Fed chief vows regulation rollback; CFPB to consider compliance costs

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Powell on the Hill: Federal Reserve Board Chair Jerome Powell said he supports a Senate bill that would raise the threshold for designating a bank as a “systemically important financial institution” to $250 billion in assets from the current $50 billion. “Our view has been that that combination of raising the threshold and giving us the ability to go below it in cases where needed gives us the tools that we need,” Powell told the House Financial Services Committee in his first day of Congressional testimony as Fed chief.

He also confirmed the Fed plans to ease capital requirements for large banks. “We need a leverage ratio as a high and hard backstop to risk-based capital,” he said. But “I think we got the calibration a little bit wrong so our plan is to roll it back.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker here and here

One of the banks happy to hear that last part is JPMorgan Chase, whose chief financial officer, Marianne Lake, said the strict capital rules imposed on the biggest global banks in the wake of the financial crisis could become a “barrier to growth.”

Speaking at the bank’s investor day Tuesday, Lake raised the bank’s outlook for 2018, noting that the recent tax reform law would have a positive effect on JPM’s performance over the next few years. The bank said it expected pretax income to increase to a range of $44 billion to $47 billion this year from $40 billion in 2017. Wall Street Journal, Financial Times, American Banker

Yet it will be tough for the bank’s stock to continue to beat the market and its peer group without “some new tricks to keep wowing” investors, the Wall Street Journal’s Heard on the Street column says. The bank’s stock is up 31% over the past year, it notes, compared to the 20% rise in the KBW Nasdaq Bank Index.

Wall Street Journal

Number cruncher: The Consumer Financial Protection Bureau will take into greater consideration lenders’ cost of complying with the agency’s rules, acting director Mick Mulvaney said in his first public speech since being appointed to the post. “I am not sure in the past if they have done a good enough job at the CFPB to try to make sure that all of those costs were considered in the analysis,” Mulvaney told the Credit Union National Association. “As I told the folks at work, there is going to be a lot more math in the future at the CFPB.”

From Wall Street to Main Street: Goldman Sachs’ new consumer finance operation, dubbed Marcus, is called “one of the world’s most ambitious consumer-finance startups," in a profile. "Goldman is pushing into businesses it once dismissed as pedestrian and gimmicky, assembling a suite of banking products for the middle class it hopes will power growth.”

Based fittingly at 111 Main St in Salt Lake City, the consumer bank is “a high-stakes bet” for the bank’s CEO, Lloyd Blankfein. “Today, as trading profits dwindle under new regulations and market shifts, Mr. Blankfein’s legacy hinges on the firm’s ability to make money in more mundane ways.”

Financial Times

Different directions: Rising bad-debt levels on U.S. credit cards and mortgages are adding to “concerns that in spite of a strengthening economy, parts of middle America are missing out and are relying on credit cards to get by,” the paper reports. By contrast, commercial and industrial loan performance is getting better, handing “ammunition to critics of the U.S. tax cuts who argue the spoils are going to companies rather than families in greater need of support.”

Optimistic: Square announced an upbeat outlook for 2018, saying it is entering the year with “strong momentum” and expects a narrower loss this year compared to 2017.

Washington Post

Borrower beware:Mortgage trigger leads” can be deadly for unsuspecting borrowers, with fallout including the possibility of identity theft and other problems, according to the paper. When consumers apply for a mortgage, the credit bureaus "convert the fact that you are shopping for a mortgage into a commercial product — a trigger lead — for immediate sale to competing lenders," who then try to win your business before you lock in a mortgage. The National Association of Mortgage Brokers is pushing a campaign on Capitol Hill to have the leads banned.


“We are there to help protect people who borrow money. But we are also mindful and respectful of the people who make those loans because it’s an important thing that needs to happen.” — Acting CFPB Director Mick Mulvaney.

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SIFIs Jerome Powell Marianne Lake CFPB JPMorgan Chase