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Finance Brief: Trump Requests $4.9 Billion Loan for Puerto Rico


Government Brief

  • The administration of President Donald Trump asked Congress for a $4.9 billion federal loan for Puerto Rico to help the island maintain liquidity and fund government operations in the wake of Hurricane Maria. The oversight board in charge of resolving Puerto Rico’s debt crisis warned in a letter to Treasury Secretary Steven Mnuchin that the island is likely to run out of money at the end of this month. (Reuters)
  • Republican Study Committee Chairman Mark Walker (R-N.C.) has introduced a bill that would allow more people to claim a charitable giving deduction. Walker’s bill, which his office said he hopes to include in the final GOP tax legislation, would allow people who don’t itemize deductions to claim the charitable giving break.  (The Hill)
  • Trump plans to highlight the proposed tax plan’s possible benefits for truckers in a speech scheduled for today in Harrisburg, Pa., according to an administration official. The official also said the president will make a new claim that by allowing the repatriation of corporate profits, American households could see an average annual gain of $4,000. (USA Today)

Business Brief

  • The breach of data at Equifax Inc. compromised the driver’s license information of around 10.9 million people in the United States, people familiar with the issue said. (The Wall Street Journal)
  • M&T Bank, which is responsible for the Delaware bank Wilmington Trust following its sale, agreed to a $44 million civil settlement with federal prosecutors to avoid criminal fraud charges linked to alleged misrepresentations in its commercial loan portfolio, adding to the $16 million it previously paid in a related 2014 deal with the Securities and Exchange Commission. Four former Wilmington Trust executives still face criminal charges. (The News Journal)
  • U.S. financial institutions are finding that the new European Union regulations on trading activity known as Mifid II, which are set to go into effect next year, are a “massive headache” because of conflicts with U.S. guidelines, according to industry groups. Some executives have complained that the SEC hasn’t worked fast enough to resolve the issue. (Financial Times)

Chart Review

Events Calendar (All Times Local)

Wednesday
AEI/CRN conference on housing risk 7:45 a.m.
The Hill event on tax reform with CEA’s Hassett, Reps. Neal and Roskam 8 a.m.
Bloomberg Government event on digital payments 8 a.m.
Peterson Institute event with OECD chief economist 8:30 a.m.
CSIS event on MDBs 9 a.m.
House Financial Services markup 10 a.m.
SEC open meeting 10 a.m.
House Agriculture hearing with CFTC’s Giancarlo 10 a.m.
Bipartisan Policy Center event with Rep. Neal 10 a.m.
Financial Services Roundtable event on tax reform 11:30 a.m.
House Ways and Means subcommittee hearing on Pacific trade 2 p.m.
Peterson Institute on Europe’s preparation for future financial crises 3:15 p.m.
Thursday
AEI/CRN housing risk conference 8 a.m.
Speaker Ryan speech at Heritage on tax reform 8:45 a.m.
House Financial Services hearing with HUD’s Ben Carson 9:30 a.m.
SEC Investor Advisory Committee meeting 9:30 a.m.
Carnegie Endowment for International Peace event on 20th anniversary of Asian financial crisis 11 a.m.
Friday
FDIC consumer research symposium 9:15 a.m.
Brookings event on regional development banks 2 p.m.
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General

Trump asks Congress for $4.9-billion loan to Puerto Rico
Roberta Rampton, Reuters

U.S. President Donald Trump asked Congress on Tuesday for a loan of $4.9 billion to help the cash-strapped Puerto Rican government pay urgent bills as the U.S. territory struggles to recover from Hurricane Maria, an administration official said. The request came as the oversight board charged with resolving Puerto Rico’s debt crisis warned the U.S. territory was at risk of being unable to pay for essential services such as salaries for teachers, first responders and healthcare providers.

Trump Sets Nafta Goals: Dilute Pact’s Force, Loosen Regional Bonds
Jacob M. Schlesinger, The Wall Street Journal

The Trump administration has honed its strategy for remaking the North American Free Trade Agreement in advance of the next round of talks starting Wednesday—by proposing a number of specific ways to water down the pact and reduce its influence on companies. U.S. trade officials have made that theme clear in recent days, prompting a backlash from Mexico and Canada and from business groups in all three countries, casting new uncertainty over the talks as they resume in Washington.

Ryan leading bipartisan delegation to Puerto Rico
Cristina Marcos, The Hill

Speaker Paul Ryan (R-Wis.) will lead a bipartisan delegation to Puerto Rico on Friday to view the damage from Hurricane Maria, his office said. Ryan’s visit is expected to follow a vote in the House this week to approve at least $29 billion in aid for communities affected by recent hurricanes and wildfires.

Ex-Dewey CFO Dodges Prison Time For Fraud Scheme
Stewart Bishop, Law360

Former Dewey & LeBoeuf LLP Chief Financial Officer Joel Sanders on Tuesday was sentenced to community service and ordered to pay a $1 million fine, following his conviction on fraud and conspiracy charges for what prosecutors say was a scheme to con the firm’s financial backers before the firm collapsed.

Stocks Gain, With Japan at Decade High; Euro Rise: Markets Wrap
Robert Brand, Bloomberg

The euro held onto gains and Spanish stocks extended a rally as the country’s government maintained a hard line after Catalonia’s pullback from an immediate declaration of independence. The dollar drifted as investors awaited minutes from the last Federal Reserve meeting.

Banking

Wilmington Trust avoids criminal trial, four execs still on the hook
Karl Baker, The News Journal

More than six years after century-old Wilmington Trust collapsed and was sold off in a fire sale, prosecutors on Tuesday reached a deal with the bank that trades criminal sanctions for a $44 million civil penalty. The deal first was announced by U.S. District Judge Richard G. Andrews who told potential jurors – gathered in a Wilmington federal courtroom Tuesday morning waiting for the trial to begin – that they could go home.

Fed’s Kaplan says his disagreements with Warsh ‘good thing’
Ann Saphir, Reuters

Former Federal Reserve Governor Kevin Warsh, under consideration to run the Fed after Chair Janet Yellen’s term ends, holds views some U.S. central bankers disagree with, but that is healthy, said Dallas Federal Reserve Bank President Robert Kaplan.

Financial Products and Investments

US finance industry bemoans ‘massive headache’ of Mifid II
Robin Wigglesworth, Financial Times

Europe’s looming regulatory overhaul is inducing a “massive headache” for the US finance industry, which is still anxiously waiting for regulators to resolve crucial conflicts with American rules, according to representatives of US banks and investment groups. The EU’s new regulations for the continent’s financial markets, known as Mifid II, come into effect at the start of 2018 and have profound implications for global markets — especially in the US, where local rules sometimes conflict with the thrust of the new European rule book.

SEC Asked to Probe Trades of Student Loan Firm Navient
Shahien Nasiripour, Bloomberg

A series of well-timed trades before the Labor Day weekend in shares of student loan giant Navient Corp. spurred the AFL-CIO to ask regulators for a review of possible insider trading. The labor organization on Tuesday urged the U.S. Securities and Exchange Commission “to examine the trading in Navient’s common stock on Aug. 31,” according to a copy of the request obtained by Bloomberg News.

Trading Database Will Be Safe From Hackers, Developer Says
Dave Michaels, The Wall Street Journal

The developer of what will become one of the world’s largest financial databases on Tuesday defended the project from industry critics who want regulators to stall the system, saying it presents a target for hackers. Mike Beller, chief executive of Thesys Technologies LLC, said the Consolidated Audit Trail shouldn’t fall victim to fear that hackers will penetrate it.

Finra cracks down on faulty variable annuity exchanges
Greg Iacurci, InvestmentNews

Finra is continuing its crackdown on variable annuity misconduct this year, following a blistering year of fines related to VA sales in 2016. Two recent enforcement actions from the Financial Industry Regulatory Authority Inc. demonstrate the watchdog’s attention on variable annuities, especially faulty annuity exchanges.

Deposed Hedge Fund Kingpin Steven Cohen Loses His Top Trader
Matthew Goldstein, The New York Times

The longtime top trader for Steven A. Cohen, the deposed hedge fund kingpin, is leaving — just months before Mr. Cohen is expected to re-enter the hedge fund game. Phil Villhauer, 52, started working for Mr. Cohen’s SAC Capital Advisors hedge fund in 2002.

What happens now after CFPB payday rule?
Ian McKendry, American Banker

For all the anticipation that preceded the Consumer Financial Protection Bureau’s final small-dollar lending rule, a picture of how the rule will affect banks and credit unions is still quite hazy. The regulation opens the door for depository institutions to offer certain installment loans, with terms of over 45 days, as a result of the CFPB’s exclusion of those loans from tough underwriting requirements targeted at shorter-term payday loans.

Housing and GSEs

Freddie Mac partnering with LoanBeam to automate income verification
Ben Lane, HousingWire

Freddie Mac is beefing up its Loan Advisor Suite again. Last year, Freddie Mac announced a series of enhancements to its Loan Advisor Suite, which is a set of integrated software applications designed to give lenders a way to originate and deliver high quality mortgages to Freddie Mac and acquire insight into representation and warranty relief earlier in the loan production process.

Taxes

Key conservative Republican eyes bigger tax break for charity
Naomi Jagoda, The Hill

The leader of the biggest group of House conservatives is quietly pushing to expand the number of people who can claim a tax break for charitable giving in the GOP tax-reform legislation, expected to be released within weeks. Rep. Mark Walker (R-N.C.), the chairman of the Republican Study Committee, introduced a bill late last week without fanfare to create a new deduction for charitable contributions for those who don’t itemize.

Trump to tout tax plan at Pennsylvania event with truckers
Heidi M Przybyla, USA Today

At a speech Wednesday in Harrisburg, Pa., President Trump will showcase a faction of American workers he says will benefit from his proposed tax plan: U.S. truckers. They’ll be standing behind Trump at a rally as he tries to cast his tax plan as a boon to the middle class – even as the nonpartisan Tax Policy Center says those with the very highest incomes would receive the biggest tax cuts.

Trump Says He’ll Adjust His Tax Plan in the Next Few Weeks
Justin Sink, Bloomberg

President Donald Trump said Tuesday he plans to make changes to his tax plan within the next few weeks, while dismissing concerns that his public spat with Senator Bob Corker would scuttle an overhaul. “We’ll be adjusting a little bit over the next few weeks to make it even stronger, but I will tell you it’s become very, very popular,” Trump told reporters in the Oval Office.

Financial Technology

Equifax Hack Disclosed Driver’s License Data for More Than 10 Million Americans
AnnaMaria Andriotis and Emily Glazer, The Wall Street Journal

Driver’s license data for around 10.9 million Americans were compromised during the breach of Equifax Inc.’s systems, according to people familiar with the matter. The license information was accessed by hackers who also took vital personal information, including Social Security numbers, of potentially 145.5 million Americans. Not all those people would have had license information in Equifax’s system.

Nasdaq CEO Friedman Says Exchange Is Keeping ICOs at Arm’s Length
Annie Massa, Bloomberg

Nasdaq Inc. Chief Executive Officer Adena Friedman said the exchange operator is keeping its distance from initial coin offerings. “There is no standard for disclosure,” Friedman said at the annual Financial Markets Quality Conference at Georgetown University in Washington Tuesday.

Wells to allow ATM withdrawals through mobile wallets
Penny Crosman, American Banker

Wells Fargo is rolling out an easier way to conduct cardless transactions on its automated teller machines. The bank said Tuesday that it is upgrading its 13,000 ATMs over the next two years to let customers withdraw cash and conduct other transactions using Apple Pay, Android Pay and Samsung Pay apps instead of a debit card.

Putin Backs Cryptocurrency Rules and Warns of ‘Serious Risks’
Ilya Arkhipov et al., Bloomberg

President Vladimir Putin called for regulation of cryptocurrencies but stopped short of backing a broad ban as a debate rages over how Russia should handle the increasingly popular financial instruments. “The use of cryptocurrencies bears serious risks,” including money laundering, tax evasion and funding for terrorism, Putin told a meeting of top finance officials including Bank of Russia Governor Elvira Nabiullina, Finance Minister Anton Siluanov and Kremlin economic aide, Andrey Belousov, in Sochi Tuesday.

Opinions, Editorials and Perspectives

Democrats Must Forget About Trump and Join the GOP on Tax Reform
Mitch McConnell, NBC

For many Americans living on the coasts — or working in Silicon Valley or finance — the recession of 2008-2009 may seem little more than a distant memory. But for many other Americans, the last 10 years have been a lost decade, where the economy stumbled and opportunities declined.

Tax Reform and Deficits
Editorial Board, The Wall Street Journal

While you are reading about Donald Trump’s Twitter irruptions, real news keeps happening. To wit, results for the government’s complete fiscal year 2017, which ended on Sept. 30, prove again that the federal budget will never be balanced without faster economic growth.

Trump’s Wall Street Watchdog Undercuts a Key Consumer Protection
David Dayen, The New Republic

In what will likely be Richard Cordray’s final major act as director of the Consumer Financial Protection Bureau, the agency last week issued the first federal rule on payday lending, an umbrella term for short-term, high-interest loans to cash-strapped Americans. Critics argue that payday lenders take advantage of vulnerable people by trapping them in a cycle of debt.

Trump’s moves on NAFTA risk massive damage
Editorial Board, The Washington Post

The future of the U.S. economy is at stake this week in a closed-door conference among three key trading partners. Starting Wednesday, representatives of the United States, Canada and Mexico will begin a fourth and possibly pivotal round of negotiations on overhauling the North American Free Trade Agreement, a 24-year-old pact that has deeply interconnected the three major economies.

Research Reports

How Taxing Is Tax Filing? Using Revealed Preferences to Estimate Compliance Costs.
Youssef Benzarti, The National Bureau of Economic Research

This paper uses a quasi-experimental design and a novel identification strategy to estimate the cost of filing income taxes. First, using US income tax returns, I observe how taxpayers choose between itemizing deductions and claiming the standard deduction.