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Coronavirus resurgence threatens recovery — The global death toll from Covid-19 hit 500,000 on Sunday as the southern U.S. reported a surge in cases. Stocks are poised to continue their decline from last week as the spike in infections derails economic restart plans.
Wall Street watches SCOTUS — The Supreme Court this week is in the final days of its term before breaking until October. Opinions in monumental finance industry cases are pending and could be issued today or tomorrow. Among them is one that could curtail the powers of the Consumer Financial Protection Bureau. Another pair of pending cases will determine the fate of subpoenas seeking President Donald Trump’s financial records from Deutsche Bank and accounting firm Mazars
Possible bank reg revamp in defense bill — Senate Banking Chair Mike Crapo and ranking member Sherrod Brown have quietly proposed an amendment to the National Defense Authorization Act that would overhaul anti-money laundering regulations, including a requirement that corporations report ownership information to the Treasury Department. The Senate is considering the defense bill this week.
Lenders have been pushing for the changes for years amid resistance from business groups, which have warned of privacy concerns and paperwork burdens from ownership disclosures. In a joint letter to the leaders of the Senate Armed Services Committee this weekend, the Bank Policy Institute, Credit Union National Association and other financial trade groups said the legislation “represents the best path forward to provide law enforcement with needed information to pursue criminals looking to exploit our financial system.”
DRIVING THE DAY — The Supreme Court will release orders at 9:30 a.m. and opinions at 10 a.m. … The House will vote this afternoon on bills to expand credit reporting safeguards and nullify the OCC’s anti-redlining rule revamp …
ALSO THIS WEEK — The Paycheck Protection Program closes to new applications at the end of Tuesday … Chris Dodd, Barney Frank, Lael Brainard and others speak at Brookings’ Dodd-Frank anniversary event Tuesday … Senate Banking holds a hearing on the digitization of money and payments Tuesday at 10 a.m. … Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell testify before House Financial Services Tuesday at 12:30 p.m. … The House Small Business Committee holds a hearing on the SBA’s Economic Injury Disaster Loan program Wednesday at 10 a.m.
Fed bought AT&T, Walmart bonds in bailout — Reuters’ Howard Schneider: “The U.S. Federal Reserve bought $428 million in bonds of individual companies through mid-June, making investments in household names like Walmart and AT&T as well as in major oil firms, tobacco giant Philip Morris International Inc, and a utility subsidiary of billionaire Warren Buffett’s Berkshire Hathaway holding company. …
“The largest purchases were of bonds issued by AT&T and the United Health Group, with the Fed buying around $16.4 million of bonds from each.
“Issuers in the energy industry accounted for about 8.45% of the bonds purchased, about a percentage point less than their representation in a broad market index that the Fed says its purchases are intended to track over time.”
Gottheimer on credit reporting safeguards — The House today will likely pass legislation that would require credit reporting firms to develop an online portal to give consumers unlimited free access to credit scores and reports. Zach interviewed Rep. Josh Gottheimer (D-N.J.), who sponsored the bill, H.R. 5332.
“This is especially important now in light of Covid, when there are so many issues swirling around people’s credit,” he says. “And of course we know credit is a significant challenge particularly to communities of color.”
Credit reporting firms are fighting the legislation. Gottheimer says negotiating with the industry was like “playing whack-a-mole.” The companies have successfully fought other safeguard proposals, even after the massive Equifax breach.
“I don’t believe there was much they were willing to agree on,” Gottheimer says.
Former energy giant Chesapeake files for bankruptcy — Bloomberg’s Dawn McCarty, Olivia Rockeman and David Wethe: “Chesapeake Energy Corp., the archetype for America’s extraordinary shale-gas fortunes, filed for bankruptcy, becoming one of the biggest victims of a spectacular collapse in energy demand from the virus-induced global lockdown.”
Paging Sen. Warren: PE’s trillion-dollar cash pile doing little for struggling firms — WSJ’s Chris Cumming: “The buyout industry has spent years building up its dry powder, or money that investors have committed to private-equity funds that hasn’t yet been spent. That pile was at a record $1.45 trillion globally as of June, excluding venture-capital funds, according to data provider Preqin Ltd.Y
“Yet all this dry powder has done little to soften the pandemic’s blow to companies owned by buyout firms. … Thirty-four U.S. private-equity-backed companies filed for bankruptcy from March 1 through June 14, according to data provider PitchBook Inc., including well-known names such as Hertz Global Holdings Inc., Neiman Marcus Group Inc. and J.Crew Group Inc.”
The American Investment Council, which represents the private equity industry, is releasing a new report today breaking down PE activity by state and congressional district. It says private equity invested more than $700 billion last year in 4,841 businesses.
Mnuchin and Powell on the Hill this week — A preview of Mnuchin and Powell’s testimony Tuesday before the House Financial Services Committee, via Capital Alpha’s Ian Katz: “[T]his may be the last chance lawmakers get to question the two crisis fighters before negotiations on a stimulus package take shape in mid- to late July. …
“Stimulus payments will be part of the discussion, with President Trump apparently supporting another round of checks. … We expect a robust discussion on what to do with the PPP, which still has more than $100 bn remaining. … Mnuchin and Powell are likely to get questioned on what they can do to help borrowers in the Commercial Mortgage-Backed Securities (CMBS) market.”
Treasuries show traders preparing for the worst — Bloomberg’s Liz McCormick: “The world’s biggest bond market is holding firm in its conviction that the revival of the American economy from the devastation of the pandemic will be slow and fragmented.
“Benchmark 10-year Treasury yields at 0.64 percent are barely changed from the end of March. Investors have pounced on any sell-off as a buying opportunity, keeping yields in check after they slid 125 basis points in the first quarter. The result is that Treasuries are up about 9 percent in 2020, on pace for the best first-half performance in the Bloomberg Barclays U.S. Treasury index since 1995.”
Appeals court upholds SEC’s ‘Best Interest’ rule — Our Kellie Mejdrich: “The 2nd U.S. Circuit Court of Appeals upheld the SEC’s financial advice rule for broker-dealers late Friday. … The SEC’s ‘Regulation Best Interest’ seeks to mitigate potential conflicts of interest by broker-dealers when dealing with clients but holds them to a different standard than investment advisers.”
FDIC may overhaul bank reports — WSJ’s Andrew Ackerman: “The Federal Deposit Insurance Corp. is moving to boost the way it monitors for risks at thousands of U.S. banks, potentially scrapping quarterly reports that have been a fixture of oversight for more than 150 years yet often contain stale data.
“The FDIC on Monday is expected to kick off a competition among 20 data and technology firms to develop a new reporting prototype that could provide the agency with more timely and targeted data about banks’ credit exposures and deposit information.
“The move is focused primarily around modernizing the data the FDIC collects from more than 3,200 community banks the agency oversees.”
‘Too big to fail’ not quite over, regulators say — Reuters’ Huw Jones: “Reforms to the global financial system following the banking crisis a decade ago have cut the risk of taxpayers having to rescue lenders again but some gaps still need plugging, the Financial Stability Board (FSB) said on Sunday.”
Germany to revamp accounting rules after Wirecard collapse — FT’s Olaf Storbeck and Guy Chazan: “Germany is to overhaul the way it regulates accountancy firms as it seeks ‘radical solutions’ to contain the fallout from the huge fraud at payments group Wirecard.
“The government will terminate its contract with the country’s accounting watchdog, the Financial Reporting Enforcement Panel, as early as Monday, according to officials briefed on the matter. The power to launch investigations into companies’ financial reporting would then be handed to BaFin, Germany’s financial regulator, the officials said. …
“German regulators have faced accusations that they failed to adequately supervise the financial technology group, which has been audited by Big Four accountancy firm EY for a decade.
Casinos may go cashless — WSJ’s Katherine Sayre: “[T]he coronavirus pandemic has generated concern over bills circulating among hundreds of hands on the casino floor, and that is pushing casinos toward cashless technology after years of discussion.
“The Nevada Gaming Commission, which oversees casinos, on Thursday approved rule changes that clear the way for wider use of cashless wagering in casinos. The American Gaming Association, an industry trade group, this month gave state and tribal regulators a list of priorities for modernizing payment systems. …
“Penn National Gaming Inc., which operates 41 gambling properties in 19 states, intends to test phone-based cashless systems in four Pennsylvania properties including technology inside two new casinos opening within the next year, said Todd George, the company’s executive vice president of operations.”