• Federal agencies released a framework and several reports this morning on crypto regulation, as requested in a March executive order from President Joe Biden, with National Economic Council Director Brian Deese telling reporters that the administration believes that “prudent regulation of cryptocurrencies is needed if digital assets are going to play the role we believe they can in fostering innovation and supporting our economic and technological competitiveness.” (MarketWatch) The framework urges the Federal Reserve to continue researching a central bank digital currency, and noted that in order to crack down on the use of crypto in illicit finance activities, Biden will evaluate whether to ask Congress to evaluate amending certain rules, including the Bank Secrecy Act, to include crypto. (CNBC)
• Securities and Exchange Commission Chairman Gary Gensler told a Senate oversight panel that proposed rules at the agency requiring publicly traded companies to report on climate risk would not include requirements to report on the climate impact of the companies’ small private suppliers. (The Wall Street Journal) Senate Banking Committee ranking member Pat Toomey (R-Pa.) criticized the SEC for failing to respond with “real answers” to questions submitted by GOP senators on how the proposed rules were developed, and told Gensler that he believed the Supreme Court would throw out the climate disclosure rules if they were implemented. (MarketWatch)
• Interest rates for 30-year fixed-rate mortgages rose to 6.02% this week, according to the latest data from Freddie Mac. It’s the highest rate recorded since November 2008, though Freddie Mac noted that rates are still below the historical average of 7.8%. (The Washington Post)
• Biden will likely nominate attorney Beth Kaufman as chief counsel of the Internal Revenue Service, according to people familiar with the matter. Kaufman, a partner at the law firm Caplin & Drysdale, would be tasked with managing the agency’s interpretation and enforcement of tax laws. (Bloomberg)

Consumer Confidence Rose 5.5% in August, Breaking Yearlong Slump

Morning Consult

US urges companies to claw back pay from staff guilty of misconduct

Stefania Palma, Financial Times

Justice department will limit deferred prosecution deals as part of tougher corporate enforcement regime.

GOP Lawmakers Want to Know Who on Biden’s Staff Would Get Student Loan Relief

Billy House, Bloomberg

The top Republicans on two House committees want details from the White House on whether any administration officials who worked on President Joe Biden’s student loan debt forgiveness plan will personally benefit from it.

CFPB, FTC say court ruling would undercut credit reporting law

Polo Rocha, American Banker

The Consumer Financial Protection Bureau and the Federal Trade Commission say that a 2021 federal court decision could limit protections for consumers looking to remove errors on their credit reports. In a court filing this week, the two agencies argued that the ruling “undercuts a central remedial purpose” of the Fair Credit Reporting Act. The law requires banks, mortgage lenders, debt collectors and other companies that furnish information used in credit reports to investigate any disputes and correct errors.

Biden Orders Deeper Scrutiny of Foreign Investment in Tech and Supply Chains

Charles Hutzler, The Wall Street Journal

The Biden administration is ordering a panel that screens foreign investment for national security risks to heighten scrutiny of deals that may give China and other adversaries access to critical technologies or may endanger supply chains and personal data. An executive order signed by President Biden on Thursday doesn’t expand the purview of the Committee on Foreign Investment in the U.S.

Congress may raise 1099-K reporting threshold in tax extenders package

Michael Cohn, Accounting Today

Advocates are pushing for Congress to restore the $20,000 threshold for reporting transactions from payment cards and third-party networks after it was lowered by the American Rescue Plan Act to just $600, warning of a tidal wave of Forms 1099-K hitting millions of unsuspecting taxpayers and an already overburdened Internal Revenue Service and overworked tax preparers.

High Inflation Brings Changes to Your Tax Bill

Ashlea Ebeling, The Wall Street Journal

One ripple effect of the high inflation eating into Americans’ spending power may be lower tax bills. Many workers will get bigger paychecks in January and be able to stash more money in their retirement accounts when the Internal Revenue Service makes its annual inflation adjustments to dozens of tax provisions.

U.S. retail sales unexpectedly rise, but inflation hampering spending

Lucia Mutikani, Reuters

U.S. retail sales unexpectedly rebounded in August as Americans ramped up purchases of motor vehicles and dined out more amid lower gasoline prices, but demand is cooling as the Federal Reserve aggressively raises interest rates to fight inflation.

World Bank sees rising risk of global recession in 2023

Reuters

The world may be edging toward a global recession as central banks across the world simultaneously hike interest rates to combat persistent inflation, the World Bank said on Thursday.

IMF head concedes, ‘We were proven wrong’ about inflation. Says central bankers must be ‘stubborn’ in fighting it

Nicholas Gordon, Fortune

The director of the International Monetary Fund thinks that inflation has proved more “stubborn” than expected, and that the world’s central bankers need to be just “as stubborn in fighting it.”

Summers Expects Fed to Raise Rates Above 4.3% to Curb Inflation

Romy Varghese, Bloomberg

The Federal Reserve may have to eventually raise rates above 4.3% to control inflation, Former Treasury Secretary Lawrence Summers said Thursday.

U.S. business inventories increase, but pace slowing

Reuters

U.S. business inventories increased in July, but the pace has slowed considerably from prior months, likely as cooling demand amid higher interest rates forces companies to be cautious.

U.S. Jobless Claims Fell Last Week

Bryan Mena, The Wall Street Journal

U.S. applications for unemployment benefits declined for the fifth consecutive week as employers held on to their workers in a persistently tight labor market. Initial jobless claims, a proxy for layoffs, fell to a seasonally adjusted 213,000 last week from a revised 218,000 the previous week, the Labor Department said Thursday. Claims have declined since August after rising earlier in the summer.

Empire State, Philly Fed indexes show contractions in activity in September

Greg Robb, MarketWatch

Two regional gauges of manufacturing sentiment moved into slight contraction territory in September, according to data released Thursday.

Hispanic Workers Are Disproportionally at Risk From a US Recession, Wells Fargo Says

Ella Ceron, Bloomberg

Hispanic and Latino workers may bear an undue hit in a US recession, according to a Wells Fargo & Co. report, which noted their concentration in industries such as construction that are vulnerable to economic downturns.

FedEx CEO says he expects the economy to enter a ‘worldwide recession’

Krystal Hur, CNBC

FedEx CEO Raj Subramaniam told CNBC’s Jim Cramer on Thursday that he believes a recession is impending for the global economy.

Prosperity Bank settles with DOJ over PPP lending allegations

Gabrielle Saulsbery, Banking Dive

The Justice Department has received its first-ever False Claims Act (FCA) settlement from a Paycheck Protection Program (PPP) lender, it announced Tuesday. Prosperity Bank, a Houston-based regional bank, will pay $18,673.50 to resolve allegations it knowingly processed a PPP loan for an ineligible business.

Barclays: $7 bln worth of securities sold in error have been claimed

Reuters

Barclays said investors have submitted claims for $7 billion out of $17.7 billion worth of securities it sold in error, under the terms of a so-called rescission offer by which the bank had to buy back the notes and compensate buyers.

U.S. Audit Inspectors Heading to China After Landmark Agreement

Paul Kiernan, The Wall Street Journal

U.S. regulators could know by Thanksgiving if Beijing is complying with an agreement designed to allow Chinese companies to continue trading on American stock exchanges. Inspectors from the U.S. Public Company Accounting Oversight Board are preparing to travel to Hong Kong to begin reviewing the audit files of publicly traded Chinese companies, Securities and Exchange Commission Chairman Gary Gensler told lawmakers Thursday.

US Yield Curve Set to Invert by Most in 40 Years, Allspring Says

Tassia Sipahutar, Bloomberg

Inversion of two-, 10-year yields may reach most since 1980s; What Fed may say next week is “really worrying” Jacobsen says.

Pricing of Stock Trades Varies Widely Among Popular Brokers, Study Finds

Alexander Osipovich, The Wall Street Journal

Brokerages aren’t created equal when it comes to getting investors a good deal on trades. A recent academic study found wide disparities in the prices that investors get when buying and selling stocks through a half dozen popular brokerages.

House passes bill to modernize VA appraisals

James Kleimann, HousingWire

The U.S. House of Representatives this week passed a bill that streamlines the appraisal process for U.S. Department of Veterans Affairs mortgage loans.

These Are the US Areas Most at Risk of Housing Downturn, According to Attom Report

Alexandre Tanzi, Bloomberg

Homes in and around New York City and Chicago are most vulnerable to price declines in a potential economic downturn, according to a report released Thursday by real estate data analytics firm Attom.

Regulators now one step closer to reining in “Buy now, pay later” companies

Hope King, Axios

“Buy now, pay later” services are about to be tamed. The Consumer Financial Protection Bureau, created after the financial crisis to regulate predatory lending practices, issued its much-anticipated report on how it might oversee companies like Affirm and Afterpay.

CFTC Already Preparing to Be Crypto Watchdog, Behnam Tells US Senators

Jesse Hamilton, CoinDesk

Agency is “right regulator” to oversee digital assets trading, CFTC chairman testifies at a hearing of the Senate Agriculture Committee.

Justice Department Forms National Network of Prosecutors Focused on Crypto Crime

Dustin Volz, The Wall Street Journal

The Justice Department has tapped more than 150 federal prosecutors across the country to bolster law enforcement’s efforts to combat the rise in crime linked to the use of cryptocurrencies such as bitcoin, officials said.

Ether’s New ‘Staking’ Model Could Draw SEC Attention

Paul Kiernan and Vicky Ge Huang, The Wall Street Journal

Ethereum’s big software update on Thursday may have turned the second-largest cryptocurrency into a security in the eyes of a top U.S. regulator. Securities and Exchange Commission Chairman Gary Gensler said Thursday that cryptocurrencies and intermediaries that allow holders to “stake” their coins might pass a key test used by courts to determine whether an asset is a security. Known as the Howey test, it examines whether investors expect to earn a return from the work of third parties.

Banks join consumer group in plea for crackdown on fintech lenders

Katy O’Donnell, Politico Pro

Banks and consumer lending advocates are teaming up to try to get the Consumer Financial Protection Bureau to clamp down on financial technology firms that extend credit to consumers. The Center for Responsible Lending and the Consumer Bankers Association are jointly petitioning the CFPB to develop a rule that would expand federal oversight to include the new breed of non-depository lenders, according to a letter the two groups sent CFPB Director Rohit Chopra on Thursday.

U.S. SEC’s crypto guidelines push up costs for lenders, disrupting projects

Hannah Lang and Michelle Price, Reuters

Banks’ cryptocurrency projects have been upended by U.S. Securities and Exchange Commission (SEC) accounting guidance that would make it too capital-intensive for lenders to hold crypto tokens on behalf of clients, according to more than half a dozen people with knowledge of the matter.

New Crypto Fund Takes US a Step Closer to Spot Bitcoin ETF

Katherine Greifeld, Bloomberg

Holdouts for a physically backed US Bitcoin exchange-traded fund saw a glimmer of hope on Thursday with the launch of a new futures-backed product. The Hashdex Bitcoin Futures ETF (ticker DEFI), developed with Teucrium, began trading on Thursday, according to a statement.

Galaxy Digital sued for $100 mln for ditching landmark Bitgo deal

Tom Hals, Reuters

Galaxy Digital Holdings Ltd, a crypto financial services firm, should pay at least $100 million in damages for walking away from its $1.2 billion takeover deal for BitGo Inc, the digital asset custodian said in a court filing made public on Thursday.

Crypto Fees Are High. The Stock Market May Hold the Answer.

Telis Demos, The Wall Street Journal

Despite predictions of doom, Wall Street thrived as stock trading commissions fell last century. The same could happen in crypto, but it won’t be easy to replicate.

FTX Is in the Lead to Buy Crypto Lender Voyager Digital’s Assets Out of Bankruptcy: Source

Ian Allison and Tracy Wang, CoinDesk

Exchange giant FTX is in the lead to buy the assets of Voyager Digital, the cryptocurrency lender whose bankruptcy filing deepened this year’s industry crisis, but higher offers could still come in in the days ahead, according to a person familiar with the matter.

Who’s Afraid of the Consumer Price Index?

Paul Krugman, The New York Times

Three important reports on inflation were released this week. On Monday the Federal Reserve Bank of New York released its latest survey on inflation expectations, which was very encouraging. On Wednesday the Bureau of Labor Statistics released its latest report on producer prices, which was fairly reassuring. But the report in between — Tuesday’s bad report on consumer prices — has gotten almost all the attention.