Top Stories

  • Fannie Mae and Freddie Mac could start keeping their earnings as early as this week, as opposed to turning them over to the Treasury Department, as part of an agreement between the Federal Housing Finance Agency and the Trump administration. The agreement, which FHFA head Mark Calabria said he hoped would be completed by the end of the month, would allow Fannie and Freddie to retain a year’s worth of profits, about $20 billion. (The Wall Street Journal
  • The Federal Reserve Bank of New York is looking into why banks with an excess of cash didn’t lend to the overnight money market after overnight borrowing rates rose as high as 10 percent Tuesday, John Williams, president of the New York Fed, said in an interview. The soaring rates led the New York Fed to inject cash in the overnight repurchase market for the first time since the financial crisis. (Financial Times
  • China canceled a planned visit to American farms after a request from the United States, according to people familiar with the matter, suggesting that the cancellation didn’t stem from a breakdown in trade negotiations. U.S. Trade Representative Robert Lighthizer’s office didn’t know about the visits until after they were scheduled and asked the Chinese to cancel them, one of the people said. (Bloomberg

Chart Review

Events Calendar (All Times Local)

09/23/2019
The 2019 U.S. Treasury Market Conference
Brookings event: “The gender and racial diversity of the federal government’s economists” 10:30 am
09/24/2019
House Financial Services Committee hearing: “Oversight of the Securities and Exchange Commission: Wall Street’s Cop on the Beat” 10:00 am
House Financial Services Subcommittee on Diversity and Inclusion hearing: “Examining the Racial and Gender Wealth Gap in America” 2:00 pm
09/25/2019
House Financial Services Committee hearing: “Promoting Financial Stability: Assessing Threats to the U.S. Financial System” 10:00 am
Senate Banking Committee hearing: “Facilitating Faster Payments in the U.S” 10:00 am
House Financial Services Subcommittee on Housing, Community Development, and Insurance hearing: “Protecting Seniors: A Review of the FHA’s Home Equity Conversion Mortgage (HECM) Program” 2:00 pm
09/26/2019
House Financial Services Committee hearing: “Examining Legislation to Protect Consumers and Small Business Owners from Abusive Debt Collection Practices” 10:00 am
House Financial Services Committee Task Force on Financial Technology hearing: “The Future of Real-Time Payments” 2:00 pm
View full calendar

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General

In the Decade Since Madoff, Ponzi Schemers Try New Tactics
Angela Wang, The New York Times

It has been more than 10 years since Bernard L. Madoff was caught running the biggest Ponzi scheme in history, a case that became a cautionary tale for investors and a call to action for regulators. The Securities and Exchange Commission made changes in its enforcement division to better detect fraud, established specialized teams and even revamped its system for handling tips from the public.

Elizabeth Warren has just one plan
Emily Stewart, Vox

Sen. Elizabeth Warren’s unofficial campaign slogan is “she’s got a plan for that.” The reality is, she has just one. She wants to finish what she started when she first came to Washington.

The Coming Currency War: Digital Money vs. the Dollar
Dave Michaels and Paul Vigna, The Wall Street Journal

The future of money might be a digital version of the cash that’s already in people’s wallets—potentially upending the currency system that the world has known for many decades. Such a future, of course, might be a disappointment to many libertarians and tech-savvy investors who are pinning their hopes (and in some cases their money) on private cryptocurrencies such as bitcoin.

Trump Calls China a ‘Threat to the World’ as Trade Talks Approach
Alan Rappeport, The New York Times

President Trump said on Friday that China was a “threat to the world” and suggested Beijing was eager to make a trade deal because his tariffs were hurting the Chinese economy, coarsening his tone as the two countries prepared to resume negotiations. The Trump administration has closely tied economic policy and national security and, in remarks at the White House, Mr. Trump said that China was using money pilfered from the United States through unfair trade practices to build up its military.

At 10,000 and Counting, This Company Is Flooding the U.S. With Tariff Appeals
Josh Zumbrun et al., The Wall Street Journal

.S. companies have filed more than 16,000 requests for exemptions from the $200 billion tranche of tariffs on Chinese goods that the Trump administration imposed one year ago. Of those appeals, over 10,000 have come from just one company: Arrowhead Engineered Products Inc. of Blaine, Minn.

Americans Are Saving More, and That Isn’t Necessarily Good
Paul Kiernan, The Wall Street Journal

From the 1980s through 2007, household saving followed a predictable pattern. It typically rose after a recession as people paid down debt and rebuilt balance sheets, then declined as they grew more optimistic—and spendthrift.

New York Fed rejects Wall St criticism of response to repo turmoil
Joe Rennison and Brendan Greely, Financial Times

Willingness and preparedness in responding to situation called into question.

A Long-Despised and Risky Economic Doctrine Is Now a Hot Idea
Enda Curran and Ben Holland, Bloomberg

It’s like a design competition. Hardly anyone thinks central banks can fix a stalling world economy with their current tools. So some of the biggest names in finance are trying to invent new ones.

Gloomy European Data Hits Stocks as Bonds Advance: Markets Wrap
Samuel Potter, Bloomberg

U.S. equity futures fluctuated and European stocks retreated as disappointing data in the euro area overshadowed easing concern about trade relations between America and China. Treasuries rose and the common currency slid.

Banking

Credit Suisse Had Star Banker Followed Before He Joined Rival UBS
Jan-Henrick Foerster and Patrick Winters, Bloomberg

A made-in-Zurich banking drama spilled out into the open over the weekend after it emerged that ex-top Credit Suisse Group AG banker Iqbal Khan had been shadowed by the lender, leading to a confrontation in broad daylight in the Swiss financial capital. The private banker, hired by crosstown rival UBS Group AG last month, was followed by detectives trying to establish if he was attempting to poach ex-Credit Suisse colleagues to join him at the world’s top wealth manager, according to several people familiar with the situation.

Financial Products and Investments

Global recession fears grow among asset managers
Phillip Georgiadis, Financial Times

Views of 200 institutions that oversee a combined $4.1tn in assets paint gloomy picture.

How Private Credit Soared to Fuel Private Equity Boom
Kelsey Butler, Bloomberg Businessweek

Private equity is booming, thanks in large measure to private credit, a rapidly growing slice of the debt markets where ever-growing pools of capital supplied by large investors are mobilized outside of traditional lending channels. Private credit has supplied the leverage that’s helped private equity buy the businesses that have expanded its collective portfolio to its current $4 trillion. 

IEX Exchange to Exit Listings Business
Alexander Osipovich, The Wall Street Journal

IEX Group Inc. will abandon its struggling listings effort after the upstart exchange’s only listed company decided to jump ship, people familiar with the matter said. The move means that corporate listings will remain an effective duopoly of the New York Stock Exchange and Nasdaq Inc., despite a long effort to break into the business by IEX, whose founders were the heroes of Michael Lewis’s 2014 book “Flash Boys: A Wall Street Revolt.”

Housing and GSEs

As Democrats call for his resignation, HUD Secretary Ben Carson defends his controversial comments about transgender people
Tracy Jan, The Washington Post

Housing and Urban Development Secretary Ben Carson on Friday sent an agencywide email seeking to explain his controversial comments about transgender people during his recent visit to San Francisco. Many Democrats called for Carson’s resignation after The Washington Post reported Thursday on the housing chief’s pattern of making dismissive remarks about transgender people, including expressing concern this week about “big, hairy men” trying to infiltrate women’s homeless shelters, lamenting that society no longer seemed to know the difference between men and women, and saying that no one group deserved “special rights.”

Does Your Real Estate Broker Owe You a Refund?
Luis Ferré-Sadurní, The New York Times

When Jo Ellen Pellman and her roommate searched for an apartment in New York City this summer, the two women dug deep into their pockets: They paid brokers a total of $1,200 in nonrefundable application fees, or $400 for each apartment they applied for. But the roommates may get most of their money back, a rare happy outcome in today’s costly real estate market, after state regulators declared last week that real estate brokers must abide by a recently enacted $20-limit on application fees.

Taxes

I.R.S. Offers Deal to Small Insurance Companies Under Scrutiny
Paul Sullivan, The New York Times

The Internal Revenue Service has offered a small group of taxpayers a deal it hopes they won’t refuse: Pay all their back taxes, plus interest, and their case will be closed without penalties. The offer, which was announced on Monday, pertains to taxpayers who have captive insurance, a vehicle meant to allow companies to insure themselves against risks not covered by traditional means.

Church Groups Registering Voters Must Heed IRS Laws
Tom Gjelten, NPR

Faith groups are running their own voter registration efforts with an eye on the next election. A challenge arises in how to follow IRS rules that prohibit churches from taking political positions.

Financial Technology

How Facebook’s Libra fuelled push for central bank-run digital currencies
Martin Sandbu, Financial Times

Technical debate previously confined to research papers has now become an urgent matter.

NYSE Owner Launches Long-Awaited Bitcoin Futures
Alexander Osipovich, The Wall Street Journal

The owner of the New York Stock Exchange launched its long-delayed market for bitcoin futures Sunday, a high-profile bet that consumers, businesses and Wall Street will embrace cryptocurrencies. Trading in the new bitcoin futures began just after 8 p.m. EDT, with the first trade at $10,115.00, in line with the current price of bitcoin, said a spokesman for the exchange’s parent company, Intercontinental Exchange Inc.

Chinese Tech Companies Turn to Financial Services
Stella Yifan Xie, The Wall Street Journal

China’s biggest internet and technology companies are crowding into the financial-services business, hoping to monetize troves of data they’ve collected on millions of people in the country. Didi Chuxing, the country’s largest ride-hailing company, smartphone maker Xiaomi Corp. 1810 0.76% , web-search giant Baidu Inc.

Fintech’s small-business lending plan will rely on banks, credit unions
John Reosti, American Banker

Community banks and credit unions will soon have another option for making unsecured loans. StreetShares, a Reston, Va., peer-to-peer lender that has moved into small business lending, is set to debut a platform to allow lenders to make small-dollar loans without collateral. 

Opinions, Editorials and Perspectives

Wayfair Revenues Come Well Short of Promises
Andrew Wilford, Morning Consult

Many states looked forward to a windfall of internet sales tax revenue in the wake of last year’s Supreme Court case that expanded their taxing power, but nationwide, budget projections are coming up billions of dollars short. The massive expansion of taxing power hasn’t led to big tax receipts for state governments, even as thousands of small businesses across the country now have to comply with more onerous tax filing administrations. 

Banks Are Still Boys’ Clubs
Elisa Martinuzzi, Bloomberg

So divergent have their fortunes been since the financial crisis, European banks tend to trail their Wall Street peers on most of the metrics investors care about. Gender diversity at the top might be the next lagging indicator. There are rare bright spots in Europe. Royal Bank of Scotland Group Plc on Friday promoted Alison Rose to chief executive officer, the first woman to run a big U.K. lender. Spain’s Banco Santander SA is chaired by Ana Botin. Cast the net a bit wider and things start to look thin.

Research Reports

Threats to Central Bank Independence: High-Frequency Identification With Twitter
Francesco Bianchi et al., The National Bureau of Economic Research

This paper presents market-based evidence that President Trump influences expectations about monetary policy. The main estimates use tick-by-tick fed funds futures data and a large collection of Trump tweets criticizing the conduct of monetary policy. 

The Most Powerful Women in Banking
American Banker

From wrestling with the potential impact of Brexit to charting a course for responsible artificial intelligence, this year’s Most Powerful Women in Banking have faced many challenges during the past year. Citigroup’s Jane Fraser may have had one of the toughest jobs.

Morning Consult