Investing in housing Investors, be they “big private-equity firms or real-estate speculators,” accounted for more than 11% of all home purchases last year, “the highest on record and nearly twice the levels before the 2008 housing crash. The investor interest poses a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes and are forced to compete with deep-pocketed cash buyers,” the Wall Street Journal says.
“A confluence of factors — rising construction costs, restrictive zoning rules and shifting consumer preferences, among others — has already led to a scarcity of affordably priced housing in many big cities. Investors, fueled by Wall Street capital, are snapping up much of what remains,” the New York Times reports.
Lenders are taking the “fix-and-flip loans” and securitizing them. “Wall Street has taken an asset class that used to be something hokey and made it the real deal,” the paper quotes Martin Kay, the founder of a platform for real estate investors.
“If it weren’t bad enough out there for first-time home buyers, the additional competition from investors is increasingly pushing starter homes out of the reach of many households,” said Ralph McLaughlin, deputy chief economist at CoreLogic.
Wall Street Journal
Entrepreneurial thoughts PayPal’s chief operating officer Bill Ready plans to leave the company by the end of the year “to pursue entrepreneurial interests” outside the company. “A key deputy to CEO Dan Schulman, Mr. Ready was responsible for product strategy and helped oversee PayPal’s branching out beyond its best-known offering of a checkout button that enabled shoppers to pay for goods and services on retailers’ websites. Mr. Ready is the second member of Mr. Schulman’s inner circle to step down this year, following the April retirement of Chief Commercial Officer Gary Marino.”
"I feel that a year gives the board enough runway to find the next leader of PayPal for an orderly transition," says Dan Schulman, who will step down as PayPal chief at year-end.
Watch what you say UBS “is still feeling the pain in one of its most important markets” a week after one of its economists made a comment in a podcast about pig prices that some people in China found offensive. Although the bank and the economist have apologized, “at least one Chinese client dropped UBS from a bond deal, traders at some asset managers stopped dealing with the bank and some corporate executives have put off meetings with UBS’s investor clients. In recent days, UBS bankers and representatives have been trying to contain the fallout in phone calls and meetings with Chinese clients as well as financial regulators.”
Separately, a former banker in UBS’ Shanghai office was sentenced to nine years in prison for leaking information about the $6.3 billion takeover of a Hong Kong shipping company.
An ounce of prevention Federal Reserve Bank of Boston President Eric Rosengren said Japan needs to strengthen its regulatory and bank oversight system to help its banks deal with problems that have plagued the country for years. “A shrinking population, aging demographics, and very low interest rates provide very little room for Japanese banks to operate profitably,” he said in a speech. As a result, the banks have to take on more risk, which could cause additional problems during the next economic downturn.
Financial Times
Leveling the field The Bank of England “intends to throw open its vaults to tech companies for the first time, allowing all payment providers to store funds overnight in interest-bearing accounts at the central bank,” putting them “on a level playing field with commercial banks. The move will be seen as a threat to banks, which have exclusive access to BoE payments operations and can make money from acting as intermediaries to other payment providers.” BoE Gov. Mark Carney “insisted that only companies that met strict standards would gain access to the BoE’s banking services.”
A vote for Libra “We need a product that fully disrupts the woefully inefficient global payments system and starts to break the power of the big banks," editor Merryn Somerset Webb opines about Facebook's planned cryptocurrency. "If Libra launches (the regulatory challenges are not small) and works as a frictionless, almost free and very fast global monetary transmission mechanism, it could be that product. However if it is, it won’t be because it is mimicking 'real' cryptocurrencies. It will be because it isn’t."
New York Times
Coming out Goldman Sachs prides itself on "being ahead of the curve on lesbian, gay, bisexual and transgender issues." The paper profiles Maeve DuVally, an employee in the bank’s “buttoned-up” communications department, who decided "to come out as transgender."
Washington Post
Back to work Eric Blankenstein, the former Consumer Financial Protection Bureau enforcement official who left the agency last month “after he was forced to apologize for online posts he wrote years ago questioning whether the n-word was racist,” is joining the Department of Housing and Urban Development as a senior counsel. He’s taking a pay cut, however. “At the CFPB he earned $259,500 a year, making him among the highest paid employees in the government. At HUD he will earn $166,500.”
Elsewhere
Not in the clear Deutsche Bank expects the Federal Reserve “to continue to impose restrictions on its Wall Street investment bank even if it passes” this year’s stress test, Reuters reports. “Executives hope improvements the bank has made to its risk management and capital planning processes since failing last year’s test will enable it to achieve a conditional pass this year.” But even if that happens, “executives expect the Fed to continue to bar it from making payments to its German parent without the Fed’s approval. They also anticipate Deutsche will be told to continue improving the systems it uses to monitor its business and risks.”
Quotable
“They should have done it sooner, but what are you going to do. You can’t win ‘em all. Eventually he’ll do what’s right, perhaps. Let’s see what he does.” — President Trump, after the Federal Reserve, led by Jerome Powell, failed to lower interest rates at Wednesday’s meeting but indicated that it may do so later this year
The Jackson, Mississippi, company will use proceeds from the sale of its Fisher Brown Bottrell Insurance unit to restructure its investment portfolio, moving $1.6 billion of low-yield securities off the balance sheet.
The store-branded card issuer is raising annual percentage rates and adding fees for paper statements to compensate for lost revenue. The Consumer Financial Protection Bureau's new regulation is scheduled to take effect on May 14.
At the banks' annual meetings, shareholders at both companies struck down proposals that would have split the board chair and CEO roles. Two other proposals also failed to win shareholder support, one concerning energy financing and another on pay gap analysis.
Congressional Review Act resolutions are ramping up ahead of the 2024 election cycle. Experts say that, although none are likely to become law, the resolutions are still powerful messaging and political tools.
The ABA is testing an information-exchange network to allow banks to share their fraud data with each other. Companies including Baselayer are also building solutions.
Republicans on the House and Senate Small Business committees are accusing the SBA of being irresponsible in granting Funding Circle permission to participate in its flagship loan-guarantee program.
