CFPB challenger quits; NYSE tech chief joins digital exchange
Receiving Wide Coverage ...
Case closed: Leandra English, who contested President Trump’s naming of Mick Mulvaney as acting director of the Consumer Financial Protection Bureau, announced her resignation from the agency. She said she was dropping her lawsuit now that the president has formally nominated Kathy Kraninger to be the agency’s permanent director. Wall Street Journal here and here, New York Times, Washington Post, American Banker
Earnings season preview: Big U.S. banks will be relying heavily on lower tax rates to boost second quarter profitability, “as world trade jitters threaten demand for corporate loans and a slowdown in the domestic mortgage market puts revenues under further pressure.” Four of the biggest banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — are expected to report aggregate net income that is about 16% higher than the same period a year ago, but pretax income is likely to be down about 2%. Earnings season begins this Friday.
The Wall Street Journal has a deep dive into what drives bank profits, and therefore stock prices. They “aren’t solely determined by long-term interest rates. Loan volume also plays a role, as do the interest rates paid to depositors.”
Fortunately, “business borrowing is picking up, a welcome relief for banks and a sign of strength for the U.S. economy.” According to the Federal Reserve, business loan growth rose to 5.5% at the end of June compared to less than 1% at the end of last year. “The upturn marks the reversal of a prolonged slump in business-loan growth that began in earnest about two years ago.”
Wall Street Journal
Going digital: Robert Cornish, the New York Stock Exchange’s chief technology officer, is joining Gemini, the digital-currency exchange founded by Cameron and Tyler Winklevoss, in a similar role. His hiring is “the latest sign that cryptocurrency trading platforms are seeking to move beyond their rebellious roots and look more like traditional financial markets.”
Going mobile: Somaliland is moving closer to “a virtual milestone than most other countries in the world: a cashless economy,” the result of “hyperinflation and economic isolation.” “The extreme economic and financial conditions have allowed Zaad, a service from the main local telecom, Telesom, to catalyze commerce in one of the most isolated parts of the world.” Indeed, the entire continent of Africa, where one in 10 people use mobile financial services, is “leapfrogging traditional brick-and-mortar banks and going straight to heavily using phones as wallets.”
Car buff: Fred Goodwin, the former CEO of Royal Bank of Scotland, once the world’s biggest bank by assets before it was rescued by the British government during the financial crisis, lost his job and his knighthood as a result of the debacle. The “de facto face of British banking excess” now reportedly “spends his days tending to his collection of vintage cars.”
Record year: Mergers and acquisitions in the global payments industry reached “record heights” in the first half of this year, with 102 transactions worth $46 billion, already the biggest total for a single full year. By comparison, $32.9 billion of deals came to market in all of 2017. PayPal, which made four acquisitions in May and June, was one of the busiest buyers.
Widening gap: “The holy grail of homeownership” still eludes blacks, 43% of whom owned their own homes last year, compared to 72% of whites, according to Harvard University’s Joint Center for Housing Studies. “A recent increase in the national homeownership rate — the first in more than a decade — has done little to close the stark gap between black and white households. The gap persists even as African Americans have experienced other major financial gains since the downturn. But when it comes to homeownership, one of the pillars of building wealth, black households are worse off than they were 30 years ago.”
Guilty: A federal jury in Brooklyn convicted a former Morgan Stanley vice president and another man of illegally trading on corporate press releases that had been stolen by hackers before they were released to the public. The two were among 10 people, including seven traders and three hackers, who were charged in the scheme, in which more than 150,000 press releases were stolen between 2010 and 2015 and netted more than $100 million in illegal trading profits.
“We need to be mindful of the fact that the financial services sector could, if we do not go about [it] in the right way, have its own ‘Cambridge Analytica moment.’ We need to make sure we are producing sustainable innovation rather than technology for its own sake. The application of algorithms to customer data can, if not properly governed and supervised, run away and start producing outcomes that society would consider completely unfair.” — Charles Randell, the new head of the U.K.’s Financial Conduct Authority.