The 20-year war — Whither the Community Reinvestment Act? — Corporate America grows impatient on China

From: POLITICO's Morning Money - Tuesday Aug 17,2021 12:02 pm

Aug 17, 2021

By Victoria Guida and Aubree Eliza Weaver

Presented by The Consumer Data Information Association

Editor’s Note: Morning Money is a free version of POLITICO Pro Financial Services' morning newsletter, which is delivered to our s each morning at 6 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.

Quick fix

The 20-year war — It’s hard not to mention the bleak news out of Afghanistan, with U.S. foreign policy rather than economic news dominating headlines. MM would point to our coworker Lara Seligman’s work on the question of why Kabul fell so quickly to the Taliban . In more market-oriented news, The Intercept crunched some numbers on how much key defense stocks have risen in value since the Afghanistan war began nearly 20 years ago.

Your guest host does have at least one tidbit to report on the matter: an administration official confirms that the Taliban won’t have access to the assets of Afghanistan’s central bank that are held in the U.S. (a majority of Da Afghanistan Bank’s assets are not held within its home country). Its international reserves exceed $9 billion, according to the International Monetary Fund.

And speaking of Da Afghanistan Bank, read this thread from the head of the central bank on his escape from Kabul.

Whither the Community Reinvestment Act? — The three federal banking regulators are ploughing ahead, yet again, in an effort to update rules for banks under the Community Reinvestment Act, the landmark 1977 law designed to encourage lending to lower-income borrowers to prevent redlining. There’s a lot of energy being dedicated to it right now; it’s a priority for lawmakers like House Financial Services ChairMaxine Waters; a key issue for Federal Reserve Governor Lael Brainard, who might be in line for a promotion; and the agencies just went through a lot of work only for former Comptroller of the Currency Joseph Otting to go it alone on a final regulation (now being withdrawn by his Biden-appointed successor).

But the message from Acting Comptroller Michael Hsu and FDIC Chairman Jelena McWilliams so far is: we think we can agree on something, but this is really complicated. That suggests a proposal is still several months away, even though their staffs are meeting jointly, along with the Fed, a lot.

“There’s a lot of devilish details,” Hsu said at the Consumer Bankers Association conference on Monday. “But … I’m not hearing anyone disagreeing with the overall objectives. I’m hearing more differences of perspective on what’s going to be effective, what are the trade offs.”

McWilliams, a Trump appointee whose term ends in 2023, sounded a similar note in a recent chat with MM. “I am cautiously optimistic that we can come up with a joint framework. I don’t know how quickly that can be done. Not because of the participants in the table, but because of the complexity that is the CRA,” she said. “We’re back to, you know, not necessarily Page 1, but we’re back to kind of doing everything relatively anew.”

IT’S TUESDAY — Ben White is off this week! Send me tips, tricks and memes at vguida@politico.com or @vtg2, and to Aubree Eliza Weaver at aweaver@politico.com and @AubreeEWeaver.

A message from The Consumer Data Information Association:

Credit reporting helps Americans achieve their financial goals and strengthens our economy. Credit reporting is always improving to better serve people and give more consumers access to the financial system. Our system is accurate, reliable and heavily regulated to ensure lenders have what they need to be safe and sound while responsibly finding new consumers. Through financial education, free credit reports and alternative data, we are building a more equitable and better financial system. Learn more.

Driving the day

8:30 a.m. Commerce Department releases data on retail sales in July … 1:30 p.m. Fed Chair Jerome Powell holds a virtual town hall with teachers and students

FED WEIGHS ENDING ASSET PURCHASES BY MID-2022 — WSJ’s Nick Timiraos: “Federal Reserve officials are nearing agreement to begin scaling back their easy money policies in about three months if the economic recovery continues, with some pushing to end their asset-purchase program by the middle of next year.

“In recent interviews and public statements, several have advocated for this timetable, which would enable them to raise interest rates sooner than currently anticipated if the economy makes rapid progress toward their goals.”

YELLEN GETS A CHANCE TO SHAPE THE FED (FROM THE OUTSIDE) — NYT’s Jeanna Smialek and Alan Rappeport: “Janet L. Yellen has dedicated most of her professional life to the Federal Reserve. She served in its highest-ranking roles, including as president of the Federal Reserve Bank of San Francisco, on its Washington-based board and as the central bank’s first female chair. When President Donald J. Trump decided to replace her in that role in 2017, she was sorely disappointed.

“Now, as Treasury secretary, Ms. Yellen is getting another chance to shape the future of the institution. She will be a critical voice in deciding who ought to lead the central bank in what some see as a once-in-a-generation opportunity to remake an institution that shepherds America’s economy and helps to regulate its largest banks.”

Treasury Secretary Janet Yellen gets up after testifying at a hearing.

Treasury Secretary Janet Yellen gets up after testifying at a hearing of the Federal Reserve Board Joint Economic Committee, Wednesday, Nov. 29, 2017, in what is expected to be her last appearance on Capitol Hill in Washington when she served as Federal Reserve chair. | (Jacquelyn Martin/AP Photo)

CORPORATE AMERICA GROWS IMPATIENT ON CHINA — Our Gavin Bade: “Corporate America was happy to give President Joe Biden a chance to reset his predecessor’s approach to China. Now, they want action. Nearly eight months into his presidency, America’s largest corporations are voicing frustration that Biden has not rolled back any of former President Donald Trump’s major tariffs, particularly the duties on $350 billion worth of Chinese imports.

“Other than announcing a top-to-bottom China review in January, Biden’s administration has given little indication how it will handle trade issues with its chief global rival. That has corporations leaning on Congress to pass relief on tariffs and trade restrictions this fall.”

RAISE THE FED’S INFLATION TARGET? — A new Peterson Institute policy brief from David Reifschneider and David Wilcox, both former Fed officials: “In 2012, the Federal Reserve formally adopted an inflation target and set it at 2 percent, in line with the level chosen by many other central banks. In hindsight, this setting left policymakers with too little room to cut interest rates when they want to fight recessions. Many researchers have noted that if central banks raised their inflation targets—either individually or in concert—they could do a better job in the long run of keeping inflation near its target and the workforce fully employed.

“ … Model simulations suggest that if the target were lifted to 3 percent, the unemployment rate could average ¾ percentage point or more below its sustainable level during the first 15 years after the higher target is announced.”

FED TELLS JUDGE SCRAPPING LIBOR TOO SOON WOULD SPUR MARKET CHAOS — Bloomberg’s Erik Larson: “The Federal Reserve told a judge not to scrap Libor as requested by consumers in a lawsuit because it would pose a risk to financial stability and undermine years of global planning for a transition to a new benchmark for borrowing rates. A staged transition away from the London interbank offered rate is underway globally, but immediately ending [Libor] by court order would likely harm consumers and businesses, the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York said in a filing Friday in federal court in San Francisco.”

INTRODUCING OTTAWA PLAYBOOK : Join the growing community of Politicos — from lawmakers and leaders to pollsters, staffers, strategists and lobbyists — working to shape Canada’s future. Every day, our reporting team pulls back the curtain to shed light on what’s really driving the agenda on Parliament Hill, the true players who are shaping politics and policy across Canada, and the impact it all has on the world. Don’t miss out on your daily look inside Canadian politics and power. Subscribe to Ottawa Playbook today.

Fly Around

COMPANIES ARE HOARDING CASH AMID DELTA FEARS — WSJ’s Anna Hirtenstein: “Companies are sitting on a record amount of cash amid lingering uncertainty about disruptions from Covid-19, defying expectations earlier this year that a waning pandemic would unleash a spending spree. Cash and short-term investments on corporate balance sheets globally are at an all-time high of $6.84 trillion, according to data from S&P Global, extrapolated from second-quarter earnings reports. That is 45 percent higher than the average in the five years preceding the pandemic and a 2.6 percent increase from the previous quarter.”

S&P HITS NEW RECORD — AP’s Damian J. Troise and Alex Veiga: “A choppy day on Wall Street ended Monday with the S&P 500 and Dow Jones Industrial Average notching new highs after recovering from an early slide. The indexes each rose 0.3 percent, extending their winning streak to a fifth day, while the Nasdaq fell 0.2 percent. Technology and health care stocks accounted for much of the gain in the S&P 500. Sectors traditionally considered lower risk, including utilities and companies that make food and personal goods also helped lift the market. Those gains outweighed a pullback in banks, energy stocks and a swath of retailers and travel sector companies. ”

SEC TO TAKE ON CORPORATE AMERICA OVER WORKFORCE DISCLOSURES — Reuters’ Katanga Johnson: “The U.S. Securities and Exchange Commission is headed for a scuffle with corporate America over how much information public companies must disclose about their most important asset: employees.

“Urged on by progressive Democrats, unions and investors, the regulator is working on a rule that will require public companies to disclose more information on their workforces, such as data on diversity, staff compensation and employee turnover. As companies depend less on physical assets and more on employees, including gig workers and contractors, such ‘human capital’ data provides crucial insight into corporate strategy and governance issues, investors and employee advocates say.”

GENSLER WARNS OF CHINESE COMPANY RISKS FOLLOWING SEC CRACKDOWN — Bloomberg’s Benjamin Bain: “U.S. Securities and Exchange Commission Chair Gary Gensler issued his most direct warning on Monday about the risks of investing in Chinese companies. Gensler said in a video message that there is a lot that American investors don’t know about some Chinese companies that are listed on U.S. stock exchanges. His remarks come just weeks after the regulator halted initial public offerings of Chinese companies until they boost disclosures.

“’That means disclosing the political and regulatory risk that the government of China could, as they’ve done a number of times recently, significantly change the rules in the middle of the game,’ Gensler said in the video.”

TRANSITIONS — Blair Smith, who previously served as chief investment officer for the Upper Manhattan Empowerment Zone Development Corporation, is joining the Milken Institute’s Center for Financial Markets as a senior director

A message from The Consumer Data Information Association:

Credit reports play an important role in Americans’ lives by helping them achieve their financial goals and by protecting the economy. Our industry works across the financial ecosystem to make sure people have frequent, free access to their credit reports and are able to maintain their financial health as best as possible.

The credit reporting ecosystem is always innovating to bring more people into the financial system and to help lenders responsibly find new consumers. Our competitive system is highly regulated to make sure consumers are getting the service they need fairly. Working together we can expand financial equity by bringing new data into the system, helping millions of Americans access the financial system and gain greater access to credit. Learn more.

Be a Policy Pro. POLITICO Pro has a free policy resource center filled with our best practices on building relationships with state and federal representatives, demonstrating ROI, and influencing policy through digital storytelling. Read our free guides today .