EU fines Mastercard; Why climate change worries BofA

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Case closed
The European Union fined Mastercard €570.6 million ($648.2 million), claiming that the company artificially raised the interchange fees it charged to process card payments inside the bloc. Mastercard, which said last month that it expected a $650 million fine, is planning to take a charge against its fourth quarter earnings. The company got a 10% fine reduction for cooperating with the EU’s investigation and admitting it infringed EU competition rules.

“By preventing merchants from shopping around for better conditions offered by banks in other member states, Mastercard’s rules artificially raised the costs of card payments, harming consumers and retailers in the EU,” competition commissioner Margrethe Vestager said. Financial Times, New York Times

New horizons
Former Fannie Mae CEO Timothy Mayopoulos is joining mortgage software startup Blend Labs as president, “becoming one of the highest-profile executives to jump into the financial-technology sector.” Blend enables consumers to apply for a mortgage via mobile phone and automatically fills in the customer’s financial information through outside data sources. Clients include Wells Fargo and U.S. Bancorp, “making it one of the more prominent fintech startups seeking to work with banks rather than compete against them.”

Speaking of which, Bill Ready, PayPal's chief operating officer, said big banks and fintech firm shouldn’t be afraid of working together. “I think partnering with those banks is a huge opportunity to move much more quickly in a way that lifts the entire ecosystem versus saying it has to be a zero-sum game,” Ready said on CNBC at the World Economic Forum in Davos, Switzerland. “There's a much greater objective here than saying let's split the pie that exists today. There's a much broader opportunity in the future that we can work together to go create.”

Wall Street Journal

Now is not the time
Lower interest rates may not be enough to persuade consumers to buy a home and lift the market out of the doldrums. “More significantly for the housing market’s future are other factors: Persistent price increases have put homes out of reach for many people, while changes in the tax law have reduced the advantages of homeownership over renting. The share of households who believe it is a good time to buy a house has fallen to the lowest level since 2008, according to the University of Michigan’s survey of consumers.”

On Tuesday the National Association of Realtors said existing home sales dropped 6.4% in December from November and 10.3% compared to a year ago, falling to their lowest level in three years.

But help may be on the way for some prospective borrowers: the return of unconventional mortgages. “A flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback. These loans, aimed at buyers with unusual circumstances such as those who can’t provide the standard proofs of income, are growing rapidly even as rising interest rates and higher home prices crimp demand for mortgages.”


Climate change fears
President Trump is still casting doubt on the science behind climate change while his administration rolls back rules designed to stop it, but corporate America is worried about the impact it could have on their businesses. That includes Bank of America and Visa, according to CDP, a U.K. nonprofit that collects information on firms' environmental impact.

"Bank of America reported that 4% of its U.S. real estate-secured loans are in flood zones, almost all of them residential. 'Increased flood incidence and severity could lead to our clients defaulting on their mortgage payments if, for example, flood insurance premiums become unaffordable,' the company wrote. 'Clients may also find themselves in a negative equity situation due to housing values being impacted when insurance costs rise.'”

Visa, meanwhile, warned of the risk of pandemics and armed conflicts, which could cause fewer people to travel and reduce the number of cross-border transactions.

Financial Times

Time to go
Justin Gmelich, chief operating officer of Goldman Sachs’ fixed income, currencies and commodities (FICC) business and one of its most senior executives, is retiring, the bank said. The announcement comes “just days after it reported another bruising quarter in fixed income trading,” when revenue fell 18%. Goldman reportedly will not be naming a replacement.

Going robo
U.K. digital wealth manager Nutmeg said it has received £45 million in funding from investors including Goldman Sachs, “making the investment bank the latest major group to take a stake in the so-called robo-advice sector in the U.K.” Nutmeg is the country’s largest robo-advice company, according to the paper, with more than £1.5 billion in assets under management.

“Fintech seems to be the place where the action is.” — Former Fannie Mae chief Timothy Mayopoulos on joining mortgage software startup Blend Labs.

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