web analytics
a

Facebook

Twitter

Copyright 2015 Libero Themes.
All Rights Reserved.

8:30 - 6:00

Our Office Hours Mon. - Fri.

703-406-7616

Call For Free 15/M Consultation

Facebook

Twitter

Search
Menu
Westlake Legal Group > Posts tagged "Banking and Financial Institutions"

Trump Administration Faces Economic Test as Coronavirus Shakes Markets

Westlake Legal Group 27DC-TRUMPECON-01-facebookJumbo Trump Administration Faces Economic Test as Coronavirus Shakes Markets United States Politics and Government United States Economy Trump, Donald J Taxation International Trade and World Market Interest Rates Federal Reserve System Economic Conditions and Trends Coronavirus (2019-nCoV) Banking and Financial Institutions

WASHINGTON — The global spread of the deadly coronavirus is posing a significant economic test for President Trump, whose three-year stretch of robust growth could be shaken by supply chain delays, a tourism slowdown and ruptures in other critical sectors of the American economy.

The outbreak of the virus in China has already disrupted global trade, sending American companies and retailers that rely on Chinese imports scrambling to repair a temporary break in their supply chains. Its spread to South Korea, Italy and beyond has hindered global travel. Economic forecasters say that the effects will hurt growth in the United States this year even if they do not intensify — and that if the virus becomes a global pandemic, it could knock the world economy into recession.

Stock markets have plunged this week on fears about the virus, with companies such as Apple and Microsoft among the most prominent businesses that have warned that supply chain disruptions could slow sales. Analysts said this week’s declines were on track to be the steepest since the 2008 financial crisis.

The market’s fall presents a challenge for Mr. Trump, whose presidential success has been deeply tied to the economy and a rising stock market that is now experiencing pronounced jitters. For now, Mr. Trump has publicly played down the potential economic fallout, saying woes at the aerospace giant Boeing, a strike last year at General Motors and the Federal Reserve’s reluctance to slash interest rates have done more to hurt the economy.

“We have been hurt by General Motors,” Mr. Trump said on Wednesday. “We’ve been hurt by Boeing. And we’ve been hurt by — we’ve been hurt, in my opinion, very badly, by our own Federal Reserve.”

Health officials expect a spike in coronavirus cases in the United States, though it remains unclear how soon and how severe an outbreak might occur. Officials have warned the nation to be prepared for the virus to spread.

If the infection gains a big foothold in the United States, it could disrupt the economy, which has been expanding steadily with an unemployment rate that has hovered near a 50-year low for more than a year. In an extreme scenario where the virus severely hits the United States, it could keep workers at home and grind production to a halt, hurting revenue streams and tanking even highly leveraged corporations as they fall behind on debt payments. In the least severe case, the current slowdown in China could cause a short-lived growth blip.

  • Answers to your most common questions:

    Updated Feb. 26, 2020

    • What is a coronavirus?
      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.
    • What if I’m traveling?
      The C.D.C. has warned older and at-risk travelers to avoid Japan, Italy and Iran. The agency also has advised against all nonessential travel to South Korea and China.
    • Where has the virus spread?
      The virus, which originated in Wuhan, China, has sickened more than 80,000 people in at least 33 countries, including Italy, Iran and South Korea.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is probably transmitted through sneezes, coughs and contaminated surfaces. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • Who is working to contain the virus?
      World Health Organization officials have been working with officials in China, where growth has slowed. But this week, as confirmed cases spiked on two continents, experts warned that the world was not ready for a major outbreak.

Economists at Goldman Sachs already expect to shave 0.8 percentage points off the United States gross domestic product in the first three months of 2020 because of slumping tourism from China and trade slowdowns. But they expect a quick rebound in the second quarter that will help to make up for the downturn.

Other economists, including those at Moody’s Analytics, foresee more drastic fallout if widespread infections appear in other countries. A global recession “is likely” if the virus “becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea,” Mark Zandi, Moody’s chief economist, wrote on Wednesday.

Chang-Tai Hsieh, an economist at the University of Chicago’s Booth School of Business who tracks Chinese economic data, said in an interview Thursday that the effects on American growth will be “huge” even in a best-case scenario with the virus. Chinese business activity, he said, is running at about 20 percent of normal levels.

“The economic consequences are, everything is down” in China, he said. “Everything is down tremendously.”

As forecasts worsen, investor expectations of a Fed cut are quickly increasing. As of Thursday, investors were betting on a March rate cut, a move that seemed highly unlikely as recently as a week ago. Many now expect two cuts by June, market pricing suggests.

Democrats on the House Financial Services Committee sent a letter on Thursday to Jerome H. Powell, the chairman of the Federal Reserve, asking for more information about whether an outbreak of the virus in the United States could cause a recession and what tools the central bank had to combat a supply shock to the economy.

Central bank policymakers said on Thursday that they were closely monitoring viral developments, though they did not yet signal a coming cut.

“It really depends on: What are the medium-term implications for the U.S. economy?” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in an interview. “If people are temporarily staying home, not traveling, not interacting and purchasing things, that could be a short-term hit. Or it could develop into something broader — and that’s the kind of calculus you have to do when you’re thinking about monetary policy.”

But rate cuts may have a limited effect: They work by stimulating demand, which could help if consumers and investors get spooked and stop spending. But cuts will do little to restart factories and correct supply problems.

“We’d absolutely expect to see a response from the Federal Reserve, not least to shore up confidence,” said Paul Ashworth, an economist at Capital Economics, a research consultancy. But he pointed out that monetary policy worked on the economy with a six- to nine-month lag, and “it doesn’t deal with the supply-side impact of, say, one-third of your work force catching this.”

The more critical response may come from Congress and the Trump administration, which have done little thus far to script a fiscal response.

Perhaps the most important thing the government can do to insulate the economy is to stem the outbreak, keeping Americans on the job and spending. If that fails, though, fiscal responses are an option; Hong Kong and China, both hit hard, have rolled out packages to help bolster growth. Tax and spending policies might also encourage demand more than fixing supply, but they can also work more quickly than monetary policy.

House Speaker Nancy Pelosi of California and Senator Chuck Schumer of New York, the Democratic leader, on Thursday morning called for Congress and Mr. Trump to fashion a spending bill meant to “address the spread of the deadly coronavirus in a smart, strategic and serious way.” A response should include interest-free loans for “small businesses impacted by the outbreak.”

Such a program would represent targeted relief but not an effort to dramatically increase consumer demand in the economy.

But such a plan seems far-off, if not improbable. Democratic and Republican leaders in Congress have not opened talks with the White House or between the House and Senate over any possible package of tax cuts and spending increases that would be meant to stimulate the economy in the event of a virus-related downturn. Top Senate aides said on Thursday that it was too soon for such conversations, with Mr. Trump’s allies noting the persistence of low unemployment and continued economic growth.

Michael Zona, a spokesman for the Senate Finance Committee and its chairman, Charles E. Grassley of Iowa, said on Thursday that “at this point, the coronavirus has not had a broad impact on the U.S. economy, and its effects have been limited.” But Mr. Zona said Mr. Grassley and the committee were “ready to consider appropriate tax relief responses if that becomes necessary and the extent of the problem can be determined.”

Mr. Trump’s economic advisers had already been working on a package of tax cuts intended to serve as a centerpiece of his 2020 campaign. That package, which is still in flux and probably months away, could include new tax cuts for the middle class and for start-up businesses, along with extensions of some expiring provisions of the 2017 tax cuts. Tax experts who have spoken with the administration do not see the effort as an immediate stimulus package, but more as an attempt to build on the 2017 law and offer voters a contrast between Mr. Trump and his Democratic opponent.

On Thursday, the White House added Treasury Secretary Steven Mnuchin and Larry Kudlow, the director of the National Economic Council, to the president’s coronavirus task force. Both officials have been working on the tax plan. The Financial Banking and Information Infrastructure Committee, chartered under the president’s Working Group on Financial Markets and chaired by Treasury, is in regular communication and is also monitoring the economic fallout from the virus.

With Democrats controlling the House, there has been little expectation of major tax legislation before the November election. There was no sign on Thursday, from inside or outside the White House, that the coronavirus had changed that.

“The bipartisan consensus on Capitol Hill is that substantive tax policy is not happening before the lame duck” session after the election, said George Callas, the managing director at Steptoe & Johnson LLP, who was tax counsel to former House Speaker Paul D. Ryan of Wisconsin. “I haven’t seen that change in thinking happen yet.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion

Westlake Legal Group 21wellsfargo1-facebookJumbo The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion Wells Fargo&Company Regulation and Deregulation of Industry Banking and Financial Institutions

Wells Fargo has agreed to pay $3 billion to settle criminal charges and a civil action stemming from its widespread mistreatment of customers in its community bank over a 14-year period, the Justice Department announced on Friday.

From 2002 to 2016, employees used fraud to meet impossible sales goals. They opened millions of accounts in customers’ names without their knowledge, signed unwitting account holders up for credit cards and bill payment programs, created fake personal identification numbers, forged signatures and even secretly transferred customers’ money.

In court papers, prosecutors described a pressure-cooker environment at the bank, where low-level employees were squeezed tighter and tighter each year by sales goals that senior executives methodically raised, ignoring signs that they were unrealistic. The few employees and managers who did meet sales goals — by any means — were held up as examples for the rest of the work force to follow.

“This case illustrates a complete failure of leadership at multiple levels within the bank,” Nick Hanna, U.S. attorney for the Central District of California, said in a statement. “Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way.”

Now the bank is grappling with the lingering consequences. Part of Friday’s deal, which includes a $500 million fine by the Securities and Exchange Commission, is a deferred prosecution agreement, a pact with prosecutors that could expose the bank to charges if it engages in new criminal activity.

“We are committing all necessary resources to ensure that nothing like this happens again,” Wells Fargo’s chief executive, Charles W. Scharf, said in a statement on Friday.

The penalty, while large, is not record breaking. In 2015, a judge ordered BNP Paribas to pay nearly $9 billion for sanctions violations. Friday’s fine is not even the largest against Wells Fargo. In 2012, when the country’s five largest banks paid a total of $26 billion to state and federal authorities to settle investigations into their mortgage lending practices in the years leading up to the 2008 financial crisis, Wells Fargo’s portion was $5.35 billion. Including Friday’s penalty, the bank has paid more than $18 billion in fines for misconduct since the financial crisis.

Wells Fargo’s profits last year totaled nearly $20 billion.

Senior Justice Department officials told journalists in a briefing on Friday that the bank’s payments to other authorities, including $1 billion in fines to the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau in 2018, were a mitigating factor in determining how much it would owe in the current settlement.

The practices for which Wells Fargo is being punished in the current deal — which includes an admission by the bank that it falsified banking records — are not the only misbehavior the bank has revealed since 2016. Since they came to light in a settlement with California authorities and the Consumer Financial Protection Bureau, the bank has also admitted it charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need.

Those matters are not part of Friday’s deal, and Justice Department officials declined to comment on whether they intended to take more action against the bank.

Wells Fargo is still under investigation by the consumer bureau over its practice of abruptly closing customers’ accounts, and has said in regulatory filings that the authorities are looking into improper fees it charged wealth management customers.

Friday’s deal is also unrelated to a continuing criminal investigation of former Wells Fargo executives’ individual roles in the sales practices scandal. On Jan. 23, the Office of the Comptroller of the Currency fined former top executives millions of dollars each for overseeing the bank while it abused customers. A former Wells Fargo chief executive, John G. Stumpf, agreed to pay $17.5 million, while others are fighting the cases brought by the regulator. One of them, Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, faces a $25 million fine.

Justice Department officials said the settlement also did not include similar conduct that fell outside the 14-year period.

In early 2018, the Federal Reserve imposed growth restrictions on Wells Fargo that will be lifted only after the bank has shown its regulators that it has made significant changes to prevent bad behavior like the fake account scandal. Since taking over in October, Mr. Scharf has not offered any hints about when that goal might be accomplished.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion

Westlake Legal Group 21wellsfargo1-facebookJumbo The Price of Wells Fargo’s Fake Account Scandal Grows by $3 Billion Wells Fargo&Company Regulation and Deregulation of Industry Banking and Financial Institutions

Wells Fargo has agreed to pay $3 billion to settle criminal charges and a civil action stemming from its widespread mistreatment of customers in its community bank over a 14-year period, the Justice Department announced on Friday.

From 2002 to 2016, employees used fraud to meet impossible sales goals. They opened millions of accounts in customers’ names without their knowledge, signed unwitting account holders up for credit cards and bill payment programs, created fake personal identification numbers, forged signatures and even secretly transferred customers’ money.

In court papers, prosecutors described a pressure-cooker environment at the bank, where low-level employees were squeezed tighter and tighter each year by sales goals that senior executives methodically raised, ignoring signs that they were unrealistic. The few employees and managers who did meet sales goals — by any means — were held up as examples for the rest of the work force to follow.

“This case illustrates a complete failure of leadership at multiple levels within the bank,” Nick Hanna, U.S. attorney for the Central District of California, said in a statement. “Wells Fargo traded its hard-earned reputation for short-term profits, and harmed untold numbers of customers along the way.”

Now the bank is grappling with the lingering consequences. Part of Friday’s deal, which includes a $500 million fine by the Securities and Exchange Commission, is a deferred prosecution agreement, a pact with prosecutors that could expose the bank to charges if it engages in new criminal activity.

“We are committing all necessary resources to ensure that nothing like this happens again,” Wells Fargo’s chief executive, Charles W. Scharf, said in a statement on Friday.

The penalty, while large, is not record breaking. In 2015, a judge ordered BNP Paribas to pay nearly $9 billion for sanctions violations. Friday’s fine is not even the largest against Wells Fargo. In 2012, when the country’s five largest banks paid a total of $26 billion to state and federal authorities to settle investigations into their mortgage lending practices in the years leading up to the 2008 financial crisis, Wells Fargo’s portion was $5.35 billion. Including Friday’s penalty, the bank has paid more than $18 billion in fines for misconduct since the financial crisis.

Wells Fargo’s profits last year totaled nearly $20 billion.

Senior Justice Department officials told journalists in a briefing on Friday that the bank’s payments to other authorities, including $1 billion in fines to the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau in 2018, were a mitigating factor in determining how much it would owe in the current settlement.

The practices for which Wells Fargo is being punished in the current deal — which includes an admission by the bank that it falsified banking records — are not the only misbehavior the bank has revealed since 2016. Since they came to light in a settlement with California authorities and the Consumer Financial Protection Bureau, the bank has also admitted it charged mortgage customers unnecessary fees and forced auto loan borrowers to buy insurance they did not need.

Those matters are not part of Friday’s deal, and Justice Department officials declined to comment on whether they intended to take more action against the bank.

Wells Fargo is still under investigation by the consumer bureau over its practice of abruptly closing customers’ accounts, and has said in regulatory filings that the authorities are looking into improper fees it charged wealth management customers.

Friday’s deal is also unrelated to a continuing criminal investigation of former Wells Fargo executives’ individual roles in the sales practices scandal. On Jan. 23, the Office of the Comptroller of the Currency fined former top executives millions of dollars each for overseeing the bank while it abused customers. A former Wells Fargo chief executive, John G. Stumpf, agreed to pay $17.5 million, while others are fighting the cases brought by the regulator. One of them, Carrie L. Tolstedt, Wells Fargo’s former head of retail banking, faces a $25 million fine.

Justice Department officials said the settlement also did not include similar conduct that fell outside the 14-year period.

In early 2018, the Federal Reserve imposed growth restrictions on Wells Fargo that will be lifted only after the bank has shown its regulators that it has made significant changes to prevent bad behavior like the fake account scandal. Since taking over in October, Mr. Scharf has not offered any hints about when that goal might be accomplished.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

‘Now Is the Time’: Fed Official Urges Congress to Plan for Recessions

Westlake Legal Group merlin_166835511_978bff17-5237-4cad-a0ea-dc7282573229-facebookJumbo ‘Now Is the Time’: Fed Official Urges Congress to Plan for Recessions United States Economy Unemployment Insurance Recession and Depression Quantitative Easing Interest Rates Inflation (Economics) Federal Reserve System Daly, Mary C Brainard, Lael Banking and Financial Institutions

Federal Reserve officials and top economists have been debating which tools will work best to fight future recessions, and a clear consensus is forming: They are going to need lawmakers’ help.

Interest rates are mired at lower levels than in past economic expansions, part of a long-running trend that looks unlikely to reverse anytime soon. That leaves central bankers with less room to goose the economy in a downturn — and raises the possibility that they could exhaust their monetary ammunition in a serious slump.

Lael Brainard, a Fed governor, on Friday issued one of the clearest calls for proactive congressional action, while speaking at a conference in New York held by the University of Chicago Booth School of Business.

“Just as monetary policymakers are actively reviewing their tools and strategies, now is the time to undertake a review of fiscal tools and strategies to ensure they are ready and effective,” she said. Fiscal policy is made by lawmakers with taxing and spending authority, and Ms. Brainard said the design of “more automatic, faster-acting” responses in that arena would take work.

Central bankers are hoping that both Congress and state and local authorities will step up come the next recession, helping to offset any economic pain. Monetary policy remains a powerful tool for fighting downturns — and officials plan to use mass bond-buying and promises to keep rates low for longer to make up for their lost room to cut rates. But central bankers could run out of the ammunition they need to quickly return the economy to health.

The Fed has long used the federal funds rate as its primary tool for guiding the economy, and it is now set in a range of 1.5 percent to 1.75 percent. It was above 5 percent heading into the 2007 to 2009 recession.

“Long-term interest rates are likely to be much lower going into the next downturn than they were going into any recession in the past 75 years,” a set of top economists wrote in a paper prepared for the conference. “This will clearly limit the potential for old and new monetary policy tools to ease financial conditions and bolster economic outcomes.”

Fed Chair Jerome H. Powell often tells lawmakers that the Fed will need their help going forward. During testimony last week, he said that “it would be important for fiscal policy to help support the economy if it weakens.”

But Ms. Brainard’s implication that Congress should be thinking about how to make fiscal tools more automatic goes a bit further. The idea that Congress could pre-commit to taxing or spending policies that would kick in as soon as the economy starts to slow has increasingly been a centerpiece of Fed and academic economic research.

One such proposal is the so-called Sahm Rule. Created by Claudia Sahm, a former Fed economist, it would use a pronounced jump in the unemployment rate to trigger a fiscal response such as stimulus payments to households.

Ms. Brainard’s colleague, Mary C. Daly, president of the Federal Reserve Bank of San Francisco, has also made a case for government spending policies that kick in immediately.

Central bankers “face greater uncertainty about the impact of our tools and their ability to achieve our goals,” she said in a speech earlier this month. “Fiscal policy will need to play a larger role in smoothing through economic shocks,” and “expanding the array of automatic stabilizers that form part of the social safety net can help mitigate the depth and duration of economic downturns.”

Ms. Brainard did not endorse any specific set of policies, but pointed out that while “monetary policy is powerful but blunt,” fiscal policy can be used to tackle precise problems — important when a big share of households “have low liquid savings and are particularly vulnerable to periods of unemployment or underemployment.”

While some congressional committees have looked into supplementing or strengthening existing spending programs that work to counter recessions — like unemployment insurance, which pays out more when times are tough — they have not been beefed up since the Great Recession.

Some economists worry that a divided Congress would be slow to coalesce around a big spending package, like the crisis-era American Recovery and Reinvestment Act, to help right the economy in a future downturn.

The onus does not fall entirely on lawmakers. As Ms. Brainard suggested, the Fed itself is thinking about how to make monetary policy faster-acting in times of crisis.

Part of the reason that the recovery from the Great Recession was so plodding is that monetary policy responded only slowly, many economists think, and then took a long time to seep through the financial system.

“We should clarify in advance that we will deploy a broader set of tools” to right the economy, Ms. Brainard said. “To have the greatest effect, it will be important to communicate and explain the framework in advance so that the public anticipates the approach and takes it into account in their spending and investment decisions.”

It is not a foregone conclusion that the Fed will find its powers depleted come the next expansion. Ben S. Bernanke, the former chair, estimates that tools including bond-buying will be enough. Proactive promises like the ones Ms. Brainard raised could help, too.

But if such policies fall short, the consequences could be serious. Europe and Japan’s experiences have showed that weak economic recoveries can lead to slumping inflation. They also come at a huge human cost, as workers struggle to find jobs and experience drawn-out periods of weak wage growth.

“Monetary policy should not be the only game in town,” according to the paper presented at the conference, written by a group of economists including JPMorgan Chase’s Michael Feroli and Citigroup’s Catherine Mann. The group wrote that “monetary policymakers should be humble about how much can be expected” from new monetary policy tools.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Morgan Stanley to Buy E-Trade, Linking Wall Street and Main Street

Westlake Legal Group 20db-etrade2-facebookJumbo Morgan Stanley to Buy E-Trade, Linking Wall Street and Main Street Morgan Stanley E TRADE Financial Corporation Banking and Financial Institutions

Morgan Stanley is betting its future on Main Street.

The Wall Street giant moved further from its investment banking origins on Thursday with an agreement to buy the discount brokerage E-Trade for about $13 billion, the biggest takeover by a major American lender since the 2008 global financial crisis.

The addition of E-Trade would allow Morgan Stanley to tap into a new source of revenue: the smaller-volume trades of the country’s so-called mass affluent, people who are wealthy enough to have some savings but not rich enough to buy into hedge funds or seek out a money manager. If it goes through, the deal will put Morgan Stanley, which does not have retail bank branches to draw in new asset-management customers, on firmer footing with competitors like Bank of America and Wells Fargo.

It would also give Morgan Stanley a big share of the market for online trading, an additional 5.2 million customer accounts and $360 billion in assets.

Morgan Stanley’s chief executive, James P. Gorman, said the merger would disrupt neither E-Trade clients nor Morgan Stanley customers, but ultimately result in more services for all.

The deal highlights the increasing convergence of Wall Street and Main Street: Elite bastions of corporate finance are seeking to cater to customers with smaller pocketbooks, and online brokerages that once hoped to overthrow traditional trading houses are instead suffering from a price war that has slashed their profits.

It also reflects a continuing shift in strategy for Morgan Stanley, which long relied on fees from high-finance services like mergers, stock offerings and massive trading desks but has lately embraced steady fees over bigger paydays and bigger risks.

Under Mr. Gorman, who has led the bank for a decade, Morgan Stanley has de-emphasized the businesses of jet-setting investment bankers and aggressive Manhattan traders, preferring the predictable and less costly realm of wealth management. It’s a strategy playing out all along Wall Street: In the dozen years since the start of the financial crisis, major financial firms from Credit Suisse to Goldman Sachs have embraced what are considered lower-risk business lines.

“This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue,” said Mr. Gorman, whose most transformative deal at Morgan Stanley before Thursday was its acquisition of Smith Barney’s retail brokerage in 2012.

E-Trade was an enticing target: It has struggled as brokerages slashed fees in a fight that peaked last fall when Charles Schwab eliminated fees for the trading of stocks and exchange-trade funds, and later agreed to buy TD Ameritrade for $26 billion.

Michael McTamney, who researches banks for the ratings agency DBRS Morningstar, said the deal accelerated Morgan Stanley’s growth plans. The bank already had a strong high-net-worth client base, he said, and now “they’ll be able to bring in this next generation of wealth via the E-Trade platform.”

If the deal goes through — it needs the approval of E-Trade shareholders and regulators — more than half of Morgan Stanley’s pretax profits will come from wealth and investment management, compared with 26 percent a decade ago.

Morgan Stanley’s $2.7 trillion in assets are largely tied to big companies and wealthy individuals. The E-Trade deal would expand its access to the comparatively well heeled, a group that encompasses more than 20 million households in the United States.

But Morgan Stanley could face a challenge luring this sort of investor toward its higher-touch investment management services.

Many E-Trade customers manage their own investments because of their intense distaste for the old-fashioned brokerage business. Others are hobbyists, trading a chunk of their retirement portfolios or some mad money. Both types have benefited greatly from decades of price wars that have made it possible for customers to pay nothing to maintain a brokerage account. Morgan Stanley will raise those fees at its peril.

But the addition of E-Trade offers another way to make money from those customers. Morgan Stanley could use the brokerage as the vehicle for delivering other products and services, such as shares of initial public offerings it has underwritten.

In Mr. Gorman’s words, the combination would unite Morgan Stanley’s “full-service, adviser-driven model” with E-Trade’s “direct-to-consumer and digital capabilities.”

Morgan Stanley is betting that regulators in Washington will approve what is perhaps the most consequential acquisition by a so-called systemically important American bank — the too-big-to-fail variety of financial institution — since 2008.

Under the Obama administration, officials at the Federal Reserve fretted about the nation’s biggest banks growing through mergers. Daniel Tarullo, a former Fed governor, said in a 2012 speech that the central bank should have a “strong, but not irrebuttable, presumption of denial” for takeovers by America’s banking titans.

But the Fed has become more industry friendly during the Trump administration, particularly with the addition of officials like Vice Chairman Randal K. Quarles, a former bank lawyer who is helping reassess the rules put in place after the financial crisis. The central bank recently approved the combination of BB&T and SunTrust, paving the way for the creation of the sixth-largest U.S. commercial bank.

The acquisition could look attractive to regulators from a financial stability perspective: The deal would infuse the Wall Street bank with stable deposits and reliable revenue streams. But it will also make Morgan Stanley more of a behemoth.

Morgan Stanley doubtless hopes an E-Trade deal goes more smoothly than a past effort to pull in retail clients. Its merger with Dean Witter Reynolds two decades ago foundered amid a clash between Morgan Stanley’s Wall Street aristocrats and Dean Witter’s more down-market brokers. Since then, however, the bank has been steadily shifting toward asset management — one of a number of approaches major banks have been trying to court Main Street.

Morgan Stanley’s traditional rival, Goldman Sachs, created a retail-focused lending arm, Marcus, in 2016 and teamed up with Apple last year to offer a credit card. Last month, Goldman said it intended to expand its retail deposit base to $125 billion, and its consumer loan and card balance to $20 billion, over the next five years.

Investors seem to be more taken with Morgan Stanley’s continuing shift than with Goldman’s, at least based on the Wall Street scoreboard of stock prices. Shares in Morgan Stanley have climbed nearly 33 percent over the past 12 months, while those in Goldman have risen about 19 percent.

Late last year, JPMorgan Chase — already known for its enormous banking operations in both the consumer and the institutional areas — established a new platform that is meant to combine financial advisory services within its bank branches with wealth-management and online brokerage offerings.

And Bank of America, whose acquisition of Merrill Lynch during the financial crisis made it a heavyweight in the wealth-management business, has moved to court less-wealthy clients as well.

Under the terms of the deal announced on Thursday, Morgan Stanley will buy E-Trade using its own stock. Its offer is worth about $58.74 a share as of Wednesday’s market close, a 30 percent premium on the value of the online brokerage’s shares.

E-Trade’s chief executive, Michael Pizzi, would continue to run the business upon the deal’s closing, which is expected by year’s end.

Jeanna Smialek and Ron Lieber contributed reporting.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Blue Chip Morgan Stanley to Buy Discount Broker E-Trade

Westlake Legal Group Morgan-Stanley001-facebookJumbo Blue Chip Morgan Stanley to Buy Discount Broker E-Trade Morgan Stanley E TRADE Financial Corporation Banking and Financial Institutions

Morgan Stanley announced on Thursday that it would buy E-Trade, the online discount brokerage, for about $13 billion, in the biggest takeover by a major American lender since the 2008 global financial crisis.

The deal would give Morgan Stanley — long one of Wall Street’s blue-chip names, whose asset management business caters to the wealthy — a big share of the market for online trading, an additional 5.2 million customer accounts and $360 billion in assets.

The deal highlights the increasing convergence of Wall Street and Main Street: Elite bastions of corporate finance are increasingly seeking to cater to customers with smaller pocketbooks, and online brokerages that once hoped to overthrow traditional trading houses are instead suffering from a price war that has slashed their profits.

It also reflects Morgan Stanley’s strategy of focusing on asset management rather than investment banking and high-stakes trading, betting on steady fees over bigger paydays and bigger risks.

Under James P. Gorman, Morgan Stanley’s chief executive for a decade, the firm has increasingly de-emphasized jet-setting mergers bankers and aggressive bond trading, preferring the predictable and less costly business of wealth management.

Before Thursday, Mr. Gorman’s most transformative deal at Morgan Stanley was its acquisition of Smith Barney’s retail brokerage in 2012.

“This continues the decade-long transition of our firm to a more balance-sheet-light business mix, emphasizing more durable sources of revenue,” Mr. Gorman said in a statement.

If the deal goes through — it needs the approval of E-Trade shareholders and regulators — more than half of Morgan Stanley’s pretax profits would come from wealth and investment management, compared with 26 percent a decade ago.

Before the deal, Morgan Stanley’s $2.7 trillion in assets were largely tied to big companies and wealthy individuals.

The move will expand the bank’s access to well-heeled but not superrich investors — known in the trade as the mass-affluent segment — a sought-after group estimated to encompass more than 20 million households in the United States.

In addition to capturing the trading business that E-Trade brings, Morgan Stanley could use the brokerage as the vehicle for delivering other products and services, such as shares of initial public offerings it has underwritten.

In Mr. Gorman’s words, the combination would unite Morgan Stanley’s “full-service, adviser-driven model” with E-Trade’s “direct-to-consumer and digital capabilities.”

Michael McTamney, who researches banks for the ratings agency DBRS Morningstar, said the deal accelerates Morgan Stanley’s growth plans. The bank already had a strong high-net-worth client base, he said, and now “they’ll be able to bring in this next generation of wealth via the E-Trade platform.”

The deal would not be Morgan Stanley’s first with a retail stock brokerage. It merged with Dean Witter Reynolds two decades ago, only for the marriage to founder amid a clash between Morgan Stanley’s Wall Street aristocrats and Dean Witter’s more down-market brokers.

Morgan Stanley’s traditional rival, Goldman Sachs, has also sought to court Main Street, in a different way. Goldman created a retail-focused lending arm, named Marcus, in 2016 and partnered with Apple last year to offer a credit card.

Last month, Goldman said that it intended to grow its retail deposit base to $125 billion, and its consumer loan and card balance to $20 billion, over the next five years.

Morgan Stanley’s approach appears to have won over investors more than Goldman’s has, at least based on the Wall Street scoreboard of stock prices. Shares in Morgan Stanley have climbed nearly 33 percent over the past 12 months, while those in Goldman have risen about 19 percent.

Bigger rivals have focused on this space as well. Late last year, JPMorgan Chase — already known for its enormous banking operations in both the consumer and the institutional areas — established a new platform that is meant to combine financial advisory services within its bank branches with wealth-management and online brokerage offerings.

And Bank of America, whose acquisition of Merrill Lynch during the financial crisis made it a heavyweight in the wealth-management business, has moved to court less-wealthy clients as well.

E-Trade has struggled amid a price war among brokerages, begun in earnest last fall when Charles Schwab eliminated fees for the trading of stocks and exchange-trade funds. Schwab later agreed to buy TD Ameritrade for $26 billion.

In striking Thursday’s deal, Morgan Stanley is betting that regulators in Washington will approve what is perhaps the most consequential acquisition by a systemically important American bank since the financial crisis.

Under the Obama administration, officials at the Federal Reserve fretted about the nation’s biggest banks growing through mergers. Daniel Tarullo, a former Fed governor, said in a 2012 speech that the central bank should have a “strong, but not irrebuttable, presumption of denial” for takeovers by America’s banking titans.

But the Fed has become more industry friendly during the Trump administration, particularly with the addition of officials like Randal K. Quarles, the central bank’s vice chairman. The central bank recently approved the combination of BB&T and SunTrust, paving the way for the creation of the sixth-largest U.S. commercial bank.

In some ways, Morgan Stanley’s acquisition of E-Trade could look attractive to regulators from a financial stability perspective: The deal would infuse the Wall Street bank with stable deposits and reliable revenue streams. But it will also make Morgan Stanley even more of a behemoth.

Under the terms of the deal announced on Thursday, Morgan Stanley will buy E-Trade using its own stock. Its offer is worth about $58.74 a share as of Wednesday’s market close, a 30 percent premium on the value of the online brokerage’s shares.

E-Trade’s chief executive, Michael Pizzi, would continue to run the business upon the deal’s closing, which is expected by year’s end.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Fed Flagged Coronavirus Risk at January Meeting

Westlake Legal Group 19DC-FED-01-facebookJumbo Fed Flagged Coronavirus Risk at January Meeting United States Economy Powell, Jerome H Interest Rates Inflation (Economics) Federal Reserve System Factories and Manufacturing Economic Conditions and Trends Coronavirus (2019-nCoV) Banking and Financial Institutions

WASHINGTON — Federal Reserve officials left interest rates unchanged at their January meeting as the economy grew steadily, but they spent their meeting reviewing risks to the outlook — including fresh concerns about the coronavirus that had begun to take hold in China.

Minutes from the Fed’s Jan. 28 and 29 meeting showed that officials called the new coronavirus “a new risk to the global growth outlook.” At the time, the outbreak had killed more than 100 people and sickened about 5,000. It has continued to spread since, causing more than 2,000 deaths and infecting more than 75,000 people.

Central bankers have been cautious about predicting how much the virus will affect the United States economy, though they have made it clear that they expect some spillover. Swaths of China have ground to a standstill as authorities try to contain the virus by shuttering factories and enforcing quarantines, disrupting trade and tourism. Factories across the nation are reopening, but haltingly.

The Fed is monitoring how the economic fallout in China bears on American growth and inflation.

“The question for us really is: What will be the effects on the U.S. economy? Will they be persistent, will they be material?” Jerome H. Powell, the Fed chair, told lawmakers while testifying last week. “We know that there will be some, very likely to be some effects on the United States. I think it’s just too early to say.”

Fed officials have signaled that they plan to leave policy unchanged as they wait to see how the economy shapes up in 2020. That patient stance comes after central bankers cut interest rates three times last year in a bid to insulate the economy against fallout from President Trump’s trade war and a slowdown abroad.

  • What do you need to know? Start here.

    Updated Feb. 10, 2020

    • What is a Coronavirus?
      It is a novel virus named for the crown-like spikes that protrude from its surface. The coronavirus can infect both animals and people, and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is possibly transmitted through the air. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • How worried should I be?
      While the virus is a serious public health concern, the risk to most people outside China remains very low, and seasonal flu is a more immediate threat.
    • Who is working to contain the virus?
      World Health Organization officials have praised China’s aggressive response to the virus by closing transportation, schools and markets. This week, a team of experts from the W.H.O. arrived in Beijing to offer assistance.
    • What if I’m traveling?
      The United States and Australia are temporarily denying entry to noncitizens who recently traveled to China and several airlines have canceled flights.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.

While an initial trade deal with China has alleviated some uncertainty that dogged America’s economy last year, tensions are not fully resolved. Beyond that, manufacturing remains slow and business investment is still weak.

“Participants generally expected trade-related uncertainty to remain somewhat elevated, and they were mindful of the possibility that the tentative signs of stabilization in global growth could fade,” according to the January minutes. Against that backdrop, they saw the current policy as “likely to remain appropriate for a time.”

Interest rates are currently set in a range between 1.5 and 1.75 percent. That is below the Fed’s longer-run estimate of where its rate will settle, and officials believe the current stance should give the economy a slight boost.

The central bank’s next meeting will take place March 17 and 18 in Washington. Since the January gathering, Fed officials have consistently signaled that they remain comfortable leaving rates unchanged for now, unless an economic surprise knocks them off that course.

Coronavirus is not the only risk on the Fed’s radar.

Some Fed officials fretted over financial stability risks at the meeting, noting that “financial imbalances — including overvaluation and excessive indebtedness — could amplify an adverse shock to the economy.”

And “several” pointed out that “planned increases in dividend payouts by large banks and the associated decline in capital buffers might leave those banks with less capacity to weather adverse shocks.”

But the minutes also suggest a paradox for regulators, noting that relatively high capital requirements could cause “potential migration of lending activities” into the shadow banking system — loosely regulated non-bank lenders where supervisors lack oversight authority. From the way the minutes are written, it is unclear how many people shared in that concern.

Officials also discussed a longer-running problem at the January gathering: inflation has remained below policy maker’s 2 percent goal even as the unemployment rate lingers near half-century lows and the economy grows steadily.

“A few participants stressed that the Committee should be more explicit about the need to achieve its inflation goal on a sustained basis,” the minutes said. Several said that “mild overshooting” might help the Fed to reinforce that its goal is symmetric, meaning that officials want price gains to oscillate around 2 percent rather than hovering below that level.

If prices grow too slowly, it diminishes the central bank’s already-limited room to cut interest rates in a recession, since the federal funds rate incorporates price gains. As of December, the central bank’s preferred price index accelerated by just 1.6 percent.

While Fed officials are hopeful that inflation will rise toward its 2 percent target in 2020, they have expressed a similar optimism for years, only to repeatedly fall short.

The Fed has been reviewing its monetary policy framework, and that discussion continued in January with a look at how to handle future financial stability concerns. If the Fed cuts rates at rock-bottom and keeps them there for an extended period of time to fight recessions going forward, they noted, it could encourage investors and financial institutions to take excessive risks — and that reality should potentially play into policy-setting.

But those at the meeting “generally agreed” that supervisory and regulatory tools should make up the backbone of the central bank’s main approach to financial stability concerns, according to the minutes.

While “many participants remarked that the Committee should not rule out the possibility of adjusting the stance of monetary policy to mitigate financial stability risks” participants noted that it was unclear how changes in rates would actually interact with financial vulnerabilities.

As such, “monetary policy should be guided primarily by the outlook for employment and inflation,” the minutes said.

Several suggested that the Fed would need a communication strategy to convey the Committee’s assessment of financial vulnerabilities and the policy implications of those views.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Pardon Closes the Book on Milken’s Case but Can’t Rewrite It

Westlake Legal Group 18stewart2-facebookJumbo Pardon Closes the Book on Milken’s Case but Can’t Rewrite It United States Politics and Government Trump, Donald J Sentences (Criminal) Milken, Michael R Frauds and Swindling Banking and Financial Institutions Amnesties, Commutations and Pardons

By pardoning Michael R. Milken, a potent symbol of the “greed is good” 1980s and arguably the most significant white-collar criminal of his generation, President Trump has sent two powerful messages: When it comes to justice, money counts. And white-collar crime doesn’t really matter.

So much for the rule of law, already under siege by the Trump administration, and the notion that no one, no matter how rich or powerful, is above it.

Lest history be entirely rewritten, it’s worth considering what Judge Kimba M. Wood told Mr. Milken at his sentencing on Nov. 21, 1990, on charges including conspiracy and fraud:

“When a man of your power in the financial world, at the head of the most important department of one of the most important investment banking houses in this country, repeatedly conspires to violate, and violates, securities and tax laws in order to achieve more power and wealth for himself and his wealthy clients, and commits financial crimes that are particularly hard to detect, a significant prison term is required in order to deter others.”

She added that Mr. Milken, who was a senior executive at Drexel Burnham Lambert, had committed “serious crimes warranting serious punishment and the discomfort and opprobrium of being removed from society.”

Mr. Milken, advised by a team of the country’s most experienced and expensive lawyers, pleaded guilty rather than face a trial on even more expansive charges. Contrary to subsequent myth, he was not charged because he championed junk bonds. He was not charged because the savings-and-loan industry all but collapsed (though Mr. Milken’s junk-bond dealings played a direct role in the collapse of some institutions). He was not charged because of the resulting recession, which cost millions of people their jobs. Rather, he was charged so that “our financial markets in which so many people who are not rich invest their savings” can be “free of secret manipulation,” Judge Wood said at his sentencing.

Mr. Milken fainted outside the courtroom after she imposed a 10-year prison term.

Mr. Milken’s transgressions didn’t end with his guilty plea and imprisonment. Released two years into his term after a diagnosis of prostate cancer, he faced a lifetime ban on deal making. That didn’t stop him from negotiating CNN’s $7.5 billion sale to Time Warner in 1996 on behalf of his old friend and client Ted Turner, for which Mr. Milken collected a $50 million fee, and working for another friend and client, the billionaire Ronald O. Perelman. In 1998, Mr. Milken agreed to pay $47 million to settle a Securities and Exchange Commission complaint that he had violated the ban — he neither admitted nor denied the allegations — and the government dropped a criminal investigation into his activities after his release.

Mr. Milken’s wealthy and powerful friends have been clamoring for a pardon for years on his behalf, but the prospect seemed remote until Mr. Trump’s election. Even Bill Clinton, who as president found a justification to pardon the notorious commodities trader and tax evader Marc Rich, balked at granting Mr. Milken a pardon.

Until Mr. Trump’s move was announced Tuesday, I had hoped to have written the last about Mr. Milken. He was a major character in my book “Den of Thieves,” which chronicles the rise and fall of Mr. Milken and his co-conspirator Ivan F. Boesky, the takeover speculator and model for the Gordon Gekko character in the “Wall Street” movies. (As someone who incriminated Mr. Milken and cooperated with the government, Mr. Boesky seems to have little chance of a pardon of his own from Mr. Trump.)

After the book was published in 1991, one of Mr. Milken’s former lawyers, Michael Armstrong, sued me, my research assistant and my publisher, claiming $35 million in damages in a case financed by Mr. Milken and his brother. (We won a resounding victory, albeit after nearly a decade of costly litigation.) I returned to the subject of Mr. Milken in an article for The New Yorker about his post-prison deal making while that case was pending.

But since then, Mr. Milken appears to have focused on nurturing his vast wealth (estimated to be in the billions of dollars even after he paid his $600 million fine) and devoting himself to reputation-enhancing charitable pursuits, ably chronicled by other reporters. The 1998 S.E.C. complaint and the threat of a return to prison seem to have worked, and so far as I’m aware, Mr. Milken has avoided the siren call of deal making for others. He deserves credit for his impressive record of good works.

While none of that warrants a presidential pardon, it’s not hard to fathom why Mr. Milken’s saga would resonate with Mr. Trump.

Like the president, Mr. Milken studied business at the Wharton School of the University of Pennsylvania but was largely shunned by New York’s elite.

Mr. Milken’s early clients were corporate raiders who, like Mr. Trump, were disdained by establishment firms like Goldman Sachs and Morgan Stanley. Mr. Milken and his junk-bond-fueled takeovers were seen as disruptive forces, threats to a complacent status quo on Wall Street and in corporate America, just as Mr. Trump has upended Washington.

And of course Mr. Milken underwent years of distracting investigations and related bad publicity. He was even represented for a time by Mr. Trump’s celebrity lawyer Alan Dershowitz (who at one point attacked me in an advertisement in The New York Times). In one of his many startling about-faces, the Trump lawyer Rudolph W. Giuliani went from being Mr. Milken’s principal accuser and the architect of his plea deal as U.S. attorney to a Milken champion and advocate for a pardon.

Seen as an underdog, even a very wealthy and well-connected one, Mr. Milken has long inspired a counternarrative that he was a victim of a media and Wall Street establishment jealous of his wealth and success. However unfounded in fact, that version of reality has now gotten a presidential stamp of approval.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Michael Bloomberg Leans Left With Plan to Rein In Wall St.

Westlake Legal Group 18db-newsletter-bloomberg-copy-facebookJumbo-v2 Michael Bloomberg Leans Left With Plan to Rein In Wall St. Presidential Election of 2020 Federal National Mortgage Assn (Fannie Mae) Federal Home Loan Mortgage Corp (Freddie Mac) Consumer Financial Protection Bureau Bloomberg, Michael R Banking and Financial Institutions

Michael R. Bloomberg on Tuesday offered his proposals for regulating Wall Street, where he made his billions, promising a return of Obama-era oversight if elected president and invoking the name of one of his rivals, Senator Elizabeth Warren, in an attempt to connect with the Democratic Party’s progressive wing.

As he proposed reversing some of President Trump’s deregulation of the finance industry, Mr. Bloomberg said he would rework the Volcker Rule, one of the most controversial regulations set up in the wake of the 2008 financial crisis. In the past, he has criticized the way the rule put limitations on how banks can invest their money.

Mr. Bloomberg, who will join the Democratic primary debate stage for the first time on Wednesday, also said he would increase the capital requirements at large financial institutions to head off the need for another taxpayer bailout, phase in a 0.1 percent tax on transactions like stock sales and curb overdraft fees that hit the financially vulnerable.

Perhaps the most surprising proposal, given Mr. Bloomberg’s close personal ties to business titans, is a plan for the Justice Department to create a team to fight corporate crime by “encouraging prosecutors to pursue individuals, not only corporations, for infractions.”

“The financial system isn’t working the way it should for most Americans,” Mr. Bloomberg said in a statement. “The stock market is at an all-time high, but almost all of the gains are going to a small number of people.”

Some of the proposals offered by Mr. Bloomberg — a former Salomon Brothers trader whose estimated $63 billion fortune came from selling data to Wall Street — suggest how far to the left the moderate Democratic presidential hopefuls have felt they need to tack.

He shares his transaction tax proposal with three fellow candidates, Ms. Warren, Senator Bernie Sanders of Vermont and Pete Buttigieg, the former mayor of South Bend, Ind. Representative Alexandria Ocasio-Cortez, an outspoken progressive from New York, last year co-sponsored a bill that called for such a tax.

By releasing a plan that contains provisions that Wall Street may balk at, Mr. Bloomberg is trying to confront one of his biggest liabilities as a candidate. In its polling and research, his campaign has found that Americans know little about him beyond two facts: He is a former mayor of New York and a billionaire.

Mr. Bloomberg and his strategists have used various tactics to stress the parts of his biography that help soften his image. His ads describe his middle-class upbringing in Boston and highlight his philanthropic giving, for instance.

He has also started talking more often about his plan to raise $5 trillion in new tax revenue from high earners and corporations. His message to voters as he campaigns across the country has been, in essence, that the government should raise taxes on people like him because they can afford it.

The surcharge on trading, meant to raise money for social programs like expanded health care coverage, has been roundly criticized by the sort of pro-business groups that Mr. Bloomberg had long been sympathetic to, like the U.S. Chamber of Commerce.

The group immediately criticized the proposal. A transaction tax “hits Main Street, not Wall Street,” said Tom Quaadman, a chamber executive. He added that it would “increase the cost of capital, decrease investment, harm businesses and hurt Americans who are saving and investing.”

Rachel Nagler, a Bloomberg campaign spokeswoman, argued that such a tax “is an effective and relatively painless way to raise more tax revenue from the wealthy,” citing its use in Britain and Hong Kong. A 2018 analysis by Congress’s Joint Committee on Taxation estimated that a tax similar to the one proposed by Mr. Bloomberg would raise $777 billion over 10 years.

Mr. Bloomberg’s plan embraces many of the regulatory changes made in the years after the financial crisis, even though he has often argued that rules aimed at reforming Wall Street are bad for the economy. In 2010, Mr. Bloomberg urged Democratic lawmakers not to get too tough on the finance industry, and he criticized the Volcker Rule, which is meant to reduce speculative trading by banks. He called the proposed restrictions “shortsighted,” with the potential to reduce middle-class jobs.

On Tuesday, Mr. Bloomberg said he would toughen the Volcker Rule — although his idea is more like a major rewrite. It would assume that banks were engaging in safe practices as long as they didn’t gain or lose too much on a deal. Rather than getting in traders’ heads about what constitutes a speculative trade, he proposes taxing big gains and losses, reasoning that volatile outcomes beyond a certain threshold must be the result of overly speculative activity.

Ms. Nagler rejected the notion that Mr. Bloomberg was flip-flopping.

“Context matters,” she said. When the Volcker Rule was introduced, Mr. Bloomberg “was skeptical of regulators’ ability to divine traders’ intent,” which was how the law required regulators to judge investments, she added. Mr. Bloomberg’s new plan would focus “on the outcome of speculative trading — big gains and losses — rather than on traders’ intent.”

Isaac Boltansky, director of policy research at Compass Point Research and Trading, said Mr. Bloomberg was engaging in “relatively tough talk” on banks and taking positions that were “more politically progressive than originally expected.”

“But we caution that talking about altering the Volcker Rule is exponentially simpler than actually revising the rule,” Mr. Boltansky wrote in a note to investors.

Mr. Bloomberg has faced escalating attacks by his fellow Democrats as he rises in the polls. His rivals, most notably Mr. Sanders, have made his wealth an issue by repeatedly accusing him of trying “to buy the election” with an advertising budget that is already approaching $500 million after less than three months.

Mr. Bloomberg’s immense wealth is a thorny matter in other ways: He owns a financial information and news behemoth that has said it will not do in-depth investigations of him or any other Democrats running for president. On Tuesday, Tim O’Brien, a senior adviser to the Bloomberg campaign, said Mr. Bloomberg would sell his company if he was elected — although he would not sell to a foreign buyer or private equity.

Although Mr. Bloomberg’s proposal frequently name-checked President Barack Obama, he also referred to Ms. Warren. He said he would strengthen the Consumer Financial Protection Bureau, and pointed out it was established under her leadership. Mr. Bloomberg said he would reverse some rule changes made by Mr. Trump and expand the agency’s power over auto lending and credit reporting.

Some of his proposals were thin on specifics. For example, the consumer bureau already oversees auto loans made by banks but not by car dealers — who aren’t specifically mentioned in Mr. Bloomberg’s plan. A person familiar with the proposal said that the proposal was indeed meant to include dealers and that they had been left out unintentionally.

“The devil is in the details,” said Dennis Kelleher, the president of the group Better Markets, which advocates rules that would rein in Wall Street and protect consumers.

But Mr. Kelleher said he believed Mr. Bloomberg was moving in the right direction on important issues. “He’s indicating that he disagrees with Trump’s deregulation, and he’s indicating that he’s going to be much tougher in a bunch of areas,” Mr. Kelleher said.

Opponents of regulation swiftly condemned Mr. Bloomberg’s proposals.

“His plan would slow down growth, innovation and entrepreneurship in the country,” said Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University.

In recent days, Mr. Bloomberg has been forced to defend his past comments on financial regulations. In 2011, for instance, he said: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

Mr. Bloomberg said he would bolster or restore elements of the 2010 Dodd-Frank law that were reversed or reduced under Mr. Trump. For example, he proposes making stress tests for banks more stringent and reinstating the requirement that banks produce annual “living wills,” which are complex documents that detail how they would unwind their operations in a bankruptcy.

Elsewhere in his plan, Mr. Bloomberg said he would merge Fannie Mae and Freddie Mac, two government-owned housing giants. He would strengthen consumer protections that govern payday lending and financial advisers, and automatically enroll student-loan borrowers into income-based repayment plans with payments capped at 5 percent of disposable income.

Jeremy Peters contributed reporting.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Michael Bloomberg Leans Left With Plan to Rein in Wall Street

Westlake Legal Group 18db-newsletter-bloomberg-copy-facebookJumbo-v2 Michael Bloomberg Leans Left With Plan to Rein in Wall Street Presidential Election of 2020 Federal National Mortgage Assn (Fannie Mae) Federal Home Loan Mortgage Corp (Freddie Mac) Consumer Financial Protection Bureau Bloomberg, Michael R Banking and Financial Institutions

Michael R. Bloomberg is proposing to crack down on the industry where he made his name — and fortune.

The former mayor of New York and Democratic presidential candidate announced an ambitious financial policy plan on Tuesday that includes imposing a tax on financial transactions and toughening restrictions on risky banking practices.

Perhaps the most surprising proposal, given the billionaire’s close personal ties to Wall Street movers and shakers, is a plan for the Justice Department to create a dedicated team to fight corporate crime by “encouraging prosecutors to pursue individuals, not only corporations, for infractions.”

“The financial system isn’t working the way it should for most Americans,” said Mr. Bloomberg in a statement. “The stock market is at an all-time high, but almost all of the gains are going to a small number of people.”

Mr. Bloomberg’s plan appears to repudiate positions he has taken on financial oversight over the years, when he often argued that rules aimed at reforming Wall Street were bad for the economy.

The new proposals suggest how far to the left Democratic presidential hopefuls considered moderates have felt they needed to tack. This is especially so for Mr. Bloomberg, a former Salomon Brothers trader whose estimated $63 billion fortune came from selling data to Wall Street.

In 2010, for instance, Mr. Bloomberg urged Democratic lawmakers not to get too tough on banks, and he criticize the so-called Volcker Rule, which prevented banks from making risky trades for themselves rather than clients. He called the proposed new restrictions “shortsighted,” with the potential to reduce middle-class jobs.

A spokeswoman for the Bloomberg campaign rejected allegations of flip-flopping.

“Context matters,” she said. When the Volcker Rule was introduced, “Mike was skeptical of regulators’ ability to divine traders’ intent,” which was how the law required regulators to judge investments, she added. Mr. Bloomberg’s new plan would focus “on the outcome of speculative trading — big gains and losses — rather than on traders’ intent.”

Some of Mr. Bloomberg’s other views on financial regulations have taken heat in recent days. He has had to defend comments he made in 2008 linking the financial crisis to the end of redlining, the discriminatory housing practice in which banks made it harder for people of color to borrow to buy a home.

In 2011, he said, “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

But as he seeks to shore up his argument as the choice for moderate Democrats in the 2020 race, Mr. Bloomberg has shifted gears.

As part of his Wall Street plan, he is now embracing a tax of 0.1 percent on all financial transactions, a position that he shares with fellow candidates Mr. Sanders, Ms. Warren and Pete Buttigieg, as well as Representative Alexandria Ocasio-Cortez. Last year, Ms. Ocasio-Cortez co-sponsored a bill in the House that called for such a tax.

The surcharge on trading, meant to raise money to pay for social programs like expanded health care coverage, has been roundly criticized by the sort of pro-business groups that Mr. Bloomberg had long been sympathetic to, like the U.S. Chamber of Commerce.

But the spokeswoman for the Bloomberg campaign argued that such a tax “is an effective and relatively painless way to raise more tax revenue from the wealthy,” citing its use in Britain and Hong Kong. A 2018 analysis by the Joint Committee on Taxation estimated that a tax similar to the one proposed by Mr. Bloomberg would raise $777 billion over 10 years, albeit with a lot of uncertainty around “how much transactions would drop in response to a tax.” Any drop in trading would probably be bad for Bloomberg L.P., the company that feeds investors data and helps them arrange the buying and selling of securities.

Much of Mr. Bloomberg’s plan is an effort to bolster or restore elements of the 2010 Dodd-Frank law which, like the Volcker Rule, were reversed or reduced under President Trump. For example, Mr. Bloomberg proposes making stress tests for banks more stringent and reinstating the requirement to produce annual “living wills,” which are complex documents that detail how banks would unwind their operations in a bankruptcy.

Elsewhere in his plan, Mr. Bloomberg says he would merge Fannie Mae and Freddie Mac, two government-owned housing giants. He would strengthen consumer protections that govern payday lending and financial advisers, as well as give the Consumer Financial Protection Bureau oversight of auto lending and credit reporting. Borrowers of student loans would be automatically enrolled into income-based repayment plans with payments capped at 5 percent of disposable income.

Progressive critics are likely to argue that Mr. Bloomberg’s proposals don’t go far enough. Some Democrats have proposed a wealth tax, while Ms. Warren has called for a complete overhaul of the private equity industry and Mr. Sanders wants to break up the big banks.

The first test of Mr. Bloomberg’s convictions in regulating Wall Street could come at Wednesday’s Democratic debate in Las Vegas, which is expected to be the first time he will appear onstage alongside his presidential rivals. The billionaire qualified for the contest today thanks to a national poll that put his support at 19 percent, up from only 4 percent in the same survey in December. He trailed only Mr. Sanders, who had 31 percent.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com