Daily Agenda: Global Bankers Push Back Against Fines

Big banks protest regulation, litigation and negative rates; experts question Trump economic plan; consultant accused of hiding ties to imploding hedge fund; Oracle earnings soft.


As the week draws to an end, the effect of monetary and regulatory policies on the global financial system has been underscored by a series of remarks from the world’s top bankers. Deutsche Bank issued a statement on Friday rejecting a $14 billion fine sought by the U.S. Department of Justice over the sale of mortgage-backed securities in the runup to the credit crisis a decade ago. Shares of the German lender, which under CEO John Cryan has aggressively pursued cost cutting and asset sales while staggering from a barrage of commecial and legal problems, fell by as much as 8 percent after the announcement, dragging other financials lower and contributing to a decline in broad European equity indexs. Yesterday a key executive of Japan’s largest bank urged policymakers there to consider the impact of negative rates and other extreme policy measures on bank operating margins. In comments made in Singapore, Bank of Tokyo-Mitsubishi UFJ CEO Takashi Oyamada warned of the unintended consequences of a negative-rate environment on the financial system. Net income at UFJ’s parent contracted by more than 30 percent year-over-year during the most recently reported fiscal quarter as lenders struggled to make money in an environment where they are punished by holding deposits. And it’s not just bank leaders grousing over the new reality. Bloomberg reports that regulators from European economies expressed grave concerns over new risk-management rules during meetings at the Basel Committee on Banking Supervision earlier this week. Meanwhile, as financial executives grow more vocal, populist critics continue to speak out. Yesterday Massachusetts Senator Elizabeth Warren, a former Harvard Law School professor and architect of the Consumer Financial Protection Bureau, who has largely built her political career on demands for greater financial regulation, wrote a public letter to the Federal Bureau of Investigation asking that it publish records relating to its post-late-2000s-crisis probes of the banking industry.

Trump unveils economic policy vision while experts question its credibility. In a speech before the Economic Club of New York, GOP presidential candidate Donald Trump unveiled more details of his proposed policies to stimulate growth. Trump’s pledge to overhaul tax and regulation and create 25 million new jobs was met with skepticism by most analysts given the current available pool of labor combined with Trumps anti-immigration stance. Trump also pledged to reduce personal taxation rates for all Americans while continuing to support current social benefits, arguing that the shortfall would be met by higher gross-domestic-policy levels.

Third-party consultant accused of hiding ties to fund. Today The Wall Street Journal published a report detailing the relationship between Beechwood Re, an adviser to institutional investors, and the hedge fund Platinum Partners, which is currently under federal investigation. According to the report, Beechwood clients were unaware that 40 percent of the firm was held by family members of Platinum’s founders and employees. In addition to charges relating to the fund’s investments, a Platinum executive has been prosecuted for allegedly bribing a union official in exchange for an allocation.

Nevada body approves stadium for Raiders move. Yesterday the Southern Nevada Tourism Infrastructure Committee approved $750 million in public funding towards a proposed domed stadium in the greater Las Vegas region intended as the new home of the Oakland Raiders. The National Football League franchise has considered the move to a facility that would ultimately cost as much as $2 billion and be potentially offset by new taxes. Officials in northern California have expressed little interest in using public funding to keep the team as they grapple with pension and other budgetary shortfalls.

Oracle earnings softer than expected. After equity markets closed yesterday, Oracle Corp. released first-quarter financial results that were weaker than analysts’ estimates, with earnings per share of $0.55 for the period versus a consensus target of $0.58. Critically, some analysts fret that the nearly 80 percent year-on-year growth in cloud-based revenues during the period is still not sufficient to help the enterprise software giant reach its fiscal and market-share targets.