Morning Consult Finance: Democrats Want SEC Rule on Political Contributions; Morgan Stanley to Pay $8.8 Million in SEC Settlement

By Gabe Rubin

Morning Consult Finance will be off for the holidays starting tomorrow. We will be back on Sunday January 3 with a look at what’s to come in 2016.

Today’s Washington Brief

  • Senate Democrats are pressing the Securities and Exchange Commission to revive a rule that would require corporations to disclose their political contributions, despite a provision in the omnibus measure, which was signed into law last week, that prevents the SEC from implementing such a rule in the next fiscal year. (The Hill)
  • An analysis of Donald Trump’s tax plan predicts that it would cost $9.5 trillion over the course of 10 years but would cost even more over the following decade, with most of the benefits going to high-income individuals and families. (Politico)
  • In an op-ed, Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) called for reforms to the Federal Reserve’s structure and board member selection process, as well as criticizing the central bank’s recent interest rate hike, which he said was premature. (The New York Times)

Today’s Business Brief

  • Morgan Stanley will pay the Securities and Exchange Commission $8.8 million to settle allegations that one of its portfolio managers used prearranged trades to benefit some clients over others. (Bloomberg News)
  • The Federal Reserve’s new countercyclical capital requirements for big banks met a mixed reaction from banks and Wall Street critics. While both were supportive of the plan, some in the banking industry expressed concern that regulators would be overzealous in applying it and be overly cautious on credit risk. (American Banker)
  • Market uncertainty is hitting online lenders, who have had to raise borrowing costs as the Fed has raised interest rates and as volatility in bond markets continues. (The Wall Street Journal)

Today’s Chart Review

Mark Your Calendars (All Times Eastern)

No events scheduled.

No events scheduled.

Federal holiday — no events scheduled.


Democrats to SEC: Don’t give up on disclosure rule
Tim Devaney, The Hill

Democrats are pressing The Securities and Exchange Commission (SEC) to revive a rule that would require corporations to disclose their political spending. The government spending bill that Congress passed last week included a policy rider that blocks the SEC from issuing the controversial rule in the next fiscal year, but Democrats say there’s nothing to stop the Wall Street regulator from developing the regulation in the meantime.

Deficit Concern Fades in Congress, Among Voters and on the 2016 Trail
Janet Hook, The Wall Street Journal

Polls show concern about the deficit has dropped sharply. And one of the few 2016 candidates who talked much about the issue just dropped out of the race.

European Stocks Rise With Metals on Growth Optimism; Oil Climbs
Adam Haigh and Lucy Meakin, Bloomberg News

Standard & Poor’s 500 Index E-mini futures rose 0.2 percent. The equity gauge rose 0.9 percent yesterday, rebounding further from a two-month low, as a rally in commodity shares ignited broader gains.


Fed’s New Capital Plan Stokes Skepticism
John Heltman, American Banker

Both banks and Wall Street critics support a new Fed proposal to implement a countercyclical capital buffer on megabanks, but the two sides diverge on when and how the Fed would use it.

Congress May Be Coming for Fed’s Reserve Interest Powers Next
John Heltman, American Banker

The ease with which Congress was able to take money from the Federal Reserve to pay for a highway transportation bill — by slashing the dividend the central bank pays large banks — is likely to encourage lawmakers to take another dip into the Fed’s books next year.

Congress Just Abandoned Data Privacy, But Banks Can Restore It
Penny Crosman, American Banker

The issue had been clear: to what extent should companies protect customers’ and employees’ personal information as they compare notes about security incidents? Congress’ answer was equally clear: not that much. However, privacy experts still warn that the absence of consumer protections in the legislation — part of the omnibus spending bill approved last Friday on Capitol Hill — could backfire, making it easier for personally identifiable information to fall into the wrong hands while it circulates among private companies and federal authorities.

Alternative Investments

Morgan Stanley to Pay $8.8 Million Over SEC ‘Parking’ Claims
Matt Robinson, Bloomberg News

Morgan Stanley will pay $8.8 million to resolve U.S. Securities and Exchange Commission allegations that a portfolio manager used prearranged trades to favor some clients over others. The former Morgan Stanley portfolio manager, Sheila Huang, and Societe Generale SA mortgage-bond trader, Yimin Ge, who assisted in the scheme, agreed to be barred from the securities industry and pay penalties as part of the settlement of the SEC’s “parking” allegations, the agency said in a statement Tuesday.

Former Morgan Stanley Broker Galen Marsh Gets Probation for Illegal Tapping
Justin Baer, The Wall Street Journal

A former Morgan Stanley financial adviser was sentenced to three years of probation for tapping illegally into the Wall Street firm’s computer system and taking client information home with him, his lawyer said Tuesday. Galen Marsh was fired from his job in January for viewing and copying account information on other advisers’ clients, and in September pleaded guilty to one felony count of exceeding authorized access to a computer.

A Fear Trade That Didn’t Pay
John Carney, The Wall Street Journal

Warren Buffett has advised investors to “be fearful when others are greedy and to be greedy only when others are fearful.” While that might often be a good strategy, it has proved painfully wrong for investors who tried to pick up bank stocks on the cheap at the height of the financial crisis.

Housing & GSEs

CFPB: Complaints about Ocwen keep falling
Ben Lane, HousingWire

Long the target of regulators and consumers due to its mortgage servicing practices, Ocwen Financial finds itself in a unique position in a new report from the Consumer Financial Protection Bureau. The report is the CFPB’s latest snapshot report about its consumer complaint database, and Ocwen again sits in the top ten most-complained-about companies. That’s not what’s unique about Ocwen’s place in this month’s report.


Analysis undercuts Trump’s claim that his tax plan would cost him
Bernie Becker, Politico

GOP front-runner Donald Trump’s tax reform plan would cut taxes by $9.5 trillion over a decade, with most of the benefits flowing to high earners like Trump, according to a new analysis from the Urban-Brookings Tax Policy Center. Trump, a billionaire real estate magnate, has said that he would pay far more in taxes under his own plan. But the non-partisan Tax Policy Center said that the wealthiest would get a far greater tax cut than anyone else under Trump’s plan, a finding in line with other projections.

Watchdog pushes IRS to improve taxpayer authentication
Naomi Jagoda, The Hill

The IRS needs to improve its processes and procedures for authenticating taxpayers’ identities, the Treasury Inspector General for Tax Administration (TIGTA) said in a report published Tuesday. “It is critical that the methods the IRS uses to authenticate individuals’ identities ensure that tax information and services are provided only to individuals who are entitled to receive them,” Treasury Inspector General J. Russell George said in a news release.

Banking Systems & Currencies

Online Lenders Pinched by Market Jitters
Telis Demos, The Wall Street Journal

While the consumer-lending moves have been modest compared with the pain in other parts of the bond market, there are early signs of damage, including delayed deals, higher funding costs and declining prices for securities backed by the loans. In a sign that more borrowers will also have to pay higher borrowing costs, LendingClub Corp. said Tuesday it would raise interest rates charged to new borrowers by 0.25 percentage points, matching the earlier move by the Federal Reserve to increase its target short-term rate.

Opinions, Editorials & Perspectives

Bernie Sanders: To Rein In Wall Street, Fix the Fed
Sen. Bernie Sanders, The New York Times

To rein in Wall Street, we should begin by reforming the Federal Reserve, which oversees financial institutions and which uses monetary policy to maintain price stability and full employment. Unfortunately, an institution that was created to serve all Americans has been hijacked by the very bankers it regulates.

Here’s What Genuine Tax Reform Looks Like
John H. Cochrane, The Wall Street Journal

The first goal of taxation is to raise needed government revenue with minimum economic damage. That means lower marginal rates—the additional tax people pay for each extra dollar earned—and a broader base of income subject to tax.

Why Investors Are Right to Be Distrustful
Editorial Board, The New York Times

Like some other banks and financial firms, JPMorgan steers its clients into pricey, in-house mutual funds and hedge funds, even in some cases where lower-cost comparable ones are available. It ran into trouble for failing to disclose the practice to clients, as required by S.E.C. rules. That is a low standard, but it was too high for JPMorgan, where “undisclosed conflicts were pervasive,” according to the S.E.C.

‘Jumpstart GSE Reform’ will only prolong the conservatorships of Fannie and Freddie
Tim Pagliara, The Hill

The “Jumpstart GSE Reform” was poorly named. It would actually hinder chances for reform by requiring Congress to sign off on administration efforts to end the conservatorship of Fannie Mae and Freddie Mac.

Obsessing About Rules Won’t Improve Culture
Stephen J. Scott and Jeffrey Kupfer, American Banker

Following the financial crisis, a focus on culture is consistent with regulators taking a macroprudential approach to reduce systemic risk. Yet determining the “right” culture of financial institutions is still uncharted territory.

Caution by Company Officers Can Create Problems for Boards
Michael W. Peregrine, The New York Times

The pursuit of legitimate corporate strategic goals is increasingly running into the concerns of corporate officers who see themselves at greater personal legal risk if there are ever allegations of corporate misconduct. This governance challenge is a byproduct of new enforcement policies from the Justice Department and Securities and Exchange Commission on the individual culpability of corporate officials.

Research Reports, Issue Briefs & Case Studies

An Analysis of Donald Trump’s Tax Plan
Jim Nunns et al., Tax Policy Center

His plan would significantly reduce marginal tax rates on individuals and businesses, increase standard deduction amounts to nearly four times current levels, and curtail many tax expenditures. His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households.

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