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.
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