Finance Brief: Mnuchin Casts Doubt on Chances of 15% Corporate Tax Rate Goal

Government Brief

  • The Senate confirmed Kevin Hassett to be the chairman of President Donald Trump’s Council of Economic Advisers in an 81-16 vote. Under Trump, the CEA chairman is not considered a Cabinet-level position as it was under previous administrations. (The Washington Examiner)
  • Three Democratic senators from states Trump carried in last year’s election said they were hopeful about the prospects for working with the administration on a tax bill, following a Tuesday night dinner with Trump and three GOP colleagues. Sen. Joe Manchin (W.Va.), one of the Democrats in attendance, said the group had a “productive discussion” about tax reform efforts, while Sen. Joe Donnelly (D-Ind.) said he and Trump discussed proposed legislation to penalize companies that move labor overseas.  (The Hill)
  • Voters who are familiar with the Consumer Financial Protection Bureau are mostly split on whether the agency’s authority should be limited, according to a Morning Consult/POLITICO poll. In general, though, voters of both parties are supportive of the CFPB’s mission to protect consumers in the financial marketplace. (Morning Consult)

Business Brief

  • Treasury Secretary Steven Mnuchin said that enacting a 15 percent corporate tax rate, as President Donald Trump has called for since the 2016 presidential campaign, will likely be difficult because of “budget issues.” Mnuchin instead said that the GOP tax reform efforts will cut the rate from 35 percent to a “competitive” level. (Reuters)
  • Equifax Inc. said that it will waive fees charged to customers for freezing credit files as the credit-reporting firm continues to respond to a massive data breach revealed last week. Fees will be waived until Nov. 21, and any fees paid since Thursday can be refunded. (The New York Times)
  • JPMorgan Chase & Co. Chief Executive Jamie Dimon said bitcoin “won’t end well” and that he’d fire any trader at his bank who was dealing in the cryptocurrency. According to Dimon, there’s a risk that governments could clamp down on bitcoin if its use harms people. (Bloomberg)

Chart Review

Events Calendar (All Times Local)

NAFCU Congressional Caucus 8 a.m.
SEC Advisory Committee on small and emerging companies 9:30 a.m.
House Financial Services hearing on North Korea’s access to finance 10 a.m.
Tax Foundation panel with U.S. Sen. Ted Cruz 12 p.m.
TCH Payments Thirty webinar 2 p.m.
POLITICO Pro Policy Summit 8:30 a.m.
AAP review workshop 9 a.m.
Senate Banking hearing on foreign investment 10 a.m.
Senate Finance Committee hearing on individual tax reform 10 a.m.
AEI seminar on trade deficits and the Trump administration 10 a.m.
FDIC webinar on deposit insurance coverage 1 p.m.

This Is the Future of Brand Reputation Tracking

See how Morning Consult Brand Intelligence is changing the way media, marketing and communications executives are managing brand reputation.


Voters Who Know of CFPB Are Split on Limiting Its Powers
Ryan Rainey, Morning Consult

While some officials in Washington indicate support for making substantial changes to the Consumer Financial Protection Bureau, voters who are familiar with the agency are split largely along party lines about whether its rule-making and enforcement authority should be curbed, according to a new Morning Consult/POLITICO poll.

Senate confirms top Trump economic adviser after weeks of delay
Joseph Lawler, The Washington Examiner

The Senate on Tuesday confirmed Kevin Hassett to be a top economic adviser to President Trump. The Senate confirmed him in an 81-16 vote, and all the “no” votes came from Democrats.

Equifax’s Seismic Breach Tests Trump’s Pledge to Dismantle Rules
Elizabeth Dexheimer and Jesse Hamilton, Bloomberg

The massive Equifax Inc. data breach has triggered demands on Capitol Hill for stiffer rules and new requirements for what financial companies must do to fend off cyberattacks. Yet tougher oversight would all but certainly require support from the Trump administration and buy-in from congressional Republicans — both of whom want to reduce financial regulation not stiffen it.

Bank lobby chief calls for ‘cooler heads’ to revamp consumer bureau
Sylvan Lane, The Hill

The president of a top banking group on Tuesday criticized both parties for not installing a bipartisan commission to lead the Consumer Financial Protection Bureau, a Republican goal long opposed by Democrats fond of bureau’s current director, Richard Cordray. Richard Hunt, president and CEO of the Consumer Bankers Association, said both parties are to blame for failing to spread the CFPB’s power among a commission, akin to several other regulatory agencies.

McConnell says ending U.S. debt ceiling would be challenging
Richard Cowan and David Morgan, Reuters

Senate Republican leader Mitch McConnell voiced doubt on Tuesday that the U.S. debt ceiling would be eliminated permanently, an idea floated by Democrats and embraced by Republican President Donald Trump last week. “As far as the debt ceiling is concerned, we will not be revisiting the debt ceiling until some time next year,” McConnell told reporters.


In Less Than a Year, The Federal Reserve Could Look Dramatically Different
Gillian B. White, The Atlantic

There are seven seats on the Federal Reserve’s Board of Governors—the group of people who make the most consequential decisions about American monetary policy—and President Donald Trump will have the opportunity to fill an unusually large number of them.

‘It Was a Frat House’: Questions Over C.E.O.’s Conduct Cloud Social Finance
Nathaniel Popper and Katie Benner, The New York Times

Within SoFi, Mr. Cagney, a married father of two, continued to raise questions among employees with his behavior. He was seen holding hands and having intimate conversations with another young female employee, according to six employees who saw the two together.

CEO’s sudden exit spurs big questions about SoFi’s future
Kevin Wack, American Banker

Mike Cagney’s swift, unexpected departure as the CEO of SoFi throws into question the path forward at one of the most successful companies in fintech. Cagney was the unquestioned leader of SoFi, the online consumer lender that he co-founded with three fellow Stanford business school students in 2011.

Deutsche Bank Said to Pledge Cap on U.S. Use of German Deposits
Steven Arons, Bloomberg

Deutsche Bank AG has pledged to cap the amount of retail deposits it will use to support U.S. activities as it seeks permission from European regulators to deploy German savers’ funds to other parts of the business, according to people with knowledge of the matter. The commitment is an attempt to reassure both the European Central Bank and German regulator Bafin that savers’ cash won’t enable risky international activities, the people said, asking not to be identified because the plans are private.

Financial Products and Investments

Meet the SEC nominees: One opposes the DOL fiduciary rule, one is a blank slate
Mark Schoeff Jr., InvestmentNews

One of the Trump administration’s Securities and Exchange Commission nominees has doubts about the Labor Department’s fiduciary rule and seems to favor disclosure as the best approach to investment advice standards. The other nominee is a blank slate on the issue.

CFTC Chief to EU: Don’t Unilaterally Change Clearinghouse Deal
Gabriel T. Rubin, The Wall Street Journal

The U.S.’s top derivatives regulator delivered a warning to his European Union counterparts Tuesday, saying that any unilateral change to a 2016 U.S.-EU clearinghouse supervision agreement would be a “violation of trust and cooperation.” The remarks by Commodity Futures Trading Commission Chairman J. Christopher Giancarlo come as EU officials consider changing the framework of the agreement because of Brexit.

CME chief, eyeing Europe, says Dodd-Frank was best thing for markets
John McCrank, Reuters

U.S. regulations enacted after the financial crisis will likely be revisited and watered down but not eliminated in their entirety, in part because they give much-needed clarity to market participants, the head of CME Group said on Tuesday. The sweeping 2010 Dodd-Frank Wall Street Reform law had a chilling effect on some areas of the U.S. market, as its authors intended, and critics say it is overly restrictive and should be eliminated.

Housing and GSEs

Early estimates put CMBS exposure to Irma in tens of billions
Allison Bisbey, National Mortgage News

Commercial mortgage servicers are taking steps to assess damage, payment delays and insurance disbursements brought on by Hurricane Irma, which made landfall in the Florida Keys early Sunday as a Category 4 storm and weakened as it and moved up the west coast, as well as for Hurricane Harvey, which submerged large parts of Houston two weeks ago. The process of contacting borrowers in the affected areas is expected to take weeks.


Red-state Democrats: We want to work with Trump, GOP on tax reform
Jordain Carney, The Hill

A trio of red-state Democrats said after a dinner at the White House that they are hopeful they will be able to work with President Trump and congressional Republicans to reach a deal on tax reform. Democratic Sens. Joe Manchin (W.Va.), Heidi Heitkamp (N.D.) and Joe Donnelly (Ind.) — who are each up for reelection next year in states won by Trump — met with the president, Vice President Mike Pence and GOP senators on Tuesday night.

Corporate tax goal in doubt as Trump kicks off push on reform
David Morgan and David Lawder, Reuters

U.S. Treasury Secretary Steven Mnuchin on Tuesday cast doubt on President Donald Trump’s goal of cutting the corporate tax rate to 15 percent, even as the president moved to inject new urgency into a sluggish effort in Congress to lower taxes. “Ideally, he’d like to get it down to 15 percent. I don’t know if we’ll be able to achieve that given the budget issues, but we’re going to get this down to a very competitive level,” Mnuchin told a conference in New York hosted by CNBC.

Mnuchin: Some Services Companies Won’t Get ‘Pass-Through’ Rate Under Tax Plan
Kate Davidson and Richard Rubin, The Wall Street Journal

Some services companies such as accounting firms won’t get the benefit of lower tax rates Republicans are planning for other businesses, Treasury Secretary Steven Mnuchin said Tuesday.

Democrats Vow to Fight Republican Tax Provisions that Aid Rich
Alan Rappeport and Thomas Kaplan, The New York Times
Senate Democrats on Tuesday warned they would work to block any rewrite of the tax code that repealed the estate tax and the deduction for state and local taxes, arguing that those moves would make a mockery of Republican promises to target tax relief to the middle class. But before Republicans could consider Democratic demands, they still were struggling to overcome their own disagreements over the arcana of a rewritten tax code.

Trump’s push for tax cuts is coming up against a familiar challenge: Divided GOP
Damian Paletta et al., The Washington Post

White House officials trying to jump-start work on the GOP’s top fall priority — tax cuts — are coming up against the same obstacle that has vexed President Trump all year: divided Republican lawmakers. Trump advisers and top congressional leaders, hoping to assuage conservatives hungry for details, are working urgently to assemble a framework that they hope to release next week, according to White House aides and lawmakers.

Will retroactive tax cuts help the economy?
Jeanne Sahadi, CNN

Treasury Secretary Steven Mnuchin on Tuesday said the administration is still considering making tax reform — and its tax cuts — retroactive to January 1, 2017. “It would be a big boon to the economy,” Mnuchin said at the Delivering Alpha investor conference.

Republicans suspicious of ‘Democrats’ Cohn and Mnuchin as tax plans take shape
Nancy Cook and Rachael Bade, Politico

Conservative lawmakers and strategists have deep concerns that Treasury Secretary Steven Mnuchin and White House economic adviser Gary Cohn — the administration’s two key leaders on tax reform — don’t have the know-how or political credibility to push a major GOP tax overhaul through Congress this fall. Neither man has ever worked in or with the legislative branch.

Financial Technology

Jamie Dimon Slams Bitcoin as a ‘Fraud’
Hugh Son et al., Bloomberg

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said he would fire any employee trading bitcoin for being “stupid.” The cryptocurrency “won’t end well,” he told an investor conference in New York on Tuesday, predicting it will eventually blow up.

Equifax, Bowing to Public Pressure, Drops Credit-Freeze Fees
Ron Lieber, The New York Times

On Tuesday, the company said it would waive all fees until Nov. 21 for people who want to freeze their Equifax credit files. It will also refund any fees that anyone has paid since Thursday, though the company would not say whether this would be automatic.

Senate Finance Committee wants to know who knew what and when at Equifax
Liz Moyer, CNBC

The Senate Finance Committee is seeking additional information from Equifax about the nature of the data breach it reported last week and the timing of insider stock sales in the days immediately after the company discovered the problem. The breach, affecting the personal information of 143 million people, has prompted outcries on Capitol Hill and calls for hearings and additional disclosures.

Massachusetts planning to sue Equifax over massive data breach
Ben Lane, HousingWire

Equifax, which is already facing inquiries from the Consumer Financial Protection Bureau, the House Financial Services Committee, and the office of New York Attorney General Eric Schneiderman over the credit reporting agency’s massive data breach, has a new problem on its hands – Massachusetts Attorney General Maura Healey. On Tuesday, Healey announced that Massachusetts plans to sue Equifax over failing to protect the personal information of millions of the state’s residents.

Equifax hack renews battle over the Consumer Financial Protection Bureau
Brittany De Lea, Fox Business

In the wake of the Equifax breach, businesses, lawmakers and individuals are grappling with the issue of protecting personal information – and for Congress, that could mean increased regulation and oversight. “Typically the credit reporting agencies like Equifax don’t get the same kind of routine oversight [as banks and financial institutions] … Generally nobody looks at them until something happens,” Scott Vernick, top privacy and cybersecurity expert at Fox Rothschild, told FOX Business.


Opinions, Editorials and Perspectives

The Republican Tax Plan Better Be Audacious
David M. Smick, The Wall Street Journal

The big question on tax reform is President Trump : Can Republicans really trust him, in the end, to go along with their plan? Or will he pivot at the last minute and play nice with “Nancy” and “Chuck,” his two new friends on Capitol Hill?

Glass-Steagall Repeal Saved Us From MUCH Worse in 2008
Allan Golombek, RealClearMarkets

Has the notion that the seeds for the 2008 Great Recession were sowed with the scrapping of the Glass-Steagall Act’s firewall between commercial banks and securities activities become entrenched as an accepted part of conventional wisdom? The popular misconception may become more than just a debating point for those who favor increased regulation of financial markets.

Equifax breach threatens bank reputations, too
Rolland Johannsen, American Banker

Clearly, if you are a banker, you can rest assured that the data breach at Equifax affecting 143 million consumers was not your fault. So why do you have a dog in this fight?

Research Reports

Financial Technology: Information on Subsectors and Regulatory Oversight
Government Accountability Office

The financial technology (fintech) industry is generally described in terms of subsectors that have or are likely to have the greatest impact on financial services, such as credit and payments. Commonly referenced subsectors associated with fintech include marketplace lending, mobile payments, digital wealth management, and distributed ledger technology.

Who Owns the Wealth in Tax Havens? Macro Evidence and Implications for Global Inequality
Annette Alstadsæter et al., The National Bureau of Economic Research

Drawing on newly published macroeconomic statistics, this paper estimates the amount of household wealth owned by each country in offshore tax havens. The equivalent of 10% of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity—from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies.