Morning Report: Congress eases Dodd-Frank a little 5/23/18

Vital Statistics:

Last Change
S&P futures 2709 -17
Eurostoxx index 392.65 -4.29
Oil (WTI) 71.89 -0.29
10 Year Government Bond Yield 3.01%
30 Year fixed rate mortgage 4.66%

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

Mortgage Applications fell 2.6% last week as purchases fell 2% and refis fell 4%. The refi share of mortgage apps fell to 35.7%. Rates increased substantially last week, driving the decline. Refis are at the lowest level since 2000.

New Home Sales in April were 662,000, lower than March and the Street estimate. The median sales price was $312k and the average price was $407k. There were 300k houses for sale at the end of the month, representing a 5.4 month inventory.

Separately, the share of new houses built to be rented is steadily increasing, adding to the tight inventory problem.

Congress passed a few tweaks on Dodd-Frank yesterday, which gave banks from $50-$250 in assets a bit of regulatory relief from the more onerous requirements in terms of risk management. This was a bipartisan and incremental bill that does not “gut Dodd-Frank.” Banks like Zion’s or Huntington simply aren’t going to get involved in some of the more esoteric stuff that a JP Morgan will and don’t require six compliance officers to ensure they don’t blow themselves up in the CDO market. This bill was less ambitious than the Financial CHOICE act that passed the House last year but failed to garner any Democratic support in the Senate.

The CFPB is planning on easing some of the Obama-era use of disparate impact. Disparate impact means that a lender is guilty of discrimination if its lending numbers don’t reflect the demographic makeup of the area in which the bank operates, even if it had no intention of discrimination. It basically strips away the ability of a lender to even defend themselves. This measure stems from a Supreme Court decision in 2015 that upheld the concept of disparate impact, but required a plaintiff to prove the company’s policies led to it. HUD is also dialing back some Obama-era policies that required local governments to submit plans to make sure neighborhoods reflect the demographic makeup of the surrounding area by forcing them to change zoning requirements to allow more affordable housing. The requirement stands, however HUD delayed the compliance date.

Separately, the CFPB is going to back away from auto financing. The original language in Dodd-Frank prevented the CFPB from getting involved in this area, but Richard Cordray claimed that because auto dealers didn’t do auto loans – banks did – that they did fall under CFPB’s jurisdiction. This change is another example of the CFPB “pushing the envelope” and reflects Mick Mulvaney’s philosophy of going as far as the law requires, but no further.

The FOMC minutes are scheduled to come out at 2:00 pm EST. The Street will be zeroing on any discussion of whether 2% inflation is a symmetric target or a hard ceiling. The Street is now leaning slightly towards 2 versus 3 more hikes this year. It was over 50% last week.

Fun fact courtesy of Barry Ritholz. On this day in 2002, Netflix went public, raising $300 million. That same year, Blockbuster earned over $800 million in late fees alone. Today, Netflix is up 15,000% while Blockbuster is extinct. Note investors had almost given up on NFLX in the mid 00s.

25 Responses

  1. Another good column by McCarthy today about how Obama’s FBI came to spy on the Trump campaign.


    • Elsewhere over at NR, we have Johah Goldberg saying:

      However, it does seem clear that the Trump campaign was eager to collude with Russia. The infamous meeting at Trump Tower between a Russian emissary and the campaign’s key leadership — Donald Trump Jr., Jared Kushner, and then-Trump campaign chairman Paul Manafort — was convened for that very reason.

      And David French adding:

      Donald Trump Jr. responded positively to a direct invitation to collude with Russia, taking a meeting with a Russian lawyer after being promised information that could hurt Hillary Clinton as part of an official Russian effort to help Trump.

      Ignoring the extremely opaque nature of the concept of “collusion” (which Godlberg acknowledges), this whole line of discussion baffles me. If this meeting is evidence of “collusion”, how is the Steele dossier, which was filled with alleged Russian intel and dirt on Trump and which was paid for by Hillary for the exact purpose of getting dirt on Trump, is not at least equally strong evidence that the Hillary campaign colluded with Russia?


  2. Sorry to spam the blog with these DailyKos conspiracy threads but I can’t get enough of them. The comments are amazing.

    This post is even wilder!


    • The leftist judiciary has gone full Calvinball…

      Liked by 1 person

      • It’s almost worth getting these rulings just to see the wailing when the SCOTUS reverses them.

        Related, 9th Circuit rules that the White House exterior is a public forum and therefore anti-Trump graffiti can’t be removed without violating First Amendment rights.

        Liked by 1 person

      • Perfect unintended consequence:

        “Noah Feldman, a Harvard law professor, said he thinks the case was wrongly decided and expects it to be reversed. For a public forum to exist, the government has to own or control it, he said, but in this case, Twitter also controls Trump’s account.

        Twitter has long been dogged by questions about how far its users’ right to speech may extend. In the past, its own executives have described the company as being “the free speech wing of the free speech party,” holding that Twitter takes no position on the messages posted by its users.

        But the rise of online bullying, hate speech and harassment on Twitter’s platform has forced the company to confront its insistence on neutrality. Last year, the company unveiled new policies to address threats of violence or reports of abuse. And it has barred some controversial right-wing figures, such as the writer Milo Yiannopolous, from the platform for violating its policies.

        Wednesday’s ruling could complicate that debate, said Feldman, potentially giving people such as Yiannopolous grounds to sue Twitter and demand that they be permitted back on Twitter to view Trump’s account and to participate in the public forum surrounding it.

        “That is crazy,” he said. “But it is a possible logical outcome of this decision.””


    • Absurd.


  3. Vox expands it’s footprint into Netflix.


  4. Goddamn

    Liked by 1 person

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