Top Stories

  • Goldman Sachs Group Inc. will introduce a robo-adviser in 2020 offering wealth management services to people with as little as $5,000 to invest, a significantly lower threshold than for its traditional accounts, which typically serve people with around $1 million to $10 million. One senior Goldman executive called the service “a pipeline for future clients,” as the bank shifts away from trading and investment banking under Chief Executive David Solomon. (Financial Times)  
  • The Bank of International Settlements found that there could be a structural issue at the heart of the September repo market volatility, since the four large U.S. banks that the market relies on for funding hold a disproportionately high amount of their liquid assets in Treasuries compared to what they store at the Federal Reserve. The repo rate spike “hasn’t proven to be temporary” or “reversible” without intervention from the Federal Reserve, which suggests the presence of a structural problem, according to Mohamed A. El-Erian, Bloomberg Opinion columnist and chief economic adviser at Allianz SE. (Bloomberg
  • Experts testified in front of the House Financial Services Committee that automation has taken thousands of routine Wall Street jobs and that it could continue to work its way to more senior positions. Democratic lawmakers on the panel questioned experts on diversity and gender bias in artificial intelligence and how to regulate data-driven financial markets. (Bloomberg

Chart Review

Events Calendar (All Times Local)

12/10/2019
CFTC Open Meeting 9:00 am
Senate Banking Committee hearing: “Oversight of the Securities and Exchange Commission” 10:00 am
12/11/2019
CFTC Market Risk Advisory Committee Meeting 9:30 am
12/12/2019
FDIC Board Meeting 2:00 pm
View full calendar

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Download the full report.

General

This is the hottest job market since the 1990s. Why aren’t wages growing faster?
Heather Long, The Washington Post

By just about any metric this is the best job market since the late 1990s. The economy has been adding jobs for 110 straight months — a record streak.

Trump Cripples W.T.O. as Trade War Rages
Ana Swanson, The New York Times

The United States has spent two years chipping away at the World Trade Organization, criticizing it as unfair, starving it of personnel and disregarding its authority, as President Trump seeks to upend the global trade system. This week, the Trump administration is expected to go one step further and effectively cripple the organization’s system for enforcing its rules — even as Mr. Trump’s widening trade war has thrown global commerce into disarray and another tariff increase on Chinese goods set for next weekend could send markets reeling.

Democrats, Trump Trade Negotiator Near Deal for Trade Pact
Natalie Andrews and Anthony Harrup, The Wall Street Journal

House Democrats and U.S. Trade Representative Robert Lighthizer are nearing a deal for Congress to pass a modified U.S. trade agreement with Canada and Mexico, though hurdles remain, according to people familiar with the negotiations. House Democrats and Mr. Lighthizer have been meeting for months to hammer out a deal to amend the U.S.-Mexico-Canada Agreement, or USMCA, and have narrowed differences over key sticking points in recent days, the people said. 

In the Next Downturn, Fiscal Policy May Have to Step Up
Nick Timiraos, The Wall Street Journal

The U.S. federal budget deficit recently surpassed $1 trillion. In the next downturn, don’t be surprised if this number hits $2 trillion. In the decades since British economist John Maynard Keynes proposed aggressive government spending to battle the Great Depression, Washington has usually injected cash into the economy through interest-rate reductions, tax cuts or ramped up spending when recession hits.

How a Strong Job Market Has Proved the Experts Wrong
Neil Irwin, The New York Times

There are a lot of good things to say, and few bad things to say, about the November employment numbers that were published Friday morning. Employers added 266,000 jobs, a blockbuster number even after accounting for the one-time boost of about 41,000 striking General Motors workers who returned to the job. 

Biden says Trump’s pressure on the Federal Reserve is an abuse of power
Thomas Franck, CNBC

President Donald Trump’s attacks on the Federal Reserve and its chairman, Jerome Powell, are an abuse of power and represent a “big mistake” for the administration, 2020 Democratic presidential front-runner Joe Biden said in an interview with CNBC. “I’m not going to get into the personalities, but I do say this: The president should not be trying to pressure the Fed,” Biden said in the interview with John Harwood.

Investors Gird for Year-End Turmoil in Cash Markets
Daniel Kruger and Julia-Ambra Verlaine, The Wall Street Journal

Investors and policy makers are bracing for new disruptions to short-term cash markets going into the end of the year. Federal Reserve officials have so far committed about $350 billion to efforts aimed at calming the market for overnight repurchase agreements, or repos, where banks and other firms borrow cash for short periods in exchange for collateral, such as supersafe government securities.

Warren, Brown object to CFPB plan to issue formal advisory opinions
Kate Berry, American Banker

Sen. Elizabeth Warren, D-Mass., and Sen. Sherrod Brown, D-Ohio, said a Consumer Financial Protection Bureau policy to issue formal advisory opinions could harm consumers and give companies immunity from consumer protection or anti-discrimination laws. The senators sent a letter Thursday to CFPB Director Kathy Kraninger stating that while agency guidance may be appropriate in some situations, it should be “broadly applicable to industry,” and not tailored to allow specific companies to skirt laws.

US business fears watering down of Nafta trade revamp
James Politi, Financial Times

Trump administration considers USMCA provisions to gain Democratic support.

U.S. Futures Edge Lower With Stocks as Bonds Climb: Markets Wrap
Sam Potter, Bloomberg

U.S. equity futures edged down alongside European stocks as investors prepared for a week brimming with potential catalysts, from central bank meetings to the looming America-China tariff deadline. Treasuries and most government bonds advanced.

Banking

Four big questions as CRA proposal nears official release
Brendan Pedersen, American Banker

 After nearly two years of internal discussions, regulators are finally ready to propose reforms to the Community Reinvestment Act on Dec. 12. Expect the reaction from within the industry and outside it to be swift and loud. When the Office of the Comptroller of the Currency asked the public to weigh in on CRA reform in 2018, it received more than 1,500 comments.

Biggest U.S. Bank Deal in Decade Fails to Trigger an M&A Frenzy
Hannah Levitt, Bloomberg

Truist Financial Corp. is officially a thing. The $28 billion deal combining BB&T Corp. and SunTrust Banks Inc. — the largest U.S. bank merger in more than a decade — was completed after trading closed last week.

HSBC Investment Banking Chief to Step Down
Harry Wilson, Bloomberg

HSBC Holdings Plc’s interim chief overhauled the sprawling bank’s senior management team as he positions himself to take the job on a permanent basis.

Financial Products and Investments

Fink Had a Frank Talk With Leaders Before BlackRock Dismissals
Annie Massa, Bloomberg

Not long before the departures began, Larry Fink warned his top lieutenants: Behave or else.

Mifid II creates ‘existential threat’ for small research groups
Siobhan Riding, Financial Times

Boutiques hit by ‘perfect storm’ two years after introduction of EU market rules.

House Democrats spar over rate cap bill
Neil Haggerty, American Banker

The debate in Congress over interest rate caps is highlighting cracks within the Democratic Party, as moderate members are holding up a bill to extend Military Lending Act provisions to all consumers. Since House Democrats took control of the chamber after the 2018 elections, the Financial Services Committee has emphasized reining in predatory lending.

Housing and GSEs

FHA loan limits increasing for almost all of U.S. in 2020
Ben Lane, HousingWire

Thanks to increases in home prices in 2019, the Federal Housing Administration loan limit will increase for nearly all of the country in 2020. According to an announcement from the FHA, the 2020 FHA loan limit for most of the country will be $331,760, an increase of nearly $17,000 over 2019’s loan limit of $314,827.

Taxes

Chemical Companies Are Building Their Plants Overseas and Shipping Them Back In. They Still Get State Tax Breaks.
Sara Sneath, ProPublica

Twice during the last decade, chemical giant Methanex has disassembled a massive methanol plant located at the southern tip of Chile and moved it to Louisiana. Each time, pieces of the facility weighing up to 1,500 tons — the equivalent of eight single-story houses — were loaded onto barges, which were then parked on top of a huge ship designed to carry offshore drilling platforms.

Democratic governor, GOP lawmakers keep clashing over taxes
John Hanna, The Associated Press

Democratic Gov. Laura Kelly and Republican legislators are headed toward another confrontation over tax cuts because the GOP isn’t giving up on reducing income taxes and Kelly has other priorities. Top Republicans in the GOP-controlled Legislature plan to push next year for tax reductions for individuals and businesses that are paying more in state income taxes because of changes in federal tax laws in 2017.

Financial Technology

Treating stablecoins like ETFs
Izabella Kaminska, Financial Times

We’ve often argued that a stablecoin is nothing more than a glorified exchange traded fund (ETF).  So when it comes to the fuss about how to regulate stablecoins like Libra, is it possible that most of the hard work has already been done on account of the regulatory environment that governs ETFs?

The IRS has a new tax form out and wants to know about your cryptocurrency
Darla Mercado, CNBC

Tax season is still months away, but the IRS will want to know about your cryptocurrency holdings. The IRS just released a new Schedule 1 for the 2019 tax season, spelling out the details on above-the-line deductions, including the tax break for student loan interest and health savings account contributions.

Opinions, Editorials and Perspectives

Consumers Need Protection From Fraudulent Tax Preparers
John Breyault, Morning Consult

More than half of low-income consumers rely on paid tax return preparers to help them prepare their taxes each year. It is imperative that consumers are able to rely on their tax return preparer to file accurate returns that get them the full refund to which they are entitled.

Worrying signs that a great global deregulation has begun
Patrick Jenkins, Financial Times

Evidence shows the US and Europe are poised to compete to ease the rules.

Research Reports

Should We Use Closing Prices? Institutional Price Pressure at the Close
Vincent Bogousslavsky and Dmitriy Muravyev

The closing price is the most important stock price of the day, but is it better than alternatives? Closing prices are determined in a special call auction. 

Morning Consult