The end of Dodd-Frank may be close at hand.
The Republican-crafted plan to overturn many provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act is one step closer to becoming a reality. The House Financial Services Committee plans to hold a hearing to discuss the updated version of the Financial Choice Act this (Wednesday) morning.
“Based upon the rhetoric out there, it appears likely the
Trump administration is going to roll back certain provisions
of Dodd-Frank, which is probably going to allow banks to be a little bit more aggressive going forward, and that’s great for Commercial Real Estate finance,” says Situs Managing Director Steven Bean.
House Financial Services Committee Chairman Jeb Hensarling revealed the full version of the Financial Choice Act of 2017, which would bring significant changes not only to the Consumer Financial Protection Bureau (CFPB), but also to the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the National Credit Union Administration.
Situs CEO Steve Powel says, “The Trump presidency will ultimately be good for business, with less regulation and more thoughtful policy.” Powel laments, “Unfortunately, with the gridlock between Congress and the president over the past eight years, it was hard to get thoughtful collaboration on policy; hence the continued need for executive orders. The nation has spoken, voting for a desire to change; with Congress and the presidency being in one party’s hands, and a check-and-balance between each other, I am hopeful that there will be changes that don’t just support select special interest groups, but are more thoughtful about how to improve the lives of all Americans.”
Hensarling said that Republicans are “eager to work with the president to end and replace the Dodd-Frank mistake with the Financial Choice Act because it holds Wall Street and Washington accountable, ends taxpayer-funded bank bailouts and unleashes America’s economic potential.”
Banks, Borrowers Waiting on Washington as Government Shutdown Looms
As Washington tries to avoid a government shutdown on Saturday, regional banks are seeing both optimism and angst in the American heartland, reporting that their customers are waiting for clues from Washington before taking action.
Slowing loan growth has been a theme as regional banks reported first-quarter earnings over the past week. Among a group of seven large regional banks, ranging from about $70 billion to $450 billion of total assets, all but one saw slower growth or an outright decline in average loans outstanding in the first quarter.
Some also issued disappointing guidance for loan growth in 2017. Political uncertainty was consistently among the causes cited.
U.S. Bancorp, a large regional bank based in Minneapolis, lowered its guidance for loan growth for 2017 from 6 percent to 8 percent to mid-single digits.
“Our large corporate customers tell us that they are optimistic about the future but are awaiting more clarity regarding potential changes in tax and regulatory reform, infrastructure spending and trade policies,” said U.S. Bancorp chief executive Andrew Cecere.
Birmingham, Alabama-based Regions Financial, which operates across southern markets, said it expects basically flat lending in 2017.
“Consumer and small-business sentiment continues to improve,” said chief executive O.B. Grayson Hall. “However, this optimism is yet to translate into the confidence needed to take on additional debt today. For now, customers appear to be in more of a wait-and-see mode.”
Darren King, chief financial officer of Buffalo, New York-based M&T Bank, said the bank’s clients are “just waiting, I think, for more certainty about which direction the administration is going to go and their ability to follow through on some of the promises around managing the costs of employees.” He specifically cited the Affordable Care Act and minimum wage laws.
Read more: Wall St Journal
New-Home Sales Through the Roof
Houses are selling like hotcakes.
New-home sales in March notched their second-strongest reading since early 2008. That red-hot number follows Monday’s reading for existing-home sales, which hit a decade high.
“Consumers are feeling good about the economy, their jobs and future economic prospects. Those positive sentiments, combined with interest rates that still remain near historic lows, are driving homebuyers off the sidelines,” says the
Collingwood Group President Brian O’Reilly.
New-home sales soared to a seasonally adjusted annual rate of 621,000, according to the Commerce Department. That was 5.8 percent higher than a downwardly adjusted February sales pace, and 15.6 percent higher than a year ago.
But still concerning, says Collingwood’s O’Reilly, “is the lack of inventory of starter homes for first-time buyers and for millennials.”
Even when homes are available, another just-released report says prices continued to rise in February, hitting their fourth consecutive all-time high.
The S&P CoreLogic Case-Shiller index increased both month-over-month and year-over-year in February. The National Home Price NSA Index, which covers all nine U.S. census divisions, increased by 5.8 percent in February, up from last month’s 5.6 percent increase.
Within the top 20 cities, Seattle, Portland and Dallas took the lead with annual home price increases of 12.2 percent, 9.7 percent and 8.8 percent, respectively. Dallas was the only new city in the top three, replacing Denver in the third spot.
“Unfortunately,” says O’Reilly “this pace is not sustainable unless something changes to increase housing inventory, and Washington must act to cut regulations that are holding builders back from that noble goal.”
Fed Might Not Raise Rates Twice This Year After All
The market suddenly doubts Yellen and Company will raise rates twice more this year.
A recent string of less-than-stellar economic news has injected some uncertainty into whether the Fed will deliver a steady diet of rate increases ahead. In fact, current trading in the fed funds futures market indicates that the U.S. central bank will not be able to enact the two additional rate hikes that officials have indicated are on the way this year. As of last week market indications were for a 57.3 percent chance of a quarter-point increase in the benchmark short-term rate in June, while there’s just a 41.1 percent probability that it would move again in December. Those expectations are counter to the past couple of months, when investors grew more comfortable with the idea that the Fed would be able to lift rates off their crisis-era lows. The first rate hike since mid-2006 happened in December 2015, with the next one not coming again until December 2016. The policymaking Federal Open Market Committee raised the rate again in March, with officials then pointing to a total of three moves for the year.
Read more: CNBC
Fannie-Freddie Plan Would Create Utilities
Fannie Mae and Freddie Mac would be turned into shareholder-owned utilities and face competition from new companies under a trade group’s mortgage-finance overhaul plan that could eventually require about $200 billion in private capital.
The Mortgage Bankers Association proposal calls for the U.S. government to remain involved in the housing market, putting its guarantee behind mortgage-backed securities that the firms issue but no longer backstopping the companies themselves.
The proposal comes as Congress and President Donald Trump’s administration ramp up work on what to do about Fannie and Freddie, which have been in government-managed limbo for more than eight years. What the government decides to do will have huge ramifications for the $10 trillion mortgage market, about half of which is backed by the two companies.
“There are two options here for anybody in the process,” said MBA President David Stevens. “You can kick and scream on how you want the game to be played differently or you can play the game. We’re staying in the game on this one.”
On a call with reporters, Stevens said senior members of the Trump administration had signaled to MBA that they support a legislative process to overhaul Fannie and Freddie. Some investors and others have advocated for the Treasury Department and the companies’ regulator, the Federal Housing Finance Agency, to release them from government control without legislation.
Read more: Bloomberg
Frexit: CRE, Other Markets Breathe Sigh of Relief for Now
It has survived enough Greek tragedy to fill out an Aeschylus trilogy and sufficient brushes with Italian banks to make an opera. It has endured a global financial shock, years of regional economic stagnation and no end of cross-border political accusations.
Now, the euro, a perpetually maligned currency, has endured yet another test — this time from the presidential election in France.
Marine Le Pen, the leader of the right-wing National Front party, and one of two remaining candidates facing off on May 7, has long disdained the euro as a malevolent threat to prosperity. She has pledged to convert French debt into a new national currency, an event that could begin the euro’s downfall. She has vowed to renegotiate France’s relationship with the European Union, threatening to upend the project of European integration that has prevailed on the continent as an antidote to the brutalities of World War II.
As her prospects appeared to advance in recent weeks, that sowed unease in international markets, with investors demanding greater returns on French government debt, a sign that the odds of default — however minute — are multiplying. In recent weeks, investors had been aggressively purchasing options that offer protection against a precipitous plunge in the value of the euro.
The results of the first round provided relief to investors, after the strong showing of her centrist opponent, Emmanuel Macron. European stocks soared on Monday, with bank shares leading the charge, while the euro strengthened against the American dollar.
read more: NY Times
Looming Brexit Spooks U.K. Confidence
U.K. consumer confidence weakened in the first quarter and households were the most pessimistic on their finances in more than two years, according to a study from Deloitte LLP, developments that may weigh on the economy.
Deloitte’s consumer sentiment gauge fell 1 percentage point from the previous quarter to minus 7 percent, while a measure of confidence in disposable income dropped 3 points to minus 17 percent.
Inflation is already weighing on consumer spending, with data on Friday showing U.K. retail sales plunged the most in seven years in the first three months of 2017. The pressure on households doesn’t bode well for an economy that relies heavily on consumer spending. Data due April 28 is forecast to show economic growth slowed by almost a half in the first quarter.
read more: Bloomberg
JPMorgan Said to Plan Tripling Size of New York Technology Hub
JPMorgan Chase & Co., the biggest U.S. lender, is planning to more than triple the size of its technology hub in New York City to increase space for the bank’s coders and data engineers, a person with knowledge of the matter said. The firm is in discussions with Brookfield Property Partners LP to lease an additional 300,000 square feet on the upper levels of 5 Manhattan West near Hudson Yards, said the person, who asked not to be identified because the plans aren’t public. The bank currently occupies about 125,000 square feet in the building. The talks are ongoing and could still fall apart, the person said. Banks are competing fiercely for technologists as the industry enters a new era of automation, fueled by cheap computing power and fears of losing customers to startups.
Read more: Bloomberg
Whole Foods for Thought
Albertsons Cos. is exploring a takeover of high-end grocer Whole Foods Markets, according to the Financial Times.
Albertsons, the second largest operator of grocery stores in the United States, has had preliminary talks with bankers about making a bid, according to the report.
No formal bid has yet been made, the newspaper reported.
Whole Foods had a market cap of $11.38 billion as of Friday’s close.
Sources told Reuters that Whole Foods hired investment bank Evercore Partners to defend itself against Jana Partners, but there were currently no plans for the company to explore a sale.
No comment from either party yet.
read more: Financial Times
Subway Goes the Wrong Way
Subway shut 359 restaurants in the United States last year, amid stiff competition in a highly fragmented fast-food industry. Subway, owned by Doctor’s Associates Inc., is the world’s largest fast-food chain by number of restaurants. It had 26,744 locations operating in the United States at the end of 2016. ‘We will continue to relocate some shops to better locations and look for new sites — both traditional and non-traditional,’ the company said in an e-mailed statement. Subway said its U.S. sales fell 1.7 percent to $11.3 billion last year, while international sales climbed 3.7 percent to $5.8 billion, reflecting a focus on overseas growth. Subway rival McDonald’s has also reduced the number of its U.S. locations in recent years, as it seeks to cut costs by franchising out more restaurants.
read more: Reuters
Big Apple, Big Sales
New York City’s residential sales market had a strong start to the year, according to new data compiled by the Real Estate Board of New York.
The analysis found the value for completed transactions for all home sales spiked 15 percent in the first quarter of 2017, compared to the same period last year. That amounted to $12.3 billion, and the dollar value went up in each of the five boroughs because of increases in both price and volume of home sales. The average sales price went up 12 percent from last year to $1.02 million. Condos saw a 19 percent spike to $1.95 million, buoyed by a record prices in Manhattan, Brooklyn and Queens. “2017 is off to a strong start, following the tempered fourth quarter of 2016,” REBNY president John Banks said in a prepared statement. The report shows improving market momentum with continued demand for all home types throughout the boroughs.
Rise of Smart Cities
Cities have a way to go before they can be considered geniuses. But they’re getting smart pretty fast.
In just the past few years, mayors and other officials in cities across the country have begun to draw on the reams of data at their disposal — about income, burglaries, traffic, fires, illnesses, parking citations and more — to tackle many of the problems of urban life. Whether it’s making it easier for residents to find parking places, or guiding health inspectors to high-risk restaurants or giving smoke alarms to the households that are most likely to suffer fatal fires, big-data technologies are beginning to transform the way cities work.
Cities have just scratched the surface in using data to improve operations, but big changes are already under way in leading smart cities, says Stephen Goldsmith, a professor of government and director of the Innovations in Government Program at the Harvard Kennedy School. “In terms of city governance, we are at one of the most consequential periods in the last century,” he says.
Although cities have been using data in various forms for decades, the modern practice of civic analytics has only begun to take off in the past few years, thanks to a host of technological changes. Among them: the growth of cloud computing, which dramatically lowers the costs of storing information; new developments in machine learning, which put advanced analytical tools in the hands of city officials; the Internet of Things and the rise of inexpensive sensors that can track a vast array of information such as gunshots, traffic or air pollution; and the widespread use of smartphone apps and mobile devices that enable citizens and city workers alike to monitor problems and feed information about them back to city hall.
read more: Wall St Journal
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