Morning Consult Finance: HUD Promotes Ex-CFPB Official Behind Racially Charged Blog Posts

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  • The Department of Housing and Urban Development said it is promoting Eric Blankenstein, formerly a political appointee at the Consumer Financial Protection Bureau, to acting vice president at Ginnie Mae. Top Democrats, including Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, criticized HUD’s hiring of Blankenstein in June, which came after it was discovered that he had written racially charged blog posts. (Politico
  • Vadim Barbarovich, a New York City marshal, will step down after the city’s Department of Investigation found that he violated debt collection rules in collecting debts for predatory lenders and that he was “untruthful” with authorities. Barbarovich, who made $1.7 million in 2017 and $1.9 million in 2018, was known for collecting debts in the unregulated merchant cash-advance industry. (Bloomberg
  • Kevin Stiroh, an executive vice president at the New York Federal Reserve who is responsible for regulating banks, said the U.S. economy took more than $500 billion in direct losses in the last five years due to climate and weather-related events. Stiroh argued that addressing climate change as it relates to the stability of the U.S. financial system is within the Federal Reserve’s mandate, saying that bank regulators “can use our tools to ensure financial institutions are prepared” for climate-related risks. (The Wall Street Journal

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San Francisco Fed conference: The Economics of Climate Change
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Trump’s Bad Election Night Shows Economy May Not Be 2020 Guide
Katia Dmitrieva, Bloomberg

Republican ballot-box defeats in two states with fairly strong economies show that growth isn’t everything for U.S. voters.

Fed’s Bostic ‘Fairly Comfortable’ With Holding Rates Steady for Now
Michael S. Derby, The Wall Street Journal

Federal Reserve Bank of Atlanta President Raphael Bostic said he doesn’t believe last week’s rate cut was justified and would have most likely voted against it if he could have. Referring to the private board of directors that oversees the Atlanta Fed, Mr. Bostic told reporters after a speech on Thursday that “my directors were pretty much in the hold stage [with interest rates], so that’s probably where I would have come down for that meeting.”

WSJ Survey: Economists Split on Causes of Hiring Slowdown
Harriet Torry, The Wall Street Journal

Economists are roughly split over whether the recent hiring slowdown reflects primarily a shortage of workers or softening demand for labor, a sign of continuing uncertainty about the outlook. In The Wall Street Journal’s latest survey of economists, 45.3% blamed the slowdown on the tight labor market, which has made it harder for many employers to find enough workers. 

Trump Courts 2020 Black Vote Betting Economy Outweighs Tensions
Mario Parker and Josh Wingrove, Bloomberg

Donald Trump has alienated large swathes of minority communities during his presidency, but he thinks he has an argument to win some of them over in the 2020 election: the economy. Trump plans to announce the formation of a new group — “Black Voices for Trump” — on Friday in Atlanta to recruit and engage African-American voters after launching a Hispanic outreach campaign earlier this year. 

China Says Tariffs Will Go, But U.S. Doubts Remain
Josh Zumbrun et al., The Wall Street Journal

Beijing’s announcement Thursday that the U.S. and China have mutually agreed to roll back tariffs as part of a “phase one” trade accord lifted financial markets, but questions remained over how much ground—if any —the Trump administration had agreed to give. Optimism that the trade war was finally nearing an end was raised by comments from a Chinese Commerce Ministry spokesman in Beijing on Thursday.

U.S. Futures Fluctuate as Stocks Slip; Bonds Mixed: Markets Wrap
Constantine Courcoulas, Bloomberg

The risk-on mood that’s permeated global financial markets this week showed signs of easing as U.S. futures fluctuated and most European stocks slipped along with Asian equities. Treasuries swung from a gain to a loss after sliding on Thursday.


Capital One Senior Security Officer Being Moved to New Role
AnnaMaria Andriotis, The Wall Street Journal

Capital One Financial Corp. COF 0.68% is moving its chief information security officer out of the role in the wake of the bank’s massive data breach, according to people familiar with the matter. The bank informed employees on Thursday that Michael Johnson will become an adviser and that the bank will begin an external search for a replacement, the people said.

Rate cap relief from FDIC doesn’t go far enough, banks say
Brendan Pedersen, American Banker

A proposal to ease interest rate restrictions that less than well-capitalized banks face relies on faulty methodology and ignores competition from fintechs and credit unions, according to the banking industry. The Federal Deposit Insurance Corp. issued a plan in September to revise the regulation, which was implemented in 1992 in an effort to stop riskier banks from attracting deposits by offering above-market interest rates as a last ditch effort to avoid or delay insolvency.

Financial Products and Investments

FEMA postpones flood insurance rate revamp amid backlash
Zachary Warmbrodt, Politico 

FEMA is delaying a sweeping overhaul of flood insurance rates by one year, after the planned changes sparked concerns in Congress about premium hikes. The agency said its Risk Rating 2.0 initiative will be implemented on Oct. 1, 2021, rather than Oct. 1, 2020 — a move that takes off the table a potential spike in rates for homeowners in the run-up to next November’s elections.

Retirement bill blocked in Senate amid fight over amendments
Naomi Jagoda, The Hill

GOP senators on Thursday attempted to bring a House-passed retirement savings bill to the Senate floor with votes on a limited number of amendments, but the effort was rejected by Democrats. The Republican effort and Democrats’ rejection highlighted how, despite widespread bipartisan support and backing from industry groups, it is still unclear when the retirement bill will be enacted.

Tower Research Capital pays $67m to settle spoofing charges
Kadhim Shubber, Financial Times

High-frequency trading firm’s penalty is the largest in a spoofing case.

Housing and GSEs

Freddie Mac hires McKinsey to review capital with government overhaul looming
Michelle Price and Pete Schroeder, Reuters

Housing finance giant Freddie Mac has hired management consultancy McKinsey & Company to advise on capital management, a spokesman said Thursday, as Freddie and its regulator start the long process of overhauling the firm and ultimately removing it from government control.

Young Homebuyers Are Vanishing From the U.S.
Reade Pickert, Bloomberg

Faced with higher property prices and piles of student debt, Americans are getting older and older before they buy a home.

Zillow Says Home-Flipping Will Pull In $1 Billion, Sending Shares Higher
Maria Armental, The Wall Street Journal

Shares of Zillow Group Inc. ZG 0.33% rose 9% in after-hours trading as the company said its home-flipping business is expected to generate as much as $1.25 billion this year. The Seattle-based company said Thursday that the homes segment, which includes results from homes that are directly sold to and bought from Zillow, added $384.6 million in revenue in the September quarter.


Bill Gates Objects to Elizabeth Warren’s Wealth Tax, and She Offers to Explain
Jacey Fortin, The New York Times

Senator Elizabeth Warren on Wednesday invited the billionaire Bill Gates to meet so she could allay his worries about her plans to raise taxes on the wealthy and explain “exactly how much” he would pay. Speaking with the columnist Andrew Ross Sorkin at The New York Times DealBook Conference on Wednesday, Mr. Gates, the Microsoft co-founder and philanthropist whose fortune totals over $100 billion, said that he had paid over $10 billion in taxes and that it would be “fine” if he had to pay $20 billion.

Warren’s Wealth Tax Could Drive Billionaires to Funds She Hates
Brandon Kochkodin, Bloomberg

Senator Elizabeth Warren’s proposed wealth tax could be a gift to an industry she has accused of looting Americans — private equity.

Democrats Worried Over Wealth Tax Design Other Plans to Tax the Rich
Laura Davison, Bloomberg

Moderate Democrats in Congress are crafting viable alternatives to Elizabeth Warren’s wealth tax, amid increasing concerns that her soak-the-rich strategy won’t pass even if the party captures both chambers of Congress in 2020. With growing confidence that they could win the White House and Senate in 2020 and maintain their House majority in 2020, Democrats are devising ideas that could raise trillions of dollars from the wealthy without the technical and constitutional challenges of Warren’s wealth tax, which Bernie Sanders, her rival on the party’s left flank, has also embraced.

Not So Fast, Mr. Trump! Relocating to a Low-Tax State Is Hard to Do
Laura Saunders, The Wall Street Journal

Last week, President Donald Trump confirmed on Twitter that he’s switching his permanent residence from New York to Florida. Mr. Trump was born in New York City and lived there most of his life, and he has had a home in Palm Beach for more than three decades.

Financial Technology

Putting the ‘AI’ into financial advice
Damian Fantato, Financial Times

Would you reveal your money wishlist to a chatbot?

The financial industry just finished its annual ‘doomsday’ cybersecurity exercise — here’s what they imagined would happen
Kate Fazzini, CNBC

This week, the Securities Industry and Financial Markets Association, or SIFMA, held the fifth in a series of exercises meant to simulate a catastrophic cybersecurity event in the banking sector, known as “Quantum Dawn.” The exercise offers an important yearly insight into what the financial services industry sees as its biggest risks and how it envisions a major cyber disaster unfolding.

Opinions, Editorials and Perspectives

Enhancements to CFPB’s Consumer Complaint Database Are Long Overdue
Lisa Im, Morning Consult

Third-party debt collectors across the nation are dedicated to empowering customers to find financial freedom and success. In fact, most debt collection agency employees contribute their time to volunteering and engaging with charitable causes to build relationships with their communities and local businesses.

The Billionaires Are Getting Nervous
The Editorial Board, The New York Times

When Bill Gates founded Microsoft in 1975, the top marginal tax rate on personal income was 70 percent, tax rates on capital gains and corporate income were significantly higher than at present, and the estate tax was a much more formidable levy. None of that dissuaded Mr. Gates from pouring himself into his business, nor discouraged his investors from pouring in their money.

How big tech is dragging us towards the next financial crash
Rana Foroohar, The Guardian

In every major economic downturn in US history, the ‘villains’ have been the ‘heroes’ during the preceding boom,” said the late, great management guru Peter Drucker. I cannot help but wonder if that might be the case over the next few years, as the United States (and possibly the world) heads toward its next big slowdown.

Research Reports

Optimal Policy for Macro-Financial Stability
Gianluca Benigno et al., Federal Reserve Bank of New York 

There is a new and now large literature analyzing government policies for financial stability based on models with endogenous borrowing constraints. These normative analyses build upon the concept of constrained efficient allocation, where the social planner is constrained by the same borrowing limit that agents face.

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