• Wells Fargo & Co. said in a court filing that it has agreed to pay $1 billion as part of a preliminary settlement in a class-action suit that alleged the bank’s leadership misled shareholders about how fast it was cleaning up governance and risk-management issues related to the bank’s 2016 fake accounts scandal, and when the slowness of progress became evident in 2020, the stock price fell, costing shareholders including pensions and mutual funds. If approved, the settlement would likely be the 17th-largest settlement in a class action brought by shareholders, according to the filing. (The Wall Street Journal)
• Treasury Secretary Janet Yellen will meet to discuss debt ceiling negotiations with the Bank Policy Institute board, which includes CEOs of major U.S. banks, on Thursday, according to a person familiar with the event, who noted that bank CEOs will also hold meetings with regulators and Biden administration officials in Washington. (Politico Pro) Yellen warned in a letter to lawmakers yesterday that the Treasury is already seeing increased borrowing costs for securities that mature in early June, around the time that the agency has projected the U.S. government could run out of money to pay its bills, though she also noted that the exact date of when the country faces a default could arrive “a number of days or weeks later” than early June due to special accounting maneuvers. (Bloomberg)
• The Internal Revenue Service has created a prototype for a free tax filing system that could be available for testing by a small pilot group as early as January, according to people briefed on the matter. Commissioner Daniel Werfel had previously told lawmakers the agency would not make a decision on pursuing a free file option until after the think tank New America, which was brought on to study the possibility of such a program, had issued its report, which is expected this week. (The Washington Post)
  • Morning Consult has found that just 26% of Americans are aware of the IRS’ currently available free filing option, which is available to anyone making less than $73,000 a year. And among those eligible for free filing, 76% said they had heard little or nothing at all about the option.
• Securities and Exchange Commission Chair Gary Gensler said that the agency is not considering a temporary ban on short selling of stocks in troubled regional banks, a statement that follows comments last week by JPMorgan Chase & Co. CEO Jamie Dimon suggesting that regulators should prosecute “unscrupulous” market participants who pair market manipulation with short selling of bank stocks. Gensler told attendees at an Atlanta Federal Reserve conference that historically, such bans have been ineffective at preventing panic selling and may actually create more fear in the market because bans signal that the sector “is not confident in fair, orderly and efficient markets.” (MarketWatch)

Worth watching:
Former executives of recently failed banks — including Gregory Becker of Silicon Valley Bank, as well as Scott Shay and Eric Howell of Signature Bank — will testify before the Senate Banking Committee. According to a copy of his prepared testimony posted on the committee’s website, Becker, the former chief executive of SVB, will say that he did not believe any bank could have survived a run “of that velocity and magnitude.” More on SVB: SVB Quietly Deleted Rate-Risk Metric as Auditor KPMG Stayed Mum (Bloomberg Tax)

 

Fed Vice Chair for Supervision Michael Barr, Federal Deposit Insurance Corp. Chairman Martin Gruenberg and acting Comptroller of the Currency Michael Hsu will testify in the semiannual oversight hearing before the House Financial Services Committee. 

 

Yellen and Rep. Roger Williams (R-Texas), chairman of the House Small Business Committee, speak at the Independent Community Bankers of America’s Capital Summit. 

 

Consumer Financial Protection Bureau Director Rohit Chopra will speak at the CFPB’s 2023 Consumer Advisory Board Meeting. 

 

Atlanta Fed President Raphael Bostic, Chicago Fed President Austan Goolsbee and Dallas Fed President Lorie Logan speak at the Atlanta Fed’s 2023 Financial Markets Conference.

Most Voters Believe Debt Default Would Worsen Economy, Hit Stock Market Hard

Morning Consult

More than 140 Democrats defend CFPB in case before Supreme Court that threatens agency’s existence

Chelsea Cox, CNBC

More than 140 current and former Democratic lawmakers filed an amicus brief in the Supreme Court on Monday to defend the country’s leading consumer protection agency from challenges to its regulatory authority.

 

Consumers Buried in Record $17 Trillion in Debt

Al Lewis, The Messenger

Household debt surpassed $17 trillion for the first time ever as consumers continued borrowing more for homes, automobiles and education in the first quarter, according to new data released Monday by the Federal Reserve Bank of New York.

 

To Stop Living Paycheck to Paycheck, They Spill About It on TikTok

Oyin Adedoyin, The Wall Street Journal

Some brave souls are trying a novel strategy to tackle the age-old struggle to stop living paycheck to paycheck: itemizing their spending for all to see on TikTok.

Kevin McCarthy said on Monday he thinks he is “far apart” on a debt ceiling solution with Biden.

Ayelet Sheffey, Insider

Speaker of the House Kevin McCarthy isn’t inspiring confidence that the US can avoid an unprecedented and catastrophic default on its debt.

 

IRS audits Black taxpayers more often than other groups, agency confirms

Jacob Bogage, The Washington Post

Algorithms targeted filers who collected anti-poverty credits and did not report business income, researchers found.

 

‘Every family should be concerned’ about debt ceiling, consumer watchdog warns

Matt Egan, CNN

Leaders in Washington are running out of time to avoid an unprecedented default on US debt. The top consumer watchdog in the federal government is warning of dire consequences for American families. “It’s a big worry. Every family should be concerned,” Rohit Chopra, director of the Consumer Financial Protection Bureau, told CNN in an interview on Thursday.

 

GOP rejected White House effort to close tax loopholes in debt ceiling talks

Jeff Stein, The Washington Post

Negotiations are stuck and time is running out, but Republicans have signaled that there cannot be any new tax increases as part of a budget deal.

 

Centrist Dems are plotting a save-McCarthy strategy for the debt fight

Sarah Ferris and Nicholas Wu, Politico

Kevin McCarthy faces a clear challenge as he tries to strike a debt limit deal: Any compromise he makes with President Joe Biden risks sparking a conservative rebellion aimed at ending his speakership. But some Democrats have a plan to spare him.

 

Biden dives into debt ceiling talks, causing mini panics among his base

Adam Cancry et al., Politico

President Joe Biden finally feels good about his chances of striking a debt ceiling agreement in time to avert economic catastrophe. Some of the White House’s closest allies are wondering if he’s feeling a little too good about it.

 

Treasury Deputy Secretary Urges Congress to Lift Debt Limit, Rejects Platinum Coin

Christopher Condon, Bloomberg

The US Treasury’s deputy secretary urged Congress to lift the nation’s debt limit to avoid a default while also rejecting calls to mint a $1 trillion platinum coin to ease the crisis.

 

How Wall Street is preparing for possible US debt default

Davide Barbuscia and Pete Schroeder, Reuters

As talks over raising the U.S. government’s $31.4 trillion debt ceiling intensify, Wall Street banks and asset managers have begun preparing for fallout from a potential default.

 

Default Fears Rattle Main Street Investors

Matt Grossman, The Wall Street Journal

Political stalemate could bring historic U.S. default next month.

 

World Leaders Warily Watch U.S. Debt-Limit Standoff

Andrew Duehren, The Wall Street Journal

The impasse in Washington over raising the roughly $31.4 trillion borrowing limit is looming over a series of meetings of the Group of Seven advanced democracies this month.

 

Fed Officials Signal Rate Caution on Credit and Price Pressures

Steve Matthews and Matthew Boesler, Bloomberg

Two Federal Reserve officials signaled they favored pausing interest-rate increases, while a third policymaker said the central bank’s task in subduing inflation was not complete.

 

New York factory activity slumps in May – NY Fed

Reuters

The New York Federal Reserve said on Monday its barometer of manufacturing activity in New York State plunged in May, but the survey is extremely volatile, making it harder to interpret. The regional Fed’s “Empire State” index on current business conditions plummeted 42.6 points to -31.8 this month.

 

The Disappearing White-Collar Job

Chip Cutter and Harriet Torry, The Wall Street Journal

A once-in-a-generation convergence of technology and pressure to operate more efficiently has corporations saying many lost jobs may never return.

 

Turf fight holds up tax accord with Taiwan, complicating chip-making expansion

Brian Faler, Politico Pro

Tax writers and foreign policy chiefs in Congress are tangling over who gets to lead in hammering out an agreement to relieve Taiwanese companies of double taxation.

US banking regulators open to mergers, but vow tougher rules

Pete Schroeder, Reuters

Top U.S. banking regulators plan to tell lawmakers the government will be open to future bank mergers, but are committed to establishing tougher rules after recent turmoil. In prepared testimony published by the House Financial Services Committee Monday, officials were resolute on the need for stricter bank rules and supervision following several high-profile failures, while maintaining the sector remains healthy.

 

U.S. banks face regulatory scrutiny over interest-rate risks

Craig Torres and Katanga Johnson, Bloomberg

The U.S. Federal Reserve and the Federal Deposit Insurance Corp. have been peppering lenders over the past several weeks with questions related to interest-rate risks and commercial real estate exposure, according to people familiar with the matter. Failures by Silicon Valley Bank and Signature Bank to deal with surging borrowing costs were partly blamed for their demise.

 

Goldman fined $7 million by ECB over credit risk reporting

Reuters
The European Central Bank said on Monday it had fined Goldman Sachs’ European unit 6.63 million euros ($7.3 million) for underreporting the risk associated with some corporate credit, thereby flattering its balance sheet.

 

JPMorgan claims Jes Staley thwarted efforts to sever ties with Jeffrey Epstein

Joshua Franklin and Joe Miller, Financial Times

Bank opposes former executive’s motion to dismiss its countersuit in lawsuits over disgraced financier.

 

Elon Musk Issued Subpoena in Lawsuit Over JPMorgan’s Ties to Jeffrey Epstein

Khadeeja Safdar and David Benoit, The Wall Street Journal

U.S. Virgin Islands seeking documents from Tesla leader for its civil suit against bank

 

Republic First Bancorp to go slow on fundraise, says it has ‘adequate’ capital

Reuters

Republic First Bancorp said on Monday it had “adequate” capital and would wait for market conditions to stabilize before rounding out the $125-million fundraise it had announced in March.

Record buyback spree attracts shareholder complaints

Arjun Neil Alim, Financial Times

Purchases by the world’s biggest 1,200 companies triple in a decade to rival dividends in scale

 

Warren Buffett’s Berkshire Hathaway bet almost $1bn on credit card issuer Capital One

Eric Platt, Financial Times

Investment conglomerate exited stakes in US Bancorp and Bank of New York Mellon in first quarter

 

A stock-market milestone: Apple is now worth more than the entire Russell 2000

Joseph Adinolfi, MarketWatch

The market capitalization of Apple Inc. has surpassed that of the entire Russell 2000 for two weeks, the longest stretch on record, according to Bloomberg data. Apple’s market capitalization, which measures how much the company is worth based on the value of all its outstanding stock, surpassed that of the Russell 2000 on April 27 and has held higher through Monday.

 

New York Fed finds big slowdown in new mortgage creation in first quarter

Michael S. Derby, Reuters

Americans’ appetite for taking on new mortgages slowed substantially during the first quarter, data released by the New York Fed on Monday showed, amid a modest gain in overall household borrowing levels at the start of the year. Overall household debt levels rose by 0.9% to $17.05 trillion during the first three months of the year, the bank said, noting that overall debt levels are nearly $3 trillion higher than in 2019 before the onset of the coronavirus pandemic.

 

Fair access to proper housing can boost economic growth – report

Marine Strauss, Reuters

Providing equitable access to appropriate housing in slums and other informal settlements could massively increase economic growth and boost life expectancy, a report to be published on Tuesday by home-building charity Habitat for Humanity shows. Proper housing could increase economic growth by up to 10.5%, while life expectancy could go up by 2.4 years on average, the report said.

Large Investors Led 2022 Runs on Crypto Platforms, Study Finds

Olga Kharif, Bloomberg

Last year’s run on crypto platforms like lender Celsius Network were “spearheaded by customers with large holdings, some of which were sophisticated institutional customers,” according to research from the Federal Reserve Bank of Chicago.

 

​​EU Council adopts first legal framework to regulate crypto sector

Reuters

The European Council on Tuesday said it had adopted the world’s first comprehensive set of rules for cryptoassets regulation (MiCa).

 

Coinbase Hasn’t Proven SEC Needs to Create Crypto-Specific Rules, Regulator Says

Nikhilesh De, CoinDesk

The U.S. Securities and Exchange Commission (SEC) told an appeals court that crypto exchange Coinbase hadn’t proven the regulator needs to create a new regulatory framework for the digital asset industry late Monday.

 

Coinbase Initiated at Hold, Likely To Face Enforcement Action From SEC: Berenberg

Will Canny, CoinDesk

The Securities and Exchange Commission (SEC) will soon bring enforcement action against Coinbase (COIN) and this action is likely to mirror those that the regulator brought against rival crypto exchanges Bittrex and Kraken, Berenberg said in a research report on Monday.

 

Binance is banking big on M&A and VC deals

Jacquelyn Melinek, TechCrunch

The exchange’s chief business officer talks investments, BD and the future of the exchange