Top Stories

  • President-elect Joe Biden is set to unveil proposals today for trillions of dollars in government spending to combat the impacts of the coronavirus pandemic, including a large-scale expansion of the vaccination program and test capacity, along with $2,000 direct payments to individuals and aid to small businesses and local and state governments, according to Brian Deese, the incoming director of the National Economic Council. People briefed on Biden’s thinking said that in the first of two parts of the legislation, the Delaware Democrat will include an extension of supplemental federal unemployment benefits and more aid for renters. (The New York Times
  • Biden is also expected to include an expansion of the existing tax credit for children in the spending package, according to three people familiar with details of the internal deliberations. The exact policy hasn’t been decided, but Biden will likely press for something similar to his campaign proposal to provide $300 per month to American households for every child under 6 and $250 per month for every child between the ages of 6 and 17. (The Washington Post)  
  • Barbara Novick, a BlackRock Inc. co-founder who built the firm’s lobbying operations that successfully helped the world’s largest asset manager avoid the same kind of regulations as banks, will retire, transitioning from her role as vice chairman to senior adviser on Feb. 1. About a year ago, Novick said she would leave the company by the summer, but delayed her departure after Chief Executive Larry Fink asked her to stay a few months longer following the pandemic-induced roiling of markets and BlackRock’s key role in the Federal Reserve’s response. (The Wall Street Journal
  • The U.S. government is expected to allow Americans to make further investments in Chinese technology giants Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Baidu Inc., following a weeks-long battle between Treasury Department officials, who worried about the economic fallout after an anticipated widespread selloff of the tech giants’ stock, and State Department and Pentagon officials, who wanted to take a tougher stance against Beijing. Nine other companies will be added to the Pentagon’s Chinese military companies list, joining more than 100 subsidiaries of companies already on the list, according to people familiar with the matter. (The Wall Street Journal

Chart Review

Events Calendar (All Times Local)

01/14/2021
Princeton University Bendheim Center for Finance Conversation with Federal Reserve Chair Jerome Powell 12:30 pm
PIIE event: Fiscal resiliency in a deeply uncertain world 12:00 pm
View full calendar

The Fastest Growing Brands of 2020

Morning Consult’s Fastest Growing Brands of 2020 is the definitive measure of brand growth for both emerging and established brands, showcasing a wide range of companies and products that have accelerated their consumer appeal and awareness in 2020.

Download the report for the full rankings overall and by generation, and for the brands that most increased their brand ID in 2020.

General

Banks, insurers move to shape climate debate as Washington crackdown looms
Zachary Warmbrodt, Politico 

Some of the country’s biggest banking and insurance trade groups are poised to pledge trillions of dollars in financing to fight climate change in a move that could give them greater clout in the debate as Democrats step up scrutiny of Wall Street’s role in global warming. The organizations described their “clear mandate” on climate finance in an unreleased and yet-to-be finalized report that they’ve been assembling since Joe Biden secured the presidency.

U.S. Economy Saw Modest Growth in Late 2020, Fed’s Beige Book Shows
Paul Kiernan, The Wall Street Journal

The U.S. economy grew “modestly” in the final weeks of 2020, as a resurgence in Covid-19 cases prompted activity in some sectors to slow, a Federal Reserve report said Wednesday. The Fed’s periodic compilation of anecdotes from business contacts, known as the Beige Book, provided the latest evidence that the pandemic dealt a setback to the economic recovery in recent months. 

Unemployment Claims Likely Rose as Pandemic Weighs on Economy
Gwynn Guilford and Hannah Lang, The Wall Street Journal

The number of applications for unemployment benefits likely edged up last week, another sign that the economic recovery is sputtering, as coronavirus infections hit record levels nationwide. Economists surveyed by The Wall Street Journal expect the government to report that new unemployment claims, a proxy for layoffs, came in at a seasonally adjusted 800,000 last week. 

U.S. Budget Gap Rose 61% in First Quarter of Fiscal 2021
Kate Davidson, The Wall Street Journal

The federal budget gap widened in the first three months of the fiscal year, as government spending continued to outpace revenues while the economy slowly recovers from the pandemic-induced downturn. The U.S. Treasury Department said Wednesday the deficit from October through December totaled a record $573 billion, a 61% increase from the same period a year earlier.

US Treasuries dance to different tune as fiscal policy takes precedence
Colby Smith and Tommy Stubbington, Financial Times

Bad economic news is no longer boosting US government debt in break with tradition.

Treasury Yields Rise on Aid Report; Stocks Advance: Markets Wrap
Adam Haigh and Yakob Peterseil, Bloomberg

Treasury yields rose with stocks on Thursday after a report suggested President-elect Joe Biden plans Covid-19 relief of about $2 trillion. Biden’s advisers recently told allies in Congress about the cost of the package, according to the report. Biden is expected to announce his economic support plans later in the day. 

Banking

Wall Street Fumes Over Last-Minute Rule From Trump Bank Watchdog
Robert Schmidt, Bloomberg

Were history a guide, Brian Brooks would be spending the last days of the Trump administration enjoying the Washington view from his spacious government office and contemplating his next career move. Instead, the chief overseer of the largest U.S. banks is infuriating Wall Street.

Jane Fraser Puts Mark on Citigroup With Overhaul of Wealth Businesses
David Benoit, The Wall Street Journal

Citigroup Inc. is restructuring its businesses that manage money for wealthy customers, one of the first big moves by incoming chief executive Jane Fraser to put her stamp on the bank. The New York bank is combining into a new unit its high-end private bank for the ultrarich and its wealth-management offerings for the less affluent, Ms. Fraser and outgoing CEO Michael Corbat said in a memo to employees Wednesday.

Wells Fargo CEO to unveil cost-cutting plan
Imani Moise, Reuters

Wells Fargo & Co Chief Executive Charlie Scharf will give investors more details on his long-awaited turnaround plan for the scandal-plagued bank this week. Although Wall Street expects Wells Fargo to report a 38% profit decline on Friday against the backdrop of the coronavirus pandemic, investors have become more bullish in anticipation of details about expansive cost-cutting plans. 

Bank Earnings: Expect a Messy Quarter and a Peek at 2021
Orla McCaffrey, The Wall Street Journal

2020 was a whiplash kind of year for U.S. banks. When the firms start reporting fourth-quarter earnings this week, investors will want to know if they should expect another. The spring and summer of 2020, when the coronavirus pandemic first started to ravage the U.S. economy, looked bad for banks.

Jamie Dimon Says JPMorgan Paused PAC Giving to Rethink Its Donations
Michelle F. Davis and Shahein Nasiripour, Bloomberg

Jamie Dimon said the reason JPMorgan Chase & Co. paused donations from its political action committee is to give the biggest U.S. bank time to reevaluate how it contributes to campaigns following last week’s deadly siege on the Capitol. The bank is “taking a pause, a little bit of a deep breath, figuring out what we should change and how we should change it,” Dimon, JPMorgan’s chief executive officer, said at a conference Wednesday.

Defense Act Expands Scope of Foreign Bank Records U.S. Authorities Can Obtain
Mengqi Sun, The Wall Street Journal

U.S. authorities have more power to obtain documents from foreign banks with U.S. correspondent accounts under recently passed defense-policy legislation. A provision of the National Defense Authorization Act, approved Jan. 1, allows the U.S. Treasury secretary or attorney general to subpoena records related to any account at a foreign bank with correspondent accounts in the U.S.

Financial Products and Investments

Walgreens Inks Credit-Card Deal with Synchrony, Mastercard
Jennifer Surane, Bloomberg

Walgreens is getting a credit card. In the coming months, the Walgreens Boots Alliance Inc. drugstore chain plans to introduce new credit cards with Synchrony Financial as well as a separate prepaid debit card, according to a statement Wednesday. 

Whistleblower Lawyer Sues the SEC Over Bounty Program Rule Changes
Mengqi Sun, The Wall Street Journal

A lawyer who represents corporate whistleblowers has sued the Securities and Exchange Commission over recent amendments to rules governing the agency’s whistleblower award program. Jordan Thomas, who chairs the whistleblower representation practice at law firm Labaton Sucharow LLP, filed a lawsuit Wednesday in federal court in Washington, D.C., against the securities regulator and Elad Roisman, the SEC’s acting chairman.

Investors Find Value in Low-Rated Loans
Matt Wirz, The Wall Street Journal

Investors wary of lofty stock valuations and falling bond prices are turning to an unexpected haven: corporate loans with junk credit ratings. Prices of the loans rose in recent sessions even when equities declined, and an index of the debt has returned about 1% this year—far outstripping the 0.03% delivered by junk bonds and the 2% loss posted by U.S. Treasurys.

Housing and GSEs

New York City Renters Owe More Than $1 Billion in Unpaid Rent, Survey Finds
Will Parker, The Wall Street Journal

New York City apartment tenants are more than $1 billion in debt from missed rent payments during the coronavirus pandemic, according to a new survey measuring the depth of the rent crisis brought on by Covid-19. The debt figure is the most recent indicator that unemployment benefits and federal stimulus packages have so far been inadequate to alleviate the growing financial burden of missed rent payments across thousands of city households.

Taxes

IRS watchdog: Millions had major problems getting tax refunds, stimulus payments
Naomi Jagoda, The Hill

The IRS “generally performed well” carrying out last year’s tax-filing season and issuing the first round of coronavirus stimulus payments, but millions of taxpayers encountered significant problems, according to a report issued Wednesday by the agency’s in-house watchdog. “Despite the IRS’s overall success in managing the filing season and accurately paying the significant majority of [economic impact payments], some taxpayers experienced major problems, and the agency was not always fully transparent about its struggles,” National Taxpayer Advocate Erin Collins wrote in the annual report her office submits to Congress.

Financial Technology

Affirm shares double on debut in new sign of hot IPO market
Miles Kruppa and David Carnevali, Financial Times

Consumer lender led by PayPal co-founder Max Levchin valued at more than $23bn.

Trading App May Curb Bitcoin Buying This Weekend If Market Goes Wild
Edward Robinson, Bloomberg

Retail investing platform eToro Ltd. is fielding so much demand for Bitcoin and other cryptocurrencies that it warned customers they may encounter “possible limitations” filling orders. “The unprecedented demand for crypto, coupled with limited liquidity, presents challenges to our ability to support BUY orders over the weekend,” the Israeli-British company said in an email to customers. 

Bitcoin Mining Comes to the Arctic Circle
Yuliya Fedorinova, Bloomberg

The Siberian city of Norilsk is best known as the home of mining giant MMC Norilsk Nickel PJSC.  With a population of 180,000, it’s one of the biggest human settlements beyond the Polar Circle and only reachable by plane or boat.

Opinions, Editorials and Perspectives

Banks Make a Climate Offering
The Editorial Board, The Wall Street Journal

Whenever an invader conquered new lands in ancient times, the local tribes made a pilgrimage to offer tribute to the new king. Politics has changed less than you think.

Big Business Backs Away From Trump’s Party But Longs for Old GOP
Peter Coy, Bloomberg Businessweek

Big Business is in a tight spot. Rebellious Trump loyalists have amped up their influence over the Republican Party, which business has traditionally leaned on for support. Meanwhile, although President-elect Joe Biden is a moderate, the Democratic Party’s platform is the most left-leaning it’s been in decades. 

Trump’s most enduring legacy could be the historic rise in the national debt
Allan Sloan and Cezary Podkul, The Washington Post

One of President Donald Trump’s lesser known but profoundly damaging legacies will be the explosive rise in the national debt that occurred on his watch. The financial burden that he’s inflicted on our government will wreak havoc for decades, saddling our kids and grandkids with debt.

Research Reports

The Market Risk Premium for Unsecured Consumer Credit Risk
Matthias Fleckenstein and Francis A. Longstaff, The National Bureau of Economic Research

We use the prices of credit card asset-backed securities to study the market risk premium associated with unsecured consumer credit risk. The consumer credit risk premium has historically been comparable to high yield corporate bond spreads, but has increased dramatically since the financial crisis. 

Morning Consult