General
White House Considering Derek Kan for Federal Reserve Board Seat
Saleha Mohsin, Bloomberg
The White House is considering Derek Kan, an undersecretary at the Department of Transportation, for one of two open seats on the Federal Reserve Board, according to two people familiar with the matter. Kan, a senior adviser to Transportation Secretary Elaine Chao since 2017, has served on the board of directors for Amtrak after being nominated by former President Barack Obama in 2015, and was previously general manager at ride-hailing company Lyft Inc.
‘Playing Catch-Up in the Game of Life.’ Millennials Approach Middle Age in Crisis
Janet Adamy and Paul Overberg, The Wall Street Journal
American millennials are approaching middle age in worse financial shape than every living generation ahead of them, lagging behind baby boomers and Generation X despite a decade of economic growth and falling unemployment. Hobbled by the financial crisis and recession that struck as they began their working life, Americans born between 1981 and 1996 have failed to match every other generation of young adults born since the Great Depression.
How a full-scale trade war could slam Trump in 2020
Ben White, Politico
President Donald Trump is doing everything he can to soften the economic blow of his trade battle with China, doling out billions of dollars in farmer bailouts and telling Americans that the Chinese are paying the tariffs he’s slapped on U.S. importers. It’ll be a tough trick to execute, especially if Trump can’t cut a deal and the fight escalates to a full-scale trade war. All available evidence so far suggests it is American businesses and consumers — not the Chinese — paying Trump’s tariffs.
For 2020 Democrats, a bull market for bashing Wall Street
Jim Saksa, Roll Call
In 2016, a New York City real estate developer who inherited hundreds of millions of dollars managed to win the presidency after convincing thousands of Rust Belt voters that the daughter of a textile salesman was an untrustworthy elitist because she gave a few paid speeches to a Wall Street investment bank. Four years later, some of the nearly two dozen Democrats running for president are retreading the populist path that runs roughshod over Wall Street.
Trump and 2020 Democrats Stake Out Dueling Views on China Trade
Vivian Salama and Ken Thomas, The Wall Street Journal
President Trump has worked to sell voters on the idea that he can negotiate better trade pacts. Now, as talks drag, he says only he is tough enough to walk away from a bad deal.
U.S. Seeks to Resolve Other Trade Disputes Amid China Impasse
William Maudlin et al., The Wall Street Journal
With U.S.-China trade talks at an impasse, President Trump moved Friday to tackle festering trade disputes with U.S. allies and North American neighbors. The White House released an order putting off a decision on proposed tariffs on imported cars and auto parts for about six months, giving the administration room to negotiate possible trade deals with the European Union and Japan.
New York Bill May Give Access to Trump’s Tax Returns—And Open Door to Target Others
Laura Davison, Bloomberg
New York is on the cusp of enacting a law that could help congressional Democrats gain access to President Donald Trump’s state tax returns, potentially opening the door for Congress to obtain tax records for any New York resident or business they want to investigate. That has some tax and ethics experts worried that Republicans and Democrats alike could use the provision and a similar one at the federal level to target political opponents or others to advance policy goals.
Mnuchin Defies Subpoena for President Trump’s Tax Returns
Richard Rubin, The Wall Street Journal
Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig defied congressional subpoenas by missing a Friday deadline to hand over six years of President Trump’s tax returns and audit records. Their decision was expected after weeks of rebuffing requests from Rep. Richard Neal (D., Mass.), the chairman of the House Ways and Means Committee, who invoked a statute that lets him obtain any taxpayer’s returns from the Treasury Department.
Fed’s Harker Says He’s Not in a Rush to Raise Rates
Paul Kiernan, The Wall Street Journal
Federal Reserve Bank of Philadelphia President Patrick Harker said Friday he’s not sure about the likely path of interest rates this year. Mr. Harker appeared to soften a position he gave in a speech May 6 in which he said he saw “one [rate] increase at most this year; possibly one, at most, next.”
Trump throws political lifeline to Trudeau with Canada trade deal
Jason Kirby, Financial Times
When Justin Trudeau announced the end of US steel and aluminium tariffs at a steel mill in Hamilton, Ontario on Friday, onlookers witnessed something they had not seen in weeks — the Canadian prime minister smiling. “This is just pure good news for Canadians,” said a beaming Mr Trudeau, standing before coils of steel.
Stocks Fall as Trade War Hits Tech; Bonds Steady: Markets Wrap
Todd White, Bloomberg
U.S. equity futures dropped alongside stocks in Europe as the fallout of White House moves against Chinese telco giant Huawei rippled through the technology industry. Bonds pared an earlier loss while crude oil advanced.
Banking
‘We were willing to shock historical norms’: Otting on OCC’s makeover
Rachel Witkowski, American Banker
For a year and a half, Comptroller of the Currency Joseph Otting has conducted an overhaul of key processes — reforming bank supervision, changing certain aspects of the comptroller’s role at the agency and aiming to cut $20 million in expenses by the end of 2019. Those efforts, which Otting admits took time for OCC staff to embrace, are related to his larger goal to create a “single supervisory platform” for all banks by next year.
Don’t Get Too Used to Higher Bank Deposit Rates
Allison Prang, The Wall Street Journal
The “good times” for bank depositors may not last much longer. Investors increasingly think the Federal Reserve is on course to cut interest rates at least once this year.
Credit quality declines at big US business lenders
Robert Armstrong, Financial Times
The quality of big US banks’ commercial lending portfolios is deteriorating for the first time in nearly three years, leaving investors to wonder whether there is worse to come should the ebullient economy slow. Non-performing loans at the 10 largest commercial lenders rose 20 per cent, or $1.6bn, in the first quarter, according to an analysis by the Financial Times.
Financial Products and Investments
As Thousands of Taxi Drivers Were Trapped in Loans, Top Officials Counted the Money
Brian M. Rosenthal, The New York Times
At a cramped desk on the 22nd floor of a downtown Manhattan office building, Gary Roth spotted a looming disaster. An urban planner with two master’s degrees, Mr. Roth had a new job in 2010 analyzing taxi policy for the New York City government.
‘They Were Conned’: How Reckless Loans Devastated a Generation of Taxi Drivers
Brian M. Rosenthal, The New York Times
The phone call that ruined Mohammed Hoque’s life came in April 2014 as he began another long day driving a New York City taxi, a job he had held since emigrating from Bangladesh nine years earlier. The call came from a prominent businessman who was selling a medallion, the coveted city permit that allows a driver to own a yellow cab instead of working for someone else.
25 attorneys general oppose CFPB’s payday rule revamp
Neil Haggerty, American Banker
Attorneys general from 24 states and Washington, D.C., are opposing the Consumer Financial Protection Bureau’s proposal to remove ability-to-repay requirements from the agency’s payday lending rule. In a comment letter Wednesday, the attorneys general, led by Washington, D.C., AG Karl Racine, said the bureau’s proposal is inconsistent with the Dodd-Frank Act, ignores states’ experience with payday and vehicle title lending, and undermines states’ efforts to protect consumers.
Housing and GSEs
POLITICO Pro Q&A: FHFA Director Mark Calabria
Katy O’Donnell, Politico
As the Trump administration prepares a highly anticipated housing finance reform plan, POLITICO sat down with the regulator at the center of it all, Federal Housing Finance Agency Director Mark Calabria, to talk about the future of Fannie Mae and Freddie Mac. A month after taking over the agency, Calabria — a former Senate Banking Committee aide and longtime critic of Fannie and Freddie — is plenty busy.
Trump says looking at alternatives to Fannie Mae, Freddie Mac
Roberta Rampton, Reuters
U.S. President Donald Trump said on Friday his administration was looking at alternatives to the conservatorship of mortgage giants Fannie Mae and Freddie Mac. “Fannie and Freddie can do a lot better than they’re doing. … And that’s why I recently directed the Department of Treasury and HUD (Housing and Urban Development) … to develop a framework for a modern housing finance system,” he told a gathering of real estate agents in Washington.
Taxes
Trump aides try to quash tax hike rumors amid infrastructure talks
Nancy Cook and Andrew Restuccia, Politico
The White House is reassuring conservative leaders that it has no plans to hike the gas tax to help fund a massive infrastructure package that President Donald Trump hopes to negotiate with Congress. Both acting White House chief of staff Mick Mulvaney and Russ Vought, Trump’s budget director, have repeatedly downplayed the possibility in private meetings with fiscal conservatives who are expressing alarm that Trump might embrace a massive tax increase. Concerns have specifically centered around a potential gas tax boost, an idea that Trump has flirted with during his presidency.
Why a Tax the U.S. Hasn’t Embraced Has Found Favor in Much of the World
Seema Jayachandran, The New York Times
You may not like paying taxes, but your burden will be even higher if others don’t pay their fair share. That, in a nutshell, goes a long way toward explaining why a value-added tax, or VAT, is used by just about every major country in the world except the United States.
Trump tax reform typo creates costly headache for US retailers
Alistar Gray, Financial Times
US retailers and restaurants say they are shelving hundreds of millions of dollars worth of refurbishment work, from lighting refits to paint jobs, because a mistake in the Trump tax reforms has pushed up the upfront costs. An apparent typo in the tax law that was rushed through Congress has yet to be fixed 18 months after it was introduced.
Financial Technology
Lack of Banking Options a Big Problem for Crypto Businesses
Paul Vigna, The Wall Street Journal
Banks, wary of the drug dealers and scammers attracted to the anonymity of cryptocurrency, shun many of the firms behind the electronic money, leaving them to turn to shadowy middlemen for payment processing and other financial services. In a recent high-profile example, $850 million in customer funds went missing after Bitfinex, the exchange behind the digital currency tether, handed it over to Panama-based Crypto Capital Corp. to process customer withdrawals, the New York attorney general said last month.
Ripple CEO Brad Garlinghouse explains why big banks should get into cryptocurrencies
Eric Johnson, Vox
Terms like “bitcoin” and “cryptocurrency” used to be linked with techno-anarchists who wanted an anonymous way to sell drugs and weapons on the internet, via online marketplaces like the Silk Road. So Ripple CEO Brad Garlinghouse was encouraged when regular people started speculating in tokens a few years ago.
A remittance fintech aims to be first of its kind to offer banking
Will Hernandez, American Banker
Pangea is on the cusp of becoming the first digital remittance company to offer a branded checking account closely tied to its core product. The Chicago-based fintech is adding the bank account option in response to customers that told the company they don’t feel a strong connection with their current financial institution, according to Shafiq Shariff, the vice president of product.
Opinions, Editorials and Perspectives
Restoring Reporting Requirements Key to Defending Opportunity Zones’ Promise
Shay Hawkins, Morning Consult
The United States has now seen 94 consecutive months of positive job growth, highlighting the strength of the overall economy. Despite this tremendous economic progress, however, some communities stay disconnected from the benefits of this expansion.
Bernie Sanders: Banks have been ripping off Americans for too long. I have a plan to end it
Sen. Bernie Sanders, CNN
The Federal Reserve recently reported that about half of Americans have virtually no wealth at all, with four in 10 unable to afford a $400 emergency expense. That means that if their car breaks down or their child gets sick, they have to charge those expenses to a credit card.
Research Reports
Monetary Policy, Housing Rents, and Inflation Dynamics
Daniel A. Dias and João B. Duarte, Board of Governors of the Federal Reserve System
In this paper we study the effect of monetary policy shocks on housing rents. Our main finding is that, in contrast to house prices, housing rents increase in response to contractionary monetary policy shocks.
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