Finance Brief: Week in Review & What’s Ahead


Week in Review

Executive branch

  • Finance-related parts of President Donald Trump’s fiscal year 2019 budget request were met with skepticism on Capitol Hill. Senators from both parties criticized a proposal to cut funding for the Internal Revenue Service, while a separate proposal to place user fees on the futures industry to fund the Commodity Futures Trading Commission was also faulted by GOP senators.
  • The budget also calls for funding the Consumer Financial Protection Bureau through the congressional appropriations process, rather than the independent stream of Federal Reserve funds that’s been used since the CFPB was established. The proposal would take two years to implement; curb the CFPB’s enforcement authority; and hold the budget at $485 million, the same funding level as 2015.
  • CFPB Acting Director Mick Mulvaney told members of the Senate Budget Committee that the CFPB is still investigating Equifax Inc. over the data breach that the firm disclosed last year. His remarks follow a news report that the agency’s investigation has been scaled back under Mulvaney’s leadership.
  • The CFPB released a new strategic plan that stated the agency intends to go “no further” than the requirements stipulated in the Dodd-Frank Act when it comes to regulating the financial industry.
  • Federal Reserve Chairman Jerome Powell said that under his leadership the Fed will keep looking for “ways to improve transparency” in regulations and monetary policy. Powell also said he will make sure key post-crisis rules like higher capital and liquidity requirements remain in place, adding that the financial system is “incomparably stronger and safer” with those rules.

Congress

  • The House voted 245 to 171 to pass a measure that would allow high-interest loans to keep the rate they were initially issued by a bank when they are sold to third-party buyers. The legislation, which was sent to the Senate, would likely boost partnerships between banks and financial technology firms, if enacted.

Financial industry

  • U.S. Bancorp agreed to pay $613 million over charges that bank employees responsible for overseeing its anti-money laundering efforts didn’t do enough to oversee suspicious transactions – a problem that staffers then allegedly tried to conceal from regulators.
  • Fannie Mae said it will need a $3.7 billion infusion of taxpayer funds after losing $6.5 billion in the fourth quarter of 2017, following a decline in the value of assets the mortgage-finance company can use to write off taxes that came about because of the new U.S. tax law. Freddie Mac reported that it will need $312 million from Treasury following a $3.3 billion loss during the same period.
  • Deutsche Bank AG will pay almost $4.5 million to settle civil charges brought by the U.S. Securities and Exchange Commission alleging that the bank didn’t do enough to oversee bond salespeople who were later fired after lying to customers about pricing for commercial mortgage-backed securities.
  • Credit Suisse Group said it’s under investigation by the U.S. Department of Justice and the Securities and Exchange Commission over whether it traded the hiring of referrals from governments in Asia for regulatory approvals and investment banking business. The investigation is looking into possible violations of the Foreign Corrupt Practices Act.
  • Wells Fargo & Co. Chief Financial Officer John Shrewsberry said he expects the bank’s consumer business to increase, even as it faces new restrictions from the Federal Reserve related to bank misconduct. Shrewsberry said he expects consumer loans to be a growing business, and Chief Executive Officer Tim Sloan said he doesn’t think the bank needs to fundamentally change its business model.

What’s Ahead

  • Congress is out of session this week. Both chambers will reconvene the following week.
  • The Treasury Department will soon issue guidance aimed at blocking taxpayers from circumventing the recently enacted tax law’s limits on the “carried interest” loophole, according to Treasury Secretary Steven Mnuchin. Mnuchin also announced that the department will take steps to get rid of 298 regulations that, according to Mnuchin, “serve no useful purpose to taxpayers.”

Events Calendar (All Times Local)

Monday
Federal holiday — no events scheduled
Tuesday
National Economists Club event on bitcoin 5 p.m.
Wednesday
CSIS event on economic impact of cybercrime 8 a.m.
SEC open meeting 10 a.m.
CFR World Economic Update 12:30 p.m.
Thursday
No events scheduled
Friday
Chicago Booth U.S. Monetary Policy Forum 10:15 a.m.
WITA event on North American Free Trade Agreement 10:30 a.m.
CFR event with World Bank’s Jim Yong Kim 1 p.m.

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