Finance Brief: Trump to Discuss Regulations With Community Bank CEOs Today

Washington Brief

  • GE Energy Financial Services Chief Executive David Nason withdrew his name from consideration for the top regulatory post at the Federal Reserve. National Economic Council Director Gary Cohn had been pushing for Nason to seek the position. (Bloomberg News)
  • Commerce Secretary Wilbur Ross said he hasn’t made a decision on whether to support the House GOP border adjustment tax proposal. The remarks came in response to speculation that he’s opposed to the plan backed by House Speaker Paul Ryan (R-Wis.). (The Washington Examiner)
  • Wall Street lawyer Jay Clayton, President Donald Trump’s pick to lead the Securities and Exchange Commission, said that if he’s confirmed by the Senate he will recuse himself from agency matters involving Barclays Bank, Deutsche Bank AG and other former clients for a period of one year after he last provided legal services to them. (Reuters)

Business Brief

  • Trump will meet today with community bank chief executives to discuss regulations. Meeting participants include the Independent Community Bankers of America’s Chief Executive Camden Fine and American Bankers Association President Rob Nichols. (Bloomberg News)
  • Barclays Chief Executive Jes Staley said “it would be a good thing” to keep the 2010 Dodd-Frank law in place. He expressed support for a consistent approach to financial regulation among Group of 20 economies. (CNBC)
  • The U.S. financial industry spent a record $2 billion on lobbying payments and campaign contributions during the 2016 election cycle, according to a survey by Americans for Financial Reform. That amount is an increase of about 33 percent from the 2014 election cycle. (Financial Times)

Chart Review

Events Calendar (All Times Local)

Thursday
Georgetown Law trade event 8 a.m.
SEC Investor Advisory Committee meeting 9 a.m.
Senate Banking Committee markup 10 a.m.
House Financial Services Committee flood insurance hearing 10 a.m.
Friday
Georgetown Law trade event 8 a.m.
SEC Evidence Summit 9:30 a.m.

 

General

SEC nominee Clayton vows separation from his Wall Street law firm
Amanda Becker, Reuters

Wall Street attorney Jay Clayton will recuse himself from matters involving Barclays Bank, Deutsche Bank AG and other clients he has recently represented if confirmed to head the U.S. Securities and Exchange Commission under the terms of an ethics agreement disclosed on Wednesday. Barclays Bank, Deutsche Bank AG, UBS Securities, Royal Bank of Canada, Ally Financial and Pershing Square were among the financial firms listed as Clayton’s clients at Sullivan & Cromwell, according to a form filed with the Office of Government Ethics.

SEC Chair Nominee Clayton’s Ethics Report Reveals Range of Possible Conflicts
Dave Michaels, The Wall Street Journal 

President Donald Trump’s nominee to lead the U.S. Securities and Exchange Commission faces a range of possible conflicts of interest due to the long list of banks and public companies he has represented as one of Wall Street’s top lawyers. Jay Clayton, a partner at Sullivan & Cromwell LLP whose Senate confirmation hearing is scheduled for March 23, has done legal work for Ally Financial Inc., Barclays PLC, Goldman Sachs Group Inc., Deutsche Bank AG, Tudor Investment Corp. and Pershing Square LP, according to a federal ethics report made public Wednesday.

Nafta Talks Likely Won’t Begin Until Later This Year, Ross Says
Andrew Mayeda, Bloomberg News

The U.S. government probably won’t begin “real” negotiations to revamp the North American Free Trade Agreement until later this year, Commerce Secretary Wilbur Ross said. “I would like the results tomorrow, but that is not the way the world works,” Ross said Wednesday in an interview with Bloomberg Television.

Dollar Extends Gain, Euro Climbs Before ECB Meets: Markets Wrap
Samuel Potter, Bloomberg News

Futures on the S&P 500 fell 0.1 percent after the benchmark index lost 0.2 percent on Wednesday.

Banking

Trump to Meet With Community Bank CEOs to Talk About Regulations
Michael B Marois, Bloomberg News

President Donald Trump is scheduled to meet with almost a dozen chief executives from U.S. community banks Thursday, seeking their input on which regulations may be crimping their ability to lend to consumers and small businesses, according to a White House statement. Billed as a listening session of Trump’s National Economic Council, the meeting will include Camden Fine, the CEO of the Independent Community Bankers of America, and Robert Nichols, president of the American Bankers Association, both industry trade groups.

GE’s Nason Tells White House He’s Not Interested in Fed Job
Robert Schmidt and Jesse Hamilton, Bloomberg News

David Nason, a leading candidate to be named the Federal Reserve’s bank supervision chief, told the White House he is no longer interested in the job. The chief executive officer of GE Energy Financial Services, Nason said in a statement Wednesday that he “plans to pursue opportunities at GE.”

‘It would be a good thing for Dodd-Frank to stay in place’: Barclays CEO
Sam Meredith and Wilfred Frost, CNBC

Wall Street would benefit if Dodd-Frank, the piece of legislation born out of the 2008 financial crisis, were to remain in place, Barclays chief executive Jes Staley told CNBC. “My view, or our view, is that it would be a good thing for Dodd-Frank to stay in place and not to repeal it,” Staley told CNBC on Wednesday.

Gutting Dodd-Frank is Hard, So Republicans Turn to Easier Things
Elizabeth Dexheimer, Bloomberg News

Here’s the latest indication Wall Street regulations won’t be gutted anytime soon: Republicans who write financial laws are starting to focus on other things. The Senate Banking Committee, led by Mike Crapo, on Thursday is scheduled to consider a measure about publishing research on exchange-traded funds, and a collection of other narrow bills with bipartisan support.

Bad Banker Database Needs Federal Statute, Says New York Fed’s Lawyer
Katy Burne, The Wall Street Journal

A database of individual banker misconduct, proposed in recent years by the Federal Reserve Bank of New York, would benefit from a federal statute giving banks immunity when they report misbehavior, the bank’s top lawyer said. Michael Held, who was appointed head of the New York Fed’s legal group last August, said in a speech Wednesday at Yale University’s law school in New Haven, Conn., that the database could hold details on such episodes for a predetermined period before the records are expunged.

Financial Products and Investments

Wall St spends record $2bn on US election lobbying
Ben McLannahan and Barney Jopson, Financial Times

Wall Street spent a record $2bn on lobbying and campaign contributions during the last US election cycle, according to a new survey, as big banks, hedge funds and other financial institutions stepped up efforts to reshape rules to their advantage. The contributions paved the way for financial sector lobbying that has intensified with Donald Trump’s arrival in the White House as the president expresses his determination to relax financial market reforms contained in the Dodd-Frank Act of 2010.

U.S. regulators push new ETF rules despite industry’s howl
Trevor Hunnicutt, Reuters

U.S. regulators are advancing rules this week to tighten standards on the ballooning exchange-traded fund industry over the objections of asset managers including BlackRock Inc (BLK.N) and Invesco Ltd (IVZ.N). The U.S. Securities and Exchange Commission last year pushed the three main ETF trading venues to draft rules that explicitly require the funds to continually pass a number of tests or face the possibility of being shut down, according to three people with knowledge of the matter and the regulator’s filings.

Broker-dealers move to trim fund offerings as they adjust to DOL rule
Greg Iacurci, InvestmentNews

The Department of Labor’s fiduciary rule has led broker-dealers to take stock of the mutual funds they distribute, and the outlook isn’t rosy for small investment providers. Many broker-dealers have decided to — or are at least considering — trimming the number of fund families available to advisers on their investment platforms as a way to comply with the regulation, which raises investment-advice standards in retirement accounts.

Corporate Insiders Haven’t Been This Uninterested in Buying Stocks Since Reagan Was President
Chris Dieterich and Ben Eisen, The Wall Street Journal 

Corporate executives are buying their own firms’ shares at the slowest pace in at least 29 years, the latest sign of uncertainty as the booming U.S. stock bull market this week enters its ninth year. Share purchases and sales by executives are parsed by investors searching for signals about what insiders expect from the market. Sales can show wariness about valuations, while purchases can signal confidence that more gains lie ahead.

Housing and GSEs

Goldman Sachs conference answers 3 top housing questions
Brena Swanson, HousingWire

President Donald Trump is still within his first 100 days in office, and so far, the majority of Americans believe he is executing on his campaign promises. That is the message being delivered today at Goldman Sachs’ annual housing and consumer finance housing conference in New York City.

Taxes

Trump Commerce Secretary Wilbur Ross: No decision on border tax yet
Joseph Lawler, The Washington Examiner

The Trump administration has yet to decide on the House Republicans’ plan to adjust taxes at the border, Secretary of Commerce Wilbur Ross said Wednesday, addressing speculation that he is opposed to the Paul Ryan-backed proposal. “Neither the administration nor I has yet taken a position on the border adjustable tax,” Ross said in an interview on Fox Business.

Republicans Disagree on How – and Whether – to Pay for Tax Cuts
Richard Rubin, The Wall Street Journal 

A fight is brewing among congressional Republicans over whether a planned tax overhaul should pay for itself. The plan favored by House Speaker Paul Ryan (R., Wis.) and Senate Majority Leader Mitch McConnell (R., Ky.) aims to be revenue-neutral: Lowering taxes without increasing the deficit—though their math comes with some caveats.

Profitable Companies, No Taxes: Here’s How They Did It
Patricia Cohen, The New York Times

Complaining that the United States has one of the world’s highest corporate tax levels, President Trump and congressional Republicans have repeatedly vowed to shrink it. Yet if the level is so high, why have so many companies’ income tax bills added up to zero?

Financial Technology

PayPal, Google Join Fight to Repeal CFPB Prepaid Rule
Gregory Roberts, Bloomberg BNA

Mobile-wallet providers like PayPal and Google have their own ax to grind in the prepaid card industry’s push to have Congress quash a pending rule from the Consumer Financial Protection Bureau. The companies are particularly unhappy with a provision that would require a 30-day waiting period before extending credit to cover overdrafts.

Dodd-Frank Rule Leads to $175 Million Digital Bank Deal
Peter Rudegeair, The Wall Street Journal

BankMobile, a two-year-old digital-banking upstart founded by a veteran executive of financial firms, announced Wednesday that it is being sold for $175 million after its parent company said it wouldn’t be able to operate the business profitably. It was the latest move by a new online bank to reorganize in a market that has shown stiff competition from the nation’s largest banks and uncertain growth prospects for pure-play deposit takers.

Bitcoin Tax Fight Brews as Digital Chamber Set to Battle IRS
Matthew Leising, Bloomberg News

Users of virtual currencies like bitcoin are backing an industry group to oppose tax authorities’ efforts to collect detailed information about the customers of a popular digital currency exchange. The tax group was formed because the Chamber of Digital Commerce believes a U.S. government summons for broad user information against Coinbase Inc. would, if successful, set a terrible precedent, said Perianne Boring, president of Washington D.C.-based group.

A Message from the National Black Chamber of Commerce:

Did you know the Durbin Amendment has made big box retailers $42 billion in profit? These corporations promised they would pass on profits made from lower debit transaction fees to consumers. But they have not kept their word and in many cases are charging consumers more.

Opinions, Editorials and Perspectives

Who Pays for Border Adjustment? Sooner or Later, Americans Do
Olivier Blanchard and Jason Furman, Peterson Institute for International Economics

Former Senator Russell Long famously quipped that what everyone wanted was, “Don’t tax you, don’t tax me, tax that fellow behind the tree!” Some supporters of the border adjustment to the cash flow tax being considered by Congress maintain that they have finally found a way to tax the fellow behind the tree: Namely with revenue coming from foreign producers. As a result, they say, these additional revenues can be used to pay for reductions in other taxes, in particular corporate tax rates, with American taxpayers getting off free.

GOP’s border tax will kill blue-collar jobs and harm consumers
David Williams, The Hill

Some big multinational corporations, like GE and Boeing, are waging a dishonest campaign to pass the ill-conceived Border Adjustment Tax (BAT). One of their biggest falsehoods is that there is a “Made in America Tax” that discriminates against products built in domestic factories. Nothing could be further from the truth.

A Plan B for the GOP: Raise Warren Buffett’s Taxes
Greg Ip, The Wall Street Journal 

This week’s drama over replacing Obamacare is prelude to a battle with even higher stakes for Republicans: overhauling taxes. The prospect of lower rates and a simpler tax code is one of the main reasons Donald Trump’s election last fall buoyed business confidence and stocks.

Carl Icahn responds to ‘witch hunt’ complaint
Carl Icahn, The Hill 

Public Citizen’s assertion that I should be required to register as a lobbyist is another gross misstatement of the facts which is similar to much of the “fake news” that is unfortunately so prevalent today. I have vetted my activities with a number of lawyers and it is clear that no registration is required.

A Simple Alternative to the Fiduciary Rule
Patrick Lach, The Wall Street Journal 

I have taught a Fundamentals of Financial and Tax Planning course at Eastern Illinois University for the past six years. One topic that I cover in the course is regulation of brokers and investment advisers.

Trump Administration Presents Opportunities for FinTech Expansion
Devon Pope, Independent Journal Review

Even if he is President, Donald Trump is still a businessman. However, many of his ideas and statements indicate he could negatively affect small businesses in the U.S. through his executive orders and policy initiatives.

A Message from the National Black Chamber of Commerce:

Enactment of the Durbin Amendment has led to $42 billion in extra profit for giant retailers. These corporations said they would pass on the profits to consumers in the form of lower prices, but they’ve broken that promise, pocketed the money and in many cases are charging consumers even more.

Research Reports

Wall Street Money in Washington: 2015-2016 Campaign and Lobby Spending by the Financial Sector
Americans for Financial Reform

The financial sector is by far the largest source of campaign contributions to federal candidates and parties, and the third largest spender on lobbying. In the 2015-16 election cycle, Wall Street banks and financial interests reported spending over $2.0 billion to influence decision-making in Washington.

International Comparisons of Corporate Income Tax Rates
Congressional Budget Office

In the United States, the top federal statutory corporate income tax rate (the rate set by law that applies to the highest corporate income tax bracket) has been 35 percent since 1993. Most corporate income is taxed at that rate.

AICPA Business & Industry U.S. Economic Outlook Survey 1Q 2017
AICPA 

The number of CPA executives who are optimistic about the U.S. economy increased to 69% in the first quarter, the highest since 2004. The percentage of those pessimistic also dropped from 11% to 10%.

Briefings

Finance Brief: Icahn Resigns as Special Adviser to Trump

Billionaire investor Carl Icahn resigned from his role as President Donald Trump’s unpaid adviser on regulatory reform issues just before The New Yorker published a profile that detailed potential conflicts of interests related to Icahn’s stake in a Texas-based petroleum refining company. Icahn cited “partisan bickering” in his resignation letter and denied he had profited from his advisory position.

Finance Brief: Week in Review & What’s Ahead

Members of President Donald Trump’s Strategic and Policy Forum, an advisory group of business leaders, decided to disband after Trump blamed the violence in Charlottesville, Va., on both white nationalists and the protesters who opposed them. Later, Trump announced the dissolution of that group and of an advisory panel on manufacturing. JPMorgan Chase & Co. Chief Executive Jamie Dimon, a Strategic and Policy Forum member, said in a memo to employees that he “strongly” disagreed with Trump’s comments.

Finance Brief: Week in Review & What’s Ahead

California Insurance Commissioner Dave Jones said the state will investigate whether or not Wells Fargo harmed hundreds of thousands of customers by selling them car insurance they didn’t need. The probe follows subpoenas issued by New York state’s banking and insurance regulator to two Wells Fargo units last week.

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