Morning Consult Finance: Labor Department Finalizes ESG Rule for 401(k)s


Essential financial news & intel to start your day.
November 23, 2022
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Morning Consult Finance will be off for the rest of the week for the Thanksgiving holiday. The newsletter will resume on Monday.


Today’s Top News

  • The Department of Labor issued final regulations that allow company retirement plan fiduciaries to offer retirement savings plans based on environmental, social and governance investment principles, reversing a 2020 move by the Trump administration that effectively prevented ESG investing by workplace 401(k) plans. Lisa Gomez, assistant secretary for the Labor Department’s Employee Benefits Security Administration, said the new rule allows employers to consider ESG when making investments and exercising shareholder rights, though fiduciaries must put financial returns ahead of ESG-related goals. (The Wall Street Journal)
  • The Education Department said it will extend the pause on payments and accumulation of interest on federal student loans, which had been scheduled to end Jan. 1, as the administration’s forgiveness program remains stalled in the federal courts. The payment pause will end 60 days after the debt forgiveness plan is allowed to be implemented, giving the Supreme Court time to hear the case as requested by the Biden administration, but if litigation is not resolved by June 30, 2023, payments will resume 60 days later. (CNBC)
  • In FTX’s first bankruptcy hearing, restructuring attorney James Bromley said a “substantial amount” of assets have been stolen or are missing, noting that the company had been hit with several cyberattacks since it commenced the bankruptcy process on Nov. 11. (CNN) In a letter apologizing to FTX staff, which was obtained by Bloomberg, former CEO Sam Bankman-Fried blamed a “run on the bank” and sharp falls in the cryptocurrency markets, among other factors, that led to a $51 billion crash in collateral, though he did not give details on the exact makeup of the collateral. (Bloomberg
  • The Securities and Exchange Commission has fined Goldman Sachs Asset Management $4 million on grounds that it failed to follow the agency’s rules with regard to ESG-marketed funds. The SEC said between April 2017 and February 2020, the firm failed to have any written policies and procedures regarding the ESG research used by its investment teams to select and monitor securities, and when procedures were put into place, they were not followed consistently. (Reuters)

Worth watching: 

The Federal Open Market Committee will release minutes from its last policy meeting today.


Chart Review


What Else You Need to Know


Ethics Watchdog Group Seeks Probes Into Oversight of Officials’ Stock-Trading Conflicts

Brody Mullins and Rebecca Ballhaus, The Wall Street Journal

A nonpartisan group that monitors government ethics filed a series of legal complaints alleging the federal government is failing to adequately enforce conflict-of-interest rules.


Western Allies Aim to Agree on Russian Oil Price Cap Wednesday

Laurence Norman and Andrew Duehren, The Wall Street Journal

The U.S. and its allies are seeking to agree on a level for a price cap on Russian oil as soon as Wednesday, with officials discussing setting it at around $60 a barrel as the group rushes to put the plan into place before Dec. 5, according to people familiar with the talks.


With a strike looming, railroad unions and management head back to negotiating table

Chris Isidore and Vanessa Yurkevich, CNN

With a crippling freight rail strike looming in two weeks, leaders of four railroad unions and management of the major US freight railroads are due back at the negotiating table Tuesday afternoon.


Student Loan Borrowers Lose Faith in Biden’s Forgiveness Plan

Claire Ballentine and Ella Ceron, Bloomberg

For student loan borrowers, President Joe Biden’s forgiveness plan seemed too good to be true. And now they fear that maybe it was.


Big Investors Are Better Than Quotas at Getting More Women on Boards

Jeff Green, Bloomberg

The three largest money managers in the US have been more successful in boosting the share of women in S&P 500 boardrooms than quota-like laws, new research finds.

Fiscal Policy

Punchbowl has this: Dems starting to draft FY2023 spending bills as Dec. 16 deadline looms


Tax Filing Websites Have Been Sending Users’ Financial Information to Facebook

Simon Fondrie-Teitler et al., The Markup

Major tax filing services such as H&R Block, TaxAct, and TaxSlayer have been quietly transmitting sensitive financial information to Facebook when Americans file their taxes online, The Markup has learned.


Supreme Court clears way for Trump tax records to be sent to Congress by IRS

Dan Mangan, CNBC

The Supreme Court on Tuesday rejected a bid by former President Donald Trump to prevent Congress from obtaining his federal income tax returns and those of related business entities from the IRS.


Unemployment assistance to millionaires soared during pandemic

Brian Faler, Politico

Some of the nation’s wealthiest people were among the tens of millions of Americans who received unemployment checks in the wake of the coronavirus outbreak. More than 19,000 people who made at least $1 million in 2020 also collected jobless assistance that year, new IRS data show.

Economy and Monetary Policy

Fed’s George Says Higher US Savings May Also Mean Higher Rates Needed

Jonnelle Marte, Bloomberg

Kansas City Federal Reserve Bank President Esther George said ample US savings will help to buffer households but could also mean higher interest rates are needed to cool spending.


Fed’s Mester wants more progress on inflation before ending interest rate hikes

Jeff Cox, CNBC

Cleveland Federal Reserve President Loretta Mester said Monday inflation will need to show more signs of progress before she’s ready to stop advocating for interest rate increases.


‘Inflation may have peaked’ as economy slumps: Fannie Mae

Jim Tyson, CFO Dive

Inflation may be slowing across a wide front as demand declines, supply chain disruptions fade and money supply growth tapers off, Fannie Mae said in a report. The unexpectedly low 7.7% year-over-year increase last month in the Consumer Price Index (CPI) indicated that “inflationary pressures may be easing broadly,” Fannie Mae said, noting lower health care costs and a 2.4% decline in used auto prices. “Both of these trends are likely to continue,” Fannie Mae said, adding “inflation may have peaked.”


Credit Suisse Warns of $1.6 Billion Loss After Clients Pull Money

Margot Patrick, The Wall Street Journal

Credit Suisse Group AG warned it would lose around $1.6 billion in the fourth quarter after customers pulled their investments and deposits over concerns about the bank’s financial health.


US banks use thaw in markets to shift ‘hung loans’ off their books

Eric Platt and Harriet Clarfelt, Financial Times

Investors nibble on debt of companies less exposed to economic slowdown but avoid riskier groups.


Credit Suisse lays off one-third of China-based investment bankers – sources

By Summer Zhen and Selena Li, Reuters

Credit Suisse has laid off about one-third of its China-based investment banking team and nearly half of its research department, sources with knowledge of the matter told Reuters, as part of a global restructuring and as its China business slows.


Credit Suisse’s Future Hinges on Overcoming a Fraught Past

Marion Halftermeyer et al., Bloomberg

For more than 160 years, Credit Suisse Group AG’s stone-clad headquarters on Zurich’s moneyed Paradeplatz has exuded power, stability and quiet wealth. Those days are over.


The gender gap in financial services is narrowing, but it’s far from closed

Jenna McNamee, Insider Intelligence

US banks are making progress on closing the gender gap in the financial industry, but there’s still work to be done, especially at the leadership level. This is according to a recent study by DBRS Morningstar, which looked at women in leadership roles at 28 banks in the US.

Financial Products and Investments

3 Democratic senators urge Fidelity to reconsider bitcoin exposure in 401(k) plans

Courtney Degen, Pensions & Investments

Three Democratic senators urged Fidelity Investments to reconsider its decision allowing 401(k) plan sponsors to offer participants bitcoin exposure, citing the collapse of FTX as proof that the digital asset industry “has only grown more volatile, tumultuous, and chaotic.”


Loans and Hardship Withdrawals From 401(k)s Are Rising

Suzanne Woolley, Bloomberg

More Americans are tapping their 401(k)s for financial emergencies, with the percentage of retirement savers pulling money for hardships spiking 24% in the 12 months through Sept. 30, according to new data.


Sequoia Capital Apologizes to Limited Partners for FTX Investment

Berber Jin, The Wall Street Journal

The collapse of FTX has placed Sequoia Capital in an unfamiliar position: damage control mode. The early backer of Apple Inc., Alphabet Inc.’s Google, and Airbnb Inc.—and one of Silicon Valley’s most successful venture-capital firms—apologized to its fund investors in a conference call Tuesday for its $150 million loss on the crypto exchange FTX and vowed to improve its due diligence process for future investments, said people familiar with the matter.


Insiders detail how Wall Street is preparing for a post-FTX world, from heightened scrutiny on crypto deals to rethinking hiring plans

Morgan Chittum et al, Insider Premium

Most Wall Street firms have executed big crypto and blockchain initiatives. Insiders say traditional firms will now look at crypto partnerships more skeptically.

Housing and GSEs

Where home prices are headed in 2023—this map shows CoreLogic’s revised outlook for 392 housing markets

Lance Lambert, Fortune

When a buttoned-up Fed economist says the U.S. housing market has entered into a “difficult [housing correction”], it’d be wise to believe them. When it comes from the lips of Fed Chair Jerome Powell, it’s more of a warning.


Department of Justice Opens Investigation Into Real Estate Tech Company Accused of Collusion with Landlords

Heather Vogell, ProPublica

The DOJ will examine whether RealPage helped landlords coordinate rent increases. Questions also swirl around a 2017 merger deal with its largest competitor.

Financial Technology

Fintech Giant FIS to Cut Thousands of Jobs as New CEO Targets Costs

Jennifer Surane, Bloomberg

Fidelity National Information Services Inc. plans to dismiss thousands of workers as part of incoming Chief Executive Officer Stephanie Ferris’s strategy to win back investor confidence after the fintech giant slumped 44% this year.


FTX Bankruptcy Judge Says Creditor Information Can Be Redacted – at Least for Now

Cheyenne Ligon, CoinDesk

John Dorsey said Tuesday that he wants to ensure FTX’s individual creditors are protected from cyber threats.


Genesis, the Troubled Crypto Lender, Hires a Restructuring Adviser

Lauren Hirsch and Stephen Gandel, Dealbook, The New York Times

Genesis Global Capital, the troubled crypto lender, has hired the investment bank Moelis & Company to explore options including a potential bankruptcy, three people familiar with the situation said.


Bahamas FTX Liquidators Agree to Transfer Bankruptcy Case to Delaware

Sandali Handagama, CoinDesk
Court-appointed liquidators for FTX in the Bahamas had filed a separate suit in a New York court, while the exchange had filed for bankruptcy protection in Delaware.


FTX lawyer calls this case ‘a different sort of animal’ in first bankruptcy hearing

Rohan Goswami, CNBC

In the first day of the bankruptcy hearing for collapsed crypto exchange FTX, lawyers for the company were able to get the proceedings moved to Delaware. Lawyers are trying to clean up the mess left behind by FTX founder Sam Bankman-Fried, who resigned on Nov. 11 as the company entered bankruptcy.


Crypto exchange Coinbase shed 85% of its value in a year

Felix Salmon, Axios

The market capitalization of Coinbase just dropped below $10 billion. This time last year, it was more than $70 billion.


New York Imposes 2-Year Moratorium on New Proof of Work Mining After Gov. Hochul Signs Bill Into Law

Greg Ahlstrand, CoinDesk

The new law sets a two-year moratorium on new and renewed air permits for fossil fuel power plants used for energy-intensive proof-of-work (PoW) cryptocurrency mining.


Inside Sam Bankman-Fried’s Quest to Win Friends and Influence People

Kenneth P. Vogel et al., The New York Times

In just three years, the FTX co-founder built a massive operation to woo politicians, regulators and nonprofits to support his crypto goals.

Opinions, Editorials and Perspectives

Regulate Crypto or It’ll Take Down the Economy

Elizabeth Warren, The Wall Street Journal

The dramatic collapse of Sam Bankman-Fried’s crypto exchange, FTX, may have come as a shock to the Miami Heat, Tom Brady, Twitter bots and financial-news talking heads. But crypto is following a well-worn path of financial innovations, such as subprime mortgages and credit-default swaps, that began with dazzling rewards and ended with crippling losses.


Crypto needs less regulation, not more

Thomas L. Hogan, The Hill

Recent weeks have witnessed another disaster for the cryptocurrency industry. FTX, one of the largest crypto exchanges, failed. The price of bitcoin, the largest cryptocurrency, fell by more than 20 percent. Industry-wide exposure to FTX is still unknown, with the solvency of several companies still in question.


Don’t Let FTX Executives Off the Hook Like Bankers in 2008

Aaron Klein, Time

The collapse of FTX, the world’s second largest crypto-exchange, raises major questions about the viability of cryptocurrency and the state of America’s financial regulatory system. While the debate on whether FTX’s collapse means crypto should be more regulated or kept further out of the regulatory safety net rages, we must ensure that those who might have broken the law at FTX be aggressively prosecuted.


These Banks Were Left Holding the Bag in Crypto Implosion

Marc Rubinstein, Bloomberg

Small regulated lenders saw opportunity. Now they’re part of the cleanup crew.

Morning Consult