No quick resolution for Fannie-Freddie; deposit rate war heats up

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Wall Street Journal

Not so fast
Prices of Fannie Mae and Freddie Mac stock plunged more than 20% Tuesday after the White House threw cold water on the idea that it was planning to release the two mortgage agencies from government control without input from Congress. Instead, the Trump administration said it expects to “shortly” announce a framework for developing a comprehensive housing finance plan “but that framework will not likely make specific recommendations about what to do with the two companies.” The stocks of the two companies have risen sharply this year in anticipation of a possible breakthrough in the 10-year conservatorship.

Bailing out
Many of China’s biggest overseas real estate investors are unloading some of their most prized American assets as the government “keeps the pressure on Chinese investors to bring cash home during a period of worsening economic growth.” Chinese investors were net sellers of $854 million of U.S. commercial property in the fourth quarter, the third straight quarter in which sales topped purchases, reducing net purchases for full year 2018 to their lowest level since 2012. “The selling during most of 2018 marked a powerful reversal from the previous five years, when Chinese investors went on a massive buying spree, often handily outbidding other investors for U.S. trophy properties.”

Financial Times

Paying more
Varo Money, the online-only U.S. bank backed by private equity giant Warburg Pincus, is paying 2.8% on some checking accounts, the highest deposit rate in the U.S., according to the paper. That’s about 40 basis points higher than the next best available rate “and way above the 0.09 per cent average rate.” “Varo’s move comes after a wave of online banks — including BBVA-backed Simple and Goldman Sachs’ online-only bank Marcus — introduced deposit rates above 2% in recent months.” American Banker's Will Hernandez tells the role the partial federal government shutdown played in Varo Money CEO Colin Walsh's decision to increase its rates.

Going to the top
Denmark’s financial regulator is proposing stricter penalties on banks and their senior executives in the wake of the money laundering scandal at Danske Bank, the country’s largest bank. The Danish Financial Supervisory Authority is considering adopting rules followed in the U.K., where the top financial regulator “has given itself powers to impose fines or bans on the top brass of its main lenders for failings that happen on their watch.”

Not the answer
There’s been a lot of talk that big European banks need to merge in order to compete effectively with their American counterparts. But that may be the wrong prescription, writes Simon Samuels, a banking consultant at Veritum Partners, in an op-ed. “For European banks, getting bigger may feel like an attractive escape route after a painful decade. Unfortunately, it is rarely the right response for shareholders. But it would also be a worrying development for Europe’s citizens who still have to deal with the consequences of banks that become too big to bail.”


Shying away
Major international banks have stopped trading the bonds of PDVSA, Venezuela's state-owned oil company, after the U.S. imposed stricter sanctions against the firm. “The move by Washington is set to ratchet up the pressure on Venezuela's socialist President Nicolas Maduro and will effectively prevent investors who operate in the United States from buying PDVSA bonds.”


“Housing finance reform is a priority for the administration. The White House expects to announce a framework for the development of a policy for comprehensive housing finance reform shortly.” — White House spokeswoman Lindsay Walters.

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