Some of the biggest names on Wall Street are warming up to Bitcoin, a virtual currency that for nearly a decade has been consigned to the unregulated fringes of the financial world, the New York Times reported. The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin. The news of the virtual exchange came after Goldman Sachs went public with its intention to open a Bitcoin trading unit — most likely the first of its kind at a Wall Street bank. The moves by Goldman and Intercontinental Exchange, or ICE, the parent company of the New York Stock Exchange, mark a dramatic shift toward the mainstream for a digital token that has been known primarily for its underworld associations and status as a high-risk, speculative investment.
The Federal Reserve reported that consumer credit increased at a seasonally adjusted annual rate of 3.6 percent in March, down from a 4.3 percent rate in February, according to the ABA Banking Journal. Total outstanding credit increased $11.7 billion during the month (compared with $13.6 billion in February) to $3.87 trillion. Revolving credit, largely a reflection of credit card debt, declined at an annual rate of 3.0 percent to $1.03 trillion, compared to a 0.6 percent decrease in February. Non-revolving credit rose at a 6.0 percent annual rate, or $14.2 billion. Total non-revolving credit is now $2.85 trillion. Federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising approximately 41.5 percent of outstanding credit. Depository institutions and finance companies are secondary and tertiary holders, with 25.0 percent and 17.7 percent, respectively, of outstanding non-revolving credit.
Faced with tepid loan growth and heated competition for clients, banks are sweetening their deals on loans to businesses, a development that is concerning regulators, the Wall Street Journal reported. Lenders are giving corporate borrowers lower rates and looser terms, even if they operate in industries that are under strain, according to regulators and a Wall Street Journal analysis of lending data. The development is a boon to companies looking to borrow cheaply while the economy is doing well. But regulators are raising red flags, particularly since rising interest rates may make it harder for businesses to pay off the loans. The Office of the Comptroller of the Currency, or OCC, in a report last week identified the easing of commercial loan standards as a top risk in the industry. While the rate of bad business loans remains very low and most banks still have a moderate risk appetite, the regulator said that over the past year it privately issued more warnings ordering financial institutions to modify their business-lending practices. Banks became more conservative lenders following the financial crisis, tightening standards in some sectors to focus on loans that are, for instance, secured by a business’s inventory or energy reserves, and typically would have to be paid back first in the event of a bankruptcy. Around 2013, terms started loosening a bit, the OCC said. Then, in late 2016, banks’ commercial-loan growth slowed sharply for reasons that still aren’t clear. The annual growth rate was 1.3 percent at the end of 2017, down from 12 percent three years earlier. Eager for loan growth to fuel profits, banks since then have been loosening standards further to attract business, the OCC said. They are extending interest-only periods, allowing borrowers to draw down bigger portions of the value of collateral and relaxing covenants meant to protect from losses, the agency said. Many large banks are also lowering rates over their cost of funds, according to the Federal Reserve.
Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, told banking industry executives yesterday that they should press lawmakers hard to pursue their agenda, and revealed that, as a congressman, he would meet only with lobbyists if they had contributed to his campaign, the New York Times reported. Mulvaney, who also runs the White House budget office, is a longtime critic of the Obama-era consumer bureau, including while serving in Congress. He was tapped by President Trump in November to temporarily run the bureau, in part because of his promise to sharply curtail it. Since then, he has frozen all new investigations and slowed down existing inquiries by requiring employees to produce detailed justifications. He also sharply restricted the bureau’s access to bank data, arguing that its investigations created online security risks. And he has scaled back efforts to go after payday lenders, auto lenders and other financial services companies accused of preying on the vulnerable.
A Democratic senator who supports rolling back some of the financial rules put in place after the 2008 financial crisis warned bankers yesterday that the legislation will stall if it comes back to the Senate for another vote, the Associated Press reported. Sen. Mark Warner's (Va.) comments are a warning shot to House Republicans, who are insisting on adding to Senate-passed legislation that would scale back the law known as Dodd-Frank. "This bill will not pass if it comes back to the Senate," Warner said. "We stretched this about as far as we can go. The House of Representatives needs to accept this legislation." The Senate passed legislation in March targeting relief for all but the biggest banks. The House had earlier passed a more expansive bill that also went after the Consumer Financial Protection Bureau. The House version passed with no Democratic support.
In a long-expected move that would affect the roughly 43 million households with brokerage or retirement accounts, the Securities and Exchange Commission voted yesterday to propose rules that would require brokers to put their customers’ financial interests ahead of their own, the New York Times reported. But not everyone is convinced the rules — if passed as proposed — would go far enough to improve consumer protections, including some of the SEC’s own commissioners. Some of the five commissioners said that they had concerns with different pieces of the proposal, suggesting that it may be difficult for them to coalesce around a final rule. Kara M. Stein, an SEC commissioner, called the proposed rules a squandered opportunity to provide meaningful change, and suggested a new name for the proposal, now called Regulation Best Interest.
The Senate on Wednesday moved to eliminate a 2013 consumer protection measure intended to combat discrimination in auto lending, marking an expansive new use of its power to kill federal regulations. The lawmakers voted 51-47 to gut the Consumer Financial Protection Bureau‘s guidance, which Republicans attacked as harmful to auto dealers and lenders. The House is expected to pass the measure soon, and President Donald Trump will likely sign it. The consequences of the vote will ripple beyond the confines of the CFPB, which is already on a deregulatory path under the leadership of Mick Mulvaney, Trump‘s White House budget chief. It was the first time the Senate has used its authority under the 1996 Congressional Review Act to strike down an action taken by an agency years ago, instead of just within the narrow window prescribed by the law. The move also marked a broadening of how Congress has generally used the Review Act to include regulatory guidance and not only formal agency rules that were recently issued. "It's important for Congress to reassert its role in policymaking from the executive branch," said Sen. Jerry Moran (R-Kan.), who introduced the bill that would undo the regulation.
The House voted on Friday to allow community banks to escape one of the biggest regulations imposed by the 2010 Dodd-Frank law, the Washington Examiner reported. Republicans joined with 78 Democrats to pass a bill sponsored by Rep. French Hill (R-Ark.) to revise the “Volcker Rule,” the regulation that restricts banks’ ability to speculate in the market with deposits insured by the federal government. The rule is meant to prevent banks from making risky bets that are effectively backstopped by taxpayers. The bill, which passed 300-104 just before lawmakers left for the weekend, is one of several bipartisan measures the House passed this week that would alter the Dodd-Frank law. Republican leaders in the House have said they hope for negotiations with the Senate to attach some House-passed bills to package of regulatory reforms that the upper chamber cleared last month with 17 Democratic votes. Senators so far have resisted including bills advanced in the House, and argue that their package of relief measures for community and regional banks is carefully negotiated and would be upset by involving House negotiators.
Judges on a federal appeals court panel yesterday appeared hesitant to overrule President Trump and install the deputy director of the Consumer Financial Protection Bureau as the agency's temporary leader, the Los Angeles Times reported. But two of the three judges from the U.S. Court of Appeals for the D.C. Circuit indicated they had a problem with the person Trump selected to take the position, Mick Mulvaney, because he also heads the White House Office of Management and Budget. The 2010 law that created the bureau as an independent federal agency specifically said OMB should not have oversight or jurisdiction over it. That raised the possibility that the legal battle over the future of the watchdog agency could end with Mulvaney's removal as acting director — a move that would be cheered by Democrats and consumer advocates who have complained about his public opposition to the bureau's existence.
Judges on a federal appeals court panel Thursday appeared hesitant to overrule President Trump and install the deputy director of the Consumer Financial Protection Bureau as the agency's temporary leader. But two of the three judges from the U.S. Court of Appeals for the D.C. Circuit indicated they had a problem with the person Trump selected to take the position, Mick Mulvaney, because he also heads the White House Office of Management and Budget. The 2010 law that created the bureau as an independent federal agency specifically said OMB should not have oversight or jurisdiction over it. That raised the possibility that the legal battle over the future of the watchdog agency could end with Mulvaney's removal as acting director — a move that would be cheered by Democrats and consumer advocates who have complained about his public opposition to the bureau's existence. But Mulvaney would not be supplanted as they want by Deputy Director Leandra English, who brought the suit to remove him after his appointment by Trump last fall. Under such a ruling, English might be elevated to acting director for at best a day or so until Trump simply named another person to serve as acting director, pending appointment of a permanent director needing Senate confirmation. Or the administration might appeal such a ruling to the full appeals court.