General
Would a Democratic president fire CFPB’s Kraninger?
Kate Berry, American Banker
Republicans have long tried to defang the Consumer Financial Protection Bureau, but a Democratic victor in the presidential race could actually be the first to mount a constitutional challenge to the agency’s leadership. Some lawyers think the Supreme Court will soon hear one of three cases challenging the bureau’s constitutionality, all dealing with a president’s ability to fire a CFPB director.
London Stock Exchange Board Unanimously Rejects Takeover Bid From HKEX
Bloomberg
LSE’s board has unanimously rejected an unsolicited proposal from Hong Kong Exchanges and Clearing Limited and sees no merit in further engagement, Bloomberg News reports. The company said it remains committed to the purchase of Refinitiv Holdings.
China Seeks to Narrow Trade Talks With U.S. in Bid to Break Deadlock
Lingling Wei et al., The Wall Street Journal
China is looking to narrow the scope of its negotiations with the U.S. to only trade matters, seeking to put thornier national-security issues on a separate track in a bid to break deadlocked talks with the U.S. Chinese officials hope such an approach would help both sides resolve some immediate issues and offer a path out of the impasse, people familiar with the plan said.
Mnuchin Says U.S. Looking Closely at Issuing 50-Year Bond
Kate Davidson, The Wall Street Journal
The Treasury Department is “very seriously considering” issuing a 50-year Treasury bond next year, Treasury Secretary Steven Mnuchin said Thursday, as the Trump administration looks to take greater advantage of low interest rates to slow soaring borrowing costs. The Treasury said last month it was once again exploring the possibility of issuing debt with maturities beyond 30 years, after considering and then dropping the idea in 2017.
Senate approves Trump nominee Bowman for Federal Reserve
Martin Crustinger, Associated Press
The Senate on Thursday confirmed President Donald Trump’s nominee Michelle Bowman to serve a full 14-year term on the seven-member Federal Reserve board. Bowman was approved on a 60-31 vote, winning the support of 49 Republicans and 11 Democrats. Only one Republican, Sen. Rand Paul of Kentucky, joined Democrats voting no.
Top Democrat attempts to block Trump from paying farm bailout money, setting up battle over trade war tactics
Jeff Stein and Mike DeBonis, The Washington Post
House Appropriations Committee Chair Nita Lowey (D-N.Y.) is proposing to block the White House request over its farm bailout program, according to a draft of legislation reviewed by the Washington Post, potentially imperiling President Trump’s ability to direct payments to thousands of farmers. A key Republican responded by attacking the Democrat’s move, saying it could threaten passage of key bill needed to avoid a government shutdown.
ECB Move Highlights Differences Between Eurozone, U.S. Economies
David Harrison and Paul Hannon, The Wall Street Journal
The European Central Bank’s decision Thursday to lower its key interest rate further below zero while relaunching an asset-purchase program means monetary policy in Europe is now even more stimulative than in the U.S. That prompted a strong response from President Trump, who complained in a tweet that the ECB is weakening the euro against the U.S. dollar and thus “hurting U.S. exports,” while the Federal Reserve “sits, and sits, and sits.”
Businesses Escalate Push for Trade Pact with Canada, Mexico
William Mauldin and Natalie Andrews, The Wall Street Journal
U.S. business groups are ramping up efforts to win passage of the Trump administration’s trade agreement with Canada and Mexico, even as House Democrats and other critics say the deal needs revisions before a vote. Dozens of farmers and other supporters rallied Thursday on the National Mall to advocate passage of the U.S.-Mexico-Canada Agreement, or USMCA.
Democratic candidates lay into Trump on trade
Niv Ellis, The Hill
Democratic candidates laid into President Trump’s trade policy at Thursday night’s debate, characterizing it as an erratic approach that has hurt America’s economy. “We’ve got a guy in the White House who is erratic on trade policy. He conducts trade policy by tweet, frankly, borne out of his fragile ego,” Sen. Kamala Harris (D-Calif.) said.
Stocks Set for Weekly Gain as Bonds Extend Retreat: Markets Wrap
Laura Curtis, Bloomberg
U.S. equity futures rose with Asian and European stocks as shares globally headed for a third weekly gain thanks to easing trade fears and a new round of central bank stimulus. Treasury yields climbed and the dollar slipped.
Banking
Beto O’Rourke Urges Banks to Cut Services for Gun Sales
Jacey Fortin, The New York Times
Beto O’Rourke, the Democratic presidential candidate, on Thursday called on banks and credit card companies to address gun violence by refusing to provide services for some firearms sales. In a statement, Mr. O’Rourke’s campaign said he wanted the financial institutions to stop providing services for sales of assault-style weapons — or any firearms that are sold without background checks — and to stop doing business with manufacturers that produce assault-style weapons.
Deutsche Bank settles US mortgage bond rigging case
Laura Noonan, Financial Times
Lender agrees $15m civil settlement over alleged manipulation of Fannie and Freddie bonds.
Foreign Banks Risk Losing Dollar Access Under Expanded U.S. Counter-Terror Powers
Mengqi Sun and Ian Talley, The Wall Street Journal
The U.S. plans to use expanded counterterrorism powers to target foreign financial institutions that facilitate terrorist financing, leaders of terrorist groups and those participating in terrorist training over the internet, a U.S. Treasury Department senior official said. “Foreign financial institutions should be on notice that the U.S. government will fully utilize this new authority if they are found to be, in any way, facilitating the malign activities of U.S. designated terrorist groups, their members and their supporters,” Sigal Mandelker, the Treasury undersecretary for terrorism and financial intelligence, said in prepared remarks for a speech Wednesday at the International Institute for Counterterrorism’s annual summit in Israel.
Two JPMorgan metals executives put on leave amid U.S. probe
Peter Hobson et al., Reuters
Two JPMorgan Chase & Co (JPM.N) employees, including a top metals trading executive, have been placed on leave in response to a U.S. criminal investigation into the bank’s metals trading practices, according to a source familiar with the matter. Michael Nowak and Gregg Smith are on leave, the source said on Thursday, making them the third and fourth JPMorgan employees to be connected to the criminal investigation that has resulted in guilty pleas from two former JPMorgan metals traders.
Financial Products and Investments
Falling Yields Unleash Flood of Muni ‘Century Bonds’
Gunjan Banerji, The Wall Street Journal
U.S. state and local governments, along with universities, are joining companies in a dash to issue debt and lock in low rates, sometimes for up to 100 years. Rutgers University funded various capital projects by selling roughly $300 million in debt this week that doesn’t mature for a century.
Climate change poses major risk to flood insurance program, experts warn
James Jarvis, The Hill
Environmental experts on Wednesday warned House lawmakers about risks to the National Flood Insurance Program (NFIP) posed by climate change, saying the situation is likely to worsen in the coming years. The hearing, hosted by the Financial Services Subcommittee on National Security, International Development and Monetary Policy, focused on the macroeconomic effects from climate change and the monetary risks associated with it.
Housing and GSEs
Ben Carson cleared of misconduct in furniture episode
Katy O’Donnell, Politico
HUD Secretary Ben Carson has been cleared of misconduct allegations stemming from the 2017 purchase of a $31,561 dining table set for his office, according to an inspector general’s report. “We did not find sufficient evidence to substantiate allegations of misconduct on the part of Secretary Carson in connection with this procurement,” the inspector general said in a 14-page report posted Thursday.
Treasury Secretary Mnuchin says Trump has approved reform plan for Fannie Mae and Freddie Mac
Diana Olick, CNBC
Treasury Secretary Steven Mnuchin said President Donald Trump “has approved” the Treasury’s plan to reform mortgage giants Fannie Mae and Freddie Mac. Mnuchin appeared before the Senate Banking Committee Tuesday and refused to confirm that when asked then, but said he had since confirmed it.
Taxes
Tax Break for Blighted Areas May Help Billionaire Art Collectors
Katya Kazakina, Bloomberg
The 2017 Republican tax overhaul in the U.S. could provide relief for billionaire art collectors stung by the expiration of another major tax break. Art collectors may have a “once-in-a-generation opportunity” to invest capital gains in economically depressed areas around the country, according to Cresset Partners, an adviser to wealthy families.
Financial Technology
Square Wants to Be a Bank But Doesn’t Want to Be Taxed Like One
Peter Rudegeair, The Wall Street Journal
Square SQ -2.38% Inc. has lent $5 billion to small businesses and consumers and applied for a banking license. It operates a nationwide mobile money-transfer business that serves 15 million Americans. But Square says it isn’t a financial company.
Jeffrey Epstein’s bitcoin intrigue deserves scrutiny at MIT
Matthew De Silva, Quartz
Joichi Ito, director of MIT’s Media Lab, resigned Saturday (Sept. 7) after The New Yorker published an investigation into his attempts to conceal financial contributions from pedophile Jeffrey Epstein. Although Ito stewarded MIT’s lab, his work and legacy in the crypto community have largely passed under the radar. Ito established the Digital Currency Initiative (DCI) at MIT, helping bitcoin survive some of its darkest days in 2015.
France urges EU rules on cryptocurrencies, warns of Libra risks
Francesco Guarascio, Reuters
The European Union should create a common set of rules for virtual currencies, currently largely unregulated in the bloc, to counter risks posed by Facebook’s cryptocurrency Libra, France’s Finance Minister said on Friday. The 28-nation EU does not have specific regulations on cryptocurrencies, which have so far been considered a marginal issue by most decision-makers because only a tiny fraction of bitcoins or other digital coins are converted into euros.
Opinions, Editorials and Perspectives
Where is the Next Subprime Crisis? Not in the Corporate Loan Market
David Lerner and Lee Shaiman, Morning Consult
After 10 years of economic recovery following the global financial crisis, many lawmakers and regulators in Washington, D.C. have grown fearful that a dangerous new bubble is hiding in plain sight. This has led some politicians to mistakenly compare America’s $1.2 trillion leveraged loan market to the pre-crisis subprime mortgage morass.
Don’t Mess With Fannie Mae and Freddie Mac
Editorial Board, Bloomberg
It’s official: The Trump administration has a plan to deal with mortgage giants Fannie Mae and Freddie Mac — by returning them to the same quasi-governmental form that set them up for failure in the 2008 financial crisis. If executed, it’s likely to be a win for a small coterie of hedge funds, and a big loss for everybody else.
Research Reports
Taxing wealth by taxing investment income: An introduction to mark-to-market taxation
Greg Leiserson and Will McGrew, Washington Center for Equitable Growth
The sharp increase in U.S. wealth inequality in recent decades has spurred interest in increasing taxes on wealth. This issue brief introduces mark-to-market taxation, one approach to raising taxes on wealth by reforming the taxation of investment income.
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