Banks hope consumers spend stimulus; Trump’s Deutsche bankers to leave

Receiving Wide Coverage ...

Hasty retreat?

Rosemary Vrablic, “President Trump’s longtime banker at Deutsche Bank, who arranged for the German lender to make hundreds of millions of dollars of loans to his company, is stepping down from the bank,” the New York Times reported. She is retiring effective Dec. 31.

“The reasons for Ms. Vrablic’s abrupt resignation were not clear. Deutsche Bank in August opened an internal review into a 2013 real estate transaction between Ms. Vrablic and a company owned in part by Jared Kushner, the son-in-law of Mr. Trump and a client of Ms. Vrablic’s. Dominic Scalzi, a longtime colleague of Ms. Vrablic’s who played a role in that transaction, will also leave the bank.”

“The relationship between Mr. Trump and the German bank is the subject of congressional, civil and criminal investigations. Mr. Trump’s key contacts at his biggest financial backer are leaving at a perilous time for the departing president. He owes Deutsche Bank about $330 million, and the loans come due in 2023 and 2024. Mr. Trump provided a personal guarantee to get the loans, meaning that if he fails to pay them back, the bank can pursue his personal assets.” New York Times, Financial Times

Wall Street Journal

Spend that stimulus

Banks are hoping that consumers spend their new stimulus checks rather than “save and pay down debt” like they did with the previous ones.

“The first round of stimulus appears to have bolstered many American consumers’ balance sheets. Delinquencies remain quite low by historical standards. That may be good news for household balance sheets but will be little help to banks’ revenue growth. Meanwhile, loan growth is faltering, especially relative to a continuing surge in deposits.” But a survey by the Federal Reserve Bank of New York, “conducted over the summer, found that people expressed an even higher likelihood to save and pay down debt if there were more stimulus benefits.”

PPP 2.0

The $900 billion stimulus package includes $284 billion for a rebooted Paycheck Protection Program. “Much like the program’s first iteration, the aid will be in the form of forgivable loans to small firms, but there will be some key changes on issues such as eligibility for second-time applicants and types of forgivable expenses.” The Journal looks at the details.

The measure “also enhances key elements of the Small Business Administration’s traditional lending efforts. That could result in a major lift for lenders and borrowers when the time comes to invest in an economic recovery,” American Banker reports.

Washington Post

Not giving up

“It’s not surprising” that Facebook CEO Mark Zuckerberg is “gearing up for a second attempt to launch Libra next year,” a Bloomberg analysis says. “No one should underestimate Zuckerberg’s determination to launch this product.”

“There have been a few changes: Libra is now called Diem – as in Carpe — and its membership council is headed by Stuart Levey, whose stints at the U.S. Treasury and HSBC Holdings Plc make him a blend of Beltway and banking. The biggest new concession to regulators is that Facebook will no longer create a single global currency. Facebook is even proposing that central banks one day use the Diem blockchain to issue digital currencies, similar to China’s testing of a digital yuan.”

“This plea for legitimacy suggests Facebook is leaning more toward the kind of electronic cash offered by PayPal or Alibaba than the revolutionary crypto dreams of Bitcoiners. Lawmakers may wonder whether Facebook needs a banking license, something it really doesn’t want. Still, Facebook deserves a fair hearing, given Zuckerberg has changed Libra’s message. If it falls on deaf ears, maybe the problem is the messenger.”