• The largest British, European and American banks are reportedly asking the British government for as much as 4 billion pounds ($5.2 billion) in tax breaks annually post-Brexit, after the banks say they paid billions in extra taxes in the aftermath of the financial crisis. According to a person familiar with the matter, EU countries including France are trying to lure banks away from Britain. (The Telegraph)

• Top economic policymakers, including International Monetary Fund Managing Director Kristalina Georgieva, Treasury Secretary Steven Mnuchin and European Central Bank President Christine Lagarde, predicted more growth ahead for the global economy at the World Economic Forum in Davos, Switzerland, last week. The officials warned, however, that low interest rates in many countries give central banks fewer options in the event of an economic slowdown. (The New York Times) 

• Mnuchin said the United States and Britain hope to finish a new trade agreement by the end of the year, as the United Kingdom prepares to leave the European Union on Friday. Mnuchin said that for Britain, there are “a lot of issues that can be resolved simultaneously” with the European Union and the United States. (The Wall Street Journal) 

Fed Officials Weigh New Recession-Fighting Tool: Capping Treasury Yields
Nick Timiraos, The Wall Street Journal

As part of their contingency planning for the next recession, Federal Reserve officials are looking at a stimulus scheme the U.S. last used during and after World War II. From 1942 until 1951, the Fed capped yields on Treasury securities—first on short-term bills and later on longer-term bonds—to help finance war spending and the recovery.

Expect Fed to Hold Rates Steady While Big Ideas Swirl Outside
Craig Torres, Bloomberg

Inside the Fed, it’s steady-as-she-goes. Investors see this week’s meeting as an easy call, with officials set to vote for leaving their policy rate unchanged for now.

Democrats urge Supreme Court to save consumer agency from chopping block
Harper Neidig, The Hill

Democrats are rallying around the consumer protection agency Congress created in the aftermath of the 2008 financial crisis as conservatives urge the Supreme Court to declare the regulator unconstitutional. The Consumer Financial Protection Bureau (CFPB) could be on the chopping block as it faces a Supreme Court case over whether its unique structure violates the Constitution.

Ultrafast Trading Costs Stock Investors Nearly $5 Billion a Year, Study Says
Alexander Osipovich, The Wall Street Journal

High-frequency traders earn nearly $5 billion on global stock markets a year by trading shares at slightly out-of-date prices, imposing a small but significant tax on investors, a new study says. The study—released Monday by the U.K.’s financial regulator, the Financial Conduct Authority—sheds light on a controversial practice called “latency arbitrage,” in which ultrafast traders seek to react to fresh, market-moving information more quickly than others can.

Virus Fears Batter Stocks and Oil as Bonds Surge: Markets Wrap
Todd White, Bloomberg

Intensifying concern about the economic and human impact of the deadly coronavirus sent stocks, oil and China’s yuan tumbling Monday while spurring haven assets. Treasuries gained and Italian bonds jumped after regional elections.

Goldman Sachs: will Solomon’s consumer gamble pay off?
Laura Noonan, Financial Times

Once seen as Wall Street’s most prestigious operation, the bank is betting a shift in focus will pay off in the long run.

Wells Fargo Quashes Hope That Its Scandals Are Nearly Resolved
Hannah Levitt, Bloomberg

Wells Fargo & Co.’s finance chief was promising analysts they would be kept abreast of the bank’s efforts to resolve scandals when his new boss chimed in. “I just want to be clear, I’m not suggesting here that any of these public issues will be closed this year,” Chief Executive Officer Charlie Scharf said earlier this month. 

Remaining hurdles for scandal-hit Wells Fargo
Imani Moise, Reuters

Wells Fargo & Co and its officials have racked up well over $4 billion (3 billion pounds) in penalties since a sales practices scandal erupted in 2016, and continues to face headwinds. Here are some of the remaining shoes that have yet to drop.

Industry to Crapo: Detach pot banking from public health debate
Hannah Lang, American Banker

Legislation that the House passed last year to enable banks and credit unions to serve the cannabis industry has a dim future in the Senate, but in a last-ditch effort bankers and other backers are urging lawmakers to set aside their doubts about marijuana legalization to focus solely on the banking component in the bill. Senate Banking Committee Chairman Mike Crapo, R-Idaho, issued a memo in December casting a shadow on the Secure and Fair Enforcement Banking Act that passed the House in September.

The Hidden Factor Making Junk Bonds Less Risky
Sam Goldfarb, The Wall Street Journal

Yields on junk bonds are near record lows. But their expected lifespans are shrinking fast, causing some investors to see a surprising amount of value in the lower-rated debt.

Big investment banks cool on Chinese IPOs on Wall Street
George Hammond and Ryan McMorrow, Financial Times

Falling valuations and trade war to blame as lenders back out of companies’ listings.

Fidelity chief on becoming the fund house to fear
Attracta Mooney, Financial Times

Anne Richards wants the $584bn asset manager to be the company rivals ‘have to beat.’

Trump moves to gut Obama housing discrimination rules
Katy O’Donnell and Victoria Guida, Politico 

The Trump administration is working to roll back former President Barack Obama’s efforts to combat racial segregation — potentially making it easier for banks to deny loans to black and Hispanic people or for cities to confine poor families to minority neighborhoods. One Trump Cabinet member, Housing secretary Ben Carson, is moving to scrap an Obama policy withholding federal funds from cities if they don’t address segregation.

What shapes a kid’s opportunities? Researchers say look to the neighborhood.
Rachel Siegel, The Washington Post

Of all the predictors of a child’s health and development, neighborhood is among the most telling, new data show. Researchers at Brandeis University culled data from the nation’s 72,000 census tracts to understand how a child’s neighborhood influences his or her opportunities over time.

New Risk to World Economy: Synchronized Housing Slowdown
Sarah Chaney, The Wall Street Journal

Housing markets across the world, from the U.K. to China to Australia, are losing steam, holding back prospects for the global economy that last year grew at its slowest rate since the financial crisis. Across 23 countries, an index of inflation-adjusted home prices compiled by the Federal Reserve Bank of Dallas grew 1.8% in the third quarter of 2019 from a year earlier, down from a recent peak of 4.3% in 2016, according to an Oxford Economics analysis.

Sallie Mae’s foray into personal loans proves short-lived
Kevin Wack, American Banker

Less than two years after hopping into the personal loan business, SLM Corp. is getting out. The company known as Sallie Mae, which is best known for offering student loans, announced this week that it has suspended personal loan originations in order to focus its resources on core strategic priorities.

So Long, California? Goodbye, Texas? Taxpayers Decide Some States Aren’t Worth It
Ben Eisen and Laura Kusisto, The Wall Street Journal

Larry Belardi and Bobbie LaPorte are longtime San Francisco residents, but they are planning to leave California for Nevada next year. A turning point was the federal tax overhaul that Congress passed in late 2017.

Tax season could bring more refund confusion
Naomi Jagoda, The Hill

The second tax filing season under President Trump’s tax law is kicking off on Monday, and much of the attention will be on tax refunds, a source of frustration for many taxpayers last year. Reports of people unexpectedly owing the IRS instead of receiving refunds, and taxpayer uncertainty over how they were going to be impacted by the Trump law, led tax preparers to report increased anxiety from their clients during last year’s filing season.

Visa just backed a payments start-up that powers popular fintech apps like Monzo and Revolut
Ryan Browne, CNBC

Financial technology start-up Currencycloud, which powers cross-border payments for a number of popular finance apps, has raised $80 million in a funding round backed by Visa. Based in the U.K., Currencycloud sells payment software for banks and fintech firms to process their international transactions.

Debate on ‘too big to fail’ needs reframing
Robert Armstrong, Financial Times

Deposits at largest US banks keep growing organically even with controls on expanding by acquisition.

The Tax Increases to Come
The Editorial Board, The Wall Street Journal

The brawl in President Obama’s second term over raising the top income-tax rate to 39.6% from 35% was centuries ago in political time. One way to tell is that even moderate Democratic 2020 presidential candidates have quietly proposed to raise the tax rate on labor by double digits and it’s received almost no attention. 

The Fed Won’t Take Away Markets’ Punch Bowl
Justin Lahart, The Wall Street Journal

The Federal Reserve has taken away, for now, one of the biggest uncertainties that investors face. When they meet this week, Fed officials are all but certain to leave their target range on overnight rates on hold.

A simple tweak could tell us how much tax America’s largest companies actually pay
Allan Sloan, The Washington Post

You can bet that as this year’s presidential election campaign heats up, we’ll be seeing more and more articles about the federal income tax rates that individual companies pay or the tax refunds that they’re getting. The numbers will be precise and look terrific.

Magnification of the ‘China Shock’ Through the U.S. Housing Market
Yuan Xu et al., The National Bureau of Economic Research

The ‘China shock’ operated in part through the housing market, and that is an important reason why the China shock was as big as it was. If housing prices had not responded at all to the China shock, then the total employment effect of the China shock would have been reduced by more than one-half.