Line in the sand Sen. Elizabeth Warren, D-Mass., called on the Federal Reserve to maintain its asset growth cap on Wells Fargo until the bank replaces CEO Tim Sloan. In a letter to Fed chair Jerome Powell, Warren said Sloan is "deeply implicated in the bank's repeated and egregious misconduct. The Wells Fargo board of directors cannot plausibly claim that it is 'ensuring senior management's ongoing effectiveness in managing the firm's activities' while retaining a CEO that helped oversee this much misconduct." CNBC, Reuters
Tim Sloan, chief executive officer and president of Wells Fargo & Co., speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S., on Monday, April 30, 2018. The conference brings together leaders in business, government, technology, philanthropy, academia, and the media to discuss actionable and collaborative solutions to some of the most important questions of our time. Photographer: Dania Maxwell/Bloomberg
Dania Maxwell/Bloomberg
Going strong American Express said its third quarter earnings rose 22% to $1.62 billion while revenue rose 9% to $10.1 billion. The credit card company also raised its full-year guidance. Wall Street Journal, Financial Times
Wall Street Journal
CFPB internal probe Consumer Financial Protection Bureau acting director Mick Mulvaney has asked the agency's inspector general to look into past writings by Eric Blankenstein, an associate supervision director at the agency who has been under fire from consumer groups for writing what they say are racially insensitive blog posts more than 10 years ago. Blankenstein has said he regrets writing the blogs, saying they "reflected poor judgment."
On board James Bullard, the president of the St. Louis Federal Reserve Bank, long an opponent of the Fed's monetary tightening, said the economy's recent "unexpectedly strong" performance justified the central bank's recent series of interest rate increases. "I've been willing to go along" with the rate increases, he said in a speech in Memphis. However, that doesn't mean the Fed should be telegraphing more rate hikes in case the economy falters, he said.
Separately, Randal Quarles, the Fed's vice chairman for supervision, endorsed the Fed's policy of gradual monetary tightening. "The more the economy's potential growth increases, the more gradual we can be in our removal of monetary-policy accommodation," he told the Economic Club of New York.
Another leg up? American banks have been handed "a big competitive advantage" over their European counterparts in securities trading. "The biggest U.S. players already had an advantage. But the new European rules, known as the second Market in Financial Instruments Directive, or Mifid II, have had the unintended consequence of giving U.S. banks another leg up."
Bellwether rings up a strong quarter Travelers Cos. said its core operating earnings in the third quarter jumped to $687 million, or $2.54 a share, from $253 million, or 91 cents, in the year-earlier period. Pretax catastrophe losses, net of reinsurance, fell to $264 million from $700 million a year earlier, which was skewed by hurricanes Harvey and Irma. Travelers "is one of the first big property-casualty insurers to report quarterly earnings, and its results are watched closely as a bellwether for others that follow."
Financial Times
To those who have, more shall be given Third quarter results at some of the largest U.S. banks showed a large increase in lending to high net worth customers, much more so than to average consumers. "Where lending to consumers and companies is now moderating, credit to the financial elite remains strong," the FT said. "JPMorgan reported 12% year-on-year loan growth for its wealth and asset management division, while the comparable division at Morgan Stanley reported a 7% gain. Thanks to the rapid growth in private client lending, JPMorgan has now lent out almost as much to a small number of its elite customers as it has to its millions of cardholders."
Not backing down The European Union pushed back against American threats to close U.S. futures markets to European banks if the EU insists on regulating derivatives trading. It is "the prerogative of the EU legislator to set the general supervisory framework" for clearing houses in the bloc, the EU said. "We would expect third country authorities to respect that, just as we respect the rules and legislative procedures in other countries." On Wednesday J. Christopher Giancarlo, the chairman of the U.S. Commodity Futures Trading Commission, called the EU's proposals "wholly unacceptable" and threatened to bar European banks from using the Chicago Mercantile Exchange.
New York Times
Don't look now ... The paper looks at the similarities between collateralized debt obligations (CLOs), which contributed to the financial crisis a decade ago, and collateralized loan obligations (CLOs), which have experienced a boom and are prompting wariness among some observers. "If there turns out to be an issue, this is where the unfinished business of the post-crisis financial reform efforts is going to be revealed," said Daniel Tarullo, the former oversight governor for bank regulation at the Fed who's now a professor at Harvard Law School.
Elsewhere
Back to the drawing board? Bank industry groups called on federal banking regulators to "seriously reconsider or scrap major portions" of their proposal to simplify the Volcker Rule on proprietary trading. In particular, the Financial Services Forum and the Bank Policy Institute said the regulators "should toss out a proposed new test for assessing whether trades are speculative that would focus on the accounting treatment of the instruments traded." That could "delay efforts to wrap up the overhaul in the coming months," Reuters said. The public comment period for the proposals ended Wednesday.
Quotable
"The idea we have to pencil in a lot of rate increases, that's what I'm objecting to." St. Louis Fed President James Bullard, about the Fed's practice of telegraphing future interest rate hikes.
The Office of the Attorney General in New York says the bank violated the state's Exempt Income Protection Act, illegally transferring customers' money to debt collectors.
The Providence, Rhode Island, company is having discussions with private wealth management teams elsewhere as it seeks to expand its fledgling private bank. In just three months, private banking deposits doubled to $2.4 billion.
After the Minneapolis-based company reported stubbornly high commercial deposit costs, it reduced its full-year forecast for net interest income by $200 million-$500 million.
The CFPB has dissolved the Office of Supervision, Enforcement and Fair Lending and eliminated the job of associate director in a move that impacts how it designates nonbanks for supervision.
Rising deposit costs have plagued banks in general, and the Tennessee bank had to pay up to bolster liquidity after its failed merger with TD. But First Horizon retained customers in the first quarter while not paying them the special rates they got last year.
U.S. customers who have previously used Sweden-based Klarna's buy now/pay later financing — and paid off their loans in full — will be prequalified for interest-bearing loans through a new version of the Klarna Visa card rolling out later this year.
