Fed tinkers with rates; automated home valuations prompt worries

Receiving Wide Coverage ...

Fed watch
The minutes of the Federal Reserve's November meeting, released Thursday, "revealed that officials are considering replacing the federal funds rate as their target interest rate." One rate it may consider reducing prior to its next meeting in December is the so-called interest on excess reserves rate, which it pays banks to deposit money at the central bank.

It also may be looking at using the overnight bank funding rate, "a composite of transactions in the fed funds market and the so-called eurodollar market," to conduct monetary policy.

President Trump's constant criticism of Jerome Powell "has prompted the Fed chairman to update playbook rules for dealing with a president annoyed by America's central bank. Rule 1: Speak not of Mr. Trump. Rule 2: When provoked, don't engage. Rule 3: Make allies outside the Oval Office. Rule 4: Talk about the economy, not politics." Wall Street Journal, Washington Post

"So can President Trump remove Powell as Fed chairman?" American Banker's John Heltman asks. "And if the Fed doesn't set the federal funds rate according to the president's preference, does that constitute 'cause' under the statute?"

KO'd
Boxer Floyd Mayweather Jr. and rapper DJ Khaled "became the first celebrities to face punishment over their roles in touting cryptocurrency deals that regulators say were fraudulent." Mayweather agreed to pay a $300,000 fine to the Securities and Exchange Commission and forfeit the $300,000 he made for his work, while DJ Khaled will pay a $100,000 penalty and give up the $50,000 he earned. Wall Street Journal, Financial Times

Wall Street Journal

Unknown risks
The recent proposal by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve to allow the majority of home sales to take place without a licensed human appraiser "potentially opens the door for cheaper, faster, but largely untested property valuations based on computer algorithms. Some worry that dropping appraisal requirements would introduce new risks into the $10.7 trillion market for home loans."

Financial Times

Deutsche under fire
More Deutsche Bank offices in Frankfurt were raided by criminal prosecutors on Friday "as they seek evidence on suspected money laundering. The prosecutors suspect that the alleged misconduct at Deutsche Bank stretched into this year. The transactions which are under scrutiny started in 2013 and were carried out in the bank's wealth management division, a unit that in 2015 came under the remit of Christian Sewing until he was promoted to chief executive of Deutsche Bank in April."

Coincidentally, this is the 20th anniversary of the day Deutsche Bank "announced the deal that made it the biggest bank in the world — and sealed its fate." It paid $10.1 billion for Bankers Trust, "the largest foreign takeover of an American bank." It also "paved the way for the turmoil that continues today— police raids, capital calls, management upheaval."

Washington Post

Getting closer
The Senate voted 50 to 49 Thursday to move forward on Kathy Kraninger's nomination to head the Consumer Financial Protection Bureau, "a key procedural vote" that puts her "one step closer to taking control of the polarizing consumer watchdog. ... A final confirmation vote could come as early as next week."

Elsewhere

Going East
British mobile bank Revolut said it has obtained licenses to operate in Japan and Singapore and it intends to launch its app there early next year. The fintech, which also plans to eventually offer its service in the U.S. and other English-speaking countries, offers a prepaid debit card and a checking account, plus cryptocurrency trading and free unlimited foreign exchange.

Quotable

"We still would prefer a human being doing the appraisal." — Lima Ekram, mortgage-backed securities analyst at Moody's Investors Service, commenting on the use of automated valuations systems to estimate home values.