Morning Report: The CFPB has two directors 11/27/17

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Stocks are flat this morning after the US comes back from a long weekend. Bonds and MBS are up.

Retailers are rallying this morning on expectations of a strong holiday shopping season. Meanwhile, Bitcoin is pushing $10,000.

New Home Sales rose 6.2% MOM and almost 19% YOY, according to Census and HUD. The median sales price was $313k, while the average was $400k. Inventory is at 4.9 months’ worth.

We have a good amount of data this week, although the jobs report will not be released this Friday. We get new home sales today, house prices tomorrow, GDP on Wednesday, Personal Incomes / Spending on Thursday, and the ISM data on Friday. Janet Yellen will also speak on Wednesday.

Richard Cordray resigned from the CFPB last week and Donald Trump nominated Mick Mulvaney to lead the Bureau. Outgoing Director Cordray nominated Obama appointee Leandra English (a career civil servant in the Elizabeth Warren mold) to replace himself and the agency is suing the Trump Administration to prevent him from nominating Mulvaney. So, for the moment, the agency has two directors.

While there is partisan rancor over who will lead the CFPB, Trump’s nominee to lead the Fed, Jerome Powell, expects to have a smooth path to confirmation.

Tax reform will be front and center this week as the Senate hopes to vote this Thursday. If the Senate passes a bill, the House and the Senate will need to come to an agreement between their respective bills. Trump hopes to sign something by the end of the year.

Who would be the biggest losers in the tax bill? The very rich in Greenwich, CT and Manhattan. This is the last thing Connecticut needs – their entire state is largely financed by the rich in Fairfield County. Goldman Sachs estimates that NYC could lose 4% of their top earners. The most likely beneficiary? Florida. The rarefied air of the Northeast luxury market will take a hit (it was already moribund before people were talking about eliminating the state and local tax rate), although inventory is so tight it probably won’t affect the lower price points.

The NAR has released a study claiming that tax reform will hit real estate prices overall by 10%. The fear is that it will discourage homebuilding which will sap the economy of strength. It is true that economic growth has been tepid over the past decade as homebuilding contracted, but will the changes in the tax code matter all that much? I am skeptical that lowering the MID cap from $1 million to $500k will matter all that much, given the median home price in the US is under $250k. The median income in the US is under $60k as well and most people will be better off just taking the increased standardized deduction. So while they may “lose the mortgage interest deduction” it is a moot point – the increased standard deduction replaces it. But yes, I would expect to see some sort of effect at the top 10% of the market, but that should be about it. As far as homebuilding, I think the builders will shift their focus from luxury to starter homes, where the demand is. As a matter of policy, if you wanted to get rid of the mortgage interest deduction when it causes the least amount of economic pain, you would do it when the economy is expanding and interest rates are low. Interest as a percent of your mortgage payment is the lowest in 50 years.

36 Responses

  1. I’m enjoying the CFPB fight. Why did the broad move to an under-construction building next door? Why didn’t she occupy the actual office? Kinda chickenshit if you ask me, doesn’t seem as if she believes in her own cause.

    If the Trump admin prevails, why should now everybody who followed her be fired?


  2. If AMT is repealed then there seems to be no excuse to move in the proposed tax code. Besides, the ultra-high earners don’t get to deduct their state taxes now b/c of AMT. So post AMT repeal the state tax deduction issue is moot for them. Never was before and won’t be after, if you get my drift.


  3. The NYT outdoes itself.

    The first response is perfect.


    • I think the NYT will be disappointed in how few normal guys will accept the social marching orders of women and beta males…

      Liked by 1 person

    • From the NYT:

      I have seen just how profoundly men don’t want to talk about their own gendered nature.

      WTF does “gendered nature” mean? Since when is “gender” anything but a noun?


      • I saw that statement and thought “maybe they just don’t want to talk to you…”


      • George likes to talk about his male nature. Is that his gendered nature or his natural gender? Inquiring minds are rooting about in this anthill of culture.


    • There’s actually one thought in there that I agree with:

      “What if there is no possible reconciliation between the bright clean ideals of gender equality and the mechanisms of human desire?”

      This isn’t a problem if you don’t buy into the progressive view of what constitutes equality.


      • Yup…I definitely agree with you.


      • What does gender equality in the law have to do with whether I am bigger than my wife? Or with the fact that men are horniest between puberty and 25 while women are horniest in their late 30s to mid 40s [you can look it up]?

        There’s a lot of over-thinking of very small significance going on.

        And I still don’t understand the supposed connection between the tax proposals and moving out of Manhattan.


        • the news story relies on a Goldman Sachs study, and I won’t be able to see it online since it will be for clients only…


      • “What does gender equality in the law have to do with whether I am bigger than my wife?”

        You need to remember that these people read Harrison Bergeron as a how-to-guide, not as a warning.

        “THE YEAR WAS 2081, and everybody was finally equal. They weren’t only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General.”


    • Also, if we are examining sexual pathologies, someone ought to do an op ed on why adult women teachers seem to seek out underage male students for sexual encounters and what it says about feminism.


  4. Heh.


  5. THe blowback on Pelosi from pissed off broads must outweigh the potential blowback she’s gonna get from the CBC.


  6. Man lefties get butthurt when they’re reminded that Fauxahontas faked an Indian Heritage to secure a plum job.

    Liked by 1 person

  7. I don’t see how the President’s statutory right to name a new agency director after one resigns is not paramount. Perhaps there is some magic language Trump missed, but I don’t know what it would be.


    • Mark:

      Perhaps there is some magic language Trump missed…

      If I am not mistaken, the magic elixir by which any language can be transformed from what it actually says and into what the left wants it to say in any given circumstance is officially known as “emanations from penumbras”.


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