Morning Consult Finance: Robinhood Will Pay $70 Million to Settle Finra Investigation Into Trading, Technology Issues
 

Finance

Essential financial news & intel to start your day.
July 1, 2021
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Morning Consult Finance will be off Friday and Monday for the Fourth of July holiday. The weekday newsletter will resume Tuesday.

 

Top Stories

  • Robinhood Financial LLC will pay a fine of nearly $70 million to settle allegations that it misled customers, didn’t supervise technology that locked users out of their accounts, had issues with technology that automated the opening of new accounts or trading strategies and updated clients about their balances, according to the Financial Industry Regulatory Authority. Robinhood didn’t admit guilt or deny the claims, while Finra enforcement chief Jessica Hopper said in an interview that “innovation can’t be at the cost of creating compliance and supervision systems.” (The Wall Street Journal)
  • The Internal Revenue Service faces a backlog of more than 35 million unprocessed tax returns, according to a report from Erin Collins, the National Taxpayer Advocate. The figure represents a fourfold increase from 2019, the most recent year before the coronavirus pandemic. (The Washington Post)
  • At a roundtable event hosted by the White House, President Joe Biden pitched the infrastructure investment deal as part of the government’s aid toward climate change. Biden specifically touted the $50 billion slated to “build resilience to extreme weather events like wildfires.” (Politico)
 

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Events Calendar (All Times Local)

 

What Else You Need to Know

General
 

Corruption, Cybercrime Top List of U.S. Anti-Money-Laundering Concerns

Dylan Tokar, The Wall Street Journal

The U.S. Treasury Department on Wednesday issued a wide-ranging set of national anti-money-laundering priorities, naming corruption and cybercrime among the areas where financial institutions should focus their compliance resources. The list is the first created by the Treasury’s Financial Crimes Enforcement Network, or FinCEN, following a major overhaul of U.S. anti-money-laundering laws in January. 

 

A third infrastructure bill cruises into Dems’ ‘two-track’ traffic jam

Sarah Ferris and Sam Mintz, Politico

House Democrats this week are taking an early victory lap for their massive infrastructure bill that would spend hundreds of billions on roads, bridges, transit and rail. No, not the one you’re thinking of.

 

Wall Street powers through the first half of 2021 with U.S. stocks at record highs

Hamza Shaban, The Washington Post

Wall Street wrapped up the first half of 2021 at record highs, with investors defying pessimistic projections of a broader pullback and pushing past concerns of rising inflation and potential rate hikes. The Dow Jones industrial average advanced more than 210.22 points, or 0.6 percent, to close at 34,502.51 on Wednesday. 

 

White House Spotlights Failing Infrastructure to Pressure GOP

Jennifer Epstein, Bloomberg

President Joe Biden’s team is intensifying its pressure on Republicans opposed to a bipartisan infrastructure agreement by spotlighting crumbling roads and bridges on a state-by-state basis that the funding could be used to rebuild. Local fact sheets, being released on Thursday, also highlight states’ needs for improving water quality and expanding broadband internet.

 

U.S., Taiwan Revive Trade Talks, With Pledge to Combat Forced Labor

Josh Zumbrun and Chao Deng, The Wall Street Journal

The U.S. and Taiwan revived dormant trade and investment talks and pledged to keep supply chains free from forced labor, in a dig at China, which has objected to the negotiations. The trade talks, held by videoconference on Wednesday, were the first between the U.S. and Taiwan since 2016, and the delegations said they would work together “as democratic partners in support of a worker-centered trade policy.”

 

Lawmakers debate bill mandating racial equity audits at firms

Abigail Goldber-Zelizer, The Hill

House lawmakers on Tuesday debated legislation that would require banks to conduct racial equity audits every two years in an effort to promote diversity and equity. At a hearing hosted by the House Financial Services Subcommittee on Diversity and Inclusion, members discussed the Diversity and Inclusion Data Accountability and Transparency Act, sponsored by Congressional Black Caucus chair Rep. Joyce Beatty (D-Ohio).

 

Top Trump Executive Allen Weisselberg Surrenders to Face Charges

Ben Protess et al., The New York Times

Donald J. Trump’s long-serving chief financial officer, Allen H. Weisselberg, surrendered on Thursday to the Manhattan district attorney’s office as he and the Trump Organization prepared to face charges in connection with a tax investigation, people with knowledge of the matter said. The exact charges were not yet known.

 
Fiscal Policy
 

How Washington and Big Tech won the global tax fight

Mark Scott and Emily Brinbaum, Politico

Washington may have fallen out of love with Big Tech. But when it comes to revamping the world’s tax system, the United States backed Silicon Valley against the world.

 

Drivers used to pay for roads. Washington is killing that idea.

Tanya Snyder, Politico

For almost a century, one principle has governed Washington’s approach to transportation funding: The people who drive on roads should pay for them.

 

Debate over SALT deduction forges odd alliances

Naomi Jagoda, The Hill

The congressional debate over the cap on the state and local tax (SALT) deduction is creating unusual combinations of groups advocating for and against repeal of the $10,000 limit. Labor unions and some business groups back repealing or lifting the cap, while liberal and conservative think tanks are against completely doing away with the limit.

 
Economy and Monetary Policy
 

Powell and Biden link arms for America’s inflation summer

Victoria Guida, Politico

Republicans have seized on a burst of inflation to hammer President Joe Biden’s economic agenda, but the most important policymaker on the president’s side is one of the GOP’s own. Federal Reserve Chair Jerome “Jay” Powell, who worked in the George H.W. Bush administration and was elevated to central bank chief under President Donald Trump, has been the strongest voice in reassuring financial markets and Congress that higher prices will ease as the economy fully emerges from the pandemic.

 

Averting Inflation Crisis Turns on Something Fed Doesn’t Control

Rich Miller, Bloomberg

Federal Reserve Chairman Jerome Powell says controlling inflation expectations is key to achieving the central bank’s twin goals of price stability and maximum employment. The trouble is that it is far from clear the Fed can do that as the economy emerges from the pandemic.

 

U.S. Jobless Claims Projected to Resume Decline

Bryan Mena, The Wall Street Journal

Worker filings for jobless benefits are projected to have resumed a decline last week after stalling out in mid-June. Economists surveyed by The Wall Street Journal estimate that new jobless claims for the week ended June 26 decreased to a seasonally adjusted 390,000 from 411,000 the prior week.

 

For Many Jobs, Signing Bonuses of $1,000—and Up—Are the New Norm

Patrick Thomas, The Wall Street Journal

Signing bonuses are usually reserved for professional athletes and a privileged few white-collar professionals. Not this summer.

 
Banking
 

Citizens Financial chief: ‘We’ve earned the rights to do more deals’

Joshua Franklin, Financial Times

Bruce Van Saun sees more bank consolidation following lenders acquisition of HSBC’s US business.

 

Maloney reintroduces bill to curb banks’ overdraft fees

Neil Haggerty, American Banker

In the latest example of pressure on banks to rein in overdraft fees, a senior House Democrat has reintroduced legislation to restrict the charges. Rep. Carolyn Maloney, D-N.Y., held a press conference Wednesday to tout the Overdraft Protection Act, which would restrict the number of times banks can collect the fees and is also intended to ensure that charges are reasonable.

 
Financial Products and Investments
 

Private-Equity Firms Put Retirees’ Annuities in Higher Risks but Also More Cash

Leslie Scism, The Wall Street Journal

Private-equity-backed insurance companies that owe billions of dollars to retirees in annuity payments are taking some additional risk with investments, new analysis by ratings firm A.M. Best shows. To offset that risk, however, these firms on average hold more cash than traditional insurers, and they have higher capital levels, according to the report.

 

TPG Is Evaluating a Public Listing

Miriam Gottfried and Cara Lombardo, The Wall Street Journal

TPG, one of the last of the original private-equity giants to remain a closely held partnership, is evaluating a public listing, people familiar with the matter said. The firm is considering a straightforward initial public offering and a merger with a special-purpose acquisition company, with the former being the most likely route, the people said.

 
Housing and GSEs
 

The Real Lender on Your Mortgage Could Be the Federal Reserve

Peter Coy, Bloomberg Businessweek

Why, again, is the Federal Reserve adding $40 billion a month to its holdings of mortgage-backed securities when the mortgage market does not seem to be in need of federal assistance?  After all, the national average for 30-year fixed-rate mortgage loans is 3.02%, according to the latest survey by mortgage buyer Freddie Mac Corp. 

 

Eviction Deadline Looms for Millions of Tenants With Surging Rent Debt

Sarah Holder and Kriston Capps, Bloomberg CityLab

After a year of being unemployed and serving as the primary caretaker for her aging father, Cyndi was relieved when she got a job this spring as a contractor for a major bank. She’ll make $85,000 a year — more than enough to pay her $1,200-a-month rent in Charlotte, North Carolina.

 

Rent Catches Up to Pre-Pandemic Estimates, Except in Big Cities

Marie Patino, Bloomberg CityLab

As the first Covid-19 lockdowns began in the U.S. last year, the cost to rent a place in San Francisco began plunging. By December,  prices were down 35% year over year as those able to work remotely moved to smaller cities and suburbs nearby. Even more than a year later, the gap in the city between actual rent prices and pre-pandemic projected rent prices — representing what prices would look like if they had followed their historical course — remains the highest in the country, according to new research published by real estate aggregator Apartment List.

 

A Housing Frenzy Is Sparking Bidding Wars From New York to Shenzhen

Bloomberg

From the U.S. to the U.K. to China, housing is riding an extended boom. Global valuations are soaring at the fastest pace since 2006, according to Knight Frank, with annual price increases in double digits. Frothy markets are flashing the kind of bubble warnings that haven’t been seen since the run up to the financial crisis, a Bloomberg Economics analysis shows.

 
Financial Technology
 

Robinhood Wants You to Buy Robinhood Stock on Robinhood

Peter Rudegeair, The Wall Street Journal

Robinhood Markets Inc. wants its users to buy stock. The online brokerage’s own, that is.

 

What protections do consumers have in crypto trading?

Madison Darbyshire, Financial Times

Right now, the answer is: not many.

 

Apollo to Take Stake in Fintech Investor Motive Partners

Miriam Gottfried, The Wall Street Journal

Apollo Global Management Inc. is taking a stake in financial-technology investor Motive Partners, a move aimed at beefing up the private-equity giant’s own technology. Apollo is to buy up to 24.9% of Motive in a deal the firms plan to unveil later Thursday. 

 

Traders lend out cryptocurrencies in quest for huge returns

Joshua Oliver, Financial Times

Consumers are taking on heightened risks to chase ‘ridiculously high’ rates, analysts warn.

 
Opinions, Editorials and Perspectives
 

Prioritizing People to Build Back the Economy

Rashida Tlaib and Eduardo Suplicy, The New York Times

The pandemic has highlighted the harsh realities of food insecurity, lack of income and inadequate public health infrastructure. But these issues are not new, nor are they limited to one nation. 

 

Is Citi the New ‘It’ Place to Work on Wall Street?

Tara Lachapelle, Bloomberg

Wall Street may not be clued in yet to the undercurrent of cultural change afoot at Citigroup Inc., but you can bet prospective employees are. Ask any millennial in financial services, and they would probably tell you that Citi wasn’t on their list of most desirable banks to work at in New York for the last decade.

 
Morning Consult