News

Farmers’ Anxiety Grows as Details on Federal Aid Remain Unclear - ABI

Farmers fretting over a trade conflict sparked by President Trump’s tariffs may soon get more details on the $12 billion worth of aid that the administration has pledged, as their concerns mount over potentially plunging incomes and market losses, the Wall Street Journal reported. “We certainly are appreciative of it but…we don’t know how it’s going to be determined,” Ryan Pederson, a North Dakota farmer who grows soybeans and canola, said of the proposed farm aid. “You can’t do any planning off of that because you don’t know what it’s going to be.” An Agriculture Department representative this week said that the agency expects to announce official guidelines for the programs by Aug. 24 and be ready to implement them by Sept. 4. Farmers would receive payments between September and the end of their harvest, and would be required to provide documentation of what they grew, the agency said. But details on how much farmers will receive, and how it will be distributed, remain unclear. In July, the White House said it planned to direct the emergency funds to farmers to compensate for losses they face, as other countries retaliate and impose tariffs on U.S. goods.


Overhaul Boosts Credit Scores of Millions of U.S. Consumers - ABI

The credit scores of millions of U.S. consumers have risen following a broad overhaul of how credit-reporting firms handle negative credit information, the Wall Street Journal reported. Consumers who had at least one collections account removed from their files experienced an 11-point increase, on average, in their credit scores, according to a report released yesterday by the New York Federal Reserve. The report was based on a sample of millions of anonymous credit reports from credit-reporting firm Equifax Inc. Collections were completely removed from 8 million consumers’ credit reports in the 12 months through June, resulting in an average 14-point increase. The improvements come after the three largest U.S. credit-reporting firms changed how they deal with certain kinds of negative credit events that some have said are prone to error and unfairly drag down credit scores. The firms — Equifax, Experian PLC and TransUnion — agreed to revamp the reports following settlements with state attorneys general dating back to 2015.


U.S. Household Debt Jumps to $13.3 Trillion While Student Loan Delinquencies Dip - ABI

U.S. household debt continued to increase in the second quarter, propelled by an advance in mortgage borrowing, according to a Federal Reserve Bank of New York report that also noted a decline in seriously delinquent student loans, Bloomberg News reported. Total household debt rose 3.5 percent from a year earlier in the April-to-June period to a record $13.3 trillion, while mortgage debt rose 3.5 percent to $9 trillion. The majority of newly originated mortgages continued to go to borrowers with the highest credit scores, extending the pattern of most of the current economic expansion — 58 percent of new mortgage loans were taken by those with scores of 760 or higher. As borrowing advanced, borrower stress continued to decline. Loans slipping into delinquency fell to 4.52 percent in the second quarter, the lowest in data from 2003. The drop was primarily due to student loans, for which the transition rate has fallen 1.3 percentage points over the last year.


Financial Crisis Cost Every American $70,000, Fed Study Says - ABI

America never made up the growth it lost in the 2008 global financial crisis and the recession it triggered, according to research from the Federal Reserve Bank of San Francisco, Bloomberg News reported. Gross domestic product remains well below what its 2007 trend would have implied and it’s unlikely the economy will ever make up that lost ground, according to the research published yesterday. The hit will cost the average American $70,000 in lifetime income, the study estimates. “Without the large adverse financial shocks experienced in 2007 and 2008, the behavior of GDP would have been very different,” Regis Barnichon and his co-authors write. They find that the hit to growth was persistently 7 percentage points deeper than it would have been in the mild recession that they think would have occurred without the financial meltdown.


Mulvaney Looks to Weaken Oversight of Military Lending - ABI

The Trump administration is planning to suspend routine examinations of lenders for violations of the Military Lending Act, which was devised to protect military service members and their families from financial fraud, predatory loans and credit card gouging, according to internal agency documents, the New York Times reported. Mick Mulvaney, the interim director of the Consumer Financial Protection Bureau, intends to scrap the use of so-called supervisory examinations of lenders, arguing that such proactive oversight is not explicitly laid out in the legislation, the main consumer measure protecting active-duty service members, according to a two-page draft of the change. The proposal surprised advocates for military families, who have urged the government to use its powers to crack down harder on unscrupulous lenders. The consumer bureau conducted dozens of investigations into payday and other lenders during the Obama administration without any significant legal opposition, and no lenders are currently challenging its oversight based on the law, according to administration officials. The bureau will still bring individual cases against lenders who are found to charge in excess of the annual interest rate cap of 36 percent mandated under the law, and continue to supervise lenders under other statutes. But it will scrap supervisory examinations, which are the most powerful tool for proactively uncovering abuses and patterns of illegal practices by companies suspected of wrongdoing, former consumer bureau enforcement officials said.


HUD Moves to Shake Up Fair-Housing Enforcement - ABI

The Trump administration wants to shift the way it enforces an aspect of fair housing around the U.S., pivoting away from efforts to integrate lower-income housing into wealthier neighborhoods in favor of promoting more housing development overall, the Wall Street Journal reported. The U.S. Department of Housing and Urban Development is set to announce the change today. HUD will begin holding stakeholder hearings on how to change the way it determines whether communities are enforcing the Fair Housing Act, which requires local governments to institute policies that help break down patterns of housing segregation. HUD stakeholders include nonprofit groups, academic researchers and private businesses. The Obama administration took steps to encourage the development of low-income housing in high-income neighborhoods. In an interview, HUD Secretary Ben Carson said he plans instead to focus on restrictive zoning codes. Stringent codes have limited home construction, thus driving up prices and making it more difficult for low-income families to afford homes, Carson said.


FHFA: Fannie, Freddie Could Need $78 Billion in a Potential Crisis - ABI

The mortgage giants Fannie Mae and Freddie Mac could require as much as $78 billion in bailout money in the event of a serious financial crisis, according to stress test results released on Tuesday by the Federal Housing Finance Agency, National Mortgage News reported. The government-sponsored enterprises would need to draw between $42.1 billion and $77.5 billion from the Treasury Department under the test's "severely adverse" economic scenario, depending on how the enterprises treat their deferred tax assets, the agency said in its report. Under the terms of the senior preferred stock purchase agreements, the GSEs would retain between $176.5 billion and $212 billion under their funding commitment from Treasury. The projected draw is lower than the estimate from last year, when regulators reported that the GSEs could need nearly $100 billion in a new crisis. In 2016, the agency said that they would need just under $126 billion. The Dodd-Frank Act requires federally regulated financial companies with total assets of more than $10 billion to conduct annual stress tests to assess their ability to withstand an economic crisis.


Senator Warren Points to Boston Herald Bankruptcy to Make Case for Venue Reform - ABI

A bipartisan bill co-sponsored by U.S. Sens. Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) earlier this year to require companies to file for bankruptcy in their main place of business has garnered no support among fellow lawmakers, Warren is continuing to push for the legislation, WSJ Bankruptcy Pro reported. Troubled by the overwhelming number of debt-burdened companies seeking protection from creditors in Delaware or New York courts regardless of where they are headquartered, Sen. Warren and Sen. Cornyn last January introduced the Bankruptcy Venue Reform Act. If passed, the bill would require corporations to file for bankruptcy in the district where their principal place of business is located, not simply where they are incorporated or where they operate much-smaller affiliates. No other lawmakers have signed on to the bill, according to Congress.gov, but Sen. Warren raised the topic last month in a speech to the New England Council, a regional business group, in Boston. “Why did the Boston Herald file bankruptcy in Delaware?” she asked her audience, noting that the newspaper’s retirees, suppliers and current employees are in Boston. “Last time I looked, we have a bankruptcy court in Boston — a court whose judges are excellent,” she said. The Boston Herald filed for chapter 11 last December. Citing a recent study, Sen. Warren said that, of the 159 biggest bankruptcies between 2007 and 2013, about 80 percent filed in either Delaware, where many businesses are incorporated, or Manhattan, the epicenter of the bankruptcy bar.


New FDIC Leader Joins Push to Re-Evaluate Banking Rulebook - ABI

Washington’s newest senior bank regulator is turning her agency’s agenda in the direction of policies being proposed by other Trump-appointed officials, adding momentum to a push to revisit rules adopted after the 2008 financial crisis, the Wall Street Journal reported. Federal Deposit Insurance Corp. Chairman Jelena McWilliams, in her first interview since being sworn in June 5, said she is ready to re-evaluate rules on bank capital, small-dollar loans and investments in low-income areas. Like other bank regulators, McWilliams has broad discretion to rewrite rules for the companies she oversees, using authority from the 2010 Dodd-Frank financial overhaul and other laws. The Republican-controlled Congress earlier this year passed a law calling for easing banking rules, especially for small lenders. But much of Dodd-Frank remained intact, leaving the Trump administration’s financial-regulatory overhauls to be carried out largely by bank regulators such as McWilliams. She said Friday that her top priorities are examining the regulatory burden on small banks, speeding up her agency’s review of bank-charter applications and helping banks introduce new financial products for underserved communities.


British Study Says U.S. Regulators Not Strong Enough for a Crisis - ABI

A Bank of England study said that the Financial Stability Oversight Council would probably not be able to stop another financial crisis because of its limited powers and narrow remit, Bloomberg News reported. The FSOC “has no macroprudential levers under its direct control, and not all its members have mandates to protect financial stability,” according to the study, which compared the powers of the U.S. body with the U.K.’s Financial Policy Committee. That could leave the American regulator vulnerable to political pressure and impede its ability to act. The FSOC was formed after the 2008 financial crisis to monitor threats that could lead to another crash. Since the election of President Donald Trump, the body has looked for ways to cut back outdated and overlapping rules to reduce Wall Street’s regulatory burden and compliance costs. The authors said the range of powers granted to the FPC makes it “the most muscular macroprudential regulator in the world.” The committee has the authority to restrict lending, add capital buffers, vary risk weights for lenders, advise on stress tests and to demand additional powers as part of its remit. By contrast, the FSOC has few powers under its control.