Finance Brief: Trump Suggests Tariffs Could Be Dropped if New and ‘Fair’ NAFTA Is Signed

Top Stories

  • President Donald Trump said his administration will remove forthcoming tariffs on aluminum and steel imports from Canada and Mexico only if a new and “fair” version of the North American Free Trade Agreement deal is signed. Trade negotiators for those three countries are currently meeting for the seventh of eight planned rounds of NAFTA talks. (CNBC)
  • Billionaire investor Carl Icahn, who previously served as an adviser to Trump, revealed in a regulatory filing that he sold a $31.3 million stake in the Manitowoc Company, a Wisconsin-based, steel-dependent construction crane manufacturer whose stock plummeted in the wake of Trump’s announcement that he plans to impose steel and aluminum tariffs. Icahn sold his shared for between $32 to $34 one week before the announcement, after which the price fell to around $26. (The Washington Post)
  • The shadow banking industry, which engages in financial practices that do not follow the same safeguards as normal banking functions, has grown to $45 trillion in assets, according to an estimate by the Financial Stability Board, a group of global financial policymakers and regulators. The FSB said shadow banking now makes up 13 percent of all financial assets around the world, up from 8 percent in its last annual estimate. (Financial Times)

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Events Calendar (All Times Local)

Institute of International Bankers Washington conference 8:45 a.m.
Institute of International Bankers Washington conference 9 a.m.
Senate Finance Committee hearing on e-commerce and counterfeits 10 a.m.
House Appropriations subcommittee hearing with Treasury’s Mnuchin 10 a.m.
House Appropriations subcommittee hearing with DOL’s Acosta 10 a.m.
House Financial Services Committee markup of budget views and estimates 10 a.m.
RegTech Data Summit 9 a.m.
House Appropriations subcommittee hearing with CFTC’s Giancarlo 10 a.m.
House Financial Services subcommittee hearing on state insurance regulation 10 a.m.
Joint Economic Committee hearing with CEA’s Hassett 2 p.m.
House Financial Services subcommittee hearing on data security 2 p.m.
Wilson Center event on TPP 2 p.m.
Managed Funds Association Legal & Compliance Conference 7:50 a.m.
Politico event with Mark Calabria of Vice President Pence’s office 8:30 a.m.
SEC Investor Advisory Committee quarterly meeting 9:30 a.m.
No events scheduled

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Trump says tariffs ‘will only come off’ if new and fair NAFTA agreement is signed
John Melloy, CNBC

President Donald Trump signaled on Monday that his hastily announced tariffs on steel and aluminum may not be implemented, at least for Canada and Mexico, if a “fair” NAFTA agreement is negotiated. “Tariffs on steel and aluminum will only come off if new & fair NAFTA agreement is signed,” the President tweeted Monday.

GOP fears midterm backlash from Trump’s tariffs
Rachael Bade and Burgess Everett, Politico

President Donald Trump’s threatened trade war has opened a rift within the Republican Party that some lawmakers and strategists believe could undermine their effort to keep their majorities in Congress. Republicans plan to brag about the economy in midterm campaigns in hopes of countering Trump’s unpopularity, touting a strong stock market, low unemployment rate and — most importantly — their increasingly popular tax legislation.

‘Don’t react’: trade experts look past Trump noise at NAFTA talks
Dave Graham and David Alire Garcia, Reuters

Donald Trump may be president of the United States but his words do not necessarily carry the weight of the U.S. government at the biggest trade shake-up he is pushing. Sometimes, it is better to block them out and carry on, participants say.

Warren’s consumer dream dismantled
Liz Goodwin, The Boston Globe

Eight years ago, Elizabeth Warren fought tooth and nail for a strong federal consumer protection agency that would be free from political influence, with a budget outside Congress’s grasp and a single, independent director appointed to a lengthy five-year term. “My second choice is no agency at all and plenty of blood and teeth left on the floor,” she said then.

Stocks Mixed Amid Trade Fears; Italian Bonds Drop: Markets Wrap
Samuel Potter, Bloomberg

Investor nerves remained on show across global stock markets Monday amid continued fretting about the potential for a trade war. Futures on the S&P 500 Index decreased less than 0.05 percent.


Shadow banking grows to more than $45tn assets globally
Caroline Binham, Financial Times

“Shadow banking” grew by nearly 8 per cent globally to more than $45tn on a conservative measure after international rulemakers were able to include detailed data from China and Luxembourg for the first time. Shadow banking — the parts of the financial system that perform banklike functions such as lending but do not have the same safeguards — accounted for 13 per cent of total global financial assets, according to the Financial Stability Board, the international group of policymakers and regulators that makes recommendations to the G20.

Credit-Card Losses Surge at Small Banks
AnnaMaria Andriotis, The Wall Street Journal

Small banks have been fighting for a bigger piece of the credit-card market in search of higher returns. Now, they’re contending with rising losses.

As Senate nears big vote, Dodd-Frank shows its staying power
Ian McKendry, American Banker

The Senate is poised to pass the most substantial bank regulatory relief since the crisis, to many bankers’ delight and progressive Democrats’ alarm. But any disruption of the post-crisis regime is still eclipsed by how much the bill enshrines Dodd-Frank.

Rare Loss for Wall Street in Senate’s Reboot of Financial Rules
Elizabeth Dexheimer, Bloomberg

The U.S. Senate is expected to approve a sweeping revamp of financial rules this week. Of all the surprises that entails — about a dozen Democrats signing on, Republicans leaving a lot of the much-maligned Dodd-Frank legislation intact — the biggest is the lack of goodies for Wall Street.

Foreign banks drawn into heated US debate over Dodd-Frank reform
Ben McLannahan and Barney Jopson, Financial Times

Big foreign banks including Santander and Deutsche Bank are being drawn into an increasingly heated debate over reform of US banking regulation, as some Democrats warn that a bill going through the Senate could release “troubled and troubling” banks from tougher standards. The Senate is expected to begin voting this week on a bipartisan bill that would lift the threshold at which banks face closer oversight to $250bn in assets, from the current $50bn, as part of the first reforms of the Dodd-Frank banking act since it was passed into law nearly eight years ago.

Taxi Study Finds Increase in Trips Between Fed, Banks Around FOMC Meetings
Michael S. Derby, The Wall Street Journal

A new study has found a jump in New York City taxi cab activity between the Federal Reserve Bank of New York and major Wall Street banks around the time of central bank policy meetings, and the study’s author says the findings suggest an increase in informal communications between Fed employees and individuals in the private sector could be occurring. The New York Fed strenuously disputed the study’s assertions.

Financial Products and Investments

Shortly before Trump announced tariffs, his former adviser dumped millions in steel-related stocks
Marwa Eltagouri , The Washington Post

President Trump’s decision Thursday to impose crippling tariffs on the imports of steel and aluminum took many by surprise — particularly investors, as the Dow Jones Industrial Average closed the day’s trading down more than 400 points, or 1.7 percent, at 24,608. But one billionaire investor and former Trump adviser, Carl Icahn, was seemingly unvexed, having dumped a million shares tied to the steel industry a week before the president announced 25 percent tariffs for foreign-made steel.

Ex-Morgan Stanley, UBS advisers prevail in TRO claims
Bruce Kelly, InvestmentNews

Some financial advisers at Morgan Stanley and UBS Financial Services may be scared stiff of being sued if they leave their firms to move to another broker-dealer. That’s because both wirehouses decided toward the end of last year to exit an agreement among competitors known as the protocol for broker recruiting; the pact allows an adviser to carry a limited amount of client information with him when he leaves his old firm for a new employer.

A $50 Million Stock-Fraud Probe, 6 Defendants and a Picasso
Patricia Hurtado et al., Bloomberg

U.S. prosecutors lifted the veil on a $50 million international stock-manipulation scam that got shut down after the alleged culprits suggested to an undercover FBI agent that they buy a Picasso to launder illicit profits. It’s the “only market that is unregulated,” one of the alleged wrongdoers boasted in a conversation that was secretly recorded, U.S. prosecutors said as they handed down an indictment in Brooklyn, New York, against six people on Friday.

Housing and GSEs

BoA Can’t Use Dodd-Frank To Dodge Calif. Law, 9th Circ. Says
Dean Seal, Law360

The Ninth Circuit on Friday revived a putative class action alleging Bank of America is illegally dodging a California law requiring it to pay interest on mortgage escrow accounts, finding that the bank must abide by the state consumer law because the law doesn’t interfere with the bank exercising its banking powers.

Trump’s Tariff Is Forcing Homebuilders to Cut Costs
Jen Skerritt, Bloomberg

About 40 percent of the Texas homebuilder’s framing lumber comes from Canada. The Trump administration slapped punitive tariffs on Canadian softwood timber last year, claiming the industry is unfairly subsidized.

$713M in GSE, Ginnie Mae servicing rights up for bid
Bonnie Sinnock, National Mortgage News

Incenter Mortgage Advisors is putting up for bid a $712.8 million package of government-sponsored enterprise and Ginnie Mae mortgage servicing rights concentrated in the Southeast. While California often dominates larger MSR packages, the largest percentage of loans in this portfolio are concentrated in Tennessee (28.1%), followed by Georgia (22.3%), Kentucky (10.5%), North Carolina (6.6%) and Florida, a state hit hard by Hurricane Irma (5.1%).


Trump tax cuts herald $1tn bonanza for US investors
Andrew Edgecliff-Johnson, Financial Times

US companies are on track this year to return a record $1tn to shareholders, as Donald Trump’s tax cuts prompt boards to boost buybacks and dividends at a faster rate than their capital expenditure, research and development budgets or wage bills.  The expected surge in returns to shareholders is based on forecasts that a lower corporate tax rate, incentives to repatriate overseas cash and strong earnings will supercharge growth in share repurchases by S&P 500 companies.

Financial Technology

Are You Ready for an Amazon-Branded Checking Account?
Emily Glazer et al., The Wall Street Journal Inc. is in talks with big banks including JPMorgan Chase & Co. about building a checking-account-like product the e-commerce giant could offer its customers, according to people familiar with the matter. The effort is still in its early stages and may not come to fruition, the people said.

Opinions, Editorials and Perspectives

Trade Wars Are Destructive. Of Course Trump Wants One.
The Editorial Board, The New York Times

President Trump has been spoiling for a trade war since before his election. Now, he has taken the first meaningful step with his decision to impose tariffs on steel and aluminum imports.

Would Trump Rejoin the TPP? Let’s Hope So
Noah Smith, Bloomberg

It’s no surprise that one of Trump’s first actions after his inauguration was to withdraw from the TPP. But now, more than a year afterwards, a few voices of reason are starting to suggest that the U.S. reconsider.

The Treasury Still Needs to Bid Adios to OLA
Peter J. Wallison, The Wall Street Journal

The Treasury Department’s odd zeal to retain or even increase the government’s role in the financial system may be fading—but perhaps not fast enough. Consider the memorandum Treasury sent to President Trump on Feb. 21.

Research Reports

Bipartisanship in banking Is back
Aaron Klein, The Brookings Institution

This week the full Senate is likely to consider legislation that for the first time meaningfully amends the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This set of edits to Dodd-Frank has assembled bipartisan backing with a group of moderate Democrats joining most if not all Republicans, providing the bill enough votes to likely pass.