Morning Consult Finance: SEC Moves Forward With Conflicts Rule Tied to 2008 Financial Crisis


Essential financial news & intel to start your day.
January 26, 2023
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Today’s Top News

  • The Securities and Exchange Commission voted unanimously to propose a conflicts-of-interest rule that would prohibit traders in asset-backed securities from betting against the assets they sell to investors, a rule that Chairman Gary Gensler called an “unfinished step” in the regulatory response to the 2008 financial crisis. Republican commissioners raised concerns that the rule could inhibit legitimate investment activity, but the SEC said the proposed rule would provide exceptions for those activities, including hedging to account for risk and meeting liquidity commitments. (Reuters)
  • Morgan Stanley has fined some of its own bankers after they messaged clients using unapproved platforms such as WhatsApp, actions which led to several U.S. banks being fined by regulators in an industry-wide crackdown on the practice. Morgan Stanley will collect the fines — which range from a few thousand dollars to more than $1 million — by docking future pay or clawing back previous bonuses, according to a person familiar with the matter. (Bloomberg)
  • The Treasury Department’s Financial Crimes Enforcement Network warned U.S. banks to be on the lookout for wealthy Russian oligarchs with ties to the Kremlin using complex commercial real estate finance schemes and ownership structures to obscure funds and evade sanctions. FinCEN acting Director Himamauli Das said that Russian elites are being forced to look for new ways to hide their “ill-gotten wealth,” and the agency noted in the report that sanctioned individuals could try to evade detection and bank verification procedures by lowering their stakes in investments. (The Wall Street Journal)
  • In a speech at a union facility in Virginia today, President Joe Biden plans to call out House Republicans over their economic agenda and unwillingness to raise the U.S. debt ceiling unconditionally, drawing attention to what the White House says are plans to cut earned benefits for Americans, such as Social Security and Medicare. (The Washington Post) Meanwhile, House Republicans are working on a plan that would stretch the debt ceiling deadline to the end of the fiscal year, Sept. 30, and buy more time for negotiations, according to sources familiar with the talks, while passing the extension plan would not be contingent on any specific spending cuts and would suspend the debt ceiling rather than increase the total dollar amount of the debt limit. (Roll Call)

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What Else You Need to Know


Democratic lawmakers create sustainable investment caucus to address ESG investing

Courtney Degen, Pensions & Investments

Two Democratic lawmakers announced the launch of the Congressional Sustainable Investment Caucus on Wednesday, which will aim to inform policy related to environmental, social and governance investing.


NYSE Mayhem Traced to a Staffer Who Left a Backup System Running

Katherine Doherty, Bloomberg

More than 700 miles from Wall Street, the New York Stock Exchange’s backup data center on Cermak Road in Chicago is supposed to safeguard US markets, standing by at all hours in case disaster ever strikes the world’s largest venue for trading shares.


Companies Fight Back Against Premium Increases for Crucial Insurance

Leslie Scism and Alice Uribe, The Wall Street Journal

Insurance rates are up for cars, homes and commercial property. Some of the biggest increases have been for policies that protect a company’s directors and top executives.


White House to update small business lending tool

Katy O’Donnell, Politico Pro

The Small Business Administration is updating its marketplace tool designed to match borrowers with lenders, in a bid to streamline underwriting and expand access to capital, the Biden administration said.

Economic and Fiscal Policy

McCarthy knocks bill to abolish IRS he promised GOP rebels a hearing on

Ryan King, The Washington Examiner

House Speaker Kevin McCarthy (R-CA) disavowed a national sales tax measure called the Fair Tax Act that he promised Republicans rebels his Congress would hold a hearing on.


Joe Manchin to Introduce Bill to Delay EV Tax Credits

Yuka Hayashi, The Wall Street Journal

Sen. Joe Manchin (D., W.Va.) said he would introduce legislation Wednesday that delays implementation of new tax credits for electric vehicles amid disagreements with the Treasury Department over how to implement the program, a component of the Inflation Reduction Act.


US economic growth set to have slowed in fourth quarter of 2022

Colby Smith, Financial Times

Expected lower GDP figures come as Federal Reserve’s aggressive tightening campaign weighs on activity.


Debt-Limit Showdown Splits Credit Raters on US Downgrade Trigger

Liz McCormick, Bloomberg

The three most-cited debt-rating firms are all expecting Congress ultimately to raise the federal debt ceiling — despite a deep partisan divide — though they’re split on the implications of any move to prioritize payments on Treasuries in the event the debate goes into extra time.


McCarthy’s moderate Republican allies have their own debt-ceiling ideas

Mackenzie Hawkins, Bloomberg

Ultraconservatives in the House have dominated the public discussion on the U.S. debt ceiling, but Speaker Kevin McCarthy can’t afford to ignore GOP centrists if the country is to avoid a catastrophic payments default later this year.


Democrats revel in the GOP’s ‘doozy’ of an idea for a national sales tax

Ben Werschkul, Yahoo Finance

“This so-called fair tax plan is the craziest yet. It’s a real doozy,” Chuck Schumer said on Wednesday.


Measure seeks to repeal national debt ceiling

Douglas Clark, Financial Regulation News

U.S. Rep. Bill Foster (D-IL) has joined colleagues in co-sponsoring the End the Threat of Default Act (H.R.415), which would repeal the national debt ceiling.


Bill seeks to hold Congress accountable for balanced budget

Douglas Clark, Financial Regulation News

Sen. Steve Daines (R-MT) has re-introduced the Balanced Budget Accountability Act (S.6), which he noted requires Congress to produce a balanced budget, or members will not get paid.


Biden finally gets a win against inflation

Victoria Guida, Politico

The war on inflation may be far from over, but the economy has reached a key, little-noticed milestone: Workers’ wage gains are finally outpacing the rise in consumer prices.


What a Brainard departure would mean for the Fed

Neil Irwin, Axios

Lael Brainard, the No. 2 official at the Fed, is a leading contender to become President Biden’s top economic adviser, the Washington Post first reported this morning. It raises an important question: If she heads to the White House, what would it mean for the central bank?


Small Businesses Keep Hiring as Fed Raises Rates to Cool Economy

Dion Rabouin, The Wall Street Journal

A surge in hiring by American small businesses complicates the Federal Reserve’s effort to cool inflation.


Bloomberg LP is hiring 1,000 people while other media, finance, and tech companies slash staff

Lucia Moses, Insider Premium

Bloomberg LP is on a hiring tear while other media, finance, and tech companies slash staff amid the softening economy. The financial news and info giant approved the hiring of 1,000 people this year, according to a staff memo from Vlad Kliatchko, the company’s chief product officer, that was reviewed by Insider.


High-Earning Men Are Cutting Back on Their Working Hours

Courtney Vinopal, The Wall Street Journal

American workers have cut the number of hours they spend in their jobs since 2019, but no group has dialed back its time on the clock more than young, high-earning men whose jobs typically demand long hours.


Millions of working parents, especially women, are unpaid caregivers. Why doesn’t government data account for their labor?

Aarthi Swaminathan, MarketWatch

Working mothers have two full-time jobs. But only one is seen by official statistics. The U.S. economy relies on unpaid care to function, as parents juggle childcare and chores, and others manage elderly at home. Yet caregiving is not considered as part of economic output.


Banks, fintechs poised for battle over CFPB consumer data rule

Sam Sutton, Politico Pro

The banking and fintech lobbies are bracing for a fight over an upcoming Consumer Financial Protection Bureau rule that would set guardrails around how financial services businesses access and use consumer data.


Former BofA CEO-backed fintech launches to match SMBs with lenders

Anna Hrushka, Banking Dive

“What we want to do is to put people that want to lend money together with people who need money. It’s not complicated,” said former Bank of America Chairman and CEO Hugh McColl Jr.


As Capital One’s deposits climb, interest costs rise sharply

Polo Rocha, American Banker

The McLean, Virginia-based company reported $333 billion in deposits during the fourth quarter, a 7% increase from a year earlier, partly due to a high-yield savings account that has quickly been paying better rates to savers amid supersized interest rate hikes from the Federal Reserve.


Some banks will go to any lengths for deposits, even opening branches

John Reosti, American Banker

As banks continue looking for ways to shrink their branch networks amid a historic shift to digital delivery systems, some institutions are moving in a different direction, opening new branches in a bid to attract deposits.


BNY Wants to Help Money Managers Outsource Their Trading Desks

Hannah Levitt, Bloomberg

Bank of New York Mellon Corp. wants to do money managers’ trading for them with a new outsourcing service aimed at helping buy-side firms cut costs.

Financial Products and Investments

State treasurers warn of pension fund, 401(k) damage if debt ceiling breached

Brian Croce, Pensions & Investments

A group of 11 state treasurers and the comptrollers of Maryland and New York City are calling on House Speaker Kevin McCarthy, R-Calif., “to cooperate in increasing the debt limit of our country in a timely manner,” in order to prevent economic chaos.


Hindenburg vs Adani: The Short Seller Taking on Asia’s Richest Person

Edward Ludlow and Katherine Burton, Bloomberg

Over the past few years, Nathan Anderson has made a name with analysis that sends stocks sinking. Now the activist short seller behind Hindenburg Research is going after his biggest game yet — what Hindenburg is calling, with characteristic chutzpah, “The Largest Con in Corporate History.’’


Rich young Americans have lost confidence in the stock market — and are betting on these 3 assets instead for long-term tailwinds

Jing Pan, MoneyWise

The stock market has long been the go-to choice for people looking to invest their money. But that could be about to change as a younger generation enters the scene.

Housing and GSEs

‘Frustrated and saddened’: Progressives say White House whiffed on rent aid

Katy O’Donnell, Politico Pro

Liberal lawmakers and housing advocates in recent weeks had stepped up pressure on the administration to limit rent hikes at properties with government-backed mortgages.


Housing Demand Climbs as US Market Starts to Show Signs of Life

Prashant Gopal, Bloomberg

Pending home sales increased for the first time in more than a year.


Court rejects government’s bid to investigate realtors association

Katy O’Donnell, Politico Pro

A federal court on Wednesday rejected the government’s effort to obtain information about potentially anti-competitive behavior at the National Association of Realtors, ruling that the demand violates an earlier settlement agreement.


Most Gen Zers feel a mortgage is out of reach

Brad Finkelstein, National Mortgage News

In the United States, 5.8 million consumers opened their first credit product in 2021 with another 3 million during the first half of 2022. That was on top of 6.1 million in 2019 and 5.1 million in 2020, TransUnion found. Respondents to the survey thought that they would have some difficulty in obtaining home financing as part of their future credit needs.

Crypto and Financial Technology

Crypto industry leaders ‘scared of a strong SEC’ — Senator Warren

Brayden Lindrea, Cointelegraph

United States senator and crypto skeptic Elizabeth Warren wants the Securities Exchange Commission (SEC) to “double down” on its crypto enforcement efforts, highlighting that the cryptocurrency industry is running “scared” for what’s to come next. Warren’s comments came during an interview with the American Economic Liberties Projects on Jan. 25.


FTX lawyers: Examiner could cost $100M and ‘provide no benefit’

Luke Huigsloot, Cointelegraph

FTX lawyers, joint provisional liquidators of FTX US and the Bahamas and a committee of creditors have all opposed the appointment of an independent examiner.


Binance’s 8 Wallet “error” was there for all to see

Crystal Kim, Axios

Binance, the world’s largest crypto exchange, kept coins in a wallet with others that didn’t belong there, raising the specter of company and customer assets commingling.

Morning Consult