the bank might have made customer referrals that violated securities laws, said the person who asked not to be named because the agency’s involvement in the probe isn’t public.

Financial Products and Investments

SEC dropped inquiry a month after firm aided Kushner company
The Associated Press

The Securities and Exchange Commission late last year dropped its inquiry into a financial company that a month earlier had given White House adviser Jared Kushner’s family real estate firm a $180 million loan. It’s impossible to say those events are connected, but their timing has once again raised potential conflict-of-interest questions about Kushner’s family business and his role as an adviser to his father-in-law, President Donald Trump.

Nasdaq Sues ‘Flash Boys’ Exchange IEX for Patent Infringement
Annie Massa, Bloomberg

Nasdaq Inc. sued IEX Group Inc. for patent infringement, claiming the smaller firm stole aspects of its trading technology. In a lawsuit filed Thursday, Nasdaq said seven of its patents were violated by IEX, which transformed itself from a private trading venue to a full-fledged stock exchange in 2016.

MetLife warns of new reserving problems
Alistair Gray, Financial Times

MetLife, the US life insurer that failed to make pension payments to about 13,500 Americans, has warned of new problems with its reserving — this time in Japan, its biggest overseas market. MetLife disclosed in an annual securities filing on Thursday that the US Securities and Exchange Commission was investigating a second “material weakness” after it over-reserved for annuity payouts in the country by almost $900m.

Housing and GSEs

Ben Carson Tries to Cancel $31,000 Dining Furniture Purchase for HUD Office
Glenn Thrush, The New York Times

Ben Carson, the secretary of housing and urban development, is attempting to cancel a $31,000 order for a customized hardwood dining room table, chairs, sideboard and hutch the day after the chairman of the House Oversight Committee announced an investigation into the refurbishment of his HUD office. “At the request of the secretary, the agency is working to rescind the order for the dining room set,” Armstrong Williams, Mr. Carson’s business manager and an informal adviser, said on Thursday.

Taxes

U.S. After-Tax Incomes Rise Due to Tax-Code Changes, Spending Slows
Eric Morath, The Wall Street Journal

The incomes of U.S. households jumped in January, reflecting tax law changes that are reducing tax withholding and led to one-time bonuses for some households. After-tax income, including earnings from salaries, investments and other sources, rose 0.9% in January from December, the Commerce Department said Thursday.

At $2.3 trillion cost, Trump tax cuts leave big gap
David Rogers, Politico

Between new cost estimates and the White House’s own budget numbers, the wheels are coming off Republican claims that President Donald Trump’s tax cuts will pay for themselves by generating increased growth and government revenues over the next decade. POLITICO’s own calculations, working entirely from data in the 2018 and 2019 budgets, indicate that the added revenues generated by the tax cuts themselves would fall substantially short of matching $2.3 trillion.

Financial Technology

Equifax Says It May Lose Access to Some Card Data Over Breach
Jennifer Surane, Bloomberg

Equifax Inc., the credit bureau breached by hackers last year, said the card-payments industry may cut off its access to certain data or impose fines if the company can’t prove it’s addressed weaknesses. Equifax disclosed the latest fallout from the cyber attack in a regulatory filing on Thursday, hours after announcing it had identified more consumers affected by the hacking.

Overstock.com Shares Drop on SEC Cryptocurrency Probe
Paul Vigna, The Wall Street Journal 

Overstock.com Inc. shares fell as much as 10% Thursday morning after the company’s cryptocurrency-focused subsidiary, tZero, said that the Securities and Exchange Commission was investigating its sale of digital tokens. In a securities filing Thursday, the online retailer revealed that the SEC requested information about tZero’s initial coin offering, or ICO, in December.

Former Fed governor helps fund markets compliance AI group
Philip Stafford, Financial Times

Former Federal Reserve governor Randall Kroszner is among a group of investors in a start-up US fintech company that has raised $6m to apply artificial intelligence to markets compliance. The first round of funding by Ascent Technologies, based in Chicago, on Thursday highlights interest among investors to use machine learning to reshape the trading industry.

A Message from the Electronic Payments Coalition: 

A majority of voters are concerned with data breaches, yet there are no national data security standards to protect consumers at checkout. It’s time retailers share responsibility for data security. Learn more from the Electronic Payments Coalition.

Opinions, Editorials and Perspectives

Choose Investors Over Special Interests
Paul Atkins, Morning Consult

Just as Washington is becoming more investor-friendly, some politicians are going back to fighting in favor of well-connected special interests over Mr. and Mrs. 401(k). The latest example: A policy rider (let’s call it what it is — an earmark) attached to an appropriations bill that would prevent a long-overdue effort to save retirees and investors more than $300 million a year by modernizing how mutual fund reports are delivered to shareholders.

Why I would vote ‘no’ on Senate bill to amend Dodd-Frank
Barney Frank, CNBC

I write this in anticipation of the debate on the Senate Banking Committee bill to amend Dodd-Frank, which is expected to begin next week. The history behind this current debate begins with the Republican takeover of Congress in 2010.

Trump’s Tariff Folly
The Editorial Board, The Wall Street Journal

Donald Trump made the biggest policy blunder of his Presidency Thursday by announcing that next week he’ll impose tariffs of 25% on imported steel and 10% on aluminum. This tax increase will punish American workers, invite retaliation that will harm U.S. exports, divide his political coalition at home, anger allies abroad, and undermine his tax and regulatory reforms.

Trump’s tariffs will hurt all Americans
Editorial Board, The Washington Post

President Trump announced new tariffs on steel and aluminum imports Thursday, following the recent recommendations of his secretary of commerce, Wilbur Ross. Actually, Mr. Trump went a bit further, saying he would hit steel with a 25 percent levy, rounded up from the 24 percent Mr. Ross had said was necessary to keep the U.S. industry operating at the 80 percent of capacity that central planners in his department deem optimal.

The SEC’s Uneven Cryptocurrency Crackdown
Stephen Gandel, Bloomberg

Two weeks ago, Bitzumi Inc., which describes itself as a “vertically integrated bitcoin exchange” of online media and crypto-related offerings, began soliciting investors on its website. Bitzumi has two executives, only one of whom works full time; the CFO puts in 10 hours a week.

Taxpayers, You’ve Been Scammed
Paul Krugman, The New York Times

The key thing you need to know is that right now the U.S. government has no business cutting taxes. We need more revenue, not less.

A Message from the Electronic Payments Coalition: 

A dynamic data security strategy can help businesses protect consumers like you from data breaches. A recent report from EPC underscores why innovation is a key component to fighting fraud. Read why from EPC.

Research Reports

Chinese Capital Market: An Empirical Overview
Grace Xing Hu et al., The National Bureau of Economic Research

The Chinese capital market, despite its relative short history in its modern form, has experienced a tremendous growth and is now the second largest in the world. Due to China’s tight capital controls, the development of its capital market has mostly been isolated from and hence not been well understood by the rest of the world.