Editor's note: Morning Scan will not publish on Monday in observance of Martin Luther King Jr. Day.
Breaking News This Morning...
Earnings
"JPMorgan beats profit estimates on better-than-expected credit, record trading revenue" (CNBC)
"PNC 4Q earnings rise as some credit-loss provisions recaptured" (Morningstar)
Receiving Wide Coverage ...
No time soon
With the U.S. “a long way from a strong job market,” Federal Reserve chair Jerome H. Powell “made it clear on Thursday that the central bank would be cautious” in tightening monetary policy and raising interest rates, “an indication that the central bank’s easy-money policies will remain in place for the foreseeable future,” the Wall Street Journal said.
“Now is not the time to be talking about exit” from easy money policies, Mr. Powell said in a webcast with Princeton University. “The economy is far from our goals.”
“When the time comes to raise interest rates, we will certainly do that,” he said, according to the New York Times. “And that time, by the way, is no time soon.”
Wall Street Journal
11th hour ruling
On “his last day before stepping down,” acting Comptroller of the Currency Brian Brooks issued a rule Thursday in which “banks would be prohibited from refusing to lend or provide other services to entire categories of lawful businesses. The move by the Trump administration regulator was in response to complaints from the oil-and-gas industry after top banks have said they would stop financing new Arctic-drilling projects, citing their dismal returns and pressure from environmentalists and others. The rule covers a range of businesses the regulator said have been denied service for apparently partisan reasons, such as family planning centers, firearms manufacturers and privately managed prisons.”
The rule “may be challenged by banks, which say it micromanages credit decisions. The Biden administration may also seek to overturn the rule using a legislative tool known as the Congressional Review Act.”
“The rule, set to go into effect in April 2021, was finalized just 10 days after its public comment period closed on Jan. 4 and only 55 days since first being proposed — a breakneck regulatory pace by any measure,” American Banker said.
Your turn
The Treasury Department has effectively ended the Trump administration’s push to return Fannie Mae and Freddie Mac to private hands. “Under a more modest agreement announced Thursday by the Treasury Department and the Federal Housing Finance Agency, the mortgage companies will be allowed to retain more of their earnings, boosting their ability to absorb potential losses.” The two firms will now be allowed to retain roughly $280 billion, up from $45 billion.
The announcement “leaves it to the incoming Biden administration to decide the future of the firms. Advisers close to President-elect Biden have said he would be in no hurry to privatize the companies.”
Through the back door
Stripe may have stopped processing payments for President Trump’s fundraising organizations directly, but some of its customers still are. “Visitors to the Trump campaign website who click on a button to contribute are directed to a webpage hosted by WinRed, the small-dollar fundraising platform for Republican candidates and political-action committees. WinRed is a Stripe customer, and Stripe processes payments submitted over WinRed via that link.”
“A Stripe spokesman declined to comment. Representatives for Mr. Trump’s campaign didn’t respond to a request for comment.”
More power to you
“U.S. authorities have more power to obtain documents from foreign banks with U.S. correspondent accounts under recently passed defense-policy legislation. A provision of the National Defense Authorization Act, approved Jan. 1, allows the U.S. Treasury secretary or attorney general to subpoena records related to any account at a foreign bank with correspondent accounts in the U.S. The law applies to records held in the U.S. or abroad that are subject to federal criminal investigations or civil forfeiture actions.”
“Previously, the U.S. government’s authority was limited to records related to the correspondent accounts, including those related to the deposit of funds into a foreign bank. The provision, while a major step toward revamping safeguards in the correspondent banking system, may increase risks and challenges for foreign financial institutions with accounts in the U.S., policy observers said.”
Financial Times
Insider alert
Commerzbank “suspended coverage of companies tracked by its former Wirecard analyst after it emerged on Thursday that she had briefed executives of the disgraced payments provider about criticism that a hedge fund had shared with her. The Commerzbank analyst, Heike Pauls, was one of the more bullish among those covering Wirecard, which collapsed last June. The move by Commerzbank comes as Germany’s parliamentary inquiry into Wirecard’s failure focuses on the payment group’s relationship with the country’s banks.”
“In December 2016, Ms. Pauls shared information gathered during a call with Greenvale Capital, a London-based hedge fund, with Wirecard’s then chief financial officer and its head of communications. In early 2019, Ms. Pauls published a research note in which she described a Financial Times report, into allegations over accounting manipulation at the company’s Asian business, as ‘fake news.’ Commerzbank later retracted that report and apologized for the wording.”
Deutsche Bank CEO Christian Sewing said his bank “had exposure of €80 million to Wirecard as part of bigger syndicated loan to the group, but because of a hedging strategy kept its loss to €18 million when the payments company filed for insolvency last June. By contrast, Commerzbank, which had a €200 million exposure in the same syndicated loan, suffered a loss of €175 million.
Washington Post
Questionable
Debt collectors and high-interest lenders received 1,800 loans totaling more than $580 million through the Paycheck Protection Program last year. “More than 170 of those recipients have been the subject of a multitude of complaints — each racking up at least 100 with the Consumer Financial Protection Bureau, according to The Post’s analysis. Twenty-five have been subject to legal enforcement or consumer alerts, many by the CFPB and the Federal Trade Commission.”
Quotable
“The rule lacks both logic and legal basis, it ignores basic facts about how banking works, and it will undermine the safety and soundness of the banks to which it applies.” — Greg Baer, CEO of the Bank Policy Institute, which opposes a rule by the OCC that would prohibit banks from refusing to lend to unpopular lawful businesses.
