Top Stories

  • House Democrats are working out which panels will lead investigations into President Donald Trump’s ties to Deutsche Bank AG between the Intelligence Committee and House Financial Services Committee, aides familiar with the matter said. House Financial Services Committee Chair Maxine Waters tried in 2017 to request documents from Deutsche Bank regarding its dealings with Trump, his businesses and potential Russian money laundering through the German bank, although Republicans still controlled the House at the time and declined issuing subpoenas to the bank. (Reuters)
  • Sen. Elizabeth Warren (D-Mass.) has demanded that Wells Fargo & Co. leave college campuses, which the bank says is one of its fastest-growing markets, following a report from the Consumer Financial Protection Bureau that said Wells Fargo charged students the highest fees among 573 studied banks. Warren called the fees “an outlier within the industry.” (Bloomberg)
  • The Treasury Department is refusing to have Secretary Steven Mnuchin testify in front of the House Ways and Means Committee after committee Chairman Richard Neal (D-Mass.) requested Mnuchin to speak about the partial government shutdown’s impact on Treasury and taxpayers. Treasury is instead offering testimony from Treasury and Internal Revenue Service officials “who are most knowledgeable” about the agency’s lapse plans, according to an agency spokesperson. (The Hill)

Chart Review

Events Calendar (All Times Local)

Friday
New York Federal Reserve Bank President speech at the New Jersey Bankers Association’s Economic Leadership Forum 9:05 a.m.

The Brands That Defined 2018

Which brands won 2018, who’s on the rise, and key lessons for brands to take into the new year.

General

Alexandria Ocasio-Cortez is one of many reasons to care about the House committee that oversees banking
Emily Stewart, Vox

Alexandria Ocasio-Cortez (D-NY) is about to make a lot more news in the world of finance after getting a coveted spot on the powerful House Financial Services Committee, which oversees the banking industry. But Ocasio-Cortez isn’t the only reason you should be paying attention.

Trump cancels US delegation to Davos World Economic Forum due to shutdown
Christine Wang, CNBC

President Donald Trump has canceled his delegation’s trip to the World Economic Forum, citing the ongoing partial government shutdown. “Out of consideration for the 800,000 great American workers not receiving pay and to ensure his team can assist as needed, President Trump has canceled his Delegation’s trip to the World Economic Forum in Davos, Switzerland,” press secretary Sarah Sanders said in a late Thursday statement.

Navient files for partial summary judgment in CFPB case
Katy O’Donnell, Politico

Navient, the nation’s largest student loan servicer, today filed a motion for a partial summary judgment on two of the 11 counts the Consumer Financial Protection Bureau has brought against it, accusing the CFPB of failing to provide evidence of its claims. The CFPB filed suit in January 2017, alleging that Navient had “steered hundreds of thousands of federal student loan borrowers experiencing long-term financial hardship” into forbearance, which allows borrowers to temporarily stop making payments, while providing little or no information about alternative repayment plans, among other counts.

CFPB’s Kraninger asks for ‘clear authority’ over military lending exams
Kate Berry, American Banker

The director of the Consumer Financial Protection Bureau on Thursday asked Congress to give it the “clear authority” to conduct supervisory exams of banks and financial firms for compliance with the Military Lending Act. The director, Kathy Kraninger, sent a letter to Vice President Mike Pence and House Speaker Nancy Pelosi with draft legislation that would give the bureau “nonexclusive authority to require reports and conduct examinations on a periodic basis.”

Fed’s Randal Quarles Is Upbeat on U.S. Economy
Michael S. Derby, The Wall Street Journal

A top Federal Reserve official said Thursday the outlook for the U.S. economy remains very good, although he refrained from commenting on what that might mean for the central bank’s interest-rate decisions. “The data on the real economy is very strong and continues to look strong,” said Randal Quarles, the Fed’s vice chairman for bank supervision, at a gathering held by the Insurance Information Institute in New York.

Who’s in the running for the World Bank presidency?
James Politi, Financial Times

Will the next World Bank president come from Donald Trump’s inner circle, or will it be an American from outside the administration? Or will countries rally around an alternative candidate from a developing economy? The race to succeed Jim Yong Kim will not be formally decided by the World Bank board until after March 14, the deadline for nominations to be submitted.

Stocks Climb as Trade Hopes Aid Rally; Oil Rises: Markets Wrap
Todd White, Bloomberg

Stocks rose in Europe and Asia on Friday alongside American equity futures, extending the week’s risk-on tone amid further optimism for U.S.-China trade talks. Haven assets declined, with Treasuries, the yen and gold edging lower.

Banking

JPMorgan CEO Dimon’s Compensation Tops Pre-Crisis Record
Patrick Thomas, The Wall Street Journal

JPMorgan JPM 0.41% Chase & Co. Chief Executive James Dimon received a compensation package valued at $31 million in 2018, up 5% from $29.5 million in 2017, according to a Thursday securities filing. The CEO earned a base salary of $1.5 million and $5 million in cash, the same as a year ago, and $24.5 million in restricted equity, according to a filing with the U.S. Securities and Exchange Commission.

Malaysia’s Finance Minister Wants Goldman’s $7.5 Billion, Not an Apology
Yantoultra Ngui, The Wall Street Journal

Malaysia’s finance minister waved off an apology from Goldman Sachs Chief Executive David Solomon for the role of one its then-bankers in the scandal surrounding state investment fund 1Malaysia Development Bhd., saying it wasn’t enough. Lim Guan Eng said Friday that the only apology that would matter is one that comes with full reimbursement and reparations for the $6.5 billion the 1MDB fundraised with the investment bank’s help.

Barr eases pot banking concerns, but banks still in limbo
Hannah Lang, American Banker

Financial institutions looking to serve businesses in the marijuana industry may have breathed a collective sigh of relief during Attorney General nominee William Barr’s confirmation hearing earlier this week when he said that if confirmed he would uphold an Obama-era memo that relaxed marijuana enforcement. But his comments ultimately do little to mitigate the inherent risks associated with pot banking.

Financial Products and Investments

For Credit Unions, Government Shutdown Holds Potential for Both Growth and Risk
Claire Williams, Morning Consult

The partial government shutdown could benefit at least one sector in the finance industry in the short term: credit unions, which could see a boost in membership as furloughed employees seek temporary financing. Experts warn, though, that the longer the shutdown persists, the more likely that initial boost in members could have a negative impact on those same cooperatives.

American Express earnings miss Wall Street expectations
Robert Armstrong, Financial  Times

Competition in the card industry took a toll on fourth-quarter earnings at American Express, with the results falling well short of Wall Street’s expectations. Revenue grew 8 per cent, to $10.4bn, supported by higher spending by cardholders, higher loan volumes and increased fees.

Will Square’s banking ambitions be curbed by Fiserv-First Data?
Will Hernandez, American Banker

Banks certainly have a bone to pick with big fintechs like Fiserv and First Data, but the merger deal between the two companies could help banks address another competitive threat: Square. Square has been offering more banklike services, including business loans. Its plan to obtain a bank charter threatens traditional banks the same way its mobile point-of-sale business disrupted merchant acquiring.

Housing and GSEs

Latest GSE reform offers blueprint without Congress
Hannah Lang, American Banker

As the housing market anxiously awaits the Trump administration’s plans for the future of Fannie Mae and Freddie Mac, the list of outside proposals for reforming the government-sponsored enterprises keeps growing. The latest blueprint, released this month, comes from four housing finance experts at the Milken Institute, including former officials in both the Obama and George W. Bush administrations.

Microsoft’s Leap Into Housing Illuminates Government’s Retreat
Emily Badger, The New York Times

With its $500 million pledge to address affordable housing in the Seattle area, Microsoft isn’t primarily cutting checks to local charities. Private companies have done that before. Nor is it proposing to create housing for its own employees, as corporations have done in the past, too. Rather, Microsoft is trying to help fix a market failure — a job government typically does.

Mortgage rates stand pat as federal shutdown creates uncertainty about economy
Kathy Orton, The Washington Post

Without access to the usual economic data because of the federal government shutdown, mortgage lenders are left with a murky picture of where the economy is headed. Their uncertainty has left mortgage rates stuck in place. According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average was unchanged at 4.45 percent with an average 0.4 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.04 percent a year ago.

Taxes

How Wealthy Americans Like Jack Benny Avoided Paying a 70% Tax Rate
Laura Saunders, The Wall Street Journal

It wasn’t that long ago, in 1980, that America had a top income-tax rate of 70% for individuals, nearly double the current top rate of 37%. And it wasn’t unusual.

Will the government shutdown affect tax refunds and returns? Maybe not.
German Lopez, Vox

The federal government’s partial shutdown is now the longest in history, with President Donald Trump refusing to sign a spending deal that reopens the government as long as it doesn’t include $5 billion for his wall at the US-Mexico border. As the shutdown continues and as tax filing season nears, many people may wonder: How is the government shutdown affecting tax returns and refunds?

Financial Technology

Square takes another step into banking with a debit card for businesses
Kate Rooney, CNBC

Square is launching yet another banking product. The payments company announced a debit card for businesses on Thursday that lets Square sellers using its credit card processor get immediate access to money from sales.

Freelance fintech — can apps replace accountants?
Iona Bain, Financial Times

“Come and file your self-assessment tax return — ON A SKY DIVE!” When this offer from an online accountancy service pinged into my email inbox, I was curious.

Opinions, Editorials and Perspectives

The Impossibility of Enforcing China’s Trade Commitments
Dan DiMicco, Morning Consult

Last week’s trade talks in Beijing achieved some progress. An experienced U.S. delegation led by Deputy U.S. Trade Representative Jeffrey Gerrish and Commerce Under Secretary Gilbert Kaplan agreed to an extra day of meetings — a sign that the talks were “serious,” according to China’s foreign ministry. But the United States still has major concerns regarding China’s forced technology transfer, intellectual property theft, non-tariff barriers and cyber hacking.

‘Modern Monetary Theory’ Is a Joke That’s Not Funny
Michael R. Strain, Bloomberg

If you follow the debates over U.S. economic policy, you had probably heard of modern monetary theory well before freshman Democratic Representative Alexandria Ocasio-Cortez spoke favorably about it earlier this month. If you thought from the start that the whole idea sounded like lunacy, you were right, even if it’s possible to admit some sliver of sympathy for it.

Research Reports

Furloughed workers are facing an all-too-common problem for many Americans—living paycheck to paycheck
Aaron Klein, Brookings Institution

Furloughed workers have already started taking steps all too common to families living paycheck to paycheck: curtailing spending, increasing credit card debt, delaying paying bills, and seeking short-term, small dollar credit. Financial institutions are surprisingly ill equipped with reasonable products to help families handle short-term small-dollar credit needs.

Morning Consult