General
The Economist Who Would Fix the American Dream
Gareth Cook, The Atlantic
Raj chetty got his biggest break before his life began. His mother, Anbu, grew up in Tamil Nadu, a tropical state at the southern tip of the Indian subcontinent.
What Brexit could mean for the US economy
Holly Ellyatt, CNBC
After three long years of negotiations and the possibility of a no-deal Brexit rising every day, economists have predicted what it could all mean for the U.S. economy and its financial markets when the U.K. does finally leave the EU. A current leadership race to succeed Prime Minister Theresa May has largely put Brexit on hold, but whoever wins the contest — the former Foreign Minister Boris Johnson or the incumbent Jeremy Hunt — will have to quickly turn his attention to the issue, given an October 31 deadline to leave the bloc.
Pelosi Says Deal on Debt Ceiling, Spending Levels Needed by Friday
Andrew Duehren and Kate Davidson, The Wall Street Journal
House Speaker Nancy Pelosi set a Friday deadline for Congress and the Trump administration to reach an agreement on raising the U.S. government’s borrowing limit and setting new overall spending levels.
Fed Says U.S. Economy Trundles Steadily Along, Outlook Positive
Christopher Condon, Bloomberg
The U.S. economy expanded at a modest pace with job gains slowing somewhat and inflation remaining stable or slightly weaker, a Federal Reserve survey showed. “The outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty,” according to the report Wednesday in Washington.
Fed’s George Suggests She’s Not Ready to Cut Rates
Michael S. Derby, The Wall Street Journal
Federal Reserve Bank of Kansas City President Esther George said Wednesday she’s prepared to be flexible, but she doesn’t yet see the case for a cut in interest rates later this month. “When I look at the current settings for monetary policy, my own outlook suggests we will continue to see growth in the economy around or slightly above the trend rate of growth, we see an unemployment rate at a 50-year low and continued job gains as recently as the most recent employment numbers,” with positive wage growth for workers, Ms. George said in a speech in Kansas City, Mo.
Stocks Mixed Amid Earnings Misses, Trade Angst: Markets Wrap
Todd White, Bloomberg
U.S. equity futures and European stocks trimmed an earlier decline as investors weighed the outlook for corporate earnings and global trade. Treasuries edged down.
Banking
Big Banks Are Earning Billions of Dollars. Trump’s Tax Cuts Are a Big Reason.
Emily Flitter, The New York Times
The five largest banks in the United States reaped tens of billions of dollars in profits in the first half of the year, thanks in part to a strong economy and to the lingering effects of President Trump’s tax cuts. Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase and Wells Fargo have all seen their tax rates decline to 22 percent or less as a result of the cuts, compared with rates of around 30 percent three years ago, one of the most consistent sources of strength apparent in quarterly earnings reports issued this week.
Morgan Stanley beats profit estimates as rising stocks benefit wealth management and fund business
Hugh Son, CNBC
Morgan Stanley beat analysts’ estimates for second-quarter profit as a buoyant stock market helped two of the investment bank’s three main businesses. The bank posted earnings of $2.2 billion, or $1.23 a share, exceeding the $1.14 estimate of analysts surveyed by Refinitive.
Wells Fargo sued for denying loan to Dreamer
Jon Prior, American Banker
Wells Fargo’s legal woes have expanded to claims the bank wrongly denied an auto loan for a migrant working in the U.S. under the Deferred Action for Childhood Arrivals program, according to a lawsuit filed in a California federal court Tuesday. Eduardo Peña, who was born in Mexico and is a resident of Illinois, alleges that Wells Fargo discriminated against him over his immigration status when he applied for a car loan online in November 2018. Peña, who has a Social Security number and a work permit, claims the bank never provided an accurate written explanation for denying the loan, which is a potential violation of federal law.
The lawyer thrust into the front line of Deutsche Bank clean-up
Olaf Storbeck and Ortenca Aliaj, Financial Times
Without the Libor scandal, Stefan Simon’s career switch from law to banking is unlikely to have happened. Until three years ago, Mr Simon was a successful German corporate lawyer working in the sleepy Rhineland town of Bonn and teaching law at the University of Cologne.
Bank of New York Mellon’s Revenue, Earnings Fall
Chris Wack, The Wall Street Journal
Earnings at Bank of New York Mellon Corp. BK 2.34% decreased in the company’s second quarter as fee revenue slipped 3% from the same period a year ago. The company reported $1.02 billion in net income, down 8% from the comparable quarter a year prior. Earnings were $1.01 a share, down from $1.03 a share.
Former JPMorgan Banker Pleads Not Guilty in ‘Sons and Daughters’ Bribery Case
Joanne Chiu, The Wall Street Journal
A former executive at JPMorgan Chase JPM -0.98% & Co. pleaded not guilty to bribery charges in a Hong Kong court on Thursday, after prosecutors alleged she persuaded her colleagues to hire the son of a potential client in 2009. Catherine Leung Kar-cheung, a former vice chairwoman of JPMorgan’s Asia-Pacific investment banking business, was charged in May with two counts of bribery.
Financial Products and Investments
CFPB urges financial institutions to report elder fraud cases
Kate Berry, American Banker
The Consumer Financial Protection Bureau is recommending that banks report suspected financial crimes against the elderly to local, state and federal authorities. On Wednesday, the CFPB updated a 2016 advisory by recommending that financial institutions file suspicious activity reports on elder fraud to law enforcement agencies.
The Rise of Passive Investing Resumes Its March
Dawn Lim, The Wall Street Journal
A decadelong shift of money and power from old-fashioned money managers into index funds resumed its march in 2019. Last year, net inflows into funds that track markets fell about 30% from the year before, according to Morningstar data.
Housing and GSEs
U.S. reform plan for Fannie, Freddie seen by Sept.: housing regulator
Pete Schroeder and Richard Long, Reuters
The Trump administration’s hotly anticipated blueprint for overhauling mortgage guarantors Fannie Mae and Freddie Mac may not be published until September as the U.S. Treasury juggles several other pressing issues, the housing regulator told Reuters. Mark Calabria, director of the Federal Housing Finance Agency (FHFA), which oversees the government-sponsored enterprises, said in an interview it was his “hope” that they would have exited or be ready to exit conservatorship before his term ends in 2024.
Federal court blocks HUD guidance on down payment assistance
Hannah Lang, American Banker
A federal judge has dealt a blow to efforts by the Department of Housing and Urban Development to restrict nonprofit housing funds from offering down payment assistance, according to people familiar with the matter. In April, Federal Housing Administration chief Brian Montgomery issued an industry letter stating that nonprofits must prove they operate only within their geographic area.
Foreign Buying of U.S. Homes Suffers Record Drop
Laura Kusisto, The Wall Street Journal
Foreign purchases of U.S. homes have dropped by half over the last two years, a fresh blow to the top end of the market in New York City, Miami and cities in California. Foreigners bought less than $78 billion worth of U.S. residential real estate in the year that ended in March—a 36% decline from $121 billion the previous year, according to a report released Wednesday by the National Association of Realtors.
US building permits fall by the most since 2017
Peter Wells, Financial Times
The weakest set of building permits since 2017 underscored an overall weak pack of data for the US housing market in June, doing little to allay broader concerns about the health of the domestic economy. Building permits, which track early-stage construction approval, fell 6.1 per cent year-on-year in June to a seasonally adjusted annual rate of 1.22m, according to the US Census Bureau, and came in below market expectations for a slight increase to 1.3m
Home prices grew 4 times faster than income: Study
Niv Ellis, The Hill
The American dream of homeownership is becoming less accessible, as home prices have increased four times faster than incomes over the past six decades, according to a study by Clever, a real estate company. The study, which relied on census data, found the median price of a house increased 121 percent since 1960.
Taxes
G7 nations struggle to reach compromise on digital tax
Victor Mallet, Financial Times
Finance ministers of the biggest western economies were struggling to reach a compromise on Wednesday night on how to tax tech companies such as Google and Facebook that often pay little corporate tax in the countries where they profit from consumers and their data. Steven Mnuchin, US Treasury secretary, locked horns with Bruno Le Maire, French finance minister, at a meeting of G7 ministers in Chantilly over France’s unilateral new 3 per cent turnover tax on big tech groups, to which the Trump administration has responded by threatening trade tariffs and launching a Section 301 trade investigation against Paris.
Bipartisan House Coalition Votes to Repeal Health Law’s Cadillac Tax
Richard Rubin and Stephanie Armour, The Wall Street Journal
The House of Representatives overwhelmingly voted to repeal the “Cadillac tax” on high-cost employer health insurance, removing a piece of the Affordable Care Act that never took effect. The 419-6 vote delivered a victory to labor unions and employers that teamed up against the tax. On the losing side: deficit hawks and health economists who worry about distortions caused by favorable tax treatment of employer-sponsored insurance.
Financial Technology
House asks Facebook: ‘What is Libra?’
Emily Birnbaum and Sylvan Lane, The Hill
House lawmakers on Wednesday questioned how and why Facebook plans to enter the financial services industry and raised doubts about the viability and safety of the company’s proposed cryptocurrency payments system. Members of a House panel grilled Facebook’s lead on Project Libra about concerns spanning from financial systemic risk and data privacy to core questions about what kind of product the social media giant was building with dozens of major corporations.
Opinions, Editorials and Perspectives
Blue Dog Democrats Run Away From $15 Wage Fight
Michael Saltsman, Morning Consult
House ”Blue Dog” Democrats position themselves as a voice of reason, promising “commonsense” alternatives to the party’s more progressive members. But if Blue Dogs cave in and support a $15 federal minimum wage that will eliminate up to 3.7 million jobs, it suggests the coalition’s promise is more rhetoric than reality.
Research Reports
Understanding Weak Capital Investment: the Role of Market Concentration and Intangibles
Nicolas Crouzet and Janice C. Eberly, The National Bureau of Economic Research
We document that the rise of factors such as software, intellectual property, brand, and innovative business processes, collectively known as “intangible capital” can explain much of the weakness in physical capital investment since 2000. Moreover, intangibles have distinct economic features compared to physical capital.
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