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

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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.

51 Responses

  1. Frist! And, yay, Frank-Dodd reform. I like reform!

    Also, have you read Aaron Sorkins open letter to his wife and daughter published in Vanity fair about how sexist and awful it is that Trump was elected because NAZIS!!! ?

    http://www.vanityfair.com/hollywood/2016/11/aaron-sorkin-donald-trump-president-letter-daughter

    Like

    • It’s a great example of why I’ll probably be voting for Trump four years from now. Or thinking about it very seriously. I was not going to vote for him this time around and, if my state hadn’t already been a given, I might have considered voting for HRC.

      But, as usually, the people smarter and kinder and better than the rest of us make me suspect that both them and who they support are out of touch with a reality far more than Trump. In so many ways.

      From the letter: “And it wasn’t just Donald Trump who won last night—it was his supporters too. The Klan won last night. White nationalists. Sexists, racists and buffoons. Angry young white men who think rap music and Cinco de Mayo are a threat to their way of life (or are the reason for their way of life) have been given cause to celebrate. Men who have no right to call themselves that and who think that women who aspire to more than looking hot are shrill, ugly, and otherwise worthy of our scorn rather than our admiration struck a blow for misogynistic shitheads everywhere. Hate was given hope. Abject dumbness was glamorized as being “the fresh voice of an outsider” who’s going to “shake things up.” (Did anyone bother to ask how? Is he going to re-arrange the chairs in the Roosevelt Room?) For the next four years, the President of the United States, the same office held by Washington and Jefferson, Lincoln and Teddy Roosevelt, F.D.R., J.F.K. and Barack Obama, will be held by a man-boy who’ll spend his hours exacting Twitter vengeance against all who criticize him (and those numbers will be legion). We’ve embarrassed ourselves in front of our children and the world.”

      Emphasis mine. No mention of the folks burning cars, breaking windows, looting and rioting in some of the blues places in the country, or the protest sign advocating Melania Trump be sexually assaulted.

      FDR freakin’ rounded up Japanese citizens and put them in frickin’ “internment” (re: prison) camps. Washington and Jefferson both owned slaves. What’s Trump going to do that’s worse than any of that? What, FDR was super smart and erudite while depriving American citizens of their constitutional rights?

      And don’t get me started on “embarrassing ourself in front of the world”. Look, nobody who gets elected is going to embarrass me. If I elected him, I like the guy. Why would I be embarrassed? If I didn’t elect him, I don’t like the guy. He’s not my fault! Why would I be embarrassed? Why are you people so concerned that we elect for our president someone that all the other countries approve of? If everybody jumped off a bridge, would you do that, too?

      And on and on.

      Like

      • ” Angry young white men who think rap music and Cinco de Mayo are a threat to their way of life (or are the reason for their way of life) have been given cause to celebrate.”

        damn, he slays strawmen as well as obama does..

        Like

  2. One of the things I’m interested to see with Trump is how the establishment reacts if he stick with his current plans to go over their head with Twitter, disregard their ethical values by keeping his Trump organization and having his kids run it, and insulting their sense of importance by not bothering to live in the White House.

    He may well be the most anti-elite president in temperament since Andrew Jackson.

    Liked by 1 person

    • This is one area where there can be no doubt a decision not to hang out at the Whitehouse would be praise, by Democrats and the left, if Hillary made, if Obama had made it, if Bill Clinton had made it . . . basically, if any Democrat made it. They would all immediately jump to: “It’s 2016! There’s Skype! Videoconferencing! FaceTime! Remote desktop access anywhere in the world, there’s a full command center in Airforce 1. Seriously, why should President Elect Hillary Clinton ever go to the Whitehouse? Thank goodness we’ve finally got a president who lives in the 21st century!”

      There would be articles filled with glowing praise in Wired and the tech press. It would be a wonderful innovation.

      Partisan Republicans would complain, of course, but that’s how politics works. They would at least have the benefit of the position not being transparently hypocritical and regressive. That any liberal can complain about how much time Donald plans to spend at the Whitehouse with a straight face indicates either than they are over 70 years old or have a capability for sociopathic hypocrisy or self-delusion.

      It would all be “Hillary will probably get more done from Chappaqua!”

      And everyone in New York would be all for it.

      Like

  3. Yep. Bruce backfired.

    “Popular Culture’s Failed Presidential Campaign

    Political science suggests the celebrities who supported Hillary Clinton appealed to her base but also emphasized wider divides.

    Spencer Kornhaber
    Nov 13, 2016 ”

    https://www.theatlantic.com/entertainment/archive/2016/11/election-celebrities-trump-clinton-endorsements-beyonce-springsteen-david-jackson-bowling-green/507383/

    Presumably once Trump changes the Title IX guidance on transgender bathroom usage, they will boycott the entire United States to be consistent with the stand that they took in North Carolina.

    Liked by 1 person

    • You mean, when TrumpHitler makes it illegal for LGBQT people to use the bathroom??!?!

      Hatemonger.

      Like

    • When has popular culture won a presidential campaign after JFK? I’d argue any wins after 1960 would have to be a coincidence.

      Seriously. Cameron Diaz speculating that George W. Bush, if elected, was going to legalize rape. Pop-culture folks have opinions but generally come off as less-informed and detached than the folks on Facebook.

      They can alienate themselves from their conservative fans, but any non-partisan fans they can influence with their opinions are highly unlikely to ever bother to vote.

      Like

    • jnc:

      Presumably once Trump changes the Title IX guidance on transgender bathroom usage, they will boycott the entire United States to be consistent with the stand that they took in North Carolina.

      Only if they value intellectual consistency. And they don’t.

      Their actions were never driven by any logic or intellectually considered conviction towards certain principles. They were driven by sentimentality and a will to exercise power over those who think differently.

      Liked by 1 person

      • But they will hashtag up a storm. #NotMyPresident and #IStandWithXer will probably be big ones.

        There will be a lot of wearing of safety pins. And riots, no doubt, Over something almost nobody is ever going to do (statistically) and, when those people do it, almost nobody is ever going to get in trouble for it. I don’t pay attention to whose in the bathroom and if a transgender dude sauntered in and I happened to know it was a transgender dude I wouldn’t give a damn. This has all been a completely made up issue.

        It’s what used to happen with religion, I guess, and the rites and sacraments and huge arguments had over the trinity and what constituted an appropriate bread or wine to represent the blood and body of Christ. Now, since they are mostly agnostics and atheists, they have to argue over issues around bathroom usage, the problems with which are a statistical 0.

        Of course, these are the same people that, despite all the available historical data, still blame Ronald Reagan for the AIDS epidemic (as contrasted to the cancer-non-epidemic and heart-disease-non-epidemic that were killing more than 20 times as many people. I understand why they didn’t include accidental injury, although this kills far more people per year that AIDS ever did . . . still.

        Like

      • I had assumed that the snark was implicit and that it was clear that the point I was making was that they would be willing to stand on principle right up to the point that the cost/benefit ratio changed.

        Liked by 1 person

  4. If LePen wins, does that mean that Trump was on “the right side of history”?

    “For Le Pen, the Impossible Now Seems Possible

    After Brexit and Trump, the National Front’s leader foresees a trifecta for the West’s far right when France votes next spring.”

    http://www.nytimes.com/2016/11/14/opinion/for-le-pen-the-impossible-now-seems-possible.html

    Like

    • “Far right” . . . Everybody with an opinion unapproved by the NYT is far right, it seems, sometimes. I’m not familiar enough with LePen, really, to offer an opinion (I recall she’s not big on Muslim immigration . . . can’t imagine why). Trump is uncouth, uncivil, and a bully amongst many other negative qualities but what “far right” politician would ever hold up a gay pride flag from gay Trump supporters at a political rally?

      Might be a fairly right-wing Whitehouse, but I suspect most of this cabinet will be to the right of him politically. Which is another thing to like about Trump.

      Like

    • I think I’m in love:

      ““You don’t draw the right lessons,” she told an interviewer who tried to get her to condemn Mr. Trump’s sexism. “This question is of no interest in the face of this gigantic change.””

      “This anger, she feels, has the same foundations in France as in the United States or Britain: Alienated by “wild globalization” and open borders, she says, people want their nation back.”

      I, for one, would prefer France to retain a unique French identity, England to retain a unique English identity. You can have immigration without also saying you have to completely surrender a national culture.

      “A high level of unemployment (9.6 percent) and an undeniable European migrant crisis have fueled discontent in France. ”

      That’s the NYT for you. Not “Muslim migrant crisis”. Because of all the Swedish immigrants burning cars in French ghettos.

      “It is not enough to protest the consequences of populism, he told me; you also need self-criticism. And Mrs. Clinton, he noted, has not been particularly good at self-criticism.

      Now let’s see if the French can do better.”

      Right. “Do better”. Hopefully, France isn’t worried about embarrassing itself in front of the New York Times.

      Like

    • Has the NYT ever uttered the words “far left?”

      Like

  5. @brentnyitray: “Other rules would center around capital requirements”

    Is this a good thing? Intuitively, I suspect it’s not, but I am no expert.

    Also, is Trump likely to reform or advocate for repeal of Sarbanes-Oxley?

    Thanks!

    Like

    • I think so… The idea would be that if banks keep a 10% capital cushion and are plain vanilla, they can escape some of these stress tests.

      I mean there is always the chance that a rogue risk manager could bet the farm on credit default swaps at East Podunk Savings and Loan, but it is pretty unlikely.

      SarbOx isn’t going anywhere because corporations love the built-in excuse not to talk to analysts and the Street..

      Liked by 1 person

      • Ah! I didn’t know that about Sarbanes-Oxley. I had always gotten the impression that it was onerous with no point. I didn’t realize the corporations were getting a tangible benefit from it.

        Like

  6. And Scott Adams is back in his groove:

    “My observation of the anti-Trump protests is that it mostly involves young people. This is their first fake-Hitler scare. They don’t realize that Reagan was compared to Hitler, both Bush presidents were compared to Hitler, and Romney was compared to Hitler. I assume lots of European and other leaders have also been compared to Hitler. You might want to point that out to any young person who thinks this is the first time we’ve seen this.”

    http://blog.dilbert.com/post/152998516891/the-de-hitlerization-of-your-brain

    How old were you when you first had to face Hitler?

    Like

    • Also spot on:

      “This brings me to the anti-Trump protests. The protesters look as though they are protesting Trump, but they are not. They are locked in an imaginary world and battling their own hallucinations of the future. Here’s the setup that triggered them.

      1. They believe they are smart and well-informed.

      2. Their good judgement told them Trump is OBVIOUSLY the next Hitler, or something similarly bad.

      3. Half of the voters of the United States – including a lot of smart people – voted Trump into office anyway.

      Those “facts” can’t be reconciled in the minds of the anti-Trumpers. Mentally, something has to give. That’s where cognitive dissonance comes in.”

      http://blog.dilbert.com/post/153080448451/the-cognitive-dissonance-cluster-bomb

      Liked by 1 person

      • This is exactly right. The people who generally came up with the most racist depictions of Obama in their protests, or compared Obama to Hitler, who claimed Obama was going to come for all their guns and already had a plan in place to confiscate them all and so on were all locked in a pitched battle with their imaginations.

        What I observe is those folks seem to get less of a sympathetic nod from the establishment right than do the BusHitler folks do from the establishment left. Beyond that, I think both sides seem immune of how hallucinatory their paranoid fantasies seem to people who don’t agree with them.

        My favorite retort to the absurdity of the Trump/Hitler comparison:

        “They laughed at Hitler, too.”

        Did they? Were you there? They also laughed at Soupy Sales. Did he become Hitler? Do we have something else you can point to that makes 240 year old America similar to war-ravaged post WWI Germany that the allies were had but under bone-crushing repatriation debts it could never pay off? Anything? Bueller?

        Like

  7. Liked by 1 person

  8. Sting needs to re-release “Russians” and change the refrain to “If Trump loves his children too”

    “In Europe and America, there’s a growing feeling of hysteria”.

    http://www.sting.com/discography/lyrics/lyric/song/220

    Liked by 1 person

    • Heck, “If Putin loves his children, too”.

      I’ve recently been informed that our most bitter, awful enemy is Russia, and Trump looooves Russia and wants to be their girlfriend. So he’s going to surrender to Russia. And make America be Russia. And that’s bad, because Putin. It would be consistent with the ultimate message of the song, which wa the lecturing of Americans and Ronald Reagan, without calling anybody racists or Nazis, they way they used to do it back in the old days.

      Like

    • “We are the generation with the strongest and most vast understanding of identity politics yet.”

      Apparently not.

      Like

    • I woke up on Election Day like a bride: rosy, thrilled, a little controlling about just how MY perfect day would be spent. After working on the Clinton campaign for eighteen months, I was ready to celebrate, and sure that by nightfall I’d be knocking back glasses of champagne and creating a story to tell my unborn children. Maybe I’d even get close enough to Hillary Clinton to hug her, to whisper “Thank you.” I had dreamed about it every night for the last two weeks.

      I just don’t understand how Hillary lost. You’d think they were voting for Bella to marry Edward and election night ended with them finding out they weren’t going to make the last Twilight movie.

      The three hours I spent at the Javits Center Tuesday night, surrounded by campaign staffers and fellow surrogates for Hillary Clinton, are blurred and spotty. At a certain point it became clear something had gone horribly wrong. Celebrants’ faces turned. The modeling had been incorrect. Watching the numbers in Florida, I touched my face and realized I was crying. “Can we please go home?” I said to my boyfriend. I could tell he was having trouble breathing, and I could feel my chin breaking into hives. Another woman showed me her matching hive, hidden by fresh concealer.

      Jeebus is inadequate to describe. I just can’t understand how these brilliant minds and courageous men/women-children lost the election.

      At home I got in the shower and began to cry even harder. My boyfriend, who had already wept, watched me as I mumbled incoherently, clutching myself. “It wasn’t supposed to go this way. It was supposed to be her job. She worked her whole life for the job. It’s her job.”

      I think I just threw up in my mouth a little.

      In this new reality, we have all been radicalized.

      Translation: easy win for Trump in 2020.

      A lot of people have been talking about how we need to try to understand how this happened and what’s going on in the minds of the people who voted for Donald Trump. Maybe. Maybe. But maybe let’s leave that to the strategists, to the men in offices who need to run the numbers. It should not be the job of women, of people of color, of queer and trans Americans, to understand who does not consider them human and why, just as it’s not the job of the abused to understand their abuser. It’s quite enough work to know about and bear the hatred of so many.

      Translation: We want an easy win for Trump in 2020. And hopefully the GOP wins in all the midterms too. Because catharsis trumps victory!

      Like

  9. While progressives dream of impeachment or somehow getting the electoral college to vote for Clinton, here’s what actual elected Democrats are saying:

    “Democrats look to exploit Trump divisions with GOP Congress

    Senate Democrats hint they’re willing to play ball with the president-elect and use the filibuster sparingly.

    By Burgess Everett
    11/14/16 05:07 AM EST

    Democrats on Capitol Hill think the newly elected Republican president might have as much in common with them as the Republicans running Congress — and they’re planning to take full advantage of it.”

    http://www.politico.com/story/2016/11/donald-trump-senate-democrats-231256

    Let’s juxtapose a recurrent meme here and see how it looks:

    “Senate Democrats hint they’re willing to play ball with Hitler and use the filibuster sparingly.”

    “Democrats on Capitol Hill think Hitler might have as much in common with them as the Republicans running Congress — and they’re planning to take full advantage of it.”

    Welcome to normalizing Trump.

    Liked by 1 person

    • jnc:

      Democrats on Capitol Hill think the newly elected Republican president might have as much in common with them as the Republicans running Congress

      This fact was always my biggest problem with Trump.

      Let’s juxtapose a recurrent meme here and see how it looks:

      heh.

      Like

  10. Trump is going full Scott Adams:

    “President-elect Donald Trump is considering a woman to run the Republican Party and an openly gay man to represent the U.S. at the United Nations, moves that would inject diversity into a Trump team.”

    http://www.chicagotribune.com/news/nationworld/ct-trump-openly-gay-man-woman-appointments-20161114-story.html

    “How to Break an Illusion
    Posted November 14th, 2016 ”

    http://blog.dilbert.com/post/153172272041/how-to-break-an-illusion

    Like

  11. Brent:

    About $1.2 trillion in wealth was wiped out in the bond market last week

    Is it really fair to say that wealth was “wiped out”? Unlike equity, there are actually two sides to debt. To the extent that owners of debt suffered a loss with prices dropping, those who issue the debt have made money, in that they can retire the debt at a much cheaper cost than before. Only if the price change is due to a credit event would I think that wealth had actually been wiped out.

    Like

    • the other side of the trade is the US government

      Like

      • Brent:

        the other side of the trade is the US government

        Yeah, but the principle is still the same. When the market rallied 70 bps over the course of January this year, would you have described that as $2 trillion in wealth creation?

        Like

  12. From the same Politico piece:

    “But Democrats in contact with Schumer say the presumptive Democratic leader hasn’t given them any indication he’s planning to declare war on the incoming president by reflexively opposing him on everything. That’s in keeping with Schumer’s pragmatic, deal-cutting sensibilities.

    Schumer chatted with Senate Majority Leader McConnell (R-Ky.) on Election Day and the two agreed to work together “whatever happens” in the presidential race, a person familiar with the exchange said. They spoke again on Wednesday.

    And in Louisville on Friday, McConnell called Schumer a “smart, transactional person, and I think we’ll get along just fine.””

    I think the progressive meltdown reaches critical mass when Senate Democrats confirm Trump’s cabinet picks rather than engaging in massive resistance to stop Hitler.

    Like

  13. You can’t parody the left:

    “Professors ask Sullivan to stop quoting Jefferson
    Many student groups believe Jefferson shouldn’t be included in emails”

    http://www.cavalierdaily.com/article/2016/11/professors-ask-sullivan-to-stop-quoting-jefferson

    That’s from UVA, the university Jefferson founded.

    Liked by 1 person

    • The guy who authored the Virginia Statute on Religious Liberty that is the foundation for religious liberty in the US and the beloved “wall of separation” between church and state. Don’t quote him.

      Huh.

      Like

  14. Brent, your victory is now complete:

    “For a certain type of conservative, one of the great outrages of the Obama era was an obscure 2015 rule from the Department of Housing and Urban Development called “Affirmatively Furthering Fair Housing.”

    AFFH was more interesting than its name. It was the Obama administration’s attempt to battle neighborhood segregation, the inequities of which are the invisible foundation of American crises like the racial wealth gap and disparity in public education.

    How will Donald Trump approach that legacy? There are rumors that Trump’s choice for HUD secretary might be Westchester County, New York, executive Rob Astorino, a Republican who has made his career fighting against integration in Westchester and would almost certainly undo HUD’s enhanced scrutiny of racial discrimination in housing.”

    http://www.slate.com/blogs/moneybox/2016/11/14/donald_trump_could_undo_obama_s_big_hud_initiative_in_desegregation.html

    Like

  15. Trust the Media!

    Like

  16. How the Democrats having been losing pretty much everywhere since 2008:

    http://rightwingnews.com/democrats/utter-complete-destruction-democrat-party-obama-era-shown-6-charts/

    Just makes sense that everybody thought Hillary was going to win.

    Like

  17. I’m fascinated by people who think/thought any Federal employees were going to quit if Trump got elected.

    http://www.nytimes.com/2016/11/14/opinion/stay-on-for-your-country.html?_r=0

    Did anybody here think any Federal employees would quit?

    Like

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