Mnuchin to end Fed lending programs; Barclays, Amazon in AI partnership

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Expiration date

Treasury Secretary Steven Mnuchin “said he would allow several emergency Federal Reserve lending programs to expire [at yearend], opening a divide with the central bank, which had pressed for an extension,” the Wall Street Journal reported. “In a letter to Fed Chair Jerome Powell, Mr. Mnuchin said the programs ‘have clearly achieved their objectives.’”

Treasury Secretary Steven Mnuchin listens during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington on Sept 24, 2020.

The Fed said it disagrees. “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy,” it said in a statement.

“The Fed’s exceedingly rare public response reflected a government divided on how to act as the pandemic surges across the nation, threatening a new wave of shutdowns and marking an inflection point of the economic recovery,” the Washington Post said.

Mnuchin’s decision “could hinder President-elect Joseph R. Biden Jr.’s ability to use the Federal Reserve’s vast powers to cushion the economic fallout from the virus,” the New York Times said. “The Treasury Department asked the Federal Reserve to return unused funds, which could prevent a new secretary from restarting key loan programs.”

“If the Fed returns the CARES Act funds, it would shut down the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Loan Facility, the Municipal Liquidity Facility and the Main Street Lending Program on Dec. 31,” American Banker reported.

“Mr. Mnuchin did, however, ask Mr. Powell to extend four emergency credit facilities that backstop short-term funding markets, including commercial paper and money market mutual funds, for 90 days,” the Financial Times said.

Financial Times

In case you missed it

In an announcement that warrants more attention than it garnered last week, according to the FT, Barclays’s credit card unit and Amazon struck a deal in which the two companies “are linking data with AI analysis to approve credit (or not) and predict what customized services clients will want next.”

“I personally think that the partnership with Amazon has been one of the most important things to have happened to Barclays in the past five years,” Barclays CEO Jes Staley told the FT. “What happens next in this AI race could soon matter enormously — helping to determine the future winners in finance and the next big set of regulatory risks.”

Google reboot

Meanwhile, Google is promoting a “new style of mobile bank account in alliance with lenders.”

Google’s app “is going through a two-stage revamp.” The first one, added this week, creates “a place to keep tabs on your various bank and credit card accounts, as well as a conduit for Google to serve up personalized offers from merchants. The second step is the more groundbreaking. Next year, users will be able to open and manage a mobile bank account directly from the app, starting with Citibank and 10 other banks and credit unions in the U.S.”

AI to the rescue

“Many law firms and their bank clients are turning to artificial intelligence (AI) technology, often provided by start-ups,” to sift through thousands of loan documents and contracts that include references to Libor. “Harnessing technology to do the grunt work means banks can avoid paying for armies of sleep-deprived junior lawyers and paralegals to sift through contracts, which in some cases may still be paper documents.”

“It is possible to train AI to look for Libor or how Libor is referenced in various guises and to do that in various languages,” one lawyer in London says, adding that “some clients have developed their own technology tools.”

To be continued

In his first public appearance since his arrest last summer, Markus Braun, the former CEO of Wirecard, the failed German payments company, told lawmakers in the Bundestag that “German regulators and politicians were not to blame for the fall of the company, and that he hoped prosecutors would succeed in tracing its missing billions.”

“I can’t understand why external regulators should be held responsible for failures here,” he said, adding that EY, Wirecard’s longtime auditor, was “apparently comprehensively deceived” and did not spot irregularities “despite extensive checks.” But he didn’t say who, if anyone, at the company was to blame.

Indeed, “having delivered his statement, Mr. Braun refused to answer any questions from MPs, citing his right under German law to remain silent. He declined to answer even basic inquiries, such as what the subject of his PhD thesis was or if he had a daughter.” He did, however, “emphasize that he had signaled his willingness to co-operate with prosecutors.”

New York Times

And the winner is …

President-elect Biden said Thursday “that he had chosen his nominee for Treasury secretary and that he would announce the pick just before or just after Thanksgiving.” He said he believed the selection would be accepted by “all elements of the Democratic Party,” including “both the moderate and progressive wings.”

“Those believed to be on the shortlist include Lael Brainard, a Federal Reserve governor; Janet L. Yellen, the former Fed chair; and Roger W. Ferguson Jr., a former Fed governor and business executive” who this week announced his retirement as CEO of TIAA.

Quotable

Banks have the lending capacity to meet the borrowing needs of their corporate, municipal and nonprofit clients.” — Treasury Secretary Steven Mnuchin, announcing he will allow several emergency Federal Reserve lending programs to expire at the end of the year.

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