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Under Trump, Banking Watchdog Trades Its Bite for a Tamer Stance - ABI

After the financial crisis in 2008, the Obama administration turned one of the banking industry’s friendliest regulators into one of its toughest. But that agency is now starting to look like its old self — and becoming a vital player in the Trump administration’s campaign to roll back regulations, the New York Times reported. The regulator, the Office of the Comptroller of the Currency, which oversees the nation’s biggest banks, has made it easier for Wall Street to offer high-interest, payday-style loans. It has softened a policy for punishing banks suspected of discriminatory lending. And it has clashed with another federal regulator that pushed to give consumers greater power to sue financial institutions. The shift, detailed in government memos and interviews with current and former regulators, is unfolding without congressional action or a rule-making process. It is happening instead through directives issued at the stroke of a pen by the agency’s interim leader, Keith A. Noreika, who — like the nominee to fill the post going forward — has deep connections to the industry. Even in his few months on the job, Noreika has made the new direction clear. At a meeting with staff members over the summer, he declared that the agency was returning to what he called its natural state, according to one of those who attended. The shift could help revive some of the policies and practices that arose on the agency’s watch amid the financial crisis and banking scandals of a decade ago — and that led congressional investigators to accuse it of “systemic failures.”


Puerto Rico May Need to Skip Bond Payments for Five Years - ABI

Puerto Rico is considering suspending debt-service payments for five years, a lead lawyer for the territory’s federal oversight board said, in the first indication of how the devastation caused by Hurricane Maria will affect the restructuring of the island’s debt, Bloomberg News reported. A moratorium may be included as part of Puerto Rico’s plan to reduce what it owes through bankruptcy, Martin Bienenstock, a partner at Proskauer Rose LLP, who represents the panel, said at a court hearing yesterday in Manhattan. It wasn’t immediately clear whether such a step would apply to all of government’s $74 billion of debt. The government’s most actively traded bonds fell yesterday to an average of 25 cents on the dollar, the lowest since they were issued in 2014 and less than half what they were worth before the storm. The September hurricane worsened the financial pressure that had already pushed the Caribbean island of 3.4 million residents into a record-setting bankruptcy. Puerto Rico this year initially said it could allocate $8 billion for debt payments through 2026, far less than the $33.4 billion that’s owed. Those plans have since been upended by the fallout from the hurricane, which Puerto Rico’s federal oversight board estimates may leave a budget shortfall of as much as $21 billion over the next two years. Puerto Rico is currently revising the fiscal plan.


Analysis: Failing Companies Gravitating to Richmond Bankruptcy Court - ABI

While Toys “R” Us world headquarters are in Wayne, N.J., the struggling retailer chose not to file for bankruptcy in nearby Newark, N.J. Instead, the toy company followed an increasing number of corporations — from Gymboree to a major coal company to a Pennsylvania fracking company — that are choosing to file for bankruptcy in Richmond, Va., according to a New York Times analysis. In recent years, Richmond has become the destination wedding spot for failed companies. The bankruptcy court there offers several features attractive to the executives, bankers and lawyers trying to get an edge in the proceedings. First, Richmond’s bankruptcy court offers a so-called rocket docket that moves cases along swiftly. Second, the legal record in that court district includes precedents favorable to companies, like making it easier to walk away from union contracts. But perhaps one of the biggest draws, according to bankruptcy lawyers and academics, is the hefty rates lawyers are able to charge there. The New York law firm representing Toys “R” Us, Kirkland & Ellis, told the judge that its lawyers were charging as much as $1,745 an hour. That is 25 percent more than the average highest rate in 10 of the largest bankruptcies this year, according an analysis by the New York Times.


How the Bankruptcy System Is Failing Black Americans Richard Cordray to step down - CNN

Cordray said Wednesday that he plans to resign as director at the end of the month.  "It has been a joy of my life to have the opportunity to serve our country as the first director of the Consumer Bureau by working alongside all of you here. Together we have made a real and lasting difference that has improved people's lives," he said in a note to CFPB staff.  Republicans have long loathed Cordray, who they see as having overstepped his regulatory authority and as lacking oversight.  After President Trump's election, some called for his ouster.  "It's time to fire King Richard," Sen. Ben Sasse of Nebraska said last January.  But his departure may have more to do with his personal political aspirations than GOP pressure. Cordray is widely thought to be preparing a 2018 run for governor of Ohio. Before he was appointed to lead by the CFPB by President Obama in 2012, he served as Ohio's attorney general and treasurer.  With Cordray gone, President Trump will have a chance to rework the consumer protection agency, which was created under the 2010 Dodd-Frank regulatory reform law following the 2008 financial crisis.  "[Cordray's CFPB has] done a lot of good, but they've also been very controversial. It's been a real political football since its inception, and it will likely look and operate quite differently once Cordray leaves," Matt Schulz, a senior industry analyst with CreditCards.com, said in a statement.


Senators Support Rollback of Bank Oversight - ABI

Dozens of banks received the biggest signal yet that they may soon be freed from some of the most onerous rules put in place after the financial crisis, as lawmakers from both parties agreed to a plan that would enact sweeping changes to current law, the Wall Street Journal reported. The bipartisan Senate agreement released Monday would relieve small and regional lenders from a number of restrictions meant to limit the damage firms could cause to the economy in the event of another crisis. In what would be the biggest step to ease the financial rule book since Republicans took control of Washington, D.C., the proposal could cut to 12 from 38 the number of banks subject to heightened Federal Reserve oversight by raising a key regulatory threshold to $250 billion in assets from $50 billion. The legislation also would ease red tape affecting credit unions and community banks, allowing them to lend more, supporters said. The deal will “significantly improve our financial regulatory framework and foster economic growth by right-sizing regulation,” said Senate Banking Committee Chairman Michael Crapo (R-Idaho), who brokered the agreement between Republicans and a group of moderate Democrats.


Bipartisan Dodd-Frank Rollback Could Benefit Banks Big and Small - ABI

The top Republican on the Senate Banking Committee is getting closer to striking a deal on a bipartisan bill to ease financial rules that could have wins for banks both big and small, Bloomberg News reported yesterday. Sen. Mike Crapo (R-Idaho), the panel’s chairman, is in talks with moderate Democrats including Jon Tester of Montana, Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana on a plan for rolling back parts of the Dodd-Frank Act. A deal could come as soon as this week, Tester has said. Reducing the compliance burden for community banks has been identified as a top priority, but the lawmakers are also discussing ways to free bigger regional lenders from some of the strictest post-crisis regulations. Also on the table, lawmakers say, are tweaks to measures such as the Volcker Rule limits on banks’ trading, though it’s unclear what will make it into the final bill.


CFPB Lawyer Kristen Donoghue Is Picked for Agency’s Enforcement Chief - ABI

The Consumer Financial Protection Bureau plans to name Kristen Donoghue, the top deputy under outgoing enforcement chief Anthony Alexis, to lead of the Obama-era agency’s effort to police the financial industry, the National Law Journal reported. Donoghue is a longtime agency lawyer who was widely seen as a likely successor to Alexis, a former federal prosecutor and Mayer Brown partner who took over as acting enforcement chief in July 2013 before being appointed the division’s permanent director in January 2015. The CFPB confirmed yesterday that Donoghue had been picked to replace Alexis, whose last day will be Nov. 17.


Tax Change on Mortgages Could Shake Up the Housing Market - ABI

The Republican tax plan unveiled yesterday takes aim at the most sacred of tax deductions: the provision that subsidizes homeownership by allowing the deduction of interest on mortgage debt, the New York Times reported. For most of America, the impact would be minimal. The proposed bill reduces the maximum deduction from $1 million to $500,000, or more than double the median home price in the U.S. of roughly $200,000. Less than 3 percent of home mortgages are more than $500,000, according to data from CoreLogic. But if the idea holds — and history suggests that will be difficult — it will echo loudly through higher-priced cities on the coasts. “The impact on the market is going to be recognizable,” said Ure R. Kretowicz, chief executive of Cornerstone Communities, a homebuilder in San Diego. “There’s going to be less incentive to build, and less incentive to buy.”


Trump to Tap Jerome Powell as Next Fed Chairman - ABI

The White House has notified Federal Reserve governor Jerome Powell that President Donald Trump intends to nominate him as the next chairman of the central bank, the Wall Street Journal reported today. If confirmed by the Senate, Powell would succeed Fed Chairwoman Janet Yellen, the central bank’s first female leader, whose four-year term as Fed chief expires in early February. In his five years at the Fed, Powell has been a reliable ally of Yellen and would likely continue the Fed’s current cautious approach to reversing the central bank’s crisis-era stimulus policies as the economy expands. That would mean gradually raising short-term interest rates in quarter-percentage-point steps through 2020 while slowly shrinking the Fed’s $4.2 trillion portfolio of Treasury and mortgage-backed securities it purchased to lower long-term rates.


Report: Retail Sets Records For Store Closure - ABI

More store closings have been announced this year than in any other year before, as retailers across categories have collectively announced plans to close the doors on 6,700 brick-and-mortar locations in the U.S., with many declaring bankruptcy as well, PYMNTS.com reported. Fung Global Retail & Technology, a retail think tank — and the source of the data — found that the prior record, 6,163, was notched during the 2008 financial meltdown. Analysts expect that the downturn could get worse with some predicting as many as 8,600 more brick-and-mortar stores shuttering their doors this year, a figure that would add up to the loss of 147 million square feet of retail space.