Will lower rates bring tougher regulation?; HELOC-backeds return

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No time for slack
Federal Reserve Bank of Dallas President Robert Kaplan “suggested that any move toward lower interest rates would require the central bank to lean more heavily on stronger regulation to guard against potential excesses from building in the economy, particularly with respect to fueling more leverage in the corporate sector. Mr. Kaplan said it was important for the central bank to maintain stronger capital requirements and stress testing for banks, and for regulators to watch nonbank financial companies carefully.”

Tougher oversight “should provide more flexibility for monetary policy to deal primarily with economic conditions,” he wrote in an essay published Monday.

Meanwhile, President Trump upped his verbal assault on the Fed on Monday, saying it “doesn’t know what it is doing.”

“Think of what it could have been if the Fed had gotten it right,” he said on Twitter. “Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what countries are doing against us. Blew it!”

The New York Times provides a timeline of the president’s vitriol against the central bank, including his “recent flirtation with stripping [Jerome] Powell of his chair title and demoting him to a Fed governor. Such a move, if it worked, could allow Mr. Trump to install a new chair — one who would ostensibly vote in favor of lowering rates more quickly.”

Security or politics?
At the request of Sen. Chuck Schumer, D-N.Y., the Treasury Department’s inspector general’s office has agreed to look into the plan to put Harriet Tubman on the $20 bill, “which Secretary Steven Mnuchin said last month wouldn’t be completed” until the bill’s security features had been finalized, likely after he leaves office. Schumer asked Treasury’s watchdog “to investigate whether the Trump Treasury Department had intentionally slow-walked the plan, noting that President Trump had panned the idea as a candidate in 2016.”

“The Trump administration has strongly denied that it delayed the release of a new $20 bill or that the timing of the change was being driven by political concerns.”

Wall Street Journal

Back from the dead
A unit of Cerberus Capital Management sold $174 million of securities backed by home-equity lines of credit, “a type of mortgage bond that went extinct during the financial crisis.”

“Mortgage bonds pooling esoteric pieces of the home-loan market have been mostly out of style in the decade since the housing market collapsed. But some structures have slowly returned, including bonds that hold unconventional mortgages resembling the Alt-A home loans of yesteryear for borrowers with hard-to-document income. There have also been a handful of deals involving fix-and-flip loans, and a market for single-family rental bonds emerged after the financial crisis.”

“We are starting to have a lot more creative issuance around mortgage credit,” Neil Aggarwal, deputy chief investment officer at Semper Capital Management told the paper.

The paper noted, "investor demand for the Cerberus home-equity deal was muted."

Financial Times

More money for Monzo
Monzo, the U.K.-based digital bank that recently launched in the U.S., has doubled its valuation to more than £2 billion in just eight months “showing investors are still keen to back upstart financial technology companies.” Monzo “said it would use the cash" including £113 million it just raised, "to support its growth in the U.S. and to develop new products to move it closer to sustainability.”

It doesn't get easier ...
“In a further embarrassing setback for the Danish lender,” Danske Bank’s former interim CEO has been fired over a scandal unrelated to the bank’s €200 billion money-laundering debacle. Jesper Nielsen, who was “hastily” appointed last October to replace disgraced former CEO Thomas Borgen, was dismissed from his position atop Danske's Denmark banking unit after a whistleblower reported a wealth management product's customers had been overcharged.

New York Times

Warning found
The New York City Council released a memo written by a city employee nearly 10 years ago that stated the price of taxi cab medallions “had skyrocketed to unsustainable levels. It also warned that in order to buy the permit, some drivers were taking out loans they could not afford. The reckless loans helped cause medallion prices to crash, leaving thousands of immigrant drivers deeply in debt.” The city had earlier claimed the memo did not exist. The Council is investigating the loans, which were made by several banks and credit unions, allegedly with the complicity of city officials.


“The timeline for issuing new notes is not a political process, and the timeline for issuing a new $20 note remains consistent with the prior Administration’s. As the [Treasury] Department and Bureau of Engraving and Printing have consistently stated, the only consideration with regard to the redesign schedule of our nation’s currency has been security and potential counterfeiting threats.” — A Treasury Department spokesman explaining the delay in issuing a new $20 bill

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Financial regulations HELOCs Fintech AML Robert Kaplan Federal Reserve Bank of Dallas