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Mnuchin, Powell report on loan programs; Scharf criticized on diversity goals

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Mission accomplished?

Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell told the House Financial Services Committee Tuesday that the “emergency loan programs to support the coronavirus-stricken economy were largely working as intended and that more government spending would be needed to sustain the recovery.” Mnuchin said “he didn’t anticipate further changes that would ease access to loan programs established jointly with the Fed,” the Wall Street Journal said.

“I unfortunately think there’s not much more we can do,” Mnuchin said.

“Their answers suggested they believed those loan programs had done what they could to preserve favorable financial conditions for eligible borrowers and that what many would-be borrowers need now are grants, which would require new funding from Congress, as opposed to loans from the Fed.” Wall Street Journal, Washington Post

Members of the committee pressed the two officials “to enable commercial real estate borrowers to access government relief tools such as the Main Street Lending Program,” American Banker’s Hannah Lang reports.

Wall Street Journal

SPAC listing

United Wholesale Mortgage, the largest wholesale mortgage originator in the country, is planning to go public through a merger with a special-purpose acquisition company “in a deal that will take the lender public at a valuation north of $16 billion, the record for a type of deal that has become all the rage on Wall Street.” United “plans to combine with Gores Holdings IV, a SPAC that raised $425 million in a public listing in January. The deal will make United Wholesale Mortgage a public company listed on Nasdaq.”

Financial Times

Retrenching

Deutsche Bank said it plans to close about 100 branches in its home market in Germany, “reducing the total number of domestic branches to about 400 as the Covid-19 emergency drives more customers online and as the country’s largest lender strives to return to profitability. The decision follows a move by domestic rival Commerzbank, which over the summer announced it would not reopen 200 branches that were shut during the pandemic.”

“The branch is neither the sole nor the key location any more [these days],” Philipp Gossow, head of Deutsche’s German retail business, told staff in an email.

The road beckons

Investment bankers “have adjusted to working from home, but many say it is no substitute for face-to-face meetings” and now “yearn to get back on the road.”

“Earlier in the pandemic, strict lockdowns across the main financial centers in the U.S. and Europe ensured a level playing field: top dealmakers worked from home safe in the knowledge that their rivals could not do face-to-face meetings either. Now with varying restrictions and differing appetites for in-person exchanges, the ‘fear of missing out’ has returned, and bankers are looking over their shoulders with a mix of hyper-competitiveness and insecurity.”

Underarmed

Citigroup has “closed its market making business in retail options, which serves retail broker-dealers such as Charles Schwab and Fidelity. Its decision to pull out of retail options leaves Morgan Stanley as the sole major Wall Street bank in the business. Citi pulled out because it was unable to compete in a technology arms race to be among the fastest and most reliable venues on Wall Street.”

Was anything real?

A report by the administrator of Wirecard says the defunct company’s “fabricated Asian business was not its only deception. The rest of the once-lauded German payment provider’s business was chaotic, beset by byzantine reporting lines, hobbled by lamentable IT and racking up losses.”

“The picture that emerges of the Wirecard businesses that did exist is a stark contrast to the one painted by former chief executive Markus Braun, who hailed the group as a highly profitable pioneer in the payments industry. It reveals the scale on which the company, Germany’s biggest corporate fraud in decades, also misled investors about its real businesses.”

New York Times

Not in my backyard

Federal Reserve hopeful Judy Shelton “has spent her career pushing for free markets and criticizing the far-reaching power of the Fed. Yet Ms. Shelton’s track record is packed with incongruities, ones that have raised eyebrows among Senate Republicans, imperiling her nomination.”

“Ms. Shelton has made contradictory statements about issues of importance to a future central banker: She once pushed for higher interest rates and a return to a gold standard before backing away from those positions as she sought to secure President Trump’s nomination to the Fed and congressional support. Those inconsistencies extend to her private life, where she has failed to apply her public view that markets and businesses should operate unencumbered and free of government interference to her own backyard.”

Elsewhere

Offended

Wells Fargo CEO Charlie Scharf “exasperated some Black employees in a Zoom meeting this summer when he reiterated that the bank had trouble reaching diversity goals because there was not enough qualified minority talent, two participants told Reuters. He also made the assertion in a company-wide memo June 18 that announced diversity initiatives.”

“While it might sound like an excuse, the unfortunate reality is that there is a very limited pool of black talent to recruit from,” Scharf said in the memo.

Wells Fargo spokeswoman Beth Richek said Scharf “is committed to deep and systemic change to increase diversity and has held several forums where there has been candid conversation and unfiltered feedback.” Scharf “has pledged to double the number of Black leaders over five years and tied executive compensation to reaching diversity goals. He is also requiring hiring managers to consider diverse candidates for high-paying roles that are vacant, and ensure diversity on interview teams.”

Going back home

Barclays and Societe Generale said some of their London staff “who had returned to office-based working in recent weeks will revert to working from home following British government guidance on Tuesday. Two other big British lenders told Reuters they will also likely reverse recent return-to-work moves for non-essential staff.”

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