Finance Brief: Trump to Nominate Giancarlo as CFTC Chairman

Washington Brief

  • President Donald Trump plans to nominate J. Christopher Giancarlo as chairman of the Commodity Futures Trading Commission, which Giancarlo currently leads on an interim basis. (The New York Times) Trump also announced plans to nominate Goldman Sachs Group partner Jim Donovan to serve as deputy treasury secretary. (Politico)
  • Leaked pages of Trump’s 2005 tax return show that he paid $38 million in federal income tax on a reported income of about $152 million. (MSNBC)
  • Treasury Secretary Steve Mnuchin is poised to face questions this week from G-20 finance ministers at their annual meeting in Germany. One of the issues likely to come up is Trump’s pledge to name countries like China currency manipulators. (The Wall Street Journal)

Business Brief

  • Industry opponents of the Labor Department’s fiduciary rule requested a federal court in Dallas place a preliminary injunction against the regulation, and make its decision by March 20. The fiduciary rule is currently in limbo under the Trump administration, and its implementation is on track to be delayed 60 days from the current implementation deadline of April 10. (InvestmentNews)
  • Charles Schwab Corp. launched a service that will combine investment advice provided by its employees with portfolios managed by robo-advisers. (Reuters)
  • Bank of America Corp. is said to have settled on relocating its main European office from London to Dublin as a result of the United Kingdom’s pending departure from the European Union. (Bloomberg News)

Chart Review

Events Calendar (All Times Local)

FIA International Futures Industry Conference 7:30 a.m.
Senate Banking Committee hearing on Russia sanctions 10 a.m.
D.C. Blockchain Summit 1:30 p.m.
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.
FIA International Futures Industry Conference 7:30 a.m.



G-20 Leaders Seek Clarity From Mnuchin on U.S. Trade Positions
Ian Talley, The Wall Street Journal

U.S. Treasury Secretary Steven Mnuchin, debuting on the global stage before the world’s finance chiefs in Germany this week, will try to tamp down growing worries the Trump administration is on the verge of sparking a trade war. President Donald Trump’s “America First” agenda—along with administration threats to level unilateral currency sanctions, vows to rewrite international trade deals, and jabs at the World Trade Organization—have spooked China, Germany and other Group of 20 economies.

GOP OK With Trump Rally Delaying Labor Nominee
John T. Bennett, Roll Call

Despite hammering Democrats for slowing Donald Trump’s Cabinet nominations, Senate Republicans don’t mind delaying a confirmation hearing this week so the president can rally the base on Wednesday and sell a Republican-crafted health care bill. But GOP sources were quick Monday to defend the delay of a Cabinet-level nominee’s hearing, saying replacing the 2010 health care law is equally important.

Partisan Split on Senate Finance Panel Over Waiver for USTR Nominee
Ryan Rainey, Morning Consult

A Tuesday confirmation hearing for Robert Lighthizer, President Donald Trump’s pick for U.S. trade representative, did not resolve partisan disagreement over whether a waiver is needed before the full Senate can vote on his nomination. Democrats on the panel, led by ranking member Sen. Ron Wyden of Oregon, are insisting that Congress pass a waiver exempting Lighthizer’s nomination from a 1995 law that bars people from serving in administration posts if they have represented foreign governments before the federal government.

Steve Bannon and the Making of an Economic Nationalist
Michael C. Bender, The Wall Street Journal

On Oct. 7, 2008, in the cramped TV room of his modest home here, Marty Bannon watched with alarm as plunging stock markets dragged down his shares of AT&T, the nest egg he built during a 50-year career at the company. His five children, including current White House counselor and chief strategist Steve Bannon, had often joked growing up that their devout father, a product of the Great Depression, would sooner leave the Catholic Church than sell those shares.

Europe Stocks, Oil Rise as Bonds Steady Before Fed: Markets Wrap
Benjamin Purvis and Samuel Potter, Bloomberg News

Crude prices were once again a dominant story in markets, with oil’s rebound helping underpin European stocks as investors wait for Wednesday’s expected U.S. interest rate increase. Futures on the S&P 500 added 0.3 percent.


Wall St. relieved as Trump picks Goldman banker as Treasury deputy
Ben White, Politico

President Donald Trump on Tuesday nominated one of the more low-profile but high-powered bankers on Wall Street to serve as Treasury Secretary Steven Mnuchin’s deputy. Jim Donovan, a Goldman Sachs partner chosen to serve as deputy secretary, is expected to play a critical role in helping Mnuchin manage the sprawling Treasury Department and push through major legislative goals including fundamental re-writes of the corporate and individual tax codes.

BofA Likely to Choose Dublin for Main EU Base After Brexit
Steven Arons and Gavin Finch, Bloomberg News

Bank of America Corp. views Dublin as its default destination for a new hub inside the European Union if Brexit means the U.K. loses easy access to the single market, according to one of the firm’s top executives in Germany. The bank will likely move some jobs to other cities across the EU, including Frankfurt, Madrid, Luxembourg and Amsterdam, Nikolaus Naerger said at a press briefing hosted by the Association of Foreign Banks in Germany.

Fed’s on thin ice in a Trump administration, expert says
Greg Robb, MarketWatch

Don’t blame the Federal Reserve if it looks jittery these days. The U.S. central bank is holding its breath waiting for a tweetstorm from President Donald Trump they are sure is coming.

Fed’s Challenge, After Raising Rates, May Be Existential
Eduardo Porter, The New York Times

Is the Fed at risk for real this time? Throughout American history, few institutions have inspired such persistent mistrust among voters and their elected officials as the mysterious authority that determines the value of their money.

Does the industry have a shot at repealing Durbin?
Ian McKendry, American Banker

Banks and credit unions see their best chance in seven years to repeal the provision of the Dodd-Frank Act that set price caps on debit interchange fees, pointing to studies that show most of the benefits have gone into retailers’ pockets. But merchants, armed with their own statistics that say it helped consumers, are confident they can prevent Congress from taking up the issue again.

Financial Products and Investments

Trump Picks a Regulator Who Could Help Reshape Dodd-Frank Act
Ben Protess, The New York Times

President Trump rounded out his financial regulatory team on Tuesday, announcing plans to select J. Christopher Giancarlo to oversee a lucrative corner of Wall Street that helped unleash the financial crisis. In appointing Mr. Giancarlo to run the Commodity Futures Trading Commission, which regulates the sort of derivatives trading that spread panic on Wall Street in 2008, the president took another step toward challenging the Obama administration’s legacy on financial regulation.

DOL fiduciary rule opponents file injunction in Dallas court
Mark Schoeff Jr., InvestmentNews

Opponents of the Department of Labor fiduciary rule are seeking to block the measure in a Dallas federal court, while in Washington they’re submitting comment letters in support of delaying next month’s implementation deadline. In the U.S. District Court of Northern Texas, the financial industry trade association plaintiffs in a lawsuit against the fiduciary rule filed a preliminary injunction last Friday to stop the regulation, which will become applicable on April 10.

Student loan defaults are rising faster than you think
Danielle Douglas-Gabriel, The Washington Post

A new analysis of federal student loans reveals that the number of people severely behind on repaying their debt has soared in the past year, painting a bleak picture of one of the largest government programs. The Consumer Federation of America (CFA) released a study Tuesday that found that millions of people had not made a payment on $137 billion in federal student loans for at least nine months in 2016, a 14 percent increase in defaults from a year earlier.

GOP Senator suggests raising flood insurance cap to solve fiscal woes
Brian Collins, American Banker

Sen. Mike Rounds, R-S.D., suggested Tuesday that the National Flood Insurance Program should boost its insurance coverage to $427,000 from $250,000 in an effort to put it on sounder fiscal footing. The suggestion from the conservative lawmakers sets up a potential battle with industry groups, however, who are lobbying to reduce the program’s role in order to boost private market participants’ role.

Housing and GSEs

Janet Yellen walks delicate Fed path on mortgage-backed bonds
Alistair Gray and Robin Wigglesworth, Financial Times

Janet Yellen is facing questions over how the Federal Reserve will reverse an important part of its crisis recovery effort as housing experts caution the central bank risks rattling the $9tn market for US mortgage-backed bonds. Fed officials have put markets on notice that they are thinking about reducing the central bank’s $1.76tn portfolio of mortgage-backed securities, amassed through its crisis-fighting quantitative easing programme, but have so far provided few details.

Fair Housing Still Has a Chance Under Trump
Jake Blumgart, Slate

Among the landmark legislative acts of the Civil Rights era, the Fair Housing Act of 1968 is the stepchild, rarely enforced with rigor by presidential administrations of either political party. Since Jim Crow fell, few American politicians have championed the cause of desegregation at the federal level.


Trump Paid $38 Million in 2005 Federal Income Tax, White House Says Before Report
Alex Johnson, MSNBC

The White House confirmed Tuesday night that President Donald Trump paid $38 million in federal income tax on more than $150 million in income for 2005 after MSNBC’s “The Rachel Maddow Show” said it would release the details. obtained two pages from what it said were Trump’s 2005 Form 1040.

U.S. taxpayers procrastinate on filing returns this year
Beth Pinsker, Reuters

Tax season in the United States is off to a slow start. The number of people filing their taxes with the Internal Revenue Service is running well below last year.

Tax-reform challenges go beyond border fight
Naomi Jagoda, The Hill

The fight over a border-adjustment tax isn’t the only challenge for Republicans in their push for tax reform. While much of the focus of the tax-reform debate has been over the border proposal, which would tax imports and exempt exports, groups are also pushing back on other parts of the House GOP’s plan.

Financial Technology

Charles Schwab launches hybrid human-robo financial advice
Anna Irrera, Reuters

Brokerage Charles Schwab Corp (SCHW.N) on Tuesday launched a service that combines its automated investment management technology with human advisors, as financial institutions race to offer digital financial advice. The service, called Schwab Intelligent Advisory, provides clients with a financial and investment plan, unlimited access to a human advisor via phone or video conference, and an investment portfolio of exchange-traded funds managed by computer algorithms.

Bitcoin Prices Recovers as True Believers Keep the Faith
Paul Vigna, The Wall Street Journal

For a crowd of uber-distrustful cryptoanarchists, bitcoiners are still a pretty optimistic lot. How else to describe the price action over the weekend for the digital currency, which ostensibly suffered a sharp setback after the Securities and Exchange Commission denied an application from Cameron and Tyler Winklevoss to build and sell a bitcoin-based exchange traded fund?

Alternative cryptocurrency ether has done something only bitcoin has managed to do
Arjun Kharpal, CNBC

A cryptocurrency called ether hit an all-time high on Monday, prompting its market capitalization to exceed $2 billion, a feat only bitcoin has managed to achieve in the digital currency world. Ether runs on an underlying technology called Ethereum, which is a different blockchain to the one that powers bitcoin.

Opinions, Editorials and Perspectives

Shortfall in Bank Ethics Stretches to the Very Top
Mark Gilbert, Bloomberg View

One of the inescapable conclusions of the economic crisis that engulfed the world a decade ago was that the culture of banking needed to change. Allowing finance to regulate itself ended in spectacular failure, underwritten by the taxes of the masses who didn’t profit from the culture of risk-taking in those institutions.

Trump’s ‘core’ regulatory principles warrant more scrutiny
Cornelius Hurley, American Banker

Unlike the response to his executive order on immigration, thousands of citizens did not hit the streets to protest President Trump’s executive order on “core principles” for regulating the financial system. No clever signs, no calls to “Dump Trump” — just resignation to the fact that a new attitude toward regulation is upon us.

Preet Bharara’s Complicated Legacy on White-Collar Crime
Sheelah Kolhatkar, The New Yorker

October 16, 2009, just two months after being sworn in as the U.S. Attorney for the Southern District of New York, Preet Bharara held a press conference in lower Manhattan to make an announcement: his office had just arrested Raj Rajaratnam, the manager of a seven-billion-dollar hedge fund, on securities-fraud charges. “This case should serve as a wake-up call for Wall Street,” Bharara said.

Research Reports

Trade Policy and Redistribution when Preferences are Non-Homothetic
Quy-Toan Do and Andrei A. Levchenko, The National Bureau of Economic Research

We compare redistribution through trade restrictions vs. domestic lump-sum transfers. When preferences are non-homothetic, even domestic lump-sum transfers affect relative prices.