Morning Consult Finance: U.S. Budget Deficit Hits $3 Trillion

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  • The U.S. budget deficit officially reached $3 trillion through the first 11 months of the fiscal year, nearly tripling from the same period last year, according to Treasury Department data, and the Congressional Budget Office expects it to hit $3.3 trillion by the time the fiscal year ends at the end of September. The cost of servicing the debt, however, has decreased 10 percent from October through August. (The Wall Street Journal)
  • Both Senate Majority Leader Mitch McConnell (R-Ky.) and House Speaker Nancy Pelosi (D-Calif.) attempted to put the blame for stalled talks on a new economic relief package on each other’s camps, with McConnell saying that the prospect of a bipartisan deal “doesn’t look that good right now.” Pelosi, meanwhile, said she was “optimistic” that an agreement would be made. (The Washington Post)
  • The New York Stock Exchange said it would see if it could operate outside of New Jersey in its secondary data center in Chicago from Sept. 28 to Oct. 2 as New Jersey weighs a tax on financial transactions. Other exchanges, including Nasdaq Inc., Cboe Global Markets Inc. and others will also test from secondary locations on Sept. 26. (Bloomberg)

Chart Review

Events Calendar (All Times Local)

NAFCU Virtual Congressional Caucus
Digital Mortgage 2020
NAFCU Virtual Congressional Caucus
Women in Housing & Finance event: “Access to Credit: How Inclusive Is the U.S. Financial System” 12:00 pm
CFPB Listening Session with Members of the Bureau’s Taskforce on Federal Consumer Financial Law 2:30 pm
House Financial Services Committee hearing: “Prioritizing Fannie’s and Freddie’s Capital over America’s Homeowners and Renters? A Review of the Federal Housing Finance Agency’s Response to the COVID-19 Pandemic” 12:00 pm
Women in Housing & Finance event: “FRB Control Framework” 12:00 pm
SIFMA webinar: LIBOR – Preparing for Alternative Reference Rates 1:00 pm
SIFMA Equity Market Structure Conference
House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets hearing: “Insider Trading and Stock Option Grants: An Examination of Corporate Integrity in the Covid-19 Pandemic” 12:00 pm
View full calendar

Watch the Webinar On Demand – The Gen Z Threat

Recently, Morning Consult hosted a webinar breaking down our latest report, Gen Z’s Most Loved Brands of 2020.

You can access a recording of the webinar here for insight into how the pandemic is transforming Gen Z’s relationship with brands, and how brands should adapt to meet the changing expectations of this generation of the future.


The Big Corporate Rescue and the America That’s Too Small to Save
Lydia DePillis et al., ProPublica

On a recent Thursday evening in downtown Chagrin Falls, a Cleveland suburb named for a picturesque cascade in a nearby river, little was amiss: Diners in loafers and sundresses dropped off their BMWs and Alfa Romeos with valets before positioning themselves on patios at prudently spaced tables. Teens ranged around manicured parks taking selfies, while well-groomed women dipped in and out of The Artful Yarn, A Bit of Skirt, and other boho boutiques, cryo spas and vintage home goods stores.

Trump’s $300 unemployment funding is already running out, leaving millions in crisis again
Jeff Stein, The Washington Post

The emergency unemployment benefits approved by President Trump last month are already running out, leaving millions of Americans without extra support as prospects dim for a congressional deal to provide more relief for jobless Americans. The Trump administration has begun telling states that the federal government will stop providing them the temporary $300 weekly jobless benefit, which had been a part of a White House executive directive in the weeks after the enhanced federal unemployment benefit of $600 ran out.

Why Fed Officials Are Begging for More Stimulus From Lawmakers
Nick Timiraos, The Wall Street Journal

Federal Reserve officials don’t like to wade into political debates, which is why it can be a distress signal when they do. In normal times, central bankers generally avoid making specific recommendations on hot-button spending, tax and other policy matters handled by elected officials, because they want to preserve their autonomy to manage monetary policy with minimal interference.

U.S. Faces Last Chance to Salvage Stimulus Deal as House Returns
Erik Wasson and Billy House, Bloomberg

Treasury Secretary Steven Mnuchin opened this month by saying that despite the stalemate over Covid-19 relief funding, the Trump administration and Congress could agree on one thing: a stimulus package was needed. That hasn’t produced serious negotiations, however, and prospects for a relief bill before the November election are dwindling fast.

Fed urged to back up new dovish policy with action
James Politi and Colby Smith, Financial Times

Investors look for guidance from US central bank as hopes of fiscal stimulus to prop up economy fade.

A Lifeline to the Jobless Has Problems With Fraud, and With Math
Ben Casselman et al., The New York Times

Two weeks ago, shortly after she advertised an apartment for rent in the Bay Area, Barbara Lamb found five envelopes from the state’s unemployment office in the building’s communal mail slot. They kept coming, day after day, until a stack of more than 30 piled up, bulging with notices of benefit approvals, questionnaires about job status — and debit cards with money.

Pandemic Job Market Has Bright Spots for Recent High School Grads
Kim Mackrael, The Wall Street Journal

High school graduates entered the labor market this summer during a deep economic downturn, but while that presented a serious hurdle—especially for those not pursuing college—many of these young, flexible workers are finding jobs. Teenage workers were among the hardest hit by the pandemic this spring because they are concentrated in fields that suffered the most from coronavirus-induced shutdowns and restrictions: low-wage, in-person service jobs in locations such as restaurants and retail stores.

Trump’s hostility to cities threatens to worsen the recession
Robert McCartney, The Washington Post

President Trump’s hostility to cities may help him politically, but it threatens to worsen the recession because metropolitan regions are the engines of the nation’s economic growth, officials and analysts say. The risk arises not just from the president’s rhetoric criticizing urban unrest. Trump and his Republican allies in the Senate are also rejecting fresh financial aid to state and local governments and to public transit systems in a second coronavirus relief package.

U.S. Futures Rally; European Stocks Mixed: Markets Wrap
Adam Haigh and Anchalee Worrachate, Bloomberg

U.S. equity-index futures rose amid a flurry of deal activity and signs of progress toward a vaccine. European shares gave up early gains, while the pound rebounded. Oracle Corp. jumped 7% in pre-market trading on reports the company beat Microsoft Corp. in negotiations for the U.S. operations of TikTok. 


Former Deutsche Bank Traders to Stand Trial in Test of Spoofing Crackdown
Dave Michaels, The Wall Street Journal

A government crackdown on traders accused of price manipulation faces one of its biggest tests next week, as a pair of former Deutsche Bank DB -0.96% traders face trial on charges related to rigging precious-metals prices using a strategy known as spoofing. Traders at Citadel Securities and Quantlab Financial, high-speed trading firms that use models to automate their buying and selling, are among the witnesses scheduled to testify against the ex-traders, James Vorley and Cedric Chanu.

Citi Argues Against Trial Delay in Disputed Revlon Payment Suit
Katherine Doherty, Bloomberg

Citigroup Inc. is looking to keep court proceedings on track in its attempt to recover more than $900 million the bank says it accidentally transferred to Revlon Inc. lenders last month. A lawyer for the bank on Thursday asked U.S. District Judge Jesse Furman in Manhattan to deny a request by some of the lenders to postpone trial in Citigroup’s suit against them for eight weeks. 

Bank Credit Swaps Signal Concern Over World’s Weakest Lenders
Alice Gledhill, Bloomberg

Credit investors are unconvinced about the ability of the world’s weakest lenders to weather a coronavirus economic slowdown, according to Bank for International Settlements. The cost of insuring debt from lower-rated banks is yet to fully recover from a virus-fueled blowout, with spreads on credit default swaps tied to high-yield lenders an average of 127 basis points above pre-pandemic levels as of Aug. 21, BIS said in report published on Monday.

Financial Products and Investments

A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its Hospitals
Sabrina Willmer, Bloomberg

Like hospital chains across the U.S., LifePoint Health tapped federal relief money to blunt the cost of the Covid-19 pandemic. It was a potent lifeline, a total of $1.5 billion.

Business groups back pandemic insurance bill modeled on post-9/11 law
Alex Gangitano, The Hill

Business groups are throwing their support behind a pandemic insurance bill modeled after a post-9/11 law that created a federal backstop for claims related to acts of terrorism. The Pandemic Risk Insurance Act, much like the 2002 Terrorism Risk Insurance Act (TRIA), would provide compensation for losses resulting from pandemics or public health emergencies.

Citigroup wins deal to offer credit cards for Wayfair, edging out rival Alliance Data Systems
Hugh Son, CNBC

Citigroup won the rights to offer a pair of new credit cards with online furniture seller Wayfair, edging out Alliance Data Systems, CNBC has learned. The deal happened amid surging demand for home goods as millions of Americans were forced to work remotely from their residences during the coronavirus pandemic. 

Housing and GSEs

The flip side of Trump’s eviction ban: Landlords face big crunch
Katy O’Donnell, Politico 

The White House’s move to ban evictions across the country during the coronavirus crisis is having an unintended side effect: It’s threatening the livelihood of millions of landlords. The sweeping order effectively requires landlords to subsidize distressed tenants’ housing through the end of the year or face criminal penalties and hefty fines.


U.S. House Rejects Trump’s Payroll Tax Deferral for Its Staff
Erik Wasson and Laura Davison, Bloomberg

The U.S. House of Representatives won’t implement President Donald Trump’s order allowing employers to defer payroll taxes owed by workers, joining major companies in rejecting the option. The House “determined that implementing the deferral would not be in the best interests of the House or our employees,” Philip G. Kiko, the chamber’s chief administrative officer, said in an email to employees.

Trump’s Payroll Tax ‘Cut’ Fizzles
Jim Tankersley, The New York Times

With congressional negotiations stalled over a new round of pandemic aid, President Trump has floated the idea of once acting alone to stimulate the economy before the November election. But Mr. Trump’s initial attempts to unilaterally bolster the economy show the limitations of the president’s ability to deliver financial help without Congress.

Financial Technology

Crypto Exchange Gets Millions After Copy-Paste of a Rival’s Code
Olga Kharif, Bloomberg

Over the past few months, investors poured billions into hundreds of so-called decentralized-finance apps, which let users lend, borrow and trade cryptocurrencies without intermediaries like banks. Then Sushi happened.

Rapper T.I. in $75,000 U.S. settlement over cryptocurrency offering
Michelle Price, Reuters

Grammy award-winning rapper Clifford Harris, known as T.I., agreed to pay a U.S. regulator $75,000 to settle charges that he broke securities laws by selling fraudulent crypto-currency investments, the agency said on Friday. The Securities and Exchange Commission (SEC) said it had charged the Atlanta rapper and actor along with four associates, including film producer Ryan Felton who it says controlled the companies FLiK and CoinSpark that conducted the initial coin offerings which T.I. promoted.

Opinions, Editorials and Perspectives

FDIC’s brokered deposit proposal has a glaring problem
Richard Cordray and Camden R. Fine, American Banker

A Federal Deposit Insurance Corp. proposal to modify the brokered deposits definition — established well before online banking — is understandably in need of an update. But some aspects of the proposal go too far and should be cut back. And that’s saying something as a former director of the Consumer Financial Protection Bureau (and former member of the FDIC Board) who’s joined the former president and CEO of the Independent Community Bankers of America on this topic.

Pandemic Unemployment Will Soon Bring Tax Hikes
Mark Duggan and Andrew C. Johnson, The Wall Street Journal

The ranks of the unemployed have more than tripled in six months. State unemployment-insurance programs have paid benefits to tens of millions of idled workers in that time, helping them hang on until the crisis eases and they can get back on their feet.

The Fed Must Weigh What’s Feasible Versus Desirable
Mohamed A. El-Erian, Bloomberg

Reacting to growing indications of a moderating recovery, some economists and Wall Street analysts are pushing the Federal Reserve to provide even more stimulative “forward guidance” at its policy meeting this week. The Fed is easily able to do so, and not only under the auspices of its long-established operating paradigm of data dependency and insurance mindset. 

Research Reports

The Fed Takes on Corporate Credit Risk: An Analysis of the Efficacy of the SMCCF
Simon Gilchrist et al., The National Bureau of Economic Research

We evaluate the efficacy of the Secondary Market Corporate Credit Facility (SMCCF), a program designed to stabilize the corporate bond market in the wake of the Covid-19 shock. The Fed announced the SMCCF on March 23 and expanded the program on April 9.

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