General
Federal Reserve’s Lesson: Keep Your Errors Manageable
Greg Ip, The Wall Street Journal
As the Federal Reserve kept interest rates low after the recession and bought bonds, critics in Congress, Wall Street and within its own ranks accused it of courting inflation, debasing the dollar, enabling fiscal profligacy and distorting markets. Today, with a record expansion and unemployment at a 50-year low, some critics are making the opposite case: The Fed has tightened too much, and growth is lower and unemployment higher than they should be.
After feeling Trump’s wrath, Mexico breathes a sigh of relief at USMCA
Mary Beth Sheridan, The Washington Post
Two years ago, as negotiators from Mexico, Canada and the United States were beginning to overhaul the NAFTA treaty, Luis Rossano had a choice. The 38-year-old engineer could expand his Mexican company, a thriving business producing high-tech car parts and medical devices in the southern city of Puebla.
Tariffs, Trade Policy Rise on List of Concerns for Risk Officers
Kristin Broughton, The Wall Street Journal
A recent slowdown in global growth has prompted U.S. businesses over the past year to grow more cautious, with some retailers moving factory operations out of China as tariffs on clothing and other imports take effect. Those decisions reflect a growing perception among executives and board members that economic-policy decisions could hinder their companies’ growth opportunities in the year ahead, according to an annual ranking of business risks published Thursday by North Carolina State University’s Enterprise Risk Management Initiative and consulting firm Protiviti Inc.
Wall Street Is Being Hunted by Futures Cops for Government Leaks
Matt Robinson and Benjamin Bain, Bloomberg
U.S. regulators are digging into a topic that has been the talk of Wall Street and Washington ever since a controversial Vanity Fair article suggested investors made billions of dollars trading ahead of market-moving news: Are government leaks fueling big profits in the futures market?
JPMorgan’s Jamie Dimon Says He Expects U.S.-China Phase-One Trade Deal
Katia Dmitrieva and Shawn Donnan, Bloomberg
JPMorgan Chase & Co.’s Jamie Dimon said he expects to see a phase-one trade deal between the world’s two largest economies, but warned that an additional wave of tariffs from the Trump administration would hit markets and U.S. growth.
U.S. Budget Deficit Widened 12% in First Two Months of Fiscal Year, Treasury Says
Kate Davidson, The Wall Street Journal
The government budget gap was 12% bigger in the first two months of the fiscal year, as higher spending on the military and health care pushed up government outlays. The government ran a $343 billion deficit in the first two months of fiscal year 2020, which began Oct. 1, the Treasury Department said Wednesday. Federal spending rose 7%, to $814 billion, in October and November, outpacing federal tax receipts, which increased 3%, to $471 billion.
North American Trade Pact Could Cushion U.S. Economy
Harriet Torry, The Wall Street Journal
The new trade agreement with Mexico and Canada won’t bring an economic boom, but it could cushion the U.S. in the face of slowing global growth as it boosts some industries and removes a big source of business uncertainty. The deal, reached Tuesday, also will keep U.S. trade on track with its two largest partners. U.S. trade with Mexico and Canada topped $1 trillion through October of this year, more than double the $470 billion of trade with China.
U.S. Futures Drift With Europe Stocks; Euro Steady: Markets Wrap
Sam Potter, Bloomberg
U.S. equity futures drifted alongside stocks in Europe on Thursday as investors count down to another major monetary policy decision. Treasuries were steady while euro-area bonds edged upward before the region’s central bank sets interest rates.
Banking
JPMorgan executive ‘sickened’ over racism revelations
Laura Noonan, Financial Times
Gordon Smith says incidents at Chase branch in Arizona ‘strike at heart of who we are.’
BofA chief joins chorus of bank bosses predicting strong end to year
Laura Noonan, Financial Times
Brian Moynihan highlights revenues boost for trading and investment banking divisions.
Powell unsure on future CRA path if Fed parts with other agencies
Hannah Lang, American Banker
Federal Reserve Chair Jerome Powell said he still hopes his agency can get on board with the Office of the Comptroller of the Currency on a plan to reform the Community Reinvestment Act, but he is unsure on the path forward if their disagreement persists. The OCC is widely expected to release a CRA proposal this week along with the Federal Deposit Insurance Corp., but the Fed will likely not sign on to the proposed draft.
Wells Fargo counting on new platform to revive its SBA lending
John Reosti, American Banker
Wells Fargo has a plan to regain its momentum in Small Business Administration lending. Though it remains the nation’s second-biggest 7(a) lender, the San Francisco company’s originations fell by 60% between the 2016 fiscal year, when it flirted with $2 billion in volume, and $786 million in production for the 2019 fiscal year.
Goldman Sachs names new head of Johannesburg office
Emma Rumney, Reuters
U.S. investment bank Goldman Sachs (GS.N) has appointed Jonathan Penkin as head of its Johannesburg office, the bank’s base for sub-Saharan Africa where the current chief executive is retiring at the end of the year. Penkin, who will relocate to Johannesburg, will be named CEO of Goldman Sachs International Bank, Johannesburg branch, pending regulatory approval, and Goldman Sachs International branch manager, the bank said in an internal memo sent on Tuesday.
Financial Products and Investments
CFPB challenger to SCOTUS: Let Congress fix bureau’s constitutional flaw
Alison Frankel, Reuters
Both the Justice Department and a debt relief law firm challenging the constitutionality of the Consumer Financial Protection Bureau argued in briefs this week that the U.S. Supreme Court need not kill off the bureau because of criticisms that its unique structure violates separation of powers doctrine. But the two sides offered the justices quite different proposed remedies for the alleged constitutional flaw.
Housing and GSEs
Zillow expects the housing market’s good times to keep rolling in 2020
Julia Falcon, HousingWire
The single-family housing market has been busy and bustling in 2019, thanks to lower than expected interest rates throughout much of the year. Zillow expects more of the same in 2020.
Taxes
Filing Frenzy Shows Companies Lining Up for Poor Area Tax Breaks
Noah Buhayar, Bloomberg
There wouldn’t be much of an economy in Center, Texas, without Tyson Foods Inc. The company has a sprawling chicken-processing plant in town and employs about 1,600 people in a city of just over 5,000 near the Louisiana border. So, when Tyson signaled two years ago that it wanted to build a $50 million feed mill, Center’s economic development director, Jim Gibson, was eager to find a location and suggest tax abatements.
Expiring tax breaks set off year-end scramble
Naomi Jagoda, The Hill
Industry groups are pressing lawmakers to include their tax priorities in year-end legislation, setting off a last-minute scramble. A number of tax breaks, particularly in the energy sector, have already expired or are set to expire at the end of this year, and groups want Congress to renew or update those tax preferences.
The IRS really needs an exemption for crypto
Matthew DeSilva, Quartz
The taxman cometh, and he asketh about virtual currency. The US tax agency has released a new draft of its Schedule 1 form, used by taxpayers to report additional income and deductions. For 2019 tax filers, the Internal Revenue Service has posed a new question, prominently listed at the top of the document: ”At any time during 2019, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”
Financial Technology
Robinhood starts up cash management service, a year after a botched launch
Julia Verhage, Bloomberg
Robinhood Markets Inc. has finally launched its take on a bank account, albeit a very different version of the service it once hoped to offer. On Wednesday, the online brokerage firm rolled out Cash Management to a subset of users. The product will sweep the money customers don’t currently have in stocks into a separate account with 1.8% interest.
Opinions, Editorials and Perspectives
A Setback for Investor Rights — and Sustainability
Will Martindale, Morning Consult
In November, headlines across the world loudly decried President Donald Trump’s confirmation that his administration plans to officially withdraw from the Paris Climate Agreement. While this unfortunate news has rightfully received significant attention, global sustainability efforts received another major, albeit quieter, setback, this time in the arcane world of U.S. financial regulation.
Central bankers have a limited ability to tackle climate change
Megan Greene, Financial Times
Monetary policymakers should be clear-eyed on what they can and cannot do about it.
Research Reports
Long-Term Consequences of Growing up in a Recession on Risk Preferences
Hitoshi Shigeoka, The National Bureau of Economic Research
Risk preferences play a fundamental role in individuals’ economic decision-making. We examine whether the historical macroeconomic environment shapes individuals’ willingness to take risks. Using nationally representative samples from Japan and exploiting regional variation in economic conditions, we find that men who experienced severe economic conditions in youth are more risk averse in adulthood and the effect is long-lasting.
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