CRA overhaul may get messy; Student loans vulnerable in bankruptcy

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At odds

Federal Reserve Gov. Lael Brainard on Wednesday “unveiled an alternative approach” to overhaul the Community Reinvestment Act, one that is at odds with changes proposed last month by the other two federal banking regulators: the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. The Fed’s “release of its own blueprint could stymie the other regulators’ approach or lead to competing rules for the industry,” the Wall Street Journal says.

“The regulatory split could lead to an unusual situation in which some U.S. banks must follow one set of rules to comply with the law while others have to abide by another. The FDIC also wants to allow most of the community banks it regulates to follow the old set of rules, raising the prospect of three different regulatory regimes for a single law.”

The Fed’s plan “would explicitly prevent big banks from satisfying requirements simply by funding a few big-dollar projects, a point of concern that community groups have raised about the other regulators’ proposal,” the New York Times says.

Brainard, who unveiled the Fed’s plan in a speech before the Urban Institute, said the CRA “should be modernized based on a careful study of data,” the Washington Post says. “If the past is any guide, major updates to the CRA regulations happen once every few decades. So it is much more important to get reform right than to do it quickly."

Brainard “stopped short of criticizing” the FDIC and OCC “by name,” American Banker notes.

Wall Street Journal

Student loan dismissed

A federal bankruptcy court judge in Poughkeepsie, N.Y., discharged a U.S. Navy veteran’s $220,000 in student loan debt, “the latest court ruling to lower the barriers to discharging educational debt.” In her ruling, Judge Cecelia G. Morris said most bankruptcy professionals and laypeople “believe it impossible to discharge student loans.” She said she would not perpetuate the “myths” that student loans are not dischargeable in bankruptcy.

“The judge’s ruling comes as some judges, experts and politicians re-evaluate the legal hurdles preventing borrowers in difficult financial straits from using bankruptcy to eliminate student loan debt,” the paper says. “With few borrowers qualifying for relief, student loan cancellations remain rare, but some bankruptcy judges are becoming more sympathetic.”

Financial Times

Prescient deal

State Street’s solution to the shake-out in the asset management business, which is putting pressure on custodial fees, is to “sell a wider range of services, becoming a full-service administrative outsourcer and helping money managers take costs out of their businesses,” CEO Ron O’Hanley says. “The centerpiece” of the bank’s strategy was its July 2018 acquisition of Charles River Development, which provides order management and analytics tools for traders. “Investors panned the deal when it was first announced. That the shares have rallied since — State Street is the best-performing large bank stock over the past six months — contributes to Mr. O’Hanley’s confidence in the deal.”

Futures bid

JPMorgan Chase has applied to the China Securities Regulatory Commission to take majority control of its futures joint venture in China, in which it currently holds a 49% stake. “The futures market is one area that is expected to open up to full foreign ownership in 2020, along with securities brokers, asset managers and mutual funds,” the paper says. Still, “foreign control of a Chinese futures business is extremely rare. UBS is the only global investment bank to do so, gaining full ownership of its Shanghai-based futures unit in 2016. It is unclear if JPMorgan will receive approval or how long that might take.”

Elsewhere

Rising cost of rewards

JPMorgan Chase customers will receive extended rewards for using their credit cards to pay for rides on Lyft, Reuters reports. “Under the new offer, launching on January 13, members of Chase’s Sapphire Reserve credit card will earn 10 rewards points on every dollar they spend on Lyft rides. That’s up from the current three reward points those card holders earn on travel expenses, which include trips with Lyft and Uber.”

But there’s a cost. The bank also announced that it is raising the annual fee on Sapphire Reserve by as much as $100 a year, to $550 from $450. “The increase in price comes as the bank also adds other new perks to the popular travel rewards card, like free monthly memberships with popular companies like the food delivery service DoorDash.”

“The increase follows a move by rival American Express in 2017, when the company raised the fee on its Platinum card to $550 after adding benefits like a $200 annual Uber credit," American Banker reports. "The two firms have been battling for premium millennial customers since 2016, when JPMorgan debuted the Sapphire Reserve.”

Quotable

“The tide is turning against the idea that student loans should not be dischargeable in bankruptcy. This creation of the banking industry has done harm to many hard-working Americans that are simply down on their luck and looking for a second chance.” — Kevin J. Rosenberg, whose $220,000 in student debt was discharged by a federal bankruptcy court judge in Poughkeepsie, N.Y.

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CRA Student loans Custody banks Loyalty and rewards Credit cards Lael Brainard JPMorgan Chase State Street
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