Morning Consult Finance: SEC Issues Most Monetary Sanctions in More Than 30 Years


Top Stories

  • The Securities and Exchange Commission has issued the most monetary sanctions in more than three decades, with the SEC issuing $4.3 billion in fines in fiscal year 2019 ending Sept. 30. The agency’s crackdown on higher-fee mutual funds aided the record number. (The Wall Street Journal)
  • Democratic lawmakers are sending numerous letters to federal agencies regarding opportunity zones, which are supposed to incentivize investors in poor neighborhoods but have reportedly facilitated money flowing into affluent areas. Sen. Ron Wyden (D-Ore.), the ranking member of the Senate Finance Committee, said he is introducing legislation this week to eliminate the zones in wealthy neighborhoods, and two Democrats and a Republican on the House Ways and Means Committee released a bill that would require funds investing in the zones to file annual update reports to the Treasury Department. (The New York Times)
  • The United States and China have agreed, in theory, to roll back tariffs simultaneously in phases if trade negotiations continue, according to China’s Commerce Ministry. The two sides have had “ernest and constructive” talks, according to ministry spokesperson Gao Feng, although he didn’t say if a deal had already been reached, and no updated timetable was provided. (The Washington Post)

Chart Review

The rich borrow, too
The FRED Blog

Events Calendar (All Times Local)

11/07/2019
Meeting of CFTC’s Energy and Environmental Markets Advisory Committee 10:00 am
Senate Banking Committee hearing: “Examining Bipartisan Bills to Promote Affordable Housing Access and Safety” 10:00 am
11/08/2019
San Francisco Fed conference: The Economics of Climate Change
View full calendar

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General

Judge Weighs Administration’s Attempt to Shield Trump’s Tax Returns From U.S. House
Richard Rubin, The Wall Street Journal

A federal judge weighing whether to let a U.S. House committee sue the Trump administration for not handing over the president’s tax returns appeared to signal he was inclined to let the lawsuit go forward. U.S. District Judge Trevor McFadden didn’t rule from the bench on Wednesday. But he noted that past cases over enforcement of House subpoenas were allowed to proceed.

Falling US unemployment draws most vulnerable into work
Brendan Greely, Financial Times

Incremental labour gains disproportionately benefit minorities and less educated.

U.S. Collected a Record $7 Billion in Tariffs in September
Josh Zumbrun, The Wall Street Journal

The U.S. collected a record $7 billion in import tariffs in September, fresh figures show, as new duties kicked in on apparel, tools, electronics and other consumer goods from China. Tariff revenue jumped 9% from August and was up more than 59% from a year earlier. 

Fed’s Williams Says No Rate Changes Penciled In, Economy Will Drive Policy
Michael S. Derby, The Wall Street Journal

Two top Federal Reserve officials said Wednesday that they don’t see a need right now for the central bank to press forward with more rate cuts after lowering the cost of short-term borrowing several times this year. “The three rate cuts we did were very effective at managing the risks” slowing global growth and trade uncertainty present to the U.S. economy, New York Fed President John Williams said at a Wall Street Journal event in New York.

Fed Adds $62.542 Billion To Markets Wednesday
Michael S. Derby, The Wall Street Journal

The New York Fed added $62.542 billion to financial markets Wednesday. The intervention came via overnight purchase agreements in which eligible banks submitted $55.042 billion in Treasurys and $7.5 billion in mortgage-backed bonds to the central bank.

Stocks Rise as China Spurs Trade Hopes; Bonds Fall: Markets Wrap
Todd White, Bloomberg

U.S equity futures climbed with European stocks after China said it agreed with America to roll back tariffs on each other’s goods in phases as they work toward a trade deal. Treasuries and gold declined.

Banking

Banks Don’t Know What to Do With Their Branches
Allison Prang, The Wall Street Journal

It is happy hour at the Capital One near Rittenhouse Square, and drinks are on the house at the Peet’s Coffee on the branch’s second floor. Staff tell customers to make themselves comfortable. At a PNC Bank a few blocks away, customers approach tellers stationed behind windows.

Goldman’s journey: from high finance to the Mittelstand
Laura Noonan and Olaf Storbeck, Financial Times

Fighting to fix weak profits, the Wall Street bank is turning to smaller European companies.

Wells Fargo slapped with $200 million patent verdict in East Texas
Jan Wolfe, Reuters

A federal jury on Wednesday said Wells Fargo should pay $200 million for infringing two patents owned by the United Services Automobile Association, a Texas-based insurance and banking giant. The verdict followed a six-day jury trial before U.S. District Judge Rodney Gilstrap in Marshall, Texas.

Ex-Banker’s Bromance Soured After He Got $5.7 Million in Bribes
Patricia Hurtado, Bloomberg

A former Credit Suisse Group AG banker told a jury in New York that a shipbuilding executive who once called him a brother ended up threatening him when money from the bank stopped flowing. Surjan Singh is one of three former Credit Suisse bankers who have pleaded guilty to taking millions of dollars in bribes from Privinvest Group executive Jean Boustani. Boustani, who’s accused of defrauding investors, denies wrongdoing.

Smaller banks take a turn swinging the ax
Jim Dobbs, American Banker

Small and midsize banks, much like their larger competitors, are cutting jobs to address margin pressure and to get ahead of a slowing economy. Headcount at banks with $10 billion or less in assets fell by 2% in the first half of this year, with a net loss of 9,100 jobs, according to data compiled by the Federal Deposit Insurance Corp. 

Financial Products and Investments

Bank of America, Raymond James to pay $12 million for college fund overcharges
Jonathan Stempel, Reuters

Bank of America Corp (BAC.N) and Raymond James Financial Inc (RJF.N) will pay roughly $12 million in restitution to customers who incurred excessive fees on investments meant to help their children afford college, a U.S. regulator said on Wednesday. The Financial Industry Regulatory Authority said Bank of America’s Merrill Lynch unit will pay at least $4 million and two Raymond James units will pay $8.03 million, after failing to ensure that financial advisers properly took fees into account when recommending investments in so-called 529 savings plans.

Housing and GSEs

CFPB Wins $59 Million Judgment Against Mortgage Relief Firms
Evan Weinberger, Bloomberg Law

The Consumer Financial Protection Bureau won a $59 million judgment against a pair of shuttered mortgage relief law firms that the bureau alleged scammed consumers seeking to escape underwater home loans. The bankruptcy estates of the Mortgage Law Group and the Consumer First Legal Group, along with the firms’ principle members, will pay a combined $59 million in restitution and civil money penalties, according to a Nov. 4 post-trial order by Judge William Conley of the U.S. District Court for the Western District of Washington.

Fannie Mae transfers risk on $10.5 billion in single-family loans
Kelsey Ramírez, HousingWire

Fannie Mae announced it completed its seventh credit risk transfer of 2019, transferring the risk on $10.5 billion in single-family loans. The deal, CIRT 2019-4, holds $10.5 billion in unpaid principal balance of 21-year to 30-year original term fixed rate loans.

HomeStreet fined for RESPA violations
Ken McCarthy, American Banker

HomeStreet Bank in Seattle will pay a nearly $1.4 million fine for violating the Real Estate Settlement Procedures Act. The Federal Deposit Insurance Corp. said in a press release Wednesday that the $7.2 billion-asset HomeStreet violated RESPA when it entered into agreements with real estate brokers to co-market services through online platforms.

Taxes

Democratic Candidates’ Wealth Tax Plans Would Shake Up Billionaire Philanthropy
Richard Rubin, The Wall Street Journal

The wealth taxes proposed by top Democratic presidential candidates might spark a short-term boom in billionaires’ donations to charity, as they accelerate gifts to avoid years of taxes eroding their fortunes. Facing an annual tax that eats into returns and shrinks wealth, billionaires would have an incentive to move money out of their control—and out of the wealth-tax base. 

Taxing the Ultra-Wealthy Forces Democrats to Get Creative
Ben Steverman, Bloomberg Businessweek

Democrats these days are throwing around plans for new and unprecedented taxes on wealth, financial transactions, capital gains, and inheritances. Tantalizing them are the trillions of dollars of wealth in the hands of the richest 0.1%, much of it escaping taxation.

What the right fears about Warren’s wealth tax
Zack Beauchamp, Vox

The angry conservative reaction to Sen. Elizabeth Warren’s tax proposals is quite revealing. They expose a particular intellectual tendency, one that goes beyond merely opposing higher taxes into a more fundamental defense of the American model of political economy. 

Financial Technology

Facebook crypto boss: ‘I don’t think of Bitcoin as a currency’
Salvador Rodriguez, CNBC

David Marcus, the head of Facebook’s cryptocurrency projects, on Wednesday said that Bitcoin is digital gold, but it’s not a good currency for transactions. “I don’t think of Bitcoin as a currency. It’s actually not a great medium of exchange because of it’s volatility,” Marcus said speaking at the New York Times DealBook Conference in New York. 

Opinions, Editorials and Perspectives

Fed Interest Rates Can Be the Wrong Tool
Conor Sen, Bloomberg

The U.S. labor market poses a conundrum: The unemployment rate is at lows last seen 50 years ago, yet runaway wage growth or inflation is absent. This has left analysts and economists with a persistent and nagging question: When will the economy hit full employment (which generally means that all available labor is employed in the most efficient way possible)? 

Research Reports

Creating Moves to Opportunity: Experimental Evidence on Barriers to Neighborhood Choice
Peter Bergman et al, The National Bureau of Economic Research

Low-income families in the United States tend to live in neighborhoods that offer limited opportunities for upward income mobility. One potential explanation for this pattern is that families prefer such neighborhoods for other reasons, such as affordability or proximity to family and jobs.

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