Top Stories

  • Morgan Stanley is reducing its global workforce by 2.5 percent, or about 1,500 jobs, according to two people familiar with the matter. The cuts are more than the bank usually makes at the end of the year, according to a third person, and are likely due to uncertainty in the 2020 presidential race, President Donald Trump’s trade war and Brexit. (Financial Times)
  • A new Democratic proposal, scheduled for a House Ways and Means Committee vote tomorrow, would repeal the cap on state and local tax deductions for two years. Although the bill isn’t likely to become law with Republicans in charge of the Senate and White House, it signals Democrats’ position on the SALT cap going forward. (The Wall Street Journal)
  • Public interest groups, including Public Citizen, have called for an investigation into letters cited by Securities and Exchange Commission Chairman Jay Clayton that he said supported a proxy rule change. After Clayton mentioned the letters, a media report found that many were signed by people who didn’t remember writing them and by relatives of a relevant lobbyist. (Politico)

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
SPONSORED BY THE CLEARING HOUSE

Consumers today feel secure, but do they know what they’re signing up for?

The appeal of financial applications is clear: They help 54% of U.S. banking consumers manage money seamlessly and conveniently. But consumers may not understand how their data is being used. Our 2019 survey findings show that while 70% of financial app users feel confident that their information is secure, 80% are not fully aware that financial apps or third parties may store their bank account username and password. Read the full report here.

General

How Fed Chairman Forged Rate-Cut Consensus
Nick Timiraos, The Wall Street Journal

Jerome Powell engineered a humbling about-face in U.S. interest-rate policy in 2019, steering a group of reluctant colleagues at the Federal Reserve toward rate cuts to ensure a cooling U.S. economy didn’t slip into recession. The moves have worked so far.

US labour market gains drive Federal Reserve’s outlook
Brendan Greeley, Financial Times

Central bank set to keep rates low as it seeks to drive unemployment down further.

Powell Steers for Economic Soft Landing Thwarted Twice by Trump
Rich Miller and Christopher Condon, Bloomberg

Maybe the third time Jerome Powell will get lucky. The Federal Reserve chairman looked close to pulling off a soft landing of the ebbing U.S. economy twice this year — at the start of May and the end of July.

American Factories Demand White-Collar Education for Blue-Collar Work
Austen Hufford, The Wall Street Journal

College-educated workers are taking over the American factory floor. New manufacturing jobs that require more advanced skills are driving up the education level of factory workers who in past generations could get by without higher education, an analysis of federal data by The Wall Street Journal found.

Powell Eyes Revamp of Fed Inflation-Targeting Framework
Nick Timiraos, The Wall Street Journal

When Fed Chairman Jerome Powell took office in early 2018, his assignment seemed straightforward: lift interest rates to a level consistent with a moderately growing economy, aided by a burst of stimulus from tax cuts and federal-spending increases. Today, his mission is altogether different. 

Paul Volcker’s Greatest Lesson Wasn’t on Economics. It Was on Being a Public Servant.
Neil Irwin, The New York Times

It is easy to forget just how miserable the situation was for the United States economy when Paul Volcker took charge as its chief central banker in August 1979. Inflation was nearly 12 percent a year and rising. People were lining up for gasoline. 

U.S. Futures Drop With Stocks; Treasuries Climb: Markets Wrap
Todd White, Bloomberg

U.S. equity-index futures retreated alongside stocks in Europe on Tuesday as investors turned cautious in the countdown to major central bank meetings and a deadline for fresh American tariffs on Chinese goods. Treasuries gained with gold.

Banking

Choppy markets leave U.S. bank bonus decisions in limbo
Elizabeth Dilts Marshall and Imani Moise, Reuters

December is always a month of suspense on Wall Street, as dealmakers, traders and money managers at big U.S. banks wait to find out how much they will receive in bonuses. But this year is more fraught than usual, industry sources said, because executives are waiting until the last minute to allocate bonuses, worried that market volatility could hit earnings.

OCC flags risks from banks’ tech overhaul, Libor transition
Brendan Pedersen, American Banker

Banks’ efforts to keep pace with rapid-fire technological change, adoption of a new interest rate benchmark, and prepare for potential future shifts in interest rates or the credit cycle all present looming risks to an otherwise healthy industry, the Office of the Comptroller of the Currency said Monday. The OCC’s semiannual report on warning signs for the industry flagged elevated operational risks “as banks adapt to a changing and increasingly complex operating environment.”

Financial Products and Investments

Student Loans A Lot Like The Subprime Mortgage Debacle, Watchdog Says
Chris Arnold, NPR News

Mike Calhoun is a man on a mission. He’s flying around the country, warning state lawmakers and prosecutors, sounding the alarm at conferences, and with members of Congress. He did the same thing back before the housing market crash, warning then about reckless subprime loans.

Housing and GSEs

Fannie Mae and Freddie Mac Curb Some Loans as Regulator Reins In Risk
Ben Eisen, The Wall Street Journal

Fannie Mae FNMA 2.36% and Freddie Mac FMCC 3.76% are pulling back on some mortgages meant to make homeownership more affordable, their latest effort to rein in risk at the behest of their regulator. The two companies are cutting back on the proportion of loans they back to borrowers with small down payments, for example, and mortgages to deeply indebted borrowers.

Taxes

Craft distillers, retailers wait anxiously for tax extenders
Doug Sword, Roll Call

Republican Rep. Denver Riggleman says a looming tax increase on small craft distillers will lead to layoffs at the distillery his family operates in Afton, Virginia, where they make a handful of spirits with colorful names like Strange Monkey Gin and Blackback Bourbon. And Jeff Quint, a Swisher, Iowa, distillery owner who makes bourbon from corn grown on his family farm, says the demise of the small distillers’ break will force him to rethink new hires he’d been planning.

Financial Technology

Regulators warn about fraudsters creating synthetic borrowers
Keith Lewis, Roll Call

The financial technology industry that’s upending consumer finance could be the solution to a kind of identity fraud that’s dogging traditional banks and fintech companies alike. It’s called synthetic identity fraud, where instead of stealing one person’s information, criminals synthesize a false identity using information from many people — usually those unlikely to monitor their credit, like children, the elderly, prisoners or the homeless.

A blockchain firm advised by Nobel laureate Myron Scholes just launched a rival to Facebook’s libra
Ryan Browne, CNBC

One blockchain company thinks it has an alternative to Facebook’s digital currency proposal. With an advisory board that includes top economists like Nobel Prize-winner Myron Scholes, U.K.-based firm Saga hopes to introduce a global currency that regulators find agreeable.

To ignore Gen Z is ‘to flirt with irrelevance’: Wells Fargo exec
Penny Crosman, American Banker

It’s Generation Z’s turn to steal the marketing spotlight, according to Wells Fargo’s Julia Carreon. For too long, companies and researchers have been obsessed with millennials, she said, but the age group that follows them — born between 1996 and 2011— is the other piece of an imminent demographic transformation.

Opinions, Editorials and Perspectives

Senate Banking Hearing with SEC Chairman Must Address Proxy Advisory Firms
Ken Blackwell, Morning Consult

On Dec. 10, the Senate Committee on Banking, Housing and Urban Affairs will hold an oversight hearing on the Securities and Exchange Commission. Among all of the SEC’s priorities, the Senate Banking Committee should raise the topic of proxy advisory reform. 

Paul Volcker Was Inflation’s Worst Enemy
John B. Taylor, The Wall Street Journal

Paul Volcker, who changed the course of economic history dramatically for the better, died Sunday at 92. He was appointed chairman of the Federal Reserve Board in 1979 by Jimmy Carter and was reappointed in 1983 by Ronald Reagan.

A Message from The Clearing House:

Recently, The Clearing House conducted a survey to dive deeper into consumer perceptions about how financial apps access, collect, use, store and share their data. The survey poll included nearly 4,000 U.S. banking consumers who have accounts, loans, and mortgages with a financial services provider. See findings.

Research Reports

The Gender Gap in Self-Promotion
Christine L. Exley and Judd B. Kessler, The National Bureau of Economic Research

In job applications, job interviews, performance reviews, and a wide range of other environments, individuals are explicitly asked or implicitly invited to assess their own performance. In a series of experiments, we find that women rate their performance less favorably than equally performing men.

Morning Consult