• President-elect Joe Biden will name Gary Gensler as head of the Securities and Exchange Commission, according to two sources familiar with the matter, signaling tighter oversight of Wall Street in the new administration. Gensler previously served as chair of the Commodity Futures Trading Commission under President Barack Obama’s administration, imposing new swaps trading rules mandated by Congress in the aftermath of the 2008 financial crisis during his time with the agency, and more recently he has led Biden’s transition planning for financial policy. (Reuters) 

• Brian Brooks is expected to step down from his post as the acting head of the Office of the Comptroller of the Currency this week, leaving Blake Paulson, the agency’s chief operating officer, in charge for the remainder of the Trump administration, a source familiar with the matter confirmed to Morning Consult and Politico first reported. An agency spokesperson said he would “not confirm such rumors,” and a Coinbase Global Inc. spokesperson told Morning Consult that despite speculation, Brooks currently has no plans to return to the cryptocurrency exchange. (Politico)

• Sen. Sherrod Brown (D-Ohio) said that as chairman of the Senate Banking Committee, he anticipates calling in top Wall Street chiefs for public hearings and will take a tougher tone toward the banking industry. Brown also said he would ramp up oversight of the private equity industry, and that legislation geared toward the industry is a possibility. (Bloomberg) 

• Biden is expected to unveil a proposal tomorrow on further coronavirus economic relief, including $2,000 stimulus payments, an extension of enhanced unemployment insurance and funds for vaccine distribution, among other measures. Biden aides have been briefing congressional staffers, and want bipartisan support for the measure instead of using a budgetary tool that would allow him to push through the legislation using only Democratic votes, according to several people with knowledge of the discussions. (The Washington Post) 

Forgiving Student Debt by Executive Action Is Illegal, Trump Lawyers Say
Josh Mitchell, The Wall Street Journal

Trump administration lawyers have concluded that it would be illegal to forgive all or some of Americans’ student debt through an executive action—as congressional Democrats have urged the incoming Biden administration to do—arguing that such a move would require Congress to pass a law. Education Department lawyers lay out their reasoning in a memo dated Tuesday to Betsy DeVos, who resigned last week as education secretary.

Fed official calls treatment of Capitol rioters ‘most stark example of racism’
Victoria Guida, Politico 

A senior Federal Reserve official on Tuesday made an unusually direct condemnation of how Black Americans are treated by law enforcement, saying if rioters at the Capitol building last week had been Black, they would not have come out alive. “If those were Black militants, armed militants, storming the U.S. Capitol, I think they’d all be dead right now,” Minneapolis Fed President Neel Kashkari said at one of a series of events that the Fed system has been hosting on racism and the economy. 

Wall Street Visionaries Provide Chilling Views on Next Big Risk
Sonali Basak, Bloomberg

Few predicted—and most were unprepared for—the enormous challenges that have kicked off this decade: pandemic, economic collapse, social unrest, and political divisions around the world. Yet it’s the job of a Wall Street executive to factor in all the unknowns. 

Trump’s parting gift to federal workers: Thinner paychecks
Heather Long, The Washington Post

More than a million employees of the federal government and some private-sector workers are seeing smaller paychecks in January as they must now repay the Social Security taxes that President Trump delayed collection of from September through December. Trump forced most federal workers who fall under the executive branch, including the military, to take the tax deferment.

U.S. Job Postings End 2020 Well Below Pre-Pandemic Levels
Sarah Chaney Cambon, The Wall Street Journal

The number of help-wanted ads increased more slowly in December, evidence the labor market is losing momentum amid rising coronavirus cases. Available jobs posted online were down 10.6% at the end of December from a year earlier, according to job-search site Indeed’s measure of job posting trends.

Fed’s Esther George cautions that inflation could rise faster than expected
Jeff Cox, CNBC

Long-dormant inflation could rebound more quickly than anticipated as the economy shakes off the effects of the coronavirus pandemic, Kansas City Federal Reserve President Esther George said Tuesday. Current measures show that inflation remains subdued, as it has been for most of time since the financial crisis of 2008.

Biden Trade Policy to Center on Workers, USTR Nominee Says
Yuka Hayashi, The Wall Street Journal

President-elect Joe Biden’s trade policy will focus on helping American workers by ensuring trade agreements protect and enhance U.S. jobs—and not just ensure low prices of imported goods for consumers, his nominee for the top trade-policy job said Tuesday. Katherine Tai, in her first speech since Mr. Biden nominated her for U.S. Trade Representative, said the new administration’s policy priorities also include confronting China over its trade practices and enforcing the U.S.-Mexico-Canada Agreement signed by President Trump last year with bipartisan support.

China wants to open up its financial markets to foreigners — but it’s a long road ahead
Evelyn Cheng, CNBC

Financial institutions are betting on more business opportunities in China’s finance industry, which Beijing is eager to crack open — even if analysts say major changes are a long way off. Regardless of the coronavirus pandemic or geopolitical tensions, Chinese authorities have stuck to plans to increase the ability of foreigners to participate in the local financial market.

Dollar Climbs; Europe Stocks, Futures Fluctuate: Markets Wrap
Adam Haigh and Cecile Gutscher, Bloomberg

The dollar strengthened, while European stocks and U.S. equity futures fluctuated as investors focused on comments from the Federal Reserve and European Central Bank about the outlook for monetary stimulus. In Europe, governing council member Francois Villeroy de Galhau said the ECB will keep an easy stance for as long as needed, and U.S. investors took comfort from remarks by two Federal Reserve officials that pushed back on the possibility of tapering bond purchases anytime soon.

Wells Fargo establishes new office to oversee consumer practices
Kevin Wack, American Banker

Wells Fargo is establishing a new division that will oversee the bank’s interactions with consumers — everything from providing advice on how products are priced to reviewing complaint data. The Office of Consumer Practices will be led by Michael Lipsitz, a lawyer who joined the $1.9 trillion-asset bank last year from Santander USA, and who serves as chief regulatory and policy affairs executive at Wells Fargo.

More of Trump’s Banks Cut Ties as Backlash Grows Over Violence
Shahien Nasiripour, Bloomberg

Donald Trump’s tumultuous relationship with the financial industry is once again under pressure after his top creditor, his hometown bank and even his mortgage lender spurned him in the wake of riots at the U.S. Capitol.  The question is whether his other banks and financial backers — including giants Capital One Financial Corp. and JPMorgan Chase & Co. — plan to keep him as a client.

Trader Charged With Ex-Goldman Banker Fights Extradition
Jonathan Browning, Bloomberg

A securities trader fighting extradition on U.S. insider-trading charges told a London court that British prosecutors dropped their own investigation because there was “insufficient evidence.” Joseph El Khouri, who holds dual Lebanese-British citizenship, was charged by U.S. authorities with making almost $2 million trading on inside information.

The SEC Undermined a Powerful Weapon Against White-Collar Crime
Lydia DePillis, ProPublica

After agonizing about the decision, the top financial adviser had finally gone to the Securities and Exchange Commission with proof of wrongdoing at his firm. He’s blunt about why: the roughly $50 million he stood to make under the agency’s whistleblower program, his calculation based on what kind of settlement he thinks the government could extract. It would be enough to offset any lost earnings in the likely event that his former colleagues figured out he’d turned them in and blacklisted him, even at the salary level he’d attained after a long career in a lucrative business.

SPAC Mania Gives Early Investors Steady Returns With Little Risk
Amrith Ramkumar, The Wall Street Journal

Sudden excitement about the flurry of startups going public through so-called blank-check companies is enriching some of the biggest players in finance, particularly hedge funds. The gains come through the unique rights given to early investors in special-purpose acquisition companies, or SPACs, which look to acquire promising startups and take them public.

Global Banks Warn of Market Chaos If Court Abolishes Libor
William Shaw and Josh Rosenblatt, Bloomberg

Some of the world’s biggest banks are urging a U.S. judge not to immediately terminate Libor after a group of borrowers filed suit claiming the benchmark was the work of a “price-fixing cartel.”

Vanguard’s assets hit record $7tn
Chris Flood, Financial Times

World’s second largest asset manager gathered net inflows of $186bn during 2020’s volatile market conditions.

Trump Team’s Final Act on Fannie-Freddie Leaves Fates to Biden
Joe Light and Saleha Mohsin, Bloomberg

The Trump administration is poised to unveil last-minute changes to Fannie Mae and Freddie Mac that would allow the mortgage giants to retain significantly more capital, while leaving many of the thorniest issues on releasing the companies from federal control to President-elect Joe Biden, said four people familiar with the matter. The revisions — expected to be announced as soon as Thursday — would modify the contracts that govern taxpayers’ backstopping of Fannie and Freddie. 

Mortgage refinance demand spikes 20% as borrowers fear missing out on record-low rates
Diana Olick, CNBC

After setting more than a dozen record lows last year, mortgage rates began 2021 on an upward climb, and that lit a fire under borrowers, fearing they might miss the last of the lowest rates. Mortgage applications to refinance a home loan spiked 20% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. 

Fannie Mae’s Henry Cason becomes CEO of FinLocker
Kelsey Ramírez, HousingWire

Following other recent moves from the government-sponsored enterprises to the private sector, former Fannie Mae Head of Digital Products Henry Cason announced his move to FinLocker, a consumer-permissioned personal financial assistance tool. Cason will serve as CEO and succeed the company’s cofounder and CEO Peter Esparrago, who will become FinLocker’s executive chairman and will continue to lead key strategic business relationships.

Tax Season Is Coming, and It Could Be Messy
Richard Rubin, The Wall Street Journal

The annual tax-filing season is about to start, and it could be much messier than usual. Many taxpayers will forgo their usual in-person meetings with tax preparers due to the pandemic.

Visa Abandons Planned Acquisition of Plaid After DOJ Challenge
Brent Kendall et al., The Wall Street Journal

Visa Inc. abandoned its $5.3 billion planned acquisition of financial-technology firm Plaid Inc. amid a Justice Department antitrust lawsuit that challenged the deal. The department sued to block the deal in November, alleging the acquisition would allow Visa to unlawfully maintain a monopoly in the online debit-card market.

Bitcoin’s wild ride leaves traditional money managers queasy
Eva Szalay, Financial Times

Turbulence raises fresh questions on whether mainstream investors will hop on board.

Goldman says bitcoin is starting to mature but institutional money is a tiny fraction of the market
Ryan Browne, CNBC

Bitcoin is showing signs of maturity but the level of institutional investment in the nascent market is still very small, according to Goldman Sachs’ Jeff Currie. The investment bank’s head of commodities research said that more money from the financial world would need to flow into bitcoin in order for it to stabilize.

New NASDAQ Proposal Is Only a Small Step Toward Greater Diversity and Inclusion
Daryn Dodson, Morning Consult

In December, NASDAQ filed a proposal that pushes for greater diversity on the boards of over 3,000 companies listed on its exchange. Under this proposal, companies will be required to have two board directors from diverse backgrounds: one woman and one person who identifies as a person of color or LGBTQ.

Get ready for self-driving banks
Brian Brooks, Financial Times

Lenders run by algorithms and blockchain technology will require 21st century regulation.

Socioeconomic Status and the Experience of Pain: An Example from Knees
David M. Cutler, The National Bureau of Economics Research

Reports of pain differ markedly across socioeconomic groups and are correlated with outcomes such as functional limitations and disability insurance receipt. This paper examines the differential experience of pain by education. We focus on knee pain, the most common musculoskeletal complaint.