News

California Bill Would Eliminate Tax Deduction on Second Home - ABI

The California state legislature is considering a bill to eliminate a tax deduction for owners of second homes and spending the newly collected revenue on affordable housing, the Palm Beach Desert Sun reported. The bill, A.B. 71, proposes the elimination of the state mortgage interest tax deduction — a policy that allows Californians to deduct any interest they pay on their mortgages from their taxes — for second homes. Assemblymember David Chiu (D-San Francisco), the bill’s sponsor, said that about 31,000 Californians claimed the tax deduction last year, and if collected, those taxes could have totaled $360 million for the state. A.B. 71 would require the state to collect those funds and deposit them into the Low-Income Housing Tax Credit program, a popular mechanism for funding the construction of affordable housing. The structure of the tax program allows developers to leverage federal and private funds, so the $300 million in state funds could allow total investment of more than $1 billion.


Fed Eases Bank Merger Rules by Lifting Size Threshold for Review - ABI

The U.S. Federal Reserve yesterday made it easier for bigger lenders to merge, by quadrupling its threshold of combined size that would require an extensive regulatory review of a proposed deal, Reuters reported. A merger that creates a bank with total assets of less than $100 billion is not a threat to the financial system, the central bank said in a statement on Thursday. Since 2012, that threshold had been $25 billion. Mergers that create banks "with less than $100 billion in total assets, are generally not likely to create institutions that pose systemic risks," the Federal Reserve said. Bank regulatory lawyers and financial dealmakers have argued that overly tight regulation since the 2008 financial crisis was hindering industry mergers and acquisitions. Under the Dodd-Frank financial reforms adopted to prevent another crisis, the Fed must consider the extent to which a bank merger would result in risks to the financial system.


Senators Introduce Bill to Improve Bankruptcy Court System - ABI

U.S. Senators Chris Coons (D-Del.), Debbie Stabenow (D-Mich.), Marco Rubio (R-Fla.), and Bill Nelson (D-Fla.) yesterday introduced “The Bankruptcy Judgeship Act of 2017,” according to a press release. This legislation would ensure that individuals and corporations have access to well-functioning bankruptcy courts even when temporary judgeships expire. “At a time when both individuals and corporations need to access the resources of bankruptcy courts, Congress must act to extend bankruptcy judgeships in judicial districts where they are most needed,” said Senator Coons. Rubio added that the legislation was a necessity. “Federal bankruptcy laws make it possible for individuals and businesses to reorganize their debts, but a significant impediment to a well-functioning system has been Congress’ failure to appropriately authorize judgeships as recommended by the nonpartisan Judicial Conference of the United States," said Senator Rubio.


Fed Sees Two More Rate Increases in 2017 - ABI

Federal Reserve officials still expect to raise short-term interest rates two more times this year after lifting them Wednesday — and they see no major changes in their economic outlook, the Wall Street Journal reported today. In economic projections released yesterday following a two-day policy meeting, officials also penciled in three more quarter-percentage-point moves in 2018. They also see interest rates settling at their long-run average of 3 percent by the end of 2019, slightly sooner than they foresaw in their December projections. Officials took the first step yesterday by raising their benchmark federal-funds rate as expected by a quarter-percentage-point to a range between 0.75 and 1 percent. Minneapolis Fed President Neel Kashkari cast the only dissenting vote, saying he preferred to stand pat. Nine of the 17 Fed officials who submitted projections indicated three rate increases would be appropriate in 2017, up from six officials in December. Only three officials saw the need for fewer than three moves this year versus six in December.


As Dodd-Frank Repeal Looms, Shareholders Gird for Annual Meetings - ABI

Investors will keep prodding companies to bring their executive pay in line with rivals’ and disclose more detail about their environmental and social policies during this year’s shareholder contests, the Wall Street Journal reported today. Their push continues trends in corporate governance, despite a murky regulatory outlook that could change disclosure rules after this year, according to a new report. “There’s a lot of uncertainty, but governance has advanced. I don’t think we’re going to roll back the clock on such things as say-on-pay,” said Chuck Callan, senior vice president for regulatory affairs at Broadridge Financial Solutions, who co-authored the report with vice president Sharyn Bilenker.


U.S. Household Net Worth Reaches Record $92.8 Trillion - ABI

U.S. household net worth climbed to a record $92.8 trillion in the fourth quarter of 2016, as the end-of-year surge in stocks and a steady climb in home prices added more than $2 trillion of wealth to household balance sheets, the Wall Street Journal reported today. The biggest contributor to the increase was the stock market, which added $728 billion to household balance sheets in the fourth quarter, according to the Federal Reserve’s quarterly financial accounts report. The stock market rallied by about 8 percent in the fourth quarter of 2016, following the election of President Donald Trump, with many investors anticipating tax cuts, regulatory relief and fiscal stimulus. The market has climbed an additional 6 percent so far this year, which isn’t captured in yesterday’s report. U.S. households lost nearly $13 trillion during the 2007-09 recession. Since the first quarter of 2009, however, wealth has soared by $38 trillion, driven by an eight-year rally in stocks and eventually by a robust recovery in home prices.


Trump to Meet With Community Bank CEOs to Talk About Regulations - ABI

President Donald Trump is scheduled to meet with almost a dozen chief executives from U.S. community banks today, seeking their input on which regulations may be crimping their ability to lend to consumers and small businesses, Bloomberg News reported today. Billed as a listening session of Trump’s National Economic Council, the meeting will include Camden Fine, the CEO of the Independent Community Bankers of America, and Robert Nichols, president of the American Bankers Association, both industry trade groups. Trump recently ordered Treasury Secretary Steven Mnuchin to scrutinize U.S. financial regulations and come back to him in June with a report.


Trump’s Deregulatory Agenda Could Result in Windfall for Banking Industry - ABI

Changes in banking regulations could result in a big windfall for the industry, much of which would make its way into investors' pockets, according to a Goldman Sachs analysis, CNBC.com reported yesterday. In a best-case scenario, the Trump administration’s proposed regulatory cuts in the banking industry would result in as much as $218 billion in excess capital which "could either be returned to shareholders or reinvested in the business," Goldman said in a report for clients this week. That excess cash would result from likely reduced requirements for banks to retain buffers against emergencies. Reforms under the Dodd-Frank law in 2011 sought to make sure the industry doesn't suffer another crisis like the one that began 10 years ago and nearly capsized the global economy. The current level of excess capital is $131 billion. While the White House has yet to lay out specifics about what regulations will look like, Goldman believes they'll center around easing stress test requirements, rolling back the way banks have to count risk assets, and bringing capital requirements imposed by the U.S. Federal Reserve more in line with other organizations such as the international Financial Stability Board.


Luetkemeyer Sees House Passing Dodd-Frank Replacement by Summer - ABI

The House could pass a forthcoming Dodd-Frank replacement bill before this summer, a senior member of the House Financial Services Committee said yesterday, MorningConsult.com. “The timeline on it is somewhere in the next two to three months to get it out of the House, hopefully get it in the Senate,” Rep. Blaine Luetkemeyer (R-Mo.), chairman of the subcommittee on financial institutions and consumer credit. The legislation, known as the Financial CHOICE Act, was introduced in September by Committee Chairman Jeb Hensarling (R-Texas), who is expected to introduce a revised version in the coming weeks. Hensarling, who also spoke at today’s conference, said the new measure is coming “soon.” Luetkemeyer also shed light on how Republicans plan to handle the Consumer Financial Protection Bureau, a key target of their Dodd-Frank overhaul efforts, following an appeals court decision last month to rehear a case that would allow the president to fire the CFPB director at will. He said that one significant revision to the forthcoming CHOICE Act would codify the president’s authority to dismiss the head of the agency, rather than restructure its leadership as a bipartisan commission. But he said that provision might not remain intact over in the Senate. “When the bill goes to the Senate, I think what you’ll see is a compromise down to the commission,” he said, adding that he expects “a lot of bipartisan support” for that measure. Democrats, he explained, would likely want some sway at the agency if a Republican-appointed director takes the helm.


Heritage Foundation Introduces Framework for Dodd-Frank Replacement- ABI

As Republicans prepare to dismantle the 2010 Dodd-Frank law, the Heritage Foundation is ready to weigh in with a blueprint for financial regulation that calls for transferring the Consumer Financial Protection Bureau’s authorities to the Federal Trade Commission, according to a document reviewed by Morning Consult. The framework, which sets conservative goalposts for the Trump administration and GOP lawmakers, advocates for reducing federal deposit insurance, loosening securities disclosure rules, eliminating a key market structure rule and placing financial regulators under the congressional appropriations process. The document, co-authored by several conservative and libertarian policy experts and edited by Heritage research fellow Norbert J. Michel, praises but proposes changes to legislation proposed last year by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) known as the Financial CHOICE Act. In a chapter on the CHOICE Act, the report expresses support for the measure but suggests eliminating Federal Reserve stress tests and raising and simplifying the leverage ratio to determine which banks — those holding higher capital — should be exempt from certain regulatory requirements.