U.S. President Donald Trump has a pool of five candidates to choose from for the next chair of the Federal Reserve and is likely to announce his choice before going to Asia in early November, Reuters reported yesterday. Trump has an interview scheduled on Thursday with current Fed Chair Janet Yellen, whose term expires in February. She is one of the five candidates while the others consist of Trump’s chief economic adviser, Gary Cohn, along with former Fed Governor Kevin Warsh, Fed Governor Jerome Powell and Stanford University economist John Taylor. Trump, at a joint news conference in the Rose Garden with Greek Prime Minister Alexis Tsipras, said in all likelihood he would choose one of the five as the next Fed chair. Announcing the choice by the time Trump leaves for Asia on Nov. 3 would give the Senate time for the confirmation process, according to sources.
Some small-business owners struggling to recover from this year’s series of brutal hurricanes said the federal government needs to beef up its response, the Wall Street Journal reported. Unlike individuals, businesses aren’t eligible for grants from the Federal Emergency Management Agency. They can receive disaster-recovery loans, but many entrepreneurs aren’t interested in taking on debt after a big storm, and some don’t qualify for a loan. The U.S. Small Business Administration’s disaster-loan program is the main source of federal aid for flood-ravaged entrepreneurs. It allows businesses to borrow up to $2 million to repair or replace damaged property and cover other disaster-related losses. But more than half of the loan applications are typically rejected, often because they don’t have the cash flow to support repayments.
The persistence of slow inflation was the dominant topic at the Federal Reserve’s most recent policy-making meeting in September, but most officials said they were still inclined to raise the Fed’s benchmark interest rate later this year, the New York Times reported yesterday. The Fed is likely to raise rates so long as the medium-term economic outlook remains unchanged, according to an official account of the meeting that the Fed published yesterday. The account said that recent hurricanes had not disrupted that outlook. The Fed expects slower growth for a few months, but it does not expect a long-term effect. The Fed next meets Oct. 31 and Nov. 1, but investors expect the Fed will wait to raise its benchmark rate at its final meeting of the year, in December. The Fed said after the September meeting that it would begin to reduce its holdings of Treasury securities and mortgage-backed securities, which it accumulated beginning in 2008 as part of the effort to reduce borrowing costs for businesses and consumers. But the minutes of the September meeting said that “a few” Fed officials opposed another 2017 rate move, and that “several others” remained on the fence.
Bankrupt U.S. Retailers Begin to Catch a Break An unexpected helping hand from creditors, landlords and vendors is allowing more U.S. retailers to stay in business following bankruptcy with most of their stores and employees in the fold, Reuters reported Friday. The new approach marks a turning point for the beleaguered sector, which has seen at least 19 brick-and-mortar retail chains shut down the bulk of their operations since 2014. Until this year, most bankrupt retailers, including American Apparel, Sports Authority and The Limited, were dismantled during their bankruptcy process. However, several creditors, landlords and vendors now see more value left in some retailers, and are seizing on an opportunity to minimize their own losses in the retail rout. This could spell a slowdown in the decline in brick-and-mortar retail jobs, which fell by more than 100,000 this year, as more than 6,000 stores shuttered under increasing pressure from competition among traditional retailers as well as e-commerce firms such as Amazon.com Inc. “We’re seeing a set of situations come together in which the constituencies have more interest in the retailer surviving than not,” said Holly Etlin, a managing director at AlixPartners LLP, a consulting firm that worked on the bankruptcy of Gymboree. Most of these retailers were owned by private equity firms, which saddled them with debt in a risky bid to juice returns. But in bankruptcy talks, the chains are arguing successfully that they can generate enough cash to withstand the sector’s woes if their debt mountains are slashed and payment obligations eased. Creditors, landlords and vendors are more receptive to this approach, because their own financial projections show that liquidations would result in a limited recovery of what they are owed.
Overall business bankruptcy filings declined 12 percent to 2,854 filings in September, compared to 3,251 filings in September 2016, according to a news release from the ABI. Consumer filings declined 7 percent from 61,384 in September 2016 to 57,147 in September this year. Total filings in the U.S. also saw a 7 percent decline from 64,635 in September 2016 to 60,001 in September 2017, according to the news release and data provided by Epiq Systems Inc.
“Consumers and businesses looking to stay afloat through financial distress may steer away from the relief of bankruptcy due to high filing costs,” ABI Executive Director Samuel J. Gerdano said in the news release. “The recommendations of ABI’s Chapter 11 Commission and the ongoing efforts of the Commission on Consumer Bankruptcy aim to make bankruptcy more accessible for struggling businesses and families.”
The Trump administration is set to release its blueprint for overhauling regulation of U.S. markets, an expansive list of priorities that touches on the stock, bond and derivatives trading that fuels Walls Street profits, Bloomberg News reported today. The report, being prepared by the Treasury Department, could come as early as today. Rather than making specific demands, the document is meant to be a road map for agencies as they streamline rules. While some of the changes would require congressional action, most could be accomplished by re-writing regulations. The markets review was spurred by President Donald Trump’s February executive order calling for a broad rethink of financial regulations. Treasury issued a separate report on bank oversight reforms in June, and another on asset managers is set to be released in the coming days.
The Consumer Financial Protection Bureau (CFPB) yesterday imposed tough new restrictions on so-called payday lending, dealing a potentially crushing blow to an industry that churns out billions of dollars a year in high-interest loans to working-class and poor Americans, the New York Times reported. The rules announced by the CFPB are likely to sharply curtail the use of payday loans, which critics say prey on the vulnerable through their huge fees. Currently, a cash-strapped customer might borrow $400 from a payday lender. The loan would be due two weeks later — plus $60 in interest and fees. That is the equivalent of an annual interest rate of more than 300 percent, far higher than what banks and credit cards charge for loans.
The House Committee in Natural Resources will start analyzing actions to be taken regarding the recovery of Puerto Rico, which will include reviewing the implementation of PROMESA law, ElNuevodia.com reported yesterday. "It's all going to be on the table," said yesterday Rep. Rob Bishop (R-Utah), chairman of the Natural Resources Committee, who led a roundtable discussion with committee members and other congressmen on the possibility of enacting legislation. Bishop, however, seemed inclined to maintain "the structure we already have." During the closed-door session, Resident Commissioner Jenniffer González and delegate Stacey Plaskett submitted reports on the catastrophes caused by Hurricanes Irma and Maria in Puerto Rico and the Virgin Islands, respectively. Shortly after, the White House Office of Management and Budget sent Congress a resolution that would allocate $ 16 billion in emergency funds to pay debt claims under the flood insurance program and another $ 12.77 billion to finance the fund to address disasters of the Federal Emergency Management Agency (FEMA). The Resident Commissioner said that the possibility of promoting that the federal government authorizes an emergency short-term loan to prevent the government of Puerto Rico from becoming insolvent this month is under discussion. The other option is to consider if it is possible to be authorized by executive order. In a press call, prior to the roundtable, Bishop said that the House Committee on Natural Resources will be in charge of possible legislation for "the overall strategy of the reconstruction process" of Puerto Rico and the Virgin Islands.
Senators questioning Equifax Inc.’s former chief yesterday attacked the business model of the credit-reporting industry, asking why consumers shouldn’t have power over the data that these companies collect on them, the Wall Street Journal reported today. The hearing before the Senate Banking Committee was as much about the control consumers have over their personal data as it was about the Equifax hack, which has affected potentially 145.5 million Americans. Senators questioning former Equifax Chief Executive Richard Smith, who is appearing before a series of congressional panels this week, asked whether a large overhaul is needed for both private sector and government activities. “There is massive data collection being undertaken in this country,” said Banking Committee Chairman Sen. Michael Crapo (R., Idaho) during Wednesday’s hearing before his panel. Congress, he said, needs to address broader issues about “the collection and use and protection of personally identifiable information that is being collected by the government, by the private sector and others.” In terms of the big credit-reporting companies, which along with Equifax include Experian PLC and TransUnion, senators repeatedly raised a key point: Consumers don’t choose to share their data with these firms nor do they receive compensation for it, even though companies like Equifax profit by gathering it and selling it to lenders and other companies.
A pair of top U.S. regulators called for increased attention to cyber risks to the financial system Tuesday in the wake of the hack of the Securities and Exchange Commission’s corporate filing system, the Wall Street Journal reported today. Federal Reserve Governor Jerome Powell and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo both cited cybersecurity as a fundamental risk point for the financial sector during a discussion at George Washington University Law School. In a broad conversation on financial regulation, they both also expressed confidence that they would make progress modifying the Volcker rule trading ban and other financial rules. Giancarlo said that the SEC hack raises questions about how much proprietary data should be held by market regulators. Since the 2016 hack was disclosed in September, companies have raised concerns about giving over closely held data such as trading source code to government regulators. The concerns threaten to trip up implementation of the SEC’s consolidated audit trail rule, which would keep track of every trade and order in U.S. stock and option markets, as well as efforts by the CFTC to expand regulators’ access to the computer code that drives automated trading strategies and bring more high-frequency traders under their oversight.