Finance Brief: Trump Includes Democrats in Dinner to Talk Tax Reform

Government Brief

  • President Donald Trump is scheduled to host several moderate Democratic senators and Republican senators for dinner at the White House tonight as he courts their votes on a tax reform package. The Democratic lawmakers expected to dine with Trump include Sens. Joe Manchin (W.Va.), Heidi Heitkamp (N.D.) and Joe Donnelly (Ind.). (Politico)
  • As part of hurricane relief efforts, Congress could place a hold on a 10 percent penalty that’s aimed at discouraging retirement investors from dipping into 401(k) savings before their retirement age. The move would be limited to victims of Hurricanes Harvey and Irma.  (The Washington Post)
  • With the Trump administration set to delay implementation of much of the Labor Department’s fiduciary rule on retirement investment advice, state governments are starting to push for conflict-of-interest rules of their own by passing legislation strengthening requirements for advisers to act in their clients’ best interest. (The Wall Street Journal)

Business Brief

  • The financial technology firm Social Finance Inc. said its chief executive, Mike Cagney, plans to step down from his post by the end of this year. Former employees have accused Cagney of having inappropriate relationships with employees, which they said encouraged poor workplace culture. (The New York Times)
  • The Justice Department accused Paul Mangione, a former Deutsche Bank employee who led the bank’s subprime mortgage trading, of civil fraud for trades related to the 2008 financial crisis. Mangione’s lawyer called the charges “wrong and unfair” and said that his client has been singled out by the Justice Department when other traders had more involvement in the transactions at issue. (Reuters)
  • Attorneys at Cooper & Kirk PLLC, a Washington-based firm involved in litigation on behalf of investors in Fannie Mae and Freddie Mac, tapped another attorney to file a “friend of the court” brief in a case that could have affected a client, which effectively obscured the law firm’s involvement. In recent years, the use of these briefs has increased, and sometimes judges cannot know who is really behind them.  (Bloomberg)

Chart Review

Events Calendar (All Times Local)

NAFCU Congressional Caucus 8 a.m.
Bipartisan Policy Center panel on curbing money laundering and terrorist financing 9 a.m.
Senate Banking hearing on fintech landscape 10 a.m.
Senate Finance Committee hearing on healthcare cost and coverage issues 10 a.m.
House Financial Services Hearing on Federal Reserve monetary policy 2 p.m.
NACHA webinar on millennials in small business 2 p.m.
NAFCU Congressional Caucus 8 a.m.
SEC Advisory Committee on small and emerging companies 9:30 a.m.
House Financial Services hearing on North Korea’s access to finance 10 a.m.
Tax Foundation panel with U.S. Sen. Ted Cruz 12 p.m.
TCH Payments Thirty webinar 2 p.m.
POLITICO Pro Policy Summit 8:30 a.m.
AAP review workshop 9 a.m.
Senate Banking hearing on foreign investment 10 a.m.
Senate Finance Committee hearing on individual tax reform 10 a.m.
AEI seminar on trade deficits and the Trump administration 10 a.m.
FDIC webinar on deposit insurance coverage 1 p.m.

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Hatch to decide on reelection by the end of the year
Seung Min Kim, Politico

Senate Finance Committee Chairman Orrin Hatch (R-Utah) said Monday that he will make a decision by the end of the year on whether he will run for an eighth term in 2018. “Right now, I intend to run again. But who knows?” Hatch said in a brief interview on Monday. “By the end of the year, I’ll make that determination.”

Bipartisan bill would force Treasury to put Tubman on $20 bill
Sylvan Lane, The Hill

A bipartisan House bill would replace President Andrew Jackson with Harriet Tubman on the $20 bill after Treasury Secretary Steven Mnuchin said his department is reconsidering plans to make the change. Reps. John Katko (R-N.Y.) and Elijah Cummings (D-Md.) introduced a bill Friday that would force the Treasury Department to swap Jackson for Tubman on the $20, a change announced by the Obama administration in 2016.

Stocks Rise as Dollar Struggles to Sustain Rebound: Markets Wrap
Robert Brand, Bloomberg

European equities headed for the longest winning streak in five months after the S&P 500 Index led global stocks to a record high on Monday. Futures on the S&P 500 Index increased 0.2 percent to the highest on record.


Ivanka Trump had breakfast with Fed Chair Yellen
Patrick Gillespie, CNN

Ivanka Trump had breakfast with Federal Reserve Chair Janet Yellen this summer, according to logs of Yellen’s public schedule. The two met on July 17 for a one-hour breakfast, according to the recently released logs.

Florida bankers exhale after Irma strikes
Jackie Stewart, American Banker

Florida banks emerged from Hurricane Irma in better-than-expected shape. While experts warned about a potential catastrophe, the storm didn’t wreak as much havoc as many had feared. Irma, which made landfall on Sunday morning as a Category 4 hurricane, weakened significantly by the time it reached the Tampa Bay area.

Financial Products and Investments

To help hurricane victims, Congress may make it easier to tap 401(k) accounts
Thomas Heath, The Washington Post

Congress may temporarily loosen the laws governing the popular 401(k) savings plans to allow hurricane victims to tap into their retirement to pay recovery costs from Harvey and Irma. House Ways and Means Committee chairman Rep. Kevin Brady (R-Tex.) said he is considering legislation that would suspend a 10 percent penalty that was designed to discourage people from tapping their 401(k) retirement savings before they retire as early as age 59.5.

States to Trump: Leave Retirement Rule Intact or We’ll Act
Lisa Beilfuss, The Wall Street Journal

The controversy over a rule restricting conflicted retirement advice is shifting to states, which are moving to bolster investor protections out of concern the Trump administration will weaken the federal provision. In recent months, the governors of Nevada and Connecticut signed bills to expand or amplify “fiduciary” requirements for brokers.

US derivatives watchdog eyes swaps trading reform
Gregory Meyer and Philip Stafford, Financial Times

After months operating short-handed, the US government watchdog for the derivatives market is getting close to full strength.  The Commodity Futures Trading Commission now has a permanent chairman after Chris Giancarlo was confirmed by the Senate last month.

Equifax Hack Could Slow Down Fast Loans
Telis Demos, The Wall Street Journal

The goal of digital lending in recent years has been to make credit decisions quickly and cheaply. The Equifax Inc. data breach could force some lenders to hit the brakes.

Insurers ache for qualified inspectors after U.S. hurricanes
Suzanne Barlyn and Catherine Ngai, Reuters

Insurers are scrambling to find inspectors in Texas and Florida after fierce hurricanes battered the states one after the other, causing tens of billions of dollars’ worth of property damage in less than two weeks. Although insurers maintain some number of inspectors, known as claims adjusters, across the U.S. year-round, they must redeploy staff from other areas or hire contract workers to fill gaps when catastrophes like Hurricanes Harvey and Irma strike.

Housing and GSEs

U.S. Justice Department charges ex-Deutsche Bank subprime trader with civil fraud
Sarah N. Lynch, Reuters

The U.S. Justice Department on Monday charged Deutsche Bank’s former head of subprime mortgage trading with civil fraud in connection with conduct dating back to the 2007-2009 financial crisis. Paul Mangione, the former trader, is accused in the complaint of misrepresenting information about the loans underpinning two residential mortgage-backed securities that were sold to investors.

‘Friends of the Court’ Have Hidden Ties to Big Investors
Zachary R. Mider, Bloomberg

Chuck Cooper, one of Washington’s top litigators, gives each new lawyer in his firm a full-size broadsword, a reminder of his motto: “Victory or death.” For the past four years, Cooper has pursued a claim against the U.S. government that could generate a huge payday for his client, Bruce Berkowitz, a wealthy Miami investor.


Continuing to court Democrats, Trump will host dinner on tax reform
Burgess Everett, Politico

President Donald Trump will host a dinner on Tuesday with moderate Democrats and Republican senators focused on tax reform as he continues to court Democrats after cutting a debt ceiling deal last week. Trump and Vice President Mike Pence will host the dinner on Tuesday evening, the White House said. Democratic Sens. Joe Manchin of West Virginia, Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana have been invited and are expected to attend, aides said.

‘Big Six’ member says tax reform blueprint to follow Senate hearings
David Morgan, Reuters

A U.S. Republican senator involved in U.S. tax reform negotiations said on Monday that he expects to share the Trump tax reform plan with other lawmakers after holding hearings on overhauling the tax code. “We’re going to have hearings first, and then we’ll go from there. We’ll share it at that time,” Senate Finance Committee Chairman Orrin Hatch, a member of the “Big Six” tax reform policymakers, told reporters.

GOP group launches new TV ad on tax reform
Naomi Jagoda, The Hill

A group aligned with Speaker Paul Ryan (R-Wis.) on Tuesday is launching a new television ad on tax reform, as President Trump has been applying pressure on lawmakers to quickly pass a rewrite of the code. The $2.5 million ad campaign from the American Action Network (AAN) features the story of a Wisconsin couple, Jim and Lindsay Pratt, explaining how a tax overhaul could help their family.

Financial Technology

Chief Executive of Social Finance, an Online Lending Start-Up, to Step Down
Katie Benner and Nathaniel Popper, The New York Times

Social Finance, an online lender that is one of the more prominent financial technology start-ups, said on Monday that its co-founder and chief executive Mike Cagney planned to step down by the end of the year. The resignation follows a lawsuit over claims of sexual harassment at the San Francisco-based start-up, which is known as SoFi.

America’s data breach crisis: Don’t expect Washington to help
Seth Fiegerman, CNN

The United States is now facing what can only be described as a national data breach crisis. Will Congress step in and fix it?

Equifax Lobbied for Easier Regulation Before Data Breach
Michael Rapoport and AnnaMaria Andriotis, The Wall Street Journal

Equifax Inc. was lobbying lawmakers and federal agencies to ease up on regulation of credit-reporting companies in the months before its massive data breach. Equifax spent at least $500,000 on lobbying Congress and federal regulators in the first half of 2017, according to its congressional lobbying-disclosure reports.

Key U.S. senators demand answers on Equifax hacking
David Shepardson and Dustin Volz, Reuters

Two key U.S. senators on Monday asked Equifax Inc to answer detailed questions about a breach of information affecting up to 143 million Americans, including whether U.S. government agency records were compromised in the hack. Senator Orrin Hatch, who chairs the Finance Committee, and ranking Democrat Ron Wyden, also demanded that Equifax Chief Executive Rick Smith provide a timeline of the breach and its discovery.

Equifax Hack Is ‘Exhibit A’ in Case for Regulation, Durbin Says
Erik Wasson et al., Bloomberg

The massive data breach at Equifax Inc. is “exhibit A” on the need for strong U.S. regulation, including higher fines against companies that mishandle consumers’ personal information, second-ranking Senate Democrat Dick Durbin said Monday. “We are duty-bound to step in on behalf of innocent citizens who are going to pay a price,” Durbin said in an interview with Bloomberg News.

Square’s ILC bid may open floodgates for fintechs
Lalita Clozel, American Banker

Trends pick up fast in Silicon Valley and for financial innovators, the up-and-coming regulatory strategy is to seek a bank charter. In June, the online lender Social Finance, or SoFi, applied for an industrial loan company charter in Utah to process certain depository accounts and credit cards.

China to Shut Bitcoin Exchanges
Chao Deng and Paul Vigna, The Wall Street Journal

Chinese authorities are preparing to shut down the country’s bitcoin exchanges, according to people familiar with the matter, reflecting a growing unease with the virtual currency and its recent surge in value. The policy shift in the world’s No. 2 economy shows how nations are wrestling with bitcoin and its place in the financial system.

Opinions, Editorials and Perspectives

Time for Congress to Protect Private-Sector Safety Net
Dirk Kempthorne, Morning Consult

Financial security is built by consistently practicing good financial habits, contributing to retirement accounts, actively managing debt and building emergency savings — financial habits many of us were taught by our parents or learned the hard way on our own. Financial security is also achieved by taking smart steps to protect what you’ve built from life’s uncertainties.

Trump, Taxes and the Democrats
Editorial Board, The Wall Street Journal

President Trump is elated with the media applause for his new political condominium with Democrats Chuck Schumer and Nancy Pelosi, and it is amusing to see sudden praise from the same circles that claim he’s unfit for the Presidency. If Mr. Trump endorses Medicare for all, maybe they’ll put him on Mount Rushmore.

Credit unions deserve all of their money back, not just some
B. Dan Berger, American Banker

It sometimes seems easier — or maybe faster — to take the path of least resistance. To do what’s expedient. But what if expediency means surrendering the better part of $1.8 billion of credit union industry monies?

Equifax Bungles the Details Over and Over Again
Stephen L. Carter, Bloomberg

Here’s a word of advice for companies in trouble: Don’t make the public any angrier than necessary. That’s the mistake Equifax Inc. repeated several times over in its careless handling of its careless loss of detailed identifying data on 143 million consumers, a breach widely described as the worst in history.

This nifty GOP trick will punish the poor and increase the deficit — at the same time!
Catherine Rampell, The Washington Post

Never accuse Republicans of being uncreative. Once again, they’ve found an innovative way to punish the poor and simultaneously increase budget deficits — all with one nifty trick!

Equifax’s Maddening Unaccountability
Zeynep Tufekci, The New York Times

Last week, Americans woke up to news of yet another mass breach of their personal data. The consumer credit reporting agency Equifax revealed that as many as 143 million Americans’ Social Security numbers, dates of birth, names and addresses may have been stolen from its files — just the kind of information that allows for identity theft and other cybercrimes.

CBS Runs Puff Piece on Likely Dem Ohio Gubernatorial Candidate Cordray
Alex Griswold, Washington Free Beacon

A CBS “Sunday Morning” profile heralded the work of Consumer Financial Protection Bureau (CFPB) Director Richard Cordray while trivializing Republican criticism, and downplaying the director’s rumored plans to run for office as a Democrat in the 2018 Ohio governor race. CBS introduced the segment on the Obama administration nominee, saying “it helps if the consumer has someone watching his or her back. [CBS News correspondent] Erin Moriarty of ’48 Hours’ has been talking to the embattled head of the federal agency that’s trying to do just that.”

Research Reports

U.S. Investor Optimism Rises Again, Hits 17-Year High
Jim Norman, Gallup

A new surge of optimism among U.S. investors has pushed the Wells Fargo/Gallup Investor and Retirement Optimism Index to its highest level since September 2000. The index, after rising in every quarter since the start of 2016, leveled off in the second quarter at +124 before rising to its current +138 in the third quarter.