Morning Consult Finance: Fed Projects It Will Keep Interest Rates Near Zero Through 2023



Top Stories

  • The Federal Reserve expects to keep interest rates near zero through 2023, and Fed Chair Jay Powell stressed the need for Congress to provide more fiscal support to consumers due to the pandemic. As part of the Fed’s new tactic to target higher inflation by keeping interest rates low, the central bank promised not to hike interest rates until “inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” (Politico)
  • President Donald Trump said in a news conference that he agrees with most of a compromise $1.5 trillion House proposal on a new economic relief package, a price tag significantly higher than the $650 billion that Senate Republicans wanted. On Twitter, Trump pushed Republicans to “Go for the much higher numbers” in regards to a new bill. (Bloomberg)
  • The way in which many financial institutions could be required to report small-business loan data on minority- and women-owned businesses under a new Consumer Financial Protection Bureau proposal drew criticism from community banks over how many small financial institutions would be included in the rulemaking. The rulemaking, which was mandated in Dodd-Frank but has yet to be implemented, is taking on increasing importance during the coronavirus pandemic, as the lack of demographic data has made oversight of some parts of the Paycheck Protection Program nearly impossible, according to two oversight committee sources. (Morning Consult)

Chart Review

Events Calendar (All Times Local)

09/17/2020
SIFMA Equity Market Structure Conference
House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets hearing: “Insider Trading and Stock Option Grants: An Examination of Corporate Integrity in the Covid-19 Pandemic” 12:00 pm
Larry Kudlow, director of the National Economic Council, at the Economic Club of New York 2:00 pm
09/21/2020
AEI event: “A global asset price bubble in a weak world economy” 2:00 pm
09/22/2020
House Financial Services Committee hearing: “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response” 10:30 am
Women in Housing and Finance event: “Discussion with Kris Kully, Doncella Young, Beth Zorc and the newly appointed FHA Commissioner, on issues of Public Policy” 12:00 pm
View full calendar


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You can access a recording of the webinar here for insight into how the pandemic is transforming Gen Z’s relationship with brands, and how brands should adapt to meet the changing expectations of this generation of the future.

General

Why Unemployment Claims May Be Overcounted by Millions
Ben Casselman, The New York Times

Economic statistics were never designed to measure the sudden shutdown and restart of large segments of the U.S. economy. Still, if there is one question that the government seemingly should be able to answer, it is this: How many Americans are receiving unemployment benefits?

Steady Number of Unemployment Claims Points to Slowing Jobs Recovery
Eric Morath, The Wall Street Journal

The number of people applying for jobless aid is expected to have held at a historically high level last week, as layoffs remain elevated despite signs of a broader labor-market recovery. Weekly initial claims for jobless benefits through regular state programs have stabilized just below 900,000 in recent weeks. 

Businesses with ‘windfall’ pandemic profits are showering them on investors, study finds
Christopher Ingraham, The Washington Post

Here’s an arresting statistic: Back at the beginning of September, if Amazon CEO Jeff Bezos were to have given each of his 876,000 employees a $105,000 bonus, he would have been left with roughly as much wealth as he had in mid-March, at the start of the pandemic. That figure comes from a new Oxfam report highlighting the staggering amount of money being made in the top echelons of American business at a time of widespread death and economic devastation.

Powell Says Fed Working on Changes to Main Street Program
Catarina Saraiva, Bloomberg

Federal Reserve Chair Jerome Powell said the Fed will be making some changes to its Main Street Lending Program, which is aimed at helping small- to mid-sized companies and nonprofits that have struggled during the pandemic. Despite many private businesses struggling economically because of shutdowns or a drop in customers during the pandemic, the fund hasn’t seen a large take-up.

Europe Stocks Retreat With U.S. Futures After Fed: Markets Wrap
Cecile Gutscher, Bloomberg

European stocks fell with U.S. futures on Thursday after Federal Reserve Chair Jerome Powell stopped short of offering any concrete new steps on monetary stimulus. The dollar was steady, while Treasuries ticked up.

Banking

JPMorgan Stops Paying for Junior Traders to Take Uber to Work
Michelle F Davis, Bloomberg

JPMorgan Chase & Co. is no longer allowing junior sales and trading staff to take Uber to work on the company dime, reversing a measure enacted early in the coronavirus pandemic to help workers feel comfortable commuting to the office. The change was communicated by managers last week, according to people with knowledge of the matter, who asked not to be identified discussing an internal policy.

Deutsche Bank Tells U.S. Staff They Can Wait Until Mid-2021 to Return to Office
Julia-Ambra Verlaine, The Wall Street Journal

Deutsche Bank AG DB 2.09% told U.S. employees they don’t have to return to the office until July 2021. In a town hall Wednesday, Americas chief of staff Matthias Krause outlined the bank’s plans around bringing employees back to work. 

Activist ValueAct played a key role in speeding up Citigroup CEO’s retirement, sources say
Hugh Son, CNBC

Three years ago, Michael Corbat strode onto the stage of a ballroom in midtown Manhattan and proclaimed that a new day had arrived at Citigroup. The bank had set up the July 2017 event, its first investor meeting since the 2008 financial crisis nearly sank the firm, as a splashy reset for the shareholder community.

Bank Executives Offer Some Optimism While Their Stocks Still Lag
Elaine Chen, Bloomberg

U.S. bank executives expressed some optimism this week. Investors were reluctant to join them. Bank of America Corp. is seeing consumer spending catch back up with last year’s pace, Chief Executive Officer Brian Moynihan said Tuesday at an industry conference.

Revlon Lenders Want Expert to Look at Citi’s $900 Million Error
Chris Delmetsch, Bloomberg

A group of Revlon Inc. creditors who were sued by Citigroup Inc. to recover nearly $900 million in funds mistakenly sent to them last month want an expert to weigh in on whether they should have known the transfer was in error. Citigroup, which is the administrator on the loan to Revlon, says an employee error caused it to mistakenly pay out a sum roughly 100 times larger than the interest payment the creditors expected. 

Citigroup Employee Who Operated QAnon Website on Leave
William Turton and Jennifer Surane, Bloomberg

Jason Gelinas, an employee at Citigroup Inc., has been placed on paid leave pending an internal investigation after he was identified as the operator of the most prominent website dedicated to the QAnon conspiracy theory, according to three people familiar with the matter. Gelinas, who lives in New Jersey, was identified Sept. 10 as the operator of the website QMap.pub and its associated mobile apps by the fact-checking site Logically.ai. 

Financial Products and Investments

SEC Bolsters Safeguards Against Penny-Stock Fraud
Alexander Osipovich, The Wall Street Journal

The Securities and Exchange Commission is beefing up protections against fraud and manipulation in the lightly regulated market for over-the-counter stocks. The SEC on Wednesday approved a change to its rules that would largely prevent brokers from quoting prices for OTC stocks unless the companies issuing such shares released up-to-date financial information to the public.

Private equity owners pile on leverage to pay themselves divis
Joe Rennison, Financial Times

TPG, Apax load companies with loans, seizing on strong demand for high-yielding debt.

Housing and GSEs

Calabria to Congress: If you don’t like crisis fee, then fund GSEs
Neil Haggerty, American Banker

 Federal Housing Finance Agency Director Mark Calabria defended Fannie Mae and Freddie Mac’s controversial “adverse market” fee at a virtual hearing with House lawmakers on Wednesday. Calabria testified before the House Financial Services Committee, where members of both parties questioned the fee imposed on refinancings.

A Million Mortgage Borrowers Fall Through Covid-19 Safety Net
Andrew Ackerman, The Wall Street Journal

About one million homeowners have fallen through the safety net Congress set up early in the coronavirus pandemic to protect borrowers from losing their homes, according to industry data, potentially leaving them vulnerable to foreclosure and eviction. Homeowners with federally guaranteed mortgages can skip monthly payments for up to a year without penalty and make them up later. 

Taxes

Where Trump and Biden Stand on Tax Policy
Richard Rubin, The Wall Street Journal

There is an enormous gulf between the presidential candidates on tax policy—with trillions of dollars at stake over the next decade. President Trump is campaigning to continue his administration’s biggest legislative achievement, the 2017 tax law, which lowered taxes on businesses and individuals while increasing budget deficits. 

Senators offer disaster tax relief bill
Naomi Jagoda, The Hill

A bipartisan group of senators on Wednesday offered legislation to provide tax relief to individuals and businesses affected by natural disasters, such as August’s derecho in the Midwest, the wildfires in western states, and Hurricanes Laura and Isaias. The bill was introduced by Iowa Sens. Joni Ernst (R) and Chuck Grassley (R), California Sen. Dianne Feinstein (D) and Louisiana Sens. Bill Cassidy (R) and John Kennedy (R) — all of whom represent states impacted by disasters in recent months.

Financial Technology

Revolut saga spotlights concerns over digital banks’ service standards
Lindsay Cook, Financial Times

Account holder tells of eight-week battle to recover £150,000 bank transfer.

Opinions, Editorials and Perspectives

A $1.5 Trillion Compromise That Congress’s Leaders Can’t Ignore
Jay C. Shambaugh, The New York Times

The pandemic brought on the most quick and severe recession that the United States has ever experienced. The economy shed over 22 million jobs in just two months, and contracted at an annualized rate of 33 percent in the second quarter.

The Real Cost of Biden’s Plans
Casey B. Mulligan, The Wall Street Journal

Presidential candidate Joe Biden has pledged that his administration will impose no new taxes on Americans making $400,000 or less and that there will be “no raising taxes . . . on mom and pop businesses.” Both his policy platform and his record belie that promise.

Powell Becomes the Anti-Volcker
The Editorial Board, The Wall Street Journal

The Federal Reserve confirmed again Wednesday that we live in a bizarre monetary world by issuing two paradoxical predictions. The sages of the Open Market Committee (FOMC) said the economy is recovering faster than they had thought, but that interest rates will nonetheless have to stay near zero through 2023.

Fed’s New Policy Approach Needs Some More Explaining
Tim Duy, Bloomberg

It has only been three weeks since Federal Reserve Chair Jerome Powell unveiled a new approach to monetary policy, letting inflation and employment rates run higher and for longer than the central bank would have done in the past before pulling in the purse strings. And while the stock market has come off its highs since then, this new policy framework should prove positive for riskier financial assets over the longer term because it means the Fed will be much less inclined to prematurely get in the way of economic gains relative to past recoveries.

How a tweak to the Federal Home Loan banks could save cities
Francis X. Suarez and Frank Scott, American Banker

Today’s mayors face the dual challenge of expanding civic engagement and economic opportunity for all of their residents. This is especially acute now with the spread of COVID-19, a pandemic that affects everyone but devastates the most vulnerable.

Research Reports

Measuring Global Financial Market Stresses
Jan J. Groen et al., Federal Reserve Bank of New York 

We propose measures of financial market stress for forty-six countries and regions across the world. Our measures indicate that worldwide financial market stresses rose significantly in March following the widespread economic shutdowns in the wake of the COVID-19 pandemic.

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