Morning Consult Finance: White House Said to Resume Talks on Barring U.S. Pension Funds From Investing in Chinese Stocks

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  • The Trump administration is progressing with talks about potential restrictions on capital flows into China, including investments made by U.S. government pension funds, according to people familiar with internal deliberations. The office of National Economic Council Director Larry Kudlow, the National Security Council and the Treasury Department held a policy-coordination committee meeting on the matter last Tuesday, the people said. (Bloomberg)
  • The Commerce Department added 28 Chinese entities to an export blacklist that will bar suppliers from providing U.S. technology to Chinese firms without a license, a move that comes as top U.S. and Chinese officials prepare to resume trade talks in Washington on Thursday. The Commerce Department said the trade talks had no bearing on the decision, which was prompted by the entities’ role in “human rights violations and abuses in the implementation of China’s campaign of repression” against Muslim minorities in northwest China. (The Wall Street Journal)
  • Hong Kong Exchanges and Clearing Ltd., the parent company of Hong Kong’s stock exchange, said it will drop a nearly $37 billion offer to acquire London’s stock exchange, without citing a reason. The Hong Kong market’s unsolicited offer four weeks ago was rejected two days later by the London Stock Exchange Group PLC, which said the proposal was “simply not credible.” (The New York Times)

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Events Calendar (All Times Local)

PIIE event: “Global Economic Prospects: Fall 2019” 12:15 pm
SEC’s National Veteran Small Business Coalition monthly meeting 7:15 pm
Yahoo Finance All Markets Summit
Bloomberg Live event titled “The Future of Investing: Focus on Corporate Governance” 9:00 am
Urban Institute event titled “From Concept to Action: Aligning Opportunity Zones and Mission Capital” 2:00 pm
AEI event titled “Monetary policy in the 21st century: An Allan Meltzer perspective” 3:00 pm
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Federal deficit estimated at $984B, highest in seven years
Niv Elis, The Hill

The federal budget deficit for 2019 is estimated at $984 billion, a hefty 4.7 percent of gross domestic product (GDP) and the highest since 2012, the Congressional Budget Office (CBO) said on Monday.

Powell Lauds Former Fed Chairman for Forging Fed’s Independence
Christopher Condon, Bloomberg

Federal Reserve Chairman Jerome Powell praised one of his early predecessors for laying the foundations for the independence of the U.S. central bank, in comments that looked back to the 1930s but resonate strongly today.

New Kind of Recession Threat Presents Problem for Powell and Fed
Rich Miller, Bloomberg

This won’t be your father’s recession — if indeed the U.S. ends up tumbling into one.

Impeachment Fight May Help a New NAFTA Deal
Carl Hulse and Emily Cochrane, The New York Times

The escalating impeachment drama between Congress and the White House that has all but doomed hopes of most legislative progress this fall has instead enhanced the prospects for approval, within weeks, of one major initiative: a sweeping new trade agreement among the United States, Canada and Mexico.

Here’s what Congress may do to fix Social Security this fall
Lorie Konish, CNBC

When Rep. Bill Pascrell, Jr., D-N.J., visited a senior living center in Englewood, New Jersey, last week, he had one main focus: Social Security reform. Speaking to a room full of older Americans, Pascrell painted an urgent picture of what needs to happen in order to shore up the nation’s insurance program.

Erie Hit ‘Rock Bottom.’ The Former Factory Hub Thinks It Has a Way Out.
Ruth Simon and Kris Maher, The Wall Street Journal

To local leaders, a row of abandoned redbrick buildings in the heart of this Rust Belt city’s ailing downtown presents the best hope to spark a citywide revival.

U.S. Futures, Stocks Slide as Trade Tensions Flare: Markets Wrap
Samuel Potter, Bloomberg

U.S. equity-index futures extended a retreat alongside European stocks on Tuesday as investor optimism over looming trade talks was knocked by news the White House is moving toward possible restrictions on capital flows into China. Treasuries and gold advanced.


New York Fed Adds $47 Billion to Financial System
Robert Barba, The Wall Street Journal

The Federal Reserve Bank of New York added $47.05 billion to the financial system Monday by using the market for repurchase agreements, or repo, to relieve funding pressure in money markets.

Deutsche Bank Plans About Half of 18,000 Job Cuts in Germany
Steven Arons, Bloomberg

Deutsche Bank AG intends to make about half its planned 18,000 job cuts in Germany as it relies on savings at the retail units to lower costs, according to people familiar with the matter.

The end of Libor: the biggest banking challenge you’ve never heard of
Sinead Cruise, Lawrence White, Reuters

On June 30, British bank NatWest (RBS.L) sent out an arcane-sounding press release – bus operator National Express (NEX.L) had become the first company to take out a loan based on Sonia, a replacement for scandal-hit interest rate benchmark Libor. It was billed as the first switch of thousands that British firms would make by end-2021, when the benchmark is set to be decommissioned.

Are small banks doing enough to counter margin pressure?
Jim Dobbs, American Banker

A number of economic shifts, including a flat-to-inverted yield curve, is putting more pressure on community banks to find ways to boost their bottom lines.

Financial Products and Investments

Index funds invest trillions but rarely challenge management
Tim McLaughlin and Ross Kerber, Reuters

Index funds now control half the U.S. stock mutual fund market, giving the biggest funds enormous power to influence decisions and demand better returns at the companies in which they invest trillions of dollars.

Ruling cuts short debt collectors’ victory lap over CFPB proposal
Kate Berry, American Banker

Debt collectors notched a victory when the Consumer Financial Protection Bureau proposed allowing more use of electronic communication. But industry lawyers are worried a recent court decision could thwart that plan.

Housing and GSEs

Confidence in housing weakens just as homes become more affordable
Diana Olick, CNBC

Lower mortgage rates are making buying a home slightly more affordable, but financial concerns are outweighing that benefit and lowering overall confidence in housing.


Supreme Court Lets New York Taxes on Part-Time Residents Stand
Greg Stohr, Bloomberg

The U.S. Supreme Court left intact New York’s rules for taxing people who work in the state but live there only part-time, rejecting two appeals including one filed by the founders of Edelman Shoe Inc.

The District may approve one of the nation’s highest taxes on sugary drinks
Fenit Nirappil, The Washington Post

A majority of the D.C. Council wants to impose one of the highest taxes on sugary drinks in the nation, driving up the cost of a soda in the capital city.

Financial Technology

Robinhood adds ex-SEC official to its board
Bloomberg News

Robinhood Markets Inc. is getting a new board member: Dan Gallagher, a former commissioner for the U.S. Securities and Exchange Commission. The addition comes almost a year after a planned Robinhood checking account product was torpedoed by regulatory and insurance questions.

EU finance commissioner pledges to regulate digital currencies
Francesco Guarascio, Reuters

The European Union’s finance commissioner pledged on Tuesday, if he is reappointed, to propose new rules to regulate virtual currencies such as Libra, the currency Facebook plans to launch.

Opinions, Editorials and Perspectives

The EXIM Bank Puts Americans First
Christyn Lansing, Morning Consult

By facilitating the sale of American products to customers in other countries, EXIM is protecting jobs here at home and earning billions of dollars for taxpayers. Without EXIM, we will all pay.

CRA reforms must go beyond branch banking
Richard Hunt, American Banker

The Community Reinvestment Act is more than 40 years old and has only been significantly amended once, in the mid-1990s when cellphones still played the snake game and there was a Blockbuster video on every corner.

Research Reports

NABE Panel Expects GDP Growth to Dip Below 2% in 2020, With Risks to the Outlook Heavily Skewed to the Downside
National Association for Business Economics

The October 2019 NABE Outlook presents the consensus macroeconomic forecast of a panel of 54 professional forecasters. The survey, covering the outlook for 2019 and 2020, was conducted September 9-16, 2019.

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