Friday, 16 Nov 2018
Business

The Finance 202: Voters Send Contradictory Messages on Wall Street Regulation

The ticket

At the present time, the dust is falling, it is clear: the message sent by voters in Washington about the Wall Street regulations is anything but clear.

The results do not indicate any clear popular preference for the financial regulation branch. And it is a rare agreement between banking lobbyists and supporters of stricter industry rules.

Consider the fate of the Senate's eight most vulnerable Senate Senators who, at the beginning of this year, helped push the first major Dodd-Frank rule back since the financial crisis. Four of them won on Tuesday; the other four failed.

Or zoom in on Ohio. Two Democrats at the head of the state, each cultivating in good faith an anti-Wall Street will have surprisingly ended. Senator Sherrod Brown, a populist critic of the sector and the Democratic leader of the Senate Banking Committee, was re-elected by more than a quarter of a million votes. Richard Cordray, a former Attorney General who recently served as Director of the Office of Consumer Financial Protection, lost more than 180,000 votes.

Or take a closer look at the candidates supported by the industry. For the first time in its history, the American Bankers Association has launched ads for a dozen of its favorite lawmakers during this cycle and at least seven have won (two were lost and the others remain too close to be followed) . But this success rate has been reversed for the sector in general, which is about to aggressively defeat up to seven of the 11 supported candidates, as Pete Schroeder of Reuters points out (although the Arizona representative, Kyrsten Sinema, took a long time in his race):

The contradictory verdict is indicative of an election contested over other hot topics, ranging from health care to immigration, to the conduct of President Trump.

Ian McKendry, an ABA spokesperson, said the group was "delighted to see that so many of the candidates and issues that we have supported through our Fund for l & # 39; Electoral education prevailed on Tuesday. These Republicans and Democrats have all shown a willingness to work in every direction and have supported pro-growth policies, including the bipartite banking law passed earlier this year. "Yet, in an online analysis, the bank lobby lamented that" much like the past few cycles, hyper-partisanship has continued to move political parties away from middle power. "

Others say the results give a confused picture of what voters expect from voters. "I do not have a clearer vision of the direction of the country after Tuesday," Isaac Boltansky of Compass Point writes in an email. "The divisions in our country – blue vs red, suburban vs urban – are sharper than ever, but it remains to be seen how this relates to politics. What is the lowest common denominator for policy making in a political climate defined by both ends of the ideological spectrum? "

It is even less clear that the newly empowered Democrats intend to tackle the problem of Wall Street reform. Four of the six Democratic candidates in the House that I outlined here in September for calling for tougher regulation of the industry ended up losing their offers. Meanwhile, securities and investment funders have favored Democrats over Republicans this cycle for the first time in a decade.

Representing Maxine Waters (D-Calif.), Who heads the House Financial Services Committee, said she plans to exercise scrutiny over some of the largest players in the sector. Industry sources also say they are waiting to know which first-year lawmakers are appointed to the committee to better identify the priorities of Democratic House leaders. In general, the committee has attracted more entrepreneurial beginners, who use this mission to raise funds from the industry.

Rion Dennis, policy and advocacy strategist for Americans for Financial Reform, says the party's compass is determined to take a tough stance on the sector. "If you put yourself on the wrong side of Wall Street reform, you get all kinds of feedback from the Democratic Party, what you've seen with members who have supported Dodd-Frank's partial dismantling in Congress. ", did he declare. E-mail. "In addition, the general suspicion of big money in politics, which this new class is vengeance, does not exactly cry for the need to do more favors on Wall Street."

A survey commissioned by Better Markets, which also calls for stricter regulation, found that 56% of voters think deregulation threatens their jobs, savings and retirement – and about seven in ten say the weakening of Regulating the bailout banks is an example of corruption in Washington. Better Markets chairman Dennis Kelleher said the results of the poll revealed more information about the attitude of the electorate than about the mid-term results. And the question should resume even more when the Democratic presidential candidates launch their applications.

"These issues will be the focus of concern," Kelleher said in the 2020 Presidential Contest. "There will be a lot of noise, but we will have much more clarity than in this very fragmented election, where we had different candidates coming forward on different issues and that Trump led the country on immigration."

MARKET MOVEMENTS

– The Fed leaves rates unchanged. Nick Timiraos of the Wall Street Journal: The US Federal Reserve maintained its short-term interest rates on Thursday and offered a generally optimistic assessment of the economy's performance, suggesting a further rate hike at its next meeting. The Fed has repeatedly stressed the strength of the economy in a statement issued after its two-day political meeting. He did not propose anything to dispel the market's expectation of achieving his fourth interest rate hike of the year in December.

"The data since the last meeting of officials in September" indicate that the labor market has continued to strengthen and that economic activity has increased at a steady pace, "said Thursday the committee fixing rates of the Fed in a statement.The only major change in the statement is beckoning at the head of the recent decline in business investment, which, according to officials, is "moderate compared to the rapid pace recorded earlier this year".

Wall Street is worried about another Fed gesture. Liz McCormick, Vivien Lou Chen and Alex Harris, of Bloomberg News: "Fixed income traders are telling the Federal Reserve that it could end up committing a serious policy mistake. And they are not just talking about rising interest rates. A more pressing concern concerns investments in Fed bonds in times of crisis. Since last October, the central bank has regularly reduced its holdings of Treasury bonds and mortgage-backed bonds. However, as the slowdown has accelerated, unexpected repercussions are emerging in day-to-day loan markets, where demand for short-term liquidity has increased. . .

"The most outspoken critics say that if the Fed does not slow down or stop easing, it could end up draining too much money out of the banking system, causing an increase in volatility in the financial and financial markets. compromising its ability to control its rate-setting policy All of this could eventually infiltrate the broader credit market and drive up borrowing costs, even slightly, in an economy that some believe will begin to slow down next year.

Investors wonder if the profits reach their maximum. Associated Press's Stan Choe: "This is the challenge when something as beautiful as it becomes: what happens next? Businesses in all sectors are reporting another quarter of earnings growth, driven by lower taxes and economic growth. . . However, stock prices do not get the same momentum as when companies publish earnings above expectations. On the other hand, investors punished actions much more severely when companies did not meet profit expectations. . . The reaction may be related to the growing concern of investors who fear that this is the peak of corporate earnings growth. Analysts estimate that growth could slow at a rate of about 15% in the last three months of the year. In teleconferences with analysts following their earnings reports, CEOs cited a number of issues, including increased spending, [Trump’s] tariffs and slowing economic growth in countries around the world. "

Technological actions may struggle to recover. Bloomberg's Michael Regan: "For years, investors have flocked to the technology pool, steadily increasing water levels on Facebook, Apple, Amazon.com, Netflix and Google … Technology companies dominate listings major holdings among hedge funds and pension funds. identical funds … It does not seem as smart today as it was a month ago, before the Nasdaq-100 index lost nearly $ 1 trillion in value. Nobody knows yet whether the market's outburst was an overreaction. But unlike previous shareholders' woes, this one reflects problems that can not be solved by a quarter or two solids.

"One of them is the rise in interest rates, which increases the costs of corporate borrowing and enhances the attractiveness of bonds relative to equities. Another cause is the trade war provoked by Trump, who threatens to reshape global supply chains and force investors to rethink the ambitions of Internet companies abroad. The low unemployment rate has increased the pressure on the labor market, as evidenced by Amazon.com Inc. which has increased its minimum wage. (The founder and CEO of Amazon.com, Jeffrey P. Bezos, is owner of The Washington Post.)

TRUMP TRACKER

AERONAUTICAL TRADE:

US and China in security negotiations. Matthew Pennington of the AP said, "Even as the US and China compete for trade, their top diplomats and defense leaders will gather in Washington on Friday to calm tensions. on other issues that have cooled relations between the two world powers US Secretary of State Mike Pompeo and US Secretary of Defense Jim Mattis, will meet with their counterparts Yang Jiechi and Wei Fenghe in the Department of Defense. The talks were scheduled to be held in Beijing last month but were postponed following Washington's announcement of new arms sales to Taiwan.American and Chinese ships nearly collided with each other. in the South China Sea … It's a bit like a placeholder before the scheduled meeting at the end of the month between President Donald Trump and Chinese President Xi Jinping at the Group of 20 summit in Argen tine. "

Signature of NAFTA 2.0 at the G20. Reuters: "The ministers of the United States, Mexico and Canada will sign a new trade agreement on November 30, announced on Thursday the Minister of Economy of Mexico.The agreement will be signed in Buenos Aires, in Argentina, told reporters the Mexican Minister of Economy Ildefonso Guajardo at an event in Mexico City, Argentina hosts the G20 International Forum for Governments and Governors of Central Banks. "

But a Dem House will complicate the passage. William Mauldin and Vivian Salama, Wall Street Journal: "Transposition to Congress of the transformation of the North American Free Trade Agreement will be much more difficult with a Congress divided in two. to the political opponents of Mr. Trump the power to demand concessions An exchange with the ratification of the new convention (…) "It will depend on whether the unions will want to advance," said a high Head of the White House AFL-CIO, a large federation of unions, said in official comments "serious doubts about the fact that the improved rules will make a significant difference to North American working families without additional provisions. "Several environmental groups rejected the new agreement."

Volvo cancels its production, quotes tariffs. Bloomberg: "Volvo Cars is eliminating the production plans developed for much of its range in order to circumvent the US and China tariffs on auto imports." first Swedish factory opens, Swedish brand has canceled plan The automaker, which belongs to China's Zhejiang Geely Holding Group Co., is also trapped by exports of its XC60 sport utility vehicles from China and the drastic reduction of its shipments from China.The trade war between the two largest countries in the world, both of which increased their tariffs, has resulted in lost revenues for their counterparts, including BMW AG, which said this week that higher fees were partly to blame for its disappointing earnings. "

MELTDOWN WATCH:

POCKET CHANGE

– Blankfein attended the 1MDB meeting. Sridhar Natarajan and Elffie Chew, Bloomberg News: "Several years before Goldman Sachs Group organized bond deals at the heart of corruption, the company's chief executive, Lloyd Blankfein, had personally helped to build relationships with Malaysia and its new sovereign wealth fund, according to people with knowledge of the issue. Blankfein was the unidentified top executive of Goldman Sachs, quoted in US court documents, who had attended a meeting in 2009 with the former Malaysian prime minister, the people said.

"The meeting was organized with the help of men who are now linked to the looting of the 1MDB fund, according to unsealed US court documents last week." Meeting at the Four Seasons Hotel New York was organized in the presence of two Malaysian businessman, Jho Low, and Goldman 's former partner, Tim Leissner, said that a person with direct knowledge of the. case had asked not to be identified because it was not to be identified, this high level rally laid the foundation for a relationship that would prove profitable for the investment bank. "

Musk turns to the BofA for SpaceX loan. Bloomberg: "Elon Musk often makes outrageous demands from his staff in his attempt to re-transport the world and colonize Mars, but the conditions he wanted in the form of a SpaceX loan were too harsh even for its closest ally on Wall Street.Not later than last week Goldman Sachs Group Inc. was looking for investors for interest on $ 500 million of debt related to Space Exploration Technologies Corp. At the time the parties involved presented Wednesday at the Four Seasons downtown Manhattan hotel to attend a breakfast, Bank of America Corp. The transfer surprised bankers and investors, as Goldman is widely regarded as the Wall Street firm having the closest relationship with Musk.

MJ sues UBS. Brian Blackstone, WSJ: "The Justice Ministry on Thursday launched a civil action against the UBS group for" catastrophic "losses suffered by investors with mortgage-backed securities sold in the run-up to the 2006 financial crisis and 2007. The lawsuit, which UBS promised to fight, to leave a legal cloud suspended for several months on the largest bank in Switzerland and to recall that, more than ten years after the bankruptcy of Lehman Brothers, some of problems at the heart of the financial crisis have in the context of the complaint, the United States alleges that UBS has misled investors on the quality of billions of dollars of subprime loans and other mortgages used to finance 40 transactions UBS has securitized more than $ 41 billion in mortgages, according to the complaint.

– Chevron is reconsidering its presence in Venezuela. Kejal Vyas and Bradley Olson, WSJ: "For nearly a century, Chevron Corp. overcame dictatorships, coups and nationalization campaigns to continue pumping oil into Venezuela. Now the executives of the last big American oil company in the country are wondering if it might be time to step down. . . Chevron's dilemma is both moral and commercial. He hopes to hold on to President Nicolás Maduro, as he did with his late mentor Hugo Chávez and other leaders. The California giant has long had close relations with the socialist regime that controls the largest oil reserves in the world and has made a lot of money in Venezuela – about $ 2.8 billion between 2004 and 2014, according to estimates by GlobalData analysis company in terms of cash flow.

"The company is aware that a withdrawal could lead to a collapse of public finances because much of its rare and rare currency comes from joint operations with Chevron.But staying in the country while its crises Economic and humanitarian worsening, the company is likely to be damaged, seen as a support for an authoritarian regime sanctioned by the US government.It does not earn much money here. "

– McDonald's unveils its Russian credentials. Thomas Grove of the WSJ says, "McDonald's Corp. has become one of the leading ambassadors of American culture after opening its first restaurant here at the twilight of the Soviet Union. Now, as Russia-U. Tensions increase and pro-Kremlin politicians repeatedly call for closure of the US channel. Management adopts a new approach: Go Russian. Earlier this year, the company took the share of Russian suppliers that its restaurants use to 98% and she embarked on a marketing campaign to make everyone understand that in Russia, McDonald's is not obliged to to be an American company. … McDonald's has been able to find local suppliers around the world wherever its restaurants are, shorten supply chains and protect against currency volatility. But as tensions between Washington and Moscow intensify, society discovers that this strategy can also ease political pressures. … The local focus seems to be paying off. The number of McDonald's restaurants in Russia increased by 6% quarter-on-quarter compared to the previous quarter, well above the global average of 1.5%. "

Wells Fargo ends his investigation of a prejudice against women

According to a senior executive, Wells Fargo concluded that there is no discrimination on the grounds of sex in his wealth management division. Another officer who was investigated and allegedly referred to women as "girls" is retiring.

WSJ

Money on the hill

The Dems House seeks to cancel the tax cuts. Richard Rubin, WSJ: "Democrats will seek to reverse tax cuts for high-income households when they win a majority in the House and will oppose Republicans to freeze tax debates the next two years, especially with regard to a bipartisan agreement intended for Senate Democrats proposed last year a spending program to improve roads, bridges, tunnels and other public works from the country, but they disagree on the funding of the project.Republicans will surely reject this idea … The Democrats sitting on the Committee of Ways and Means of Tax Writing met before the elections to start planning.

THE REGULATORS

The SEC will examine the rules of corporate democracy. Reuters: "The US securities regulator is due to review this month the rules on corporate democracy, in order to confront investors who are concerned that the agency will oppose companies to reduce voting rights on issues as worrisome as climate change and gun violence, 15 the Securities and Exchange Commission will hold a roundtable on the "proxy process" which major pension funds and other shareholders can force companies to vote on a range of environmental, social and governance issues, have complained that voting rules have allowed special interest and advisory groups to in voting that recommend investors vote to hijack corporate boardrooms with costly requirements.

CURRENT HAND

Today & # 39; hui

  • Randal Quarles, vice president of the Federal Reserve for Supervision, delivers a speech on financial regulation at the Brookings Institution in Washington.

Be there soon

Crazypeople

– From Tom Toles from the post: "Trump's idea of ​​victory means we are about to lose everything."

BULL SESSION

President Trump's post-election press conference on the facts:

Roger Stone has a rule: "Deny everything". And he does:

69-year-old Dutch asks the court to change his age to 49:

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