Finance Brief: White House Lines Up Nominees for FDIC, SEC Posts

Washington Brief

  • The White House said President Donald Trump plans to nominate James Clinger, the GOP counsel for the House Financial Services Committee, to chair the Federal Deposit Insurance Corp. FDIC Chairman Martin Gruenberg’s term ends in late November. (The Wall Street Journal)
  • Trump is said to be planning to nominate Hester Peirce, a financial regulation critic, to an open seat on the Securities and Exchange Commission. Former President Barack Obama nominated Peirce to the SEC, but she was never confirmed by the Senate. (Bloomberg News)
  • The Trump administration should let lawmakers on Capitol Hill take the lead in efforts to raise the federal debt ceiling, according to a recommendation from White House legislative affairs director Marc Short, who suggested to Trump that the House and Senate should initiate discussions within their own caucuses. (Axios)

Business Brief

  • Banks including Citigroup Inc. and Bank of America Corp. will be able to give about $30 billion more to shareholders after this year’s Federal Reserve stress tests compared to previous cycles because of changes to the examinations. The Fed is no longer administering “qualitative” tests, which were difficult for lenders like Bank of America. (Bloomberg News)
  • The Trump administration and congressional staff are working together on methods that would curb corporate tax avoidance strategies that take advantage of lower rates in other countries. The Washington effort is seen as a key element of tax reform talks since previous proposals aimed at preventing offshoring have proven divisive among Republican lawmakers. (Reuters)
  • In a financial disclosure document released Friday, Trump reported at least $310 million in liabilities to creditors including banks such as Deutsche Bank AG. Revenues for the president’s businesses last year totaled at least $597 million, according to the disclosure. (The New York Times)

Chart Review

Events Calendar (All Times Local)

Monday
Bipartisan Policy Center event in Dallas on NAFTA 9 a.m.
Tuesday
National Association of Manufacturers Investment Summit with House Speaker Ryan 10 a.m.
InvestmentNews discussion on advising baby boomers 4 p.m.
Wednesday
National Association of Manufacturers Investment Summit 7:45 a.m.
NBPCA ‘Power of Prepaid’ conference 8 a.m.
IRS-Tax Policy Center Joint Research Conference 9 a.m.
Senate Finance Committee hearing with USTR’s Lighthizer 10 a.m.
House Financial Services Committee marks up flood insurance bills 10 a.m.
House Small Business Committee hearing on trade promotion coordinating committee 11 a.m.
Financial Services Roundtable event on financial regulation in Trump administration 1 p.m.
House Financial Services subcommittee hearing on monetary policy 2 p.m.
Thursday
NBPCA ‘Power of Prepaid’ conference 8 a.m.
WITA event on trade relations with Brazil 9 a.m.
ABA Payments Forum 9 a.m.
SEC Investor Advisory Committee meeting 9 a.m.
Senate Agriculture Committee confirmation hearing for CFTC’s Giancarlo 9:30 a.m.
CFPB event on student loan servicing in Raleigh, N.C. 10 a.m.
Senate Banking Committee hearing on regulators and economic growth 10 a.m.
House Ways and Means Committee hearing with USTR’s Lighthizer 10 a.m.
Friday
NBPCA ‘Power of Prepaid’ conference 8 a.m.
Global Business Dialogue event on trade with EU 9 a.m.
ABA Payments Forum 9 a.m.
House Financial Services subcommittee hearing on illicit art trade 9:15 a.m.

 

General

Trump’s Businesses Show Mixed Returns During Campaign and Presidency
Steve Eder et al., The New York Times

The Trump International Hotel in Washington and the Mar-a-Lago private resort in Florida have been among President Trump’s favorite spots to visit in the months since he became president. And both were among the most lucrative properties in his portfolio during what otherwise was a mixed year for the Trump family businesses, according to a financial disclosure report released Friday.

Trump’s hands-off approach to looming debt ceiling fight
Jonathan Swan, Axios

President Trump is likely to play a much smaller role than previous presidents have played in the looming debt ceiling crisis. Marc Short, the director of the White House’s Office of Legislative Affairs, has told associates his recommendation to the President is that the House and Senate should initiate the debt limit negotiations within their own conferences rather than leaning on Trump to do the heavy lifting.

CFPB Chief Cordray Fires Back at GOP Lawmaker Over Wells Fargo Probe
Yuka Hayashi, The Wall Street Journal

A fight between the head of the Consumer Financial Protection Bureau and a senior Republican lawmaker escalated this week as the CFPB chief made a sharp rebuttal to a GOP report that criticized the agency’s role in investigating alleged sales misconduct at Wells Fargo & Co. In a five-page letter sent to Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee, CFPB Director Richard Cordray disputed claims by committee staff that the agency failed to conduct an “independent and comprehensive” investigation of Wells Fargo.

Trump plan gives more power to one regulator: Treasury Secretary Steven Mnuchin
Joseph Lawler, The Washington Examiner

The Trump administration’s long-awaited recommendations for financial reform would reduce the power of regulators in favor of letting banks operate more freely, with one notable exception: More influence and authority would be given to one regulator, the Treasury secretary. The 149-page report, the first official outline of the Trump administration’s goals for reshaping the financial sector, mostly calls for rolling back the new powers Congress gave to regulatory agencies in response to the financial crisis.

The Wish List From Business for How to Change Finance Rules
Elizabeth Dexheimer, Bloomberg News

BlackRock Inc. wants Congress to change an aspect of the Volcker Rule that is causing headaches within its hedge fund business. Billionaire Paul Singer wants risky derivative bets curtailed and says regulators should lose their authority to step in when large banks are failing.

Macron Victory Boosts Europe Stocks; Oil Declines: Markets Wrap
Adam Haigh and Samuel Potter, Bloomberg News

European stocks headed for the biggest gain in seven weeks, boosted by French equities after the country’s new president won a free hand to drive through economic reforms. Oil slid as fears of an ongoing supply glut refused to go away. Futures on the S&P 500 Index rose 0.3 percent after the underlying gauge posted a 0.1 percent advance last week.

Banking

White House Intends to Tap GOP Staffer James Clinger for FDIC Chair
Ryan Tracy, The Wall Street Journal

The White House announced President Donald Trump’s intent to nominate a longtime Republican congressional staffer to chair the Federal Deposit Insurance Corp., lining up another pick for a key regulatory post. James Clinger, who has been serving as chief counsel for the House Financial Services Committee, could start serving on the FDIC board as soon as he is confirmed by the Senate and would take over as chairman in late November, when current FDIC Chairman Martin Gruenberg’s term ends.

Less Stressful Tests Seen Boosting U.S. Bank Payouts $30 Billion
Yalman Onaran, Bloomberg News

The stress of stress tests may be over. At least for now. After seven annual exercises in which at least one U.S. bank failed, all of the nation’s 34 largest lenders will probably pass this year’s Federal Reserve exam when results are revealed this week and next.

Yellen says Fed to give banks more details on stress tests
Olivia Oran and Pete Schroeder, Reuters

The Federal Reserve will give banks more details on how it conducts annual stress tests, including the qualitative part of the tests, when it publishes the results later this month, Chair Janet Yellen said Friday in a letter to Congress. The Federal Reserve will provide specific examples from past years’ problems with banks’ capital planning practices, Yellen said in a letter dated June 16, a copy of which was seen by Reuters.

The Man Who Ran the Bank Bailout Is the Fed’s Toughest Internal Critic
Matthew Boesler And Jeanna Smialek, Bloomberg News

In 2008, as interim assistant secretary of the Treasury for financial stability, Neel Kashkari oversaw the bailout of the country’s biggest banks. So this April, when JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon declared in his annual shareholder letter that the problem of too big to fail had been solved, Kashkari, now the president of the Federal Reserve Bank of Minneapolis, was more than ready to respond—in public.

Financial Products and Investments

Trump Said Likely to Name Hester Peirce as SEC Commissioner
Benjamin Bain and Elizabeth Dexheimer, Bloomberg News

Hester Peirce, a former U.S. Securities and Exchange Commission counsel and Senate aide, is the Trump administration’s likely choice to fill the open Republican seat at the Wall Street regulator, according to people familiar with the matter. Should President Donald Trump pick Peirce to be an SEC commissioner, her nomination will likely be paired with a candidate backed by Senate Democrats for another vacant seat at the agency, according to the people, who weren’t authorized to speak publicly about the process.

Meet the Legislation Designed to Stifle Shareholders
Gretchen Morgenson, The New York Times

When Wells Fargo recovered $60 million in compensation from two top executives last September, it was a rare example of managers being held responsible for a titanic oversight failure. To meet sales quotas, the bank had opened thousands of sham accounts for customers, so it was only right that John G. Stumpf, then Wells Fargo’s chief executive, and Carrie L. Tolstedt, the former head of its community banking unit, would have to return some of their pay.

The Car Was Repossessed, but the Debt Remains
Jessica Silver-Greenberg and Michael Corkery, The New York Times

Many of these auto loans, it turns out, have a habit of haunting people long after their cars have been repossessed.  The reason: Unable to recover the balance of the loans by repossessing and reselling the cars, some subprime lenders are aggressively suing borrowers to collect what remains — even 13 years later.

What’s next for CFPB’s debt collection plan
Kate Berry, American Banker

The Consumer Financial Protection Bureau’s decision to drop a requirement that third parties would be on the hook for the accuracy of consumer debts they purchase is likely to speed the agency’s often-delayed efforts to write new rules in the area. The agency initially suggested it would subject third parties that purchased consumer debt to a requirement that they verify the information, but Director Richard Cordray signaled last week that the agency has changed course.

Housing and GSEs

Economists: Housing inventory could soon turn into an emergency
Kelsey Ramírez, HousingWire

The latest report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau showed housing starts sank to an eight-month low. Now, economists are saying that drop could intensify in the months ahead as building permits also saw a drop in May.

Taxes

Republicans debating remedies for corporate tax avoidance
David Morgan, Reuters

President Donald Trump and Republican leaders in Congress will soon confront a complex challenge for tax reform: how to limit U.S. corporate tax avoidance schemes that take advantage of low tax rates in foreign countries. Congressional and administration staff have begun to examine options to address profit-shifting schemes that include so-called transfer pricing, earnings stripping and tax inversions.

GOP chairman seeks tax reform recommendations
Naomi Jagoda, The Hill

Senate Finance Committee Chairman Orrin Hatch (R-Utah) is asking industry groups and other stakeholders for tax reform recommendations in an effort toward ensuring that lawmakers and the White House meet their objective of overhauling the tax code to boost the economy. “With the support of the Trump Administration, the momentum for tax reform is at peak levels, and, as Chairman of the Senate Finance Committee, I am committed to doing all I can to make this effort a success,” Hatch said in a letter Friday.

Financial Technology

Universities add blockchain to course list
Martin Arnold, Financial Times

The market for recruiting blockchain engineers has been described as “red hot”. But where can aspiring software coders find training about the intricacies of this technology?

Opinions, Editorials and Perspectives

Playing Tricks With Dodd-Frank
Editorial Board, The New York Times

When President Trump vowed in January to do “a big number on Dodd-Frank,” the post-crisis law passed in 2010 to rein in Wall Street, it was possible to hope, however naïvely, that he would offer alternative bank reform. During the campaign, he denounced Wall Street for having “robbed our working class,” a reference to the jobs, wages, savings and home equity wiped out in the financial crash.

Dodd-Frank or the Choice Act? Take the best parts of both
Matthew P. Richardson et al., American Banker

Deng Xiaoping, the Chinese leader who helped transform China from a planned economy to a market one, famously said in response to criticism that he had surrendered communist principles: “It doesn’t matter if a cat is black or white, so long as it catches mice.” So, too, with financial regulation and the ideological divide in Congress.

Janet Yellen Is Her Own Best Successor
Narayana Kocherlakota, Bloomberg View

President Donald Trump has reportedly begun the process of deciding who will lead the U.S. Federal Reserve after Janet Yellen’s term ends early next year. If he wants the best outcome for the economy, he can’t do better than Janet Yellen.

The Border-Adjustment Tax Is No Free Lunch
Alan Reynolds, Investor’s Business Daily

House Republican leaders Speaker Paul Ryan, R-Wis., and Ways and Means Chairman Kevin Brady, R-Texas, are still pushing their year-old scheme of a “border adjustable tax” (BAT) to exempt exports from their proposed 20% corporate tax while disallowing firms any deduction for the cost of imported parts, materials or inventories. Congressmen Ryan and Brady claim the BAT will “level the playing field” which, in the plain English of Boston University economist Larry Kotlikoff, means “reducing the U.S. trade deficit.”

Research Reports

2016 Report to Congress
Federal Housing Finance Agency

During 2016, FHFA continued to serve as regulator of the 11 Federal Home Loan Banks (FHLBanks) and the FHLBanks’ joint Office of Finance and as regulator and conservator of Fannie Mae and Freddie Mac. The enclosed Report summarizes the findings of the Agency’s 2016 examinations of these entities as well as FHFA’s actions as conservator of Fannie Mae and Freddie Mac during 2016.

Briefings

Finance Brief: Week in Review & What’s Ahead

The Treasury Department recommended a significant curbing of authority at the Consumer Financial Protection Bureau, along with allowing the agency’s director to be fired at will, in a report required by an executive order President Donald Trump signed in February. While the report does not call for a full repeal of Volcker Rule limits on proprietary trading, it recommended exempting small institutions from the Dodd-Frank regulation.

Finance Brief: CFPB Proposes Changes to Prepaid Card Rule

The Consumer Financial Protection Bureau announced plans to make changes to its prepaid card rule, with public comments on the proposals due within 45 days. The CFPB’s proposals would adjust the rule to require consumers register any prepaid cards before filing a complaint, and would allow providers to send disclosure forms to consumers digitally in some cases.

Finance Brief: Warren Says Democrats Open to Loosening Regulations for Community Banks, Credit Unions

Sen. Elizabeth Warren (D-Mass.) said Senate Democrats are open to working with Republicans on “targeted” measures that would ease regulations affecting community banks and credit unions. Warren, who has shown little willingness to work with the GOP on loosening financial regulations, said she remains opposed to proposals that would limit consumer protections or weaken regulations for big banks.

Finance Brief: Treasury Department Recommends Changes to CFPB, Volcker Rule

The Treasury Department recommended a significant curbing of authority at the Consumer Financial Protection Bureau, along with allowing the agency’s director to be fired at will, in a report required by an executive order President Donald Trump signed in February. The report does not call for a complete repeal of Volcker Rule limits on proprietary trading but instead proposes exempting small institutions from the Dodd-Frank regulation.

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