Dismantling Dodd-Frank; Banks hurt, helped by automation

Andrew Harrer/Bloomberg

Receiving Wide Coverage ...

It's on: Friday not only marks the first day of the Donald Trump administration. It's also the day the Dodd-Frank financial reform law's "most passionate defenders will leave the executive branch and some of its loudest critics will grab the levers of power," the Journal notes. "The question is no longer how far the law's impact will ripple across the economy, but how much of it will be dismantled."

Jeff Sovern, a law professor at New York's St. John's University, says the president-elect "will soon face a stark choice: whether to protect consumers, the ordinary Americans he pledged to defend against a system he criticized as rigged — or to side with that system."

"Mr. Trump's rhetoric, including his willingness to stand up to corporate interests, such as the Chamber of Commerce and international banks, offers hope he will choose consumers," Sovern writes in the New York Times' Another View column. "But Mr. Trump has appointed and nominated opponents of regulation to his new administration, and one of the features of his campaign was to complain about regulation, particularly the Dodd-Frank rules imposed on banks after the financial crisis. It is Dodd-Frank that created the [Consumer Financial Protection] Bureau, and it has been a target of Republican lawmakers ever since."

Indeed, Republicans on the House Financial Services Committee released a report Wednesday claiming that CFPB director Richard Cordray may have violated federal law concerning 2015 rules on auto lenders. "Republican lawmakers, long critical of the bureau created by the Obama administration after the financial crisis, are seeking the removal of Mr. Cordray by President-elect Donald Trump soon after the inauguration."

On the hot seat: Treasury Secretary-designate Steven Mnuchin's confirmation hearing begins Thursday. The Wall Street Journal and Financial Times preview what to expect.

Comeback kids: The five largest Wall Street investment banks — Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America and Morgan Stanley — had a combined $18.1 billion in trading revenue in last year's fourth quarter, up 26% from the same quarter a year earlier and the highest in any fourth quarter since the financial crisis. "The performance marks what could be a turning point for banks after a fallow period that had some worried the trading business — the lifeblood of Wall Street and its billion-dollar bonus pools — was dying for good," the Journal noted. Wall Street Journal, Financial Times

Settled: JPMorgan Chase agreed to pay $55 million to the Justice Department to settle claims that it used independent mortgage brokers who discriminated against minority mortgage customers by charging them higher rates than white borrowers from 2006 to 2009. Wall Street Journal, New York Times, American Banker

Wall Street Journal

Heaven or Hell?: Up to $45 billion of bank profits could be wiped out over the next four years by automation, ranging from electronic trading to mobile banking, a report from McKinsey & Co. warns. "Fees charged for payments like checks and wires, wealth advisory and management, and consumer banking and lending could each drop by more than 10% in the U.S. in that time, and more than 20% in the U.K. and Japan," the Journal says, quoting McKinsey.

So what should banks do to fight back? Why, use more technology, of course. A separate study from Accenture PLC says banks could save $8 billion a year by using blockchain technology to improve their processes.

Credit Suisse settles: A day after Deutsche Bank agreed to a $7.2 billion deal to settle government allegations that it misled mortgage bond investors before the 2008 financial crisis, Credit Suisse resolved its own case for $5.3 billion. "Today's settlement underscores that the Department of Justice will hold accountable the institutions responsible for the financial crisis of 2008," Attorney General Loretta Lynch said. The Credit Suisse deal includes a $2.48 billion civil penalty and $2.8 billion to help struggling mortgage borrowers.

Ooh, that smell: Ever wonder how American dollars get that distinctive fragrance? Well, a German artist hired a perfume expert to try to come up with the formula. According to the Journal, "It includes whiffs of leather from time spent in wallets and handbags, a metallic tang that evokes cash registers, salty human sweat and even bacterial and bathroom smells." Mmmm, cash registers.

Financial Times

Sued: In what the FT is calling "one of the U.K.'s first U.S.-style class action cases," Mastercard may be facing £14 billion in claims from up to 46 million individuals who say they were overcharged by the credit card company over a 16-year period ending in 2008.

Quotable ...

"I felt a bump, like a jolt of electricity, because it smelled just like money. It was invigorating." — Mike Bouchet, the German artist who commissioned the search for the smell of U.S. currency>