Finance

Essential financial news & intel to start your week.
May 2, 2021
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Hope everyone’s recovered from the Federal Reserve press conference and President Joe Biden’s address on the same day. They should really stagger those things. 

 

Before we look to the week ahead, let’s see how caught up everyone is with their fiscal policy polling this week. Which of the following do you think voters were most likely to support to fund infrastructure investments? 

 

A: Carbon tax B: 28 percent corporate tax C: Gasoline tax D: 25 percent corporate tax

 

Check out the answer at the bottom of today’s newsletter.

 

What’s Ahead

It’s round three for GameStop Corp. in the House Financial Services Committee. The panel will meet on Thursday for the hearing. (The Senate is out this week). Why it’s worth watching: This time, the Securities and Exchange Commission’s new head, Gary Gensler, will testify. 

 

It’s Gensler’s first appearance in Congress since his confirmation hearing, and it could be some of the first real insight we get into the Washington fallout from the GameStop trading frenzy. In his confirmation hearing, Gensler promised to analyze the “gamification” of stock trading and acknowledged issues with payment for order flow (where trading firms like Citadel Securities pay companies like Robinhood to send them traders’ orders to execute). He said the SEC would “look at market structure in the equity markets around payment for order flow when frankly just a couple – a handful – of financial firms are buying most of the retail flow in America.”

 

There’s a big slate of speakers at the National Community Reinvestment Coalition’s Just Economy conference on Monday and Tuesday. Why it’s worth watching: Fed Chairman Jay Powell and Secretary of Housing and Urban Development will speak on Monday. Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.) are scheduled for Tuesday. 

 

The NCRC is a key voice in the Community Reinvestment Act, which will likely be addressed by financial regulators during the Biden administration after the Office of the Comptroller of the Currency’s go–it-alone attempt last year. Housing is a big part of that, and Brown has vowed to make housing a central part of his tenure as the Senate Banking Committee’s head. 

 

Friday is jobs day. Why it’s worth watching: With unemployment claims falling and businesses beginning to reopen, we’re expecting to see at least some job gains. How steep those gains are will be a big indicator for the folks at the Fed as they consider any policy shifts.  

 

We’re expecting the Fed’s financial stability report on Thursday. Why it’s worth watching: It’s the first time the Fed will weigh in on financial stability during the Biden administration. The Fed will likely continue its analysis of the Treasurys meltdown last year (in its November report, the central bank found that hedge funds reportedly exacerbated the turmoil). The Fed is also tracking leveraged loans and corporate debt, and it will likely further explain how Fed intervention earlier in the pandemic impacted markets. 

 

Anyone have jobs day predictions? What do you think the Fed will call out in its report? Let me know; my Twitter and email info are right under my byline at the top of the newsletter. 

 

Events Calendar

 

Week in Review

  • Brian Miller, Special Inspector General for Pandemic Recovery, wrote in a report to Congress that his efforts to investigate Paycheck Protection Program fraud were thwarted by Treasury Department officials, resulting in “permanently reduced oversight of these programs.” The Department of Justice’s Office of Legal Counsel delivered an opinion earlier that those PPP programs didn’t fall under Miller’s jurisdiction, siding with Treasury officials over Miller, a former White House lawyer during the Trump administration.
  • Speaking at Berkshire Hathaway Inc.’s annual meeting, Warren Buffett said that the U.S. economy is running in “super high gear” due to government stimulus packages and the Federal Reserve’s monetary policy, besting his own predictions earlier in the pandemic. Berkshire’s first-quarter operating profit climbed 20 percent to roughly $7 billion, with net income including investments totaling $11.7 billion.
  • President Joe Biden made his big pitch for the American Families Plan in his first address to a joint session of Congress. Provisions include an expanded role for the federal government that would bring about a raft of social proposals including child care, paid leave, two years of free community college and higher taxes on the wealthiest Americans and corporations. Biden is also planning to increase the Internal Revenue’s budget and give it more authority to perform more audits, particularly of wealthy Americans. 
  • Alex Oh was appointed to head enforcement for the Securities for Exchange Commission, then resigned days later after a judge challenged her work for Exxon Mobil Corp. Oh was the first big hire by Gensler. 
  • No interest rate changes after the Federal Reserve’s Federal Open Markets Committee meeting. Powell painted an optimistic picture of the economy’s recovery but stressed that the central bank will need more data before it considers any policy changes. 
 
Stat of the Week
 

184%

The growth in fintech complaints to the Consumer Financial Protection Bureau in the first three months of 2021, compared to the same period last year. 

 
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