Morning Consult Finance: Fed to Consider Extending Dividend Cap on Large Banks



Top Stories

  • The Federal Reserve said it will decide within two weeks if the central bank will extend the dividend payment cap and share buyback restrictions on the largest U.S. banks, which are currently scheduled to expire at the end of the third quarter. The Fed also released two hypothetical situations for stress tests, which have some similarities to the economic situation caused by the coronavirus pandemic. (Bloomberg)
  • Lawmakers and aides said they plan to introduce a spending bill in the House today, which reflects a bipartisan agreement in both the House and the Senate, to avoid a government shutdown in October. Although Democrats wanted a bill that would keep the government funded into 2021, the bill will likely only cover through mid-December. (The Wall Street Journal)
  • The number of people applying for unemployment insurance again topped the pre-pandemic record dating to the 1960s for the 26th week, at 860,000. The total number of people claiming unemployment insurance hit 29.7 million as of Aug. 29, an increase of 100,000. (The Washington Post)

Chart Review

Events Calendar (All Times Local)

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
09/23/2020
Bloomberg event: “Bloomberg Equality: Now or Never: Inclusion in the Age of Disruption”
Tax Foundation event: “Creating a Telework-Friendly Tax Code” 12:00 pm
View full calendar


Watch the Webinar On Demand – The Gen Z Threat

Recently, Morning Consult hosted a webinar breaking down our latest report, Gen Z’s Most Loved Brands of 2020.

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

‘Two steps backward.’ With jobless pay but still no job, financial stress takes a toll.
Gillian Friedman, The New York Times

Marcos Quintana, 29, was laid off in December from his job as a seasonal custodian at a school in Bakersfield, Calif. He expected to find new work quickly, but the pandemic hit, and many custodial jobs dried up. He started receiving $200 a week in state unemployment benefits, as well as a $600 boost from the federal government. 

Biden Highlights Middle Class Economic Pain in Town Hall
Tyler Pager and Misyrlena Egkolfopoulou, Bloomberg

Democratic presidential candidate Joe Biden highlighted the financial pain he said middle-class Americans are facing due to the economic crisis and the coronavirus at a drive-in televised town hall, one of the few chances he has had to interact with voters in person. Biden repeatedly contrasted his middle-class roots with Trump’s family wealth, saying his life experience means he understands Americans’ fears.

Many business owners are too deeply in debt to survive without rent concessions.
Stacy Cowley, The New York Times

Main Street businesses — especially music clubs, gyms, restaurants, bars and others that were forced to close by the coronavirus pandemic — are trying to figure out how, or if, they can dig out of debt. Nearly 73,000 businesses have closed permanently since the pandemic took hold, according to an analysis by Yelp.

What are the Fed’s new hurdles for rate hikes? Only the Fed knows
Ann Saphir and Howard Schneider, Reuters

The U.S. Federal Reserve on Wednesday effectively established a three-part test that must be met before it will raise interest rates: the economy must be at “maximum employment,” inflation must have “risen to 2 percent” and it must be “on track to moderately exceed 2 percent for some time.” It may be years before the economy reaches any of those hurdles, let alone all three, fresh forecasts released by the Fed on Wednesday suggest.

Lacking Tools, Fed Pins Hopes on Powerful Words
Greg Ip, The Wall Street Journal

Can words take the place of actions? The Federal Reserve hopes so. 

Unable to Pay Rent, Small Businesses Hope for a Deal With Their Landlord
Stacy Cowley, The New York Times

In March, when the Boston restaurateur Garrett Harker and his partners shut down their seven restaurants after Massachusetts issued lockdown orders, Mr. Harker assumed the closures would be painful but temporary. Six months later, three of Mr. Harker’s restaurants, including the flagship Eastern Standard — once described as the “perfect restaurant” by The Boston Globe’s food critic — remain shuttered.

European Stocks Fluctuate, U.S. Futures Steady: Markets Wrap
Cecile Gutscher and Anchalee Worrachate, Bloomberg

Stocks in Europe fluctuated and U.S. futures were mixed as investors settled into a holding pattern while awaiting new catalysts. Treasuries nudged higher and the dollar slipped.

Banking

New racial justice target: Defund the police foundations
Zachary Warmbrodt, Politico 

Wall Street banks and other big corporations are under pressure to cut ties with nonprofit police foundations, which racial justice activists say are increasingly funding law enforcement practices that fuel violence against Black people. Bank of America, Wells Fargo and Chevron are among the businesses that watchdogs are targeting for making donations to the privately run foundations associated with local police departments.

Senator Warren blasts U.S. CEOs for ’empty’ social promises
Pete Schroeder, Reuters

U.S. Senator Elizabeth Warren on Thursday blasted U.S. business leaders, including JPMorgan Chase & Co’s Jamie Dimon and Walmart’s Doug McMillon, for falling short on a “splashy” promise to look beyond profits when running their businesses. Writing to the CEOs in their capacity as former and current chairs respectively of the Business Roundtable, Warren, a Democrat, said the country’s top business group had been lobbying for “narrow, short-term interests” rather than the broad group of stakeholders it promised to serve last year.

Ex-JPMorgan Trader Gets 8 Months in Prison for Bid-Rigging
Chris Dolmetsch, Bloomberg

A former JPMorgan Chase & Co. trader was sentenced to eight months in prison for his role in a foreign-exchange bid-rigging scheme, the second person convicted at trial in a sweeping government crackdown. Akshay Aiyer was sentenced Wednesday by U.S. District Judge John Koeltl in Manhattan. Aiyer was found guilty last November of conspiring with traders at other banks in chat rooms, on telephone calls and at social gatherings to coordinate bids and fix prices of African, European and Middle Eastern currencies while leading customers to believe they were competing with each other.

Financial Products and Investments

BlackRock, the world’s largest asset manager, may never be 100% back in the office, CEO Fink says
Pippa Stevens, CNBC

As work from home stretches on, BlackRock CEO Larry Fink said he doesn’t ever foresee all employees returning to the office. “I don’t believe BlackRock will be ever 100% back in office,” he said Thursday at the Morningstar Investment Conference. 

Warren, Schumer introduce plan for next president to cancel $50,000 in student debt
Alexander Bolton, CNBC

Progressive Sen. Elizabeth Warren (D-Mass.) and Senate Democratic Leader Charles Schumer (N.Y.) introduced a plan Thursday calling for the next president of the United States to cancel up to $50,000 in debt for student loan borrowers in 2021. “Broadly canceling student loan debt will improve the lives of tens of millions of Americans, give a boost to our economy during this pandemic and beyond and even help close the racial wealth gap,” Warren said in a conference call with reporters.

Housing and GSEs

Millions Are House-Rich but Cash-Poor. Wall Street Landlords Are Ready.
Ryan Dezember, The Wall Street Journal

Americans with mortgages have accumulated nearly $10 trillion in home equity thanks to a decade of rising home prices. Yet millions of them have fallen behind on mortgage payments and risk losing their houses. 

Average U.S. 30-year mortgage rate rises from all-time low
Kathleen Howley, HousingWire

Average mortgage rates for a 30-year fixed mortgage increased slightly to 2.87% this week, the second-lowest on record, rising one basis point from last week’s all-time low of 2.86%, while the less-popular 15-year rate fell to a new low of 2.35%, Freddie Mac said on Thursday. The 30-year rate has broken records nine times since March because of a Federal Reserve bond-buying program that has poured about $1 trillion into the mortgage markets.

Taxes

Companies Brace for Higher Taxes After U.S. Election
Mark Maurer and Kristin Broughton, The Wall Street Journal

Finance executives at major U.S. companies expect corporate tax rates to rise following the presidential election in November—no matter who wins. Seventy percent of executives anticipate higher tax rates after the poll, reflecting expectations that the government will have to fund recent stimulus spending, tax deferrals and other federal coronavirus-related relief, according to a survey by PricewaterhouseCoopers released Tuesday.

Deal Reached in N.J. for ‘Millionaires Tax’ to Address Fiscal Crisis
Tracey Tully, The New York Times

New Jersey officials agreed on Thursday to make the state one of the first to adopt a so-called millionaires tax to alleviate shortfalls caused by the pandemic, intensifying a national debate over whether to increase taxes on the rich to help address widening income gaps. Gov. Philip D. Murphy, a Democrat, announced a deal with legislative leaders to increase state taxes on income over $1 million by nearly 2 percentage points, giving New Jersey one of the highest state tax rates on wealthy people in the country.

Financial Technology

Can Digital Mortgage Platforms Reduce Discrimination in Lending?
Jennifer Miller, The New York Times

In 2015, Melany Anderson’s 6-year-old daughter came home from a play date and asked her mother a heartbreaking question: Why did all her friends have their own bedrooms? Ms. Anderson, 41, a pharmaceutical benefits consultant, was recently divorced, living with her parents in West Orange, N.J., and sharing a room with her daughter. 

Even Fidelity’s $230 Billion Star Manager Has Robinhood Anxiety
Erik Schatzker, Bloomberg

Will Danoff has been wondering why billions of dollars keep flowing out of the Contrafund, the giant mutual fund he manages at Fidelity Investments. Performance isn’t the problem. He’s up 21% this year, trouncing the S&P 500’s 6.2% return.

Opinions, Editorials and Perspectives

Clearing the Air About Stimulus Funds and Direct Deposit
Jane Larimer, Morning Consult

As weeks turn to months and COVID-19 proves to be one of the most staggering challenges of our lifetime, Americans continue to persevere. On behalf of the entire ACH Network, Nacha is proud to play a role in that. 

Distorted jobs numbers are misguiding stimulus policy
Leo Hindrey Jr., Financial Times

The way the Bureau of Labor Statistics calculates the unemployment rate, a key indicator US lawmakers use to gauge the health of the economy, has always been misleading due to the volume of unemployment categories it ignores. But now, more than ever, these failings must be addressed to ensure stimulus aid bills are not crafted around distorted BLS numbers that fail to adequately address the severe economic pain still being felt throughout the country.

Small businesses can drive the economic recovery — with our help
Steve Hamilton, The Washington Post

With so much tragedy to absorb in recent months, it’s been easy to overlook an emerging crisis. While we’ve been preoccupied by the mounting coronavirus death toll and record unemployment, millions of small businesses have been teetering on the brink.

Research Reports

Reservation Benefits: Assessing Job Acceptance Impacts of Increased UI Payments
Nicolas Petrosky-Nadeau, Federal Reserve Bank of San Francisco

Job acceptance decisions weigh the value of a job against remaining unemployed. A reservation level of benefit payments exists in this dynamic decision problem at which an individual is indifferent between accepting and refusing an offer.

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