Finance Brief: Week in Review & What’s Ahead


Week in Review

Executive nominations 

  • The Senate confirmed several nominees for financial posts in the Trump administration, including five who will serve as Treasury Department officials dealing with tax and international finance. David Kautter was confirmed as the agency’s assistant secretary for tax policy, while David Malpass was confirmed as undersecretary for international affairs.
  • The Senate confirmed Chris Giancarlo to chair the Commodity Futures Trading Commission, by voice vote. The chamber also confirmed two other CFTC nominees: Brian Quintenz and Rostin Behnam.
  • President Donald Trump’s advisers are reportedly considering Jelena McWilliams, chief legal officer for Fifth Third Bancorp., who previously worked for the GOP staff of the Senate Banking Committee and at the Federal Reserve, as the administration’s nominee to lead the Federal Deposit Insurance Corp. James Clinger, Trump’s first choice, withdrew from consideration.
  • Trump is said to be planning to nominate Robert Jackson, a Columbia University law professor who was recommended by Senate Minority Leader Chuck Schumer (D-N.Y.), as a Democratic member of the Securities and Exchange Commission. Jackson was one of 10 academics who in 2011 said that the SEC should require companies to disclose campaign finance activities, a move that could garner support from Senate Democrats who blocked a previous nominee’s confirmation after she would not say if she supports such disclosures.

Debt ceiling issues loom

  • Office of Management and Budget Director Mick Mulvaney said that the White House would support “clean” legislation to raise the debt ceiling by its expected expiration date of Sept. 29. Mulvaney’s comments mark a reversal from his previous position that raising the limit should be combined with major spending cuts and debt reforms.
  • Treasury Secretary Steven Mnuchin and Senate leaders did not come to an agreement on how to move ahead with legislation that would raise the debt ceiling. A Sept. 29 deadline for raising the debt ceiling means the House and Senate have 12 joint working days to put a bill on Trump’s desk when they return from their August recess.
  • House Freedom Caucus Chairman Mark Meadows (R-N.C.) backed off his demand that an agreement to raise the debt ceiling be paired with significant spending cuts. Meadows said he doesn’t “believe we should play around with the full faith and credit of our country,” and that he’s “bullish” about raising the debt limit before a Sept. 29 deadline.

Regulations

  • The Office of the Comptroller of the Currency requested public comments on the status of the Volcker Rule, marking the first step toward a potential overhaul of the Dodd-Frank regulation’s limits on banks using their own funds for trading on the market. The move came after regulators agreed at a meeting of the Financial Stability Oversight Council to rewrite the rule. A rewrite would likely ease rules on bank investments in hedge funds and private equity firms.
  • The federal appeals court hearing a challenge to MetLife Inc.’s designation as a systemically important financial institution said it will hold off on issuing a ruling, likely in anticipation of the Trump administration weighing in on whether it believes the FSOC should change its position regarding the insurance company. The administration is reviewing the council’s non-bank SIFI designations.
  • The Consumer Financial Protection Bureau laid the groundwork for rules on checking accounts by releasing a study and a “prototype” form that banks can use to disclose fees to customers who want to enroll in overdraft accounts. CFPB Director Richard Cordray said the agency is in a pre-rulemaking phase and hasn’t decided whether it will propose regulations related to overdraft fees.
  • A federal judge in Florida granted a request to allow the Justice Department  to file a brief that’s likely to defend mortgage servicer Ocwen Financial against CFPB claims that the firm engaged in widespread negligence. The Justice Department is expected to question the CFPB’s constitutionality, much like it did in a separate federal appeals court case brought by the firm PHH.
  • FDIC Vice Chairman Thomas Hoenig told the leaders of the Senate Banking Committee that lawmakers should avoid easing bank capital standards for major banks in their efforts to find common ground on financial regulatory relief. Loosening those standards, Hoenig said, would allow big banks “to increase their already highly leveraged positions.”
  • The CFPB penalized JPMorgan Chase & Co. $4.6 million for not ensuring it was giving third-party reporting agencies accurate accurate information about customer checking accounts.

Tax reform

  • The ongoing disagreement in Washington over how to transition to a territorial tax system could be one of the major lobbying battles waged as Republicans move forward with plans to rewrite the U.S. tax code for the first time in more than 30 years. One GOP aide said the current ideas out there aren’t yet “well-formed,” with more resistance expected regarding how the GOP plan deals with foreign earnings when tax writers release a detailed proposal.
  • Senate Majority Leader Mitch McConnell said GOP leaders will not seek to work with Democrats on a tax reform package when the chamber returns from its August recess. Instead, Senate Republicans will proceed using fast-track procedures that would allow forthcoming legislation to pass with a 51-vote majority.

Housing finance

  • Fannie Mae reported $3.2 billion in second-quarter profits. If the Federal Housing Finance Agency agrees to allow the government-sponsored enterprise to pay a dividend to the U.S. Treasury, that amount would be $3.1 billion and mark a total of $165.8 billion since the profit sweeps began.
  • Freddie Mac reported a net income of $1.66 billion in the second quarter, up from $933 million during the same three-month period last year. However, the government-sponsored enterprise held open the possibility that it won’t pay a dividend to the U.S. Treasury Department as scheduled.

Wells Fargo woes

  • Wells Fargo & Co. said it’s eliminating 69 executive positions in its retail banking division following a consolidation process. The move comes amid continuing fallout from the bank’s cross-selling scandal.
  • New York state’s financial regulatory agency subpoenaed Wells Fargo over revelations that the bank charged hundreds of thousands of customers for auto insurance that they didn’t need. The New York Department of Financial Services asked for the contracts Wells Fargo signed with borrowers in New York.
  • Wells Fargo customers filed a proposed class-action lawsuit against the bank for forcing customers to purchase automobile insurance, sometimes unknowingly, without the customers needing or wanting the coverage.

What’s Ahead

  • Both the Senate and the House are in recess until Sept. 5.
  • The Senate left town without acting on a range of financial regulatory nominees, including Scott Garrett to be chairman of the Export-Import Bank and Dawn Stump to be a member of the Commodity Futures Trading Commission. It’s not certain that the chamber will even vote on Garrett’s nomination after returning from the August recess, since he’s under pressure from major industry groups and lawmakers in both parties, but Trump is not yet pushing for Garrett to withdraw his nomination.
  • The Senate also hasn’t acted on a resolution that would block a new CFPB rule aimed at giving consumers greater ability to pursue class action lawsuits for bank misbehavior. Senators supporting the resolution didn’t have sufficient support to move ahead before recessing, and have 60 legislative days from the July 19 implementation date before time runs out to block the rule.
  • Tax writers are slated to meet in southern California to hammer out details on a GOP tax reform package to be presented to lawmakers after the August recess. Under a timeline advocated by White House Legislative Affairs Director Marc Short, the House and Senate committees dealing with taxes would begin work on the legislation in September. Meadows said that the likelihood of a major tax reform bill passing will be severely diminished if legislation fails to make it to Trump’s desk by Thanksgiving.

Events Calendar (All Times Local)

Monday
No events scheduled.
Tuesday
No events scheduled.
Wednesday
No events scheduled.
Thursday
EPI event on Regulatory Accountability Act 10 a.m.
Friday
No events scheduled.
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