Morning Report: Steve Mnuchin for Treasury Secretary 11/30/16

Vital Statistics:

Last Change
S&P Futures 2210.5 7.0
Eurostoxx Index 342.4 1.4
Oil (WTI) 48.8 3.5
US dollar index 91.7 0.4
10 Year Govt Bond Yield 2.39%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.14

Stocks are higher this morning as oil rises. Bonds and MBS are down.

Oil ministers are meeting in Vienna today and market participants are optimistic a deal can be reached to cut production. Oil is up 7.5% this morning on speculation of a deal. Ordinarily, high oil prices are bad for markets, but these days it is considered a plus.

Donald Trump has reportedly selected Steve Mnuchin for Treasury Secretary. Mnuchin is another Goldman guy, making him the third Goldman Treasury Secretary since the mid 90s. Not much is known about his position on things like the dollar and interest rates. Given Trump’s focus on manufacturing jobs, Mnuchin could be a departure from the strong dollar policy that has been in place for several administrations.

Part of Trump’s tax plan will include tax reform, where top rates will go down, however deductions will be limited. The mortgage interest deduction cap of $1 million for first and second mortgages will probably be lowered. This will probably affect only the very high end, but it is something to keep in mind for jumbo borrowers who have high DTIs to begin with. The Administration is saying that the very wealthy will get no “absolute” tax cut, but the middle class will.

Neither new Commerce Secretary Wilbur Ross nor Steve Mnuchin went out of their way to defend current Fed Head Janet Yellen, saying the decision on the remainder of her term is up to Trump. Donald Trump had been critical of Fed policy on the campaign trail, saying that interest rates were too low. Now that he is an actual politician, he may become more accepting of lower rates, as most politicians usually are. Reagan was the exception, however the 1970s inflation was so bad, people recognized that something had to be done.

Mortgage applications fell 9.4% last week as purchases fell 0.2% and refis fell 16%. Purchases held up reasonably well given the short Thanksgiving holiday.

The US added 216,000 jobs in November, according to the ADP survey. The Street was looking for 160,000 on the ADP number and has forecast 170,000 for Friday’s jobs report.

Pending home sales increased 0.1% last month as tight inventory remains an impediment to sales. Tight inventory is pushing prices up at triple the rate of wage growth, which is ultimately an untenable situation. Pending home sales rose in the Northeast, Midwest and West, while falling in the South.

The Chicago Purchasing Manager Index rose to 57.6 from 52 last month.

Personal incomes broke out of their range in October, increasing 0.6% after a string of 0.3% – 0.4% increases. Personal consumption declined however to a 0.3% increase. This bumped up the savings rate to 6% of disposable personal income, the highest since March. The PCE index for inflation is up 1.4% YOY and the PCE ex-food and energy index is up 1.7%. Nothing in this report will change the Fed’s thinking regarding the next Fed meeting.

Donald Trump announced on Twitter this morning that he will be “leaving his great business in total.” Not sure if that means a blind trust or a divestiture. A blind trust run by his kids will probably not be enough to mollify his critics.

Loan officers are painfully aware that rates have been going up. Investors have been taking it on the chin as well: the 10 year has had its worst month since 2009. Bonds have lost 2.4% this month, which is about about a years’ worth of interest at these levels. That said, the increase in rates has yet to match the 2013 “taper tantrum.” Another key piece of data: the difference between Treasuries and German Bunds is the highest on record, indicating that the correlation between US bonds and foreign bonds is breaking down. This makes sense as the Fed and the ECB have fundamentally different postures at this point. has its 5 trends for 2017. Millennials move to the Midwest, home price appreciation slows, and tight inventory remain the major trends.

Morning Report: GDP revised upward 11/29/16

Vital Statistics:

Last Change
S&P Futures 2200.8 0.0
Eurostoxx Index 340.0 0.2
Oil (WTI) 45.3 -1.8
US dollar index 91.7 0.3
10 Year Govt Bond Yield 2.34%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.14

Stocks are flat this morning as GDP surprises to the upside but oil falls as OPEC appears unable to cut production. Bonds and MBS are down.

Third quarter GDP was revised upward to 3.2% from the advance estimate of 2.9%. We will get one more revision to this number in a few weeks. Upward revisions in consumption drove the increase, while residential investment remains a drag. Business capital investment remains weak as well. The PCE Price index rose 1.4%, which means inflation remains below the Fed’s target rate. We have had a meaningful rebound in GDP after a run of 3 weak quarters.


The Case-Shiller index (considered to be the Dow Jones Industrial Average of real estate indices) surpassed its July 2006 peak in September. The index is up 5.1% YOY. The press release includes a cool table that shows the returns on real estate versus the returns on the stock market and compares those to income growth. Since 1975, real estate has increased almost 5%, and stocks have increased 8%. Since 2000, real estate has outperformed stocks. While stocks have have been a higher returning investment overall, they are typically much more volatile, and you can’t live in an ETF. Also, the press releases doesn’t address the tax benefits of real estate, which would certainly affect the analysis and improve the relative performance of real estate.


Corporate profits rebounded in the third quarter, rising 5.2% YOY after a 3 consecutive negative quarters. The divergence between stock prices (rising) and profits (falling) was creating an untenable situation in the stock market.

Ben Carson is reportedly going to be the next Secretary of HUD. has the potential implications. Though his background is in medicine, Carson does appear to follow housing: here is an editorial he wrote just over a year ago. The editorial covers fair housing issues, however doesn’t address the state of the mortgage market, and how to bring private capital back into the market. At the moment, the taxpayer bears the credit risk of the vast majority of new mortgages. Suffice it to say it doesn’t look like fair housing issues will be front and center at the new HUD, the way they have for the past 8 years.

Donald Trump named Georgia Congressman Tim Price as secretary of health and human services. Trump is meeting with Mitt Romney again for the Secretary of State position.

Consumer confidence rose sharply in November, according to the Conference Board, increasing to 107.1 from 100.8 in October. This index is back to pre-recession levels. Separately, Cyber Monday sales look to have increased 9.4% YOY.

Foreclosure starts fell to 56,500 in October, the lowest level in 12 years, according to Black Knight Financial Services. Delinquencies had a small uptick MOM, but are down YOY. Prepay speeds ticked down, but are still up markedly YOY.

Demand for houses fell in October, according to Redfin. The number of people requesting tours and submitting offers fell. Tight inventory remains the biggest issue – the number of homes listed was down almost 10% from a year ago.

Morning Report: Home Prices within 1% of peak 11/28/16

Vital Statistics:

Last Change
S&P Futures 2206.0 -58.0
Eurostoxx Index 340.9 -1.6
Oil (WTI) 47.0 0.9
US dollar index 91.7 -0.1
10 Year Govt Bond Yield 2.33%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.14

Investors return to the markets after the Thanksgiving holiday contemplating a re-litigation of the 2016 Presidential election. Bonds and MBS are up.

Green Party candidate Jill Stein is requesting a recount in PA, MI, and WI. Donald Trump took to Twitter to condemn the effort and alleged that “millions” of votes were fraudulent. The Clinton campaign is keeping its distance but will watch to make sure outside players aren’t interfering with the process. If she manages to turn all 3 states, then she could win. One question that has come up has been whether Russia could have hacked the voting machines. That possibility looks unlikely.

Since the election, bank stocks have increased their market caps by $300 billion. The bet is that a roll-back of regulation will increase profits.

The highlight of the week will be the jobs report on Friday. The Street is looking for 170k jobs added, an unemployment rate of 4.9% and an increase in average hourly earnings of 0.2%.

The FOMC minutes from the early November meeting were a non-event, and the FOMC is definitely setting the stage for a December hike: “Most participants expressed a view that it could well become appropriate to raise the target range for the federal funds rate relatively soon, so long as incoming data provided some further evidence of continued progress toward the Committee’s objectives.” In fact, a “few” participants wanted a hike at the November meeting. The December FOMC meeting is in two weeks.

The FHFA raised the conforming limit from 417k to $424k. This was the first increase in 10 years. They also increased the high balance conforming limit to $636k.

Home Prices rose 0.1% in September and are up 5.4% YOY. Home prices are now within a percent of their peaks from June 2006.

Black Friday saw more shoppers, but less spending than in the past. About 154 million bought something in a store or online over the weekend, but they only spent about $289 as opposed to $300 a year ago. The National Retail Federation attributed the drop in spending to deep discounts offered by retailers. Black Friday online purchases were up 22% YOY.

Morning Report: Existing home sales near 10 year record 11/22/16

Vital Statistics:

Last Change
S&P Futures 2197.5 5.0
Eurostoxx Index 341.5 1.3
Oil (WTI) 48.5 1.8
US dollar index 91.3 0.1
10 Year Govt Bond Yield 2.31%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.99

Stocks are up this morning as commodities rise on anticipated economic strength. Bonds and MBS are flat.

Existing home sales rose 2% to a seasonally-adjusted run rate of 5.6 million in October, according to the NAR. September’s numbers were revised upward to 5.49 million. October’s number is 5.9% higher than a year ago, and the highest reading since February 2007. The median home price rose 6% to $232,200. Total housing inventory dipped to 2.02 million units, which represents a 4.3 month supply at current levels. NAR considers 6.5 month’s worth to be a balanced market. Days on market ticked up to 41 days from 39 the month before. The first time homebuyer accounted for 33% of all

sales, which is up a couple percentage points from a year ago. Now, if we could just get housing starts up to catch up with the increase in sales we could have a real recovery on our hands.

The post-election rise in interest rates is beginning to affect home sales. First time homebuyers are being hit particularly hard. One loan officer has great advice however: the increase in rates may appear dramatic, but the difference in monthly payment often is not. “I tell people, interest rates are 80 percent psychological and 20 percent math. I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month. They initially think it’s going to be a lot more painful than that,” said Anker, who added he hasn’t lost any deals yet. ” While we have yet to see any effect in the home price indices (that will probably be a few months out) be prepared for a deceleration in home price appreciation, and maybe even flat / declining prices in the hottest markets.

The Richmond Fed Manufacturing index improved last month from -4 to 4.

Speculators in the US Eurodollar market are betting $2.1 trillion that short term rates are going up as economic growth and inflation return. Note that yesterday, all of the major stock market indices hit new highs. We have been seeing the biggest asset allocation change out of bonds and into stocks over the past week.

Donald Trump took to YouTube last night to give an update on the transition. Probably the biggest news in that was essentially a moratorium on regulations – where for every new regulation, two must be removed. Not sure how that is going to work in practice. The Trans Pacific Partnership trade deal is probably dead at this point as well. Separately, he isn’t going to launch any further investigations on Hillary Clinton.

Front-runner for Treasury Secretary Steve Mnuchin was part of a Goldman consortium that bought failed bank IndyMac, renamed it OneWest and sold it to CIT. This was post-crisis, however his confirmation hearing (if he gets the nom) will undoubtedly spend some time on the mortgage industry and past practices.

Impac said that low interest rates hurt demand for non-QM products last quarter.

When the Chinese bet on real estate, they bet big.

Morning Report: Trump causes jump in Fannie stock 11/21/16

Vital Statistics:

Last Change
S&P Futures 2186.8 6.0
Eurostoxx Index 340.0 0.7
Oil (WTI) 47.0 1.3
US dollar index 91.1 -0.5
10 Year Govt Bond Yield 2.31%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.99

Stocks are higher this morning on no major news. Bonds and MBS are up small.

Should be an uneventful week with the Thanksgiving holiday. Markets will be closed on Thursday, and SIFMA is recommending an early close on Friday.

Donald Trump continued to interview candidates for cabinet posts over the weekend. For Secretary of the Treasury, he talked to famed investor Wilbur Ross, Blackstone head of real estate Jonathon Gray, and David McCormick of Bridgewater. The “in-depth” discussion with Gray “included the economy, global capital markets and the world financial situation as well as “future legislation regarding the tax code and long-term debt. The Ross meeting covered “negotiating the best foreign deals, American manufacturing and job creation,” as well as “engaging Ambassadors to participate in creating more economic opportunities for America,” Trump’s office said. With McCormick, Trump and Pence talked “global financial markets, currency and the American economy,” and “special emphasis was placed on restoring long-term economic growth rates on an annual basis of four to five percent.” Trump insider Steve Mnuchin and Congressman Jeb Hensarling are considered to be the front-runners, however.

Mitt Romney is under active consideration for Secretary of State.

The Chicago Fed National Activity Index improved to -.08 from a downward-revised -.23. Overall economic activity remains slightly below trend.

Traders are now pricing in a 100% chance the Fed hikes next month.

Ever since Trump won, shares in Fannie Mae and Freddie Mac have been soaring. Hedge fund giant John Paulsen has a huge position in the shares and investors are betting that a Trump administration may be more shareholder-friendly than Obama was. Just as Fannie Mae was beginning to turn a profit, the Obama administration re-wrote the rules of the bailout and has taken all of Fannie’s cash flows for the government. The bailout money has now been paid back and shareholders are in litigation with the government over what to do now. Just some numbers: Market cap: 18 billion. 2015 earnings 11 billion. P/E: 1.6.

AIG is looking to boost its investment in residential mortgages. They intend to make “direct investments” into the sector, which may mean buying whole loans instead of MBS.

The CFPB is appealing a Federal Appeals Court ruling that says the agency’s structure is unconstitutional. Regardless of the outcome, the agency is probably going to have at least some changes.

Quick, what has been the best-performing IPO of the tech sector since the Great Recession? It isn’t the names you would think of like Facebook or Tesla. It is Ellie Mae, who makes software that helps automate the mortgage process. Bears are beginning to bet that a Trump administration will be more friendly to the big banks, who will get back into the mortgage business, which is bad news for Ellie Mae’s clients, who are smaller independent lenders.

Morning Report: Jeb Hensarling for Treasury? 11/18/16

Vital Statistics:

Last Change
S&P Futures 2184.0 -0.5
Eurostoxx Index 339.4 -1.2
Oil (WTI) 45.5 0.1
US dollar index 91.3 0.1
10 Year Govt Bond Yield 2.28%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4

Stocks are flat this morning on no real news. Bonds and MBS are down.

Bonds are ending their worst two week run in 25 years as the 10 year bond yield increased almost 50 basis points. Strategists are suggesting that the 10 year will be in the 2.5% – 2.75% range a year from now if Donald Trump manages to get his infrastructure spending plan and tax cut. The US dollar continues to strengthen as well.

So far, it looks like Jeb Hensarling is in the mix to take over as Secretary of the Treasury for Donald Trump. Note he is a politician, not a Wall Streeter. In fact, the banks believe he is a bit of an obstacle for getting real reform. Hensarling is generally viewed as not a friend of the big banks, and he really isn’t that interested in their input. Hensarling does have a plan to reform Dodd-Frank, which would include scrapping the Volcker Rule (which prohibits proprietary trading), reining in the CFPB, eliminating caps that banks can charge merchants for debit card transactions, and reforming the SIFI (systemically important financial institutions) rules. The big banks will need to raise a lot of capital in order to have more latitude however, as his bill requires a 10% capital cushion. Citi, for example, is at 7.4%, which means the banks would need to raise hundreds of billions in new equity capital.

The glory days of the CFPB are numbered. A court ruling that prevents the director from being fired and the potential for a business-friendly Trump Director has made it possible for a bipartisan consensus that the director be replaced with a 5 person committee, and that it be subject to Congressional appropriations. At least one expert believes that will slow down the agency and probably cut its enforcement actions in half. As of right now, if you are a graduate of a top law school and have an interest in financial regulation, the CFPB is the hot place to be.

Bottom line: we could get some regulatory relief, however it will be at the margin and probably not a wholesale change from what we have now. Will it be enough to get the private label securitization market back? So far I have not seen anything with respect to required equity tranches etc, so it is hard to tell. The only name for HUD I have heard is Westchester County Executive Rob Astorino, who is fighting HUD on zoning issues and affordable housing mandates.

After rising for several years, average home sizes are falling, as construction moves away from focusing in the high end to starter homes.

Morning Report: Housing starts jump 11/17/16

Vital Statistics:

Last Change
S&P Futures 2173.8 1.0
Eurostoxx Index 338.3 -0.2
Oil (WTI) 46.1 0.5
US dollar index 90.8 0.2
10 Year Govt Bond Yield 2.25%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4

Stocks are flattish on no real news. Bonds and MBS are down small.

Janet Yellen is speaking on Capitol Hill this morning. Her prepared statement is here. She said that job growth has been lower than last year but still above forecasts. They believe the labor market has further room to run. She pointed out that economic growth has improved from its sluggish start of the year and inflation remains tame. Nothing in the statement would change the forecast for a 25 basis point hike next month.

Speaking of inflation, the consumer price index rose 0.4% in October, in line with forecasts. Ex-food and energy, it rose 0.1% and is up 2.1% YOY.

The NAHB / Wells Fargo Housing Market Index, a measure of homebuilder sentiment was flat at 63, and is still well above neutral.

Housing starts rose to 1.323 million. This is an increase of 23% YOY, which shows the housing market may finally be getting some traction at long last. This is a 9-year high. Remember, “normalcy” is closer to 1.5 million units, so we still have a lot of room for growth. Building Permits were up 4.6% YOY to 1.23 million.

Initial Jobless Claims fell to 235k last week, which is the lowest level since early 1973, just after the Vietnam War draft ended. Employers continue to hang onto their workers.

House prices increased 7% in October, according to RedFin. Inventory dropped by 8.6% YOY, which is the 13th consecutive monthly drop. Homes stayed on the market an average of 49 days, a drop of 5 days from a year earlier. 21% of all homes were under contract within two weeks, and 20% sold for more than their asking price.

Average FICOs for closed loans dropped somewhat in October to 730 from 731, according to Ellie Mae. Purchases accounted for 53% and refis accounted for 47%.Time to close was steady at 48 days. ARMS slipped to 4% of all loans, however as rates increase they will undoubtedly become more popular at some point.

Consumer comfort increased last week, according to Bloomberg.

Democrats named Chuck Schumer Senate Minority Leader yesterday. As a practical matter, he comes from NY so he should be at least somewhat sympathetic to the financial sector, which could go a long way in helping fix some of the issues with Dodd-Frank.

Morning Report: Confidence in the economy improved 11/16/16

Vital Statistics:

Last Change
S&P Futures 2171.8 -8.0
Eurostoxx Index 337.7 -2.0
Oil (WTI) 45.4 -0.4
US dollar index 90.6 0.2
10 Year Govt Bond Yield 2.27%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4

Stocks are weaker this morning as commodities rally. Bonds and MBS are down.

Mortgage Applications fell 9% last week as purchases fell 6% and refis fell 11%. I’m actually surprised it wasn’t worse, as the 10 year bond yield went from 1.78% to 2.14%.

Inflation at the wholesale level remains low as the producer price index was flat for October. Ex-food and energy, they were down .2%. Ex food, energy and services the index was down .1% and is up 1.6% for the year. Certainly nothing to concern the Fed, however the Fed Funds futures are factoring in a 94% chance of a rate hike next month. At the beginning of the month, the odds were 68%.

Donald Trump’s transition team is already having power struggles, as Chris Christie loyalists were sent packing after VP Mike Pence replaced him as head of the transition team. Given that Trump was an outsider, his transition is going to be a lot more rocky than we are used to.

It looks like Trump is considering famed value investor Wilbur Ross and ex-Goldman guy Steve Mnuchin to Treasury and Commerce. Apparently an announcement is imminent.

Industrial Production was flat in October, while manufacturing production was up 0.2%. Capacity Utilization slipped to 75.3%. The strong dollar is going to be a headwind for the manufacturing sector, although its weight in the US economy is a lot smaller than it used to be.

Confidence in the economy surged after the election according to Gallup. The improvement was largely partisan as Republicans became more bullish on the economy.

Fast money poured into ETF last week on the election news. Large caps were bought while small caps were sold. Pharma and biotech saw big inflows, as well as tech, which would benefit the most from an overseas repatriation tax holiday.

Home prices rose 6.6% last month according to the FNC indices.

Morning Report: Retail Sales improve 11/15/16

Vital Statistics:

Last Change
S&P Futures 2165.0 5.0
Eurostoxx Index 338.3 0.1
Oil (WTI) 44.6 1.3
US dollar index 90.5 0.0
10 Year Govt Bond Yield 2.22%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.89

Stocks are up modestly this morning on no real news. The bond bears are taking a break today, everywhere except Japan, where the JGB 10 year yield is now positive.

You can see just how dramatic the sell-off in the 10 year has become. Note the big drop in yields as the election was called for Donald Trump, and then the huge reversal. That is the mother of all head fakes. Carl Icahn was buying about a billion dollars worth of S&P 500 futures contracts during that head fake.


Retail Sales came in stronger than expected in October, rising 0.8%. Ex-autos and gas, they rose 0.6%. The October readings are in that sort of trough period between back to school and the holidays. BTS sales were on the weak side, FWIW so I am not sure what this necessarily means for holiday sales. Stocks seem to like it, with the S&P SPDR retailer ETF (XRT) up a couple of percent pre-open.

More stirrings of inflation? Import Prices rose 0.5% in October, higher than expected. The headline number is even more surprising given that the dollar rose during the month, however the increase was pretty much concentrated in the petroleum sector. Export prices fell.

The Empire State Manufacturing Survey increased modestly in November, climbing out of negative territory for the first time in 4 months. New York State remains in a bit of a funk compared to the rest of the US. The employment indices fell.

More good news for housing: The Despot reported better than expected earnings this morning as people spend more on home improvement.

Is the firing spree finally over in the financial sector? It could be. Since 2005, approximately 800,000 jobs have been shed in the sector. About the only demand came in compliance.

People have been saying for a while that auto loans are the new subprime. It looks like the next subprime is online consumer loans, which were supposed to disrupt the banking industry, but are taking way more credit losses than anticipated. Technology is all fine and good, but if you can’t analyze credit risk properly, you aren’t going to make it.

Head of the SEC Mary Jo White submitted her resignation, which clears the way for a more pro-free market head of the regulatory body.

The jump in rates has been bad news for many in the mortgage business, as it weighs down the refi shops. VA IRRRLs have been a gravy train for many shops and that party looks to be winding down between higher rates and new rules on securitization. Certainly this isn’t great news for the first time homebuyer, however if the employment market continues to improve, that should offset the increase in rates. It will almost certainly mean that further home price appreciation will be harder to come by, as the affordability gift of low rates goes away. Does that necessarily mean the refi market is dead? Cash-out refis where borrowers can refinance their credit card debt will still make a ton of sense, even if mortgage rates top 4%. We may see an increase in ARM demand as a way to lower payments, but with the Fed in a tightening cycle, that is a risky way to go.

Morning Report: Potential Dodd-Frank reform 11/14/16

Vital Statistics:

Last Change
S&P Futures 2164.5 3.0
Eurostoxx Index 338.2 0.7
Oil (WTI) 42.7 -0.7
US dollar index 90.2 0.5
10 Year Govt Bond Yield 2.20%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.89

Stocks are up modestly this morning on no real news. Bonds and MBS are up again.

No economic data this morning, but we will have some Fed-speak in the afternoon.

About $1.2 trillion in wealth was wiped out in the bond market last week as yields soared in response to the Trump victory. The yield on Treasuries increased by 37 basis points last week. Bonds are reacting to (a) the potential inflation from a big infrastructure spending program, and (b) the potential for reduced trade and increased protectionism. Yields are now at highs we haven’t seen since January.

Richmond Fed President Jeff Lacker said that if Trump enacts a large fiscal stimulus plan, it might cause the Fed to move faster than the markets anticipate. Lacker will be a voting member in 2018.

One of the first jobs the new administration will tackle is to reform Dodd-Frank. The biggest piece of that will be to reform the CFPB, by making it subject to the Congressional appropriation process and to replace a single director with a bipartisan board. Banking stocks have been rallying since the election. Other rules would center around capital requirements and stress tests, which would mainly affect the smaller banks that don’t have massive derivatives portfolios or international operations, in an attempt to ease the regulatory burden on them. Democrats might attempt to filibuster any reform if it goes too far, but there probably is enough common ground in the Senate to make some sort of reform possible.

Could Donald Trump end up facing the nemesis of Bill Clinton’s first administration – the bond vigilante? Certainly if you take his promises at face value: a big uptick in spending with a massive tax cut, then you might see the creature that has been in hibernation since the early 90s resurface.

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