Bank regulation

• The Federal Reserve has temporarily capped dividends at the country’s largest banks and suspended share repurchases until at least the fourth quarter as regulators try to make sure that banks have enough capital to weather the economic fallout from the coronavirus pandemic. The Fed didn’t require banks to stop paying dividends next quarter, despite urging from former regulators and some lawmakers. 

• Bank regulators approved a major rollback of the Volcker rule, making it easier for banks to invest in some riskier funds, including venture capital funds, along with changes to a separate requirement that relaxes swap margin rules governing banks’ derivatives trades with their own affiliates. Critics of the administration’s deregulatory push said the changes could open up weaknesses in the financial system, with Jeremy Kress, a professor at the University of Michigan’s Ross School of Business, saying that the changes could expose banks and Federal Deposit Insurance Corp. deposit insurance fund to “greater risks.”

Jay Clayton

• Securities and Exchange Commission Chairman Jay Clayton is being told by some close advisers to withdraw from consideration his nomination as the top federal prosecutor in New York, although he hasn’t yet made a decision, according to people familiar with the matter. Clayton, who had discussed the job with Attorney General William Barr and other Trump administration officials for at least several weeks, was surprised and disappointed by the political turmoil that came after his pending nomination was announced, the people said. 

Taxes

• The U.S. Government Accountability Office said nearly 1.1 million dead people received coronavirus stimulus payments, reaching almost $1.4 billion, according to figures obtained as of April 30. The agency recommended that the Treasury Department should be granted access to the Social Security Administration’s full death records, which the department and its Bureau of the Fiscal Service that issues the payments are currently not able to do, and be required to use that database when sending out checks.

Economy

• The White House said Tomas Philipson, the acting chairman of the Council of Economic Advisers and a health economist, will leave the administration this week, with two people familiar with the matter saying Philipson was being forced out. Philipson’s departure is the latest by a top economic policy adviser and leaves only Tyler Goodspeed, an economic historian who has researched the history of money and banking, on the three-person council.

• The International Monetary Fund said the global economy will contract by 4.9 percent this year, more than the 3 percent decline that was forecast in April. The U.S. economy is expected to shrink by 8 percent, while the economies of countries that use the euro will fall by more than 10 percent, according to the IMF.

• Treasury Secretary Steven Mnuchin said that the Trump administration is “very seriously considering” another stimulus package that could get congressional approval in July and that it is discussing the matter with lawmakers. Mnuchin also said he anticipates that the U.S. economy will be out of a recession by the end of the year.

• Trump has told his aides that he largely supports another round of stimulus checks because it would help the economy and bolster support for his re-election, three people aware of internal administration deliberations said. Leading Republicans and others in the White House, including economic adviser Larry Kudlow, according to one person familiar with internal matters, aren’t sold on the idea of sending more stimulus checks to as many people who received them in the first round, while Treasury Secretary Steven Mnuchin has advocated for another round, according to two people with knowledge of internal deliberations.

• The Senate is in session and the House is operating remotely.

• The Trump administration plans to publicly release Paycheck Protection Program details by the end of the week. 

• Mnuchin and Chair of the Federal Reserve Jerome Powell will testify in front of the House Financial Service Committee on Tuesday.

• The Brookings Institution will host a webinar on Tuesday called “A decade of Dodd-Frank” featuring keynote discussion with former Chairmen Chris Dodd and Barney Frank, along with panels with Fed Governor Lael Brainard and former Fed officials.

1) Record number of US companies seek relief on loan terms
Joe Rennison and Nikou Asgari, Financial Times

2) SEC Chief Urged to Drop U.S. Attorney Bid Amid Political Battle
Robert Schmidt and Benjamin Bain, Bloomberg

3) Americans increase deposits as banks cut back on lending
Dion Rabaouin, Axios

4) Mnuchin Says Stimulus May Pass Congress in July to Boost Economy
Saleha Mohsin and Erik Wasson, Bloomberg

5) White House Council of Economic Advisers Acting Chairman to Depart
Nick Timiraos et al., The Wall Street Journal

6) How William Barr’s Manhattan transfer went awry
Besty Woodruff Swan and Kellie Mejdrich, Politico

7) The Credit-Card Fees Merchants Hate, Banks Love and Consumers Pay
AnnaMaria Andriotis and Harriet Torry, The Wall Street Journal

8) How Coronavirus Upended a Trillion-Dollar Corporate Borrowing Binge and Kicked Off a Wave of Bankruptcies
Cezary Podkul, The Wall Street Journal

9) Lawmakers Ask Fed to Help Businesses Struggling to Make Mortgage Payments
Ben Eisen, The Wall Street Journal

10) Fed stress tests US banks for the pandemic era
Laura Noonan, Financial Times