Good news — or not?: Total American household debt hit a new record of $12.7 trillion in the first quarter, surpassing its pre-crisis peak that occurred in 2008. But some observers are more concerned that the event "signals potential new risks to the economy" rather than showing that consumers have fully recovered from the Great Recession.
"The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago," the New York Times said.
However, the Financial Times notes that "the share of debts falling into arrears is now markedly lower than in the lead-up to the recession across a range of types of lending, with mortgage borrowers' finances proving particularly solid."
Not so bad: Treasury Secretary Steven Mnuchin is scheduled to testify before the Senate Banking Committee Thursday, at which time he may add more specifics to the Trump administration's still-vague plan to revamp the Glass-Steagall Act. On Wednesday, however, a Treasury spokeswoman said, "The administration does not support a break of banks from investment banks." Indeed, says the Journal, the administration's "often-stated goal to review the line between commercial and investment banking activities may be very different—and less onerous for big banks—than the industry fears."
Steven Mnuchin, Treasury secretary nominee for U.S. President-elect Donald Trump, listens during a Senate Finance Committee confirmation hearing in Washington, D.C., U.S., on Thursday, Jan. 19, 2017. Mnuchin defended his record as an owner of a mortgage lender that was accused of unfair loan and foreclosure practices during the financial crisis. Photographer: Andrew Harrer/Bloomberg
Andrew Harrer/Bloomberg
Deep dive: Wells Fargo is making greater use of information from polls and focus groups about its brand image among consumers to help guide its marketing. The Journal interviewed the bank's chief marketing officer, Jamie Moldafsky, about what Wells has been doing to repair its brand, such as using data more intensively to find out what its customers want and experimenting with new marketing channels.
Still bullish on banks: Bank stocks were among the hardest hit sectors in Wednesday's stock market sell-off, but the Journal's Heard on the Street column says "solid fundamentals and reasonable valuations mean the outlook for lenders is still favorable."
"There remains a solid bull case for banks, based on trends that were in place even before the November elections," it says, including a stronger economy, which will raise interest rates; large excess capital cushions, which should lead to higher dividends and stock buybacks; and "an emerging consensus, even among Obama-era officials, that financial regulation has become too cumbersome."
That was quick: Digital coins have become a new source of quick funding for tech startups. Gnosis sold out about $12.5 million of tokens in 12 minutes in April through an online "initial coin offering." Golem, a Polish firm that allows companies to rent computing power, raised $8.6 million in half an hour. "The tokens are more like a crowdfunding campaign than traditional venture-capital financing," the Journal reports. "No matter. Buyers are snapping them up." So far this month, companies have raised $27.6 million this way, compared to $3.5 million in all of May last year.
Playing both sides: Goldman Sachs has moved into the top tier of underwriters of U.S. leveraged loans used to finance corporate acquisitions, an area historically dominated by the likes of JPMorgan Chase, Bank of America and Citigroup, the FT reports. Previously, Goldman typically represented selling companies, but it is now looking to play both sides. The bank ranks third in leveraged loans so far this year, up from eighth last year, behind only B of A and JPMorgan.
Meltdown in the cold: The FT looks at Home Capital Group, Canada's biggest nonbank mortgage lender, whose "fight for survival is sparking fears of a broader meltdown in the country's super-heated property market."
Quotable
"This is not a marker we should be super-excited to get back to. In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don't support." — Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth.
At a time of mild or nonexistent loan growth, middle-market borrowers in the Lone Star State are providing a boost to Fifth Third Bancorp and Huntington Bancshares.
New details have emerged about the negotiations that culminated in Capital One's blockbuster $35 billion agreement to acquire Discover. At one point last December, the two parties broke off discussions, according to a securities filing.
According to the Federal Reserve Board's latest financial stability report, persistent inflation and policy uncertainty are the primary worries for banks. Survey respondents expressed heightened anxiety over murky policy outlooks due to geopolitical turmoil and rapidly approaching domestic elections.
The Alabama regional lender says it expects expenses to taper off this year and anticipates challenged loans will gradually rise to historically average levels.
Truist Financial's top executive leadership team announces departures; First Horizon's chief credit officer is retiring; Ferry teams with Highnote to roll out a new Visa-branded payroll card; and more in the weekly banking news roundup.
The Dallas-based regional bank tapped a client for its co-pilot capabilities, where employees can message a bot instead of a human to get tech assistance.
