Category Archives: Investing

Mnuchin: White House to negotiate 15% corporate tax rate

[Updated to include official tax reform plan revealed Wedensday afternoon]

Treasury Secretary Steven Mnuchin confirmed that the Trump administration tax plan will call for a 15% corporate rate, according to an article in CNBC by Jacob Pramuk.

Mnuchin and White House chief economic advisor Gary Cohn gave more details about the plan later in the day on Wednesday, the article stated.  

From the article:

At an event hosted by The Hill, Mnuchin — who declined to go into many specifics about the proposal — contended it would be “the biggest tax cut and the largest tax reform in the history of our country.”

When Trump floated a 15 percent corporate tax rate as a candidate, analyses of the proposal estimated that it could add atrillions to the national debt. It is unclear what the current proposal would do to raise revenue to offset those major cuts, and Mnuchin declined to say Wednesday how specifically the administration would pay for the 15% rate.

The exact details on President Donald Trump’s tax reform are were scarce leading up to the reveal, but Mnuchin has said in the past that the mortgage interest tax deduction will not be changed.

The tax deduction was brought up as an issue this past election season when House Republicans proposed tax reform that would make the mortgage-interest tax deduction irrelevant for most Americans.  

Here are highlights from the tax reform plan Cohn and Steven revealed in a briefing to reporters at the White House Wednesday afternoon, according to a follow-up piece from CNBC.

  • Trump’s plan will cut the number of income tax brackets from seven to three, with a top rate of 35% and lower rates of 25% and 10%. It is not clear what income ranges will fall under those brackets.
  • The proposal will chop the corporate tax rate to 15% from 35%.
  • It would eliminate all tax deductions except for the mortgage and charitable contribution deductions

Article source:

Community bankers: GSE reform should keep what works and just fix the problems

As talks of reforming the government-sponsored enterprises start to resurface under the new Trump administration, the Independent Community Bankers of America penned their version of how GSE reform should take place, taking a different stance from other options floating around.

The ICBA, along with other organizations that represent smaller lenders, have already publically denounced calls for reform in the past from trade associations, such as the Mortgage Bankers Association, which published its plans for GSE reform earlier this month.

The new six-page white paper details the ICBA’s principles and recommendations for reforming Fannie Mae and Freddie Mac to support continued access to the secondary mortgage market for community bank lenders.

Under the current system, Fannie Mae’s and Freddie Mac’s capital reserves will be drawn down to $0 in 2018. Both GSEs sent their latest dividend payment to the Department of the Treasury back in March, following the release of their 2016 fourth-quarter earnings.

But if the ICBA has their way, that money will stay with the GSEs to help rebuild their dwindling capital base.  

The ICBA isn’t alone is this call, banding with fellow community groups and lenders to urge elected officials to suspend the GSEs’ dividend payments to avoid the future need for another GSE bailout. As it stands now, under current conservatorship, the GSEs must reduce capital buffers to $0 next year. This means if they need money, they’ll need another bailout.

This new GSE reform white paper gives the ICBA’s general position on reform along with how to move forward with reform.

“Policymakers, industry stakeholders, think tank gurus, and politicians have weighed in on how to resolve this last remaining part of the Great Recession. There have been multiple papers and numerous legislative proposals, including some that have been attached to appropriations legislation, all seeking to end the conservatorship of the GSEs,” the paper stated.  

“Yet, the GSEs remain in conservatorship and subject to the net-worth sweep that is slowly bleeding away what little capital they have. This will eventually bring a day of reckoning for FHFA, the Treasury, and the housing market.”

Instead, ICBA stated that its approach to GSE reform is simple: use what is in place today and is working, and address or change the parts that are not.

The ICBA’s approach has two parts:

  1. Reforms that can be accomplished administratively by Federal Housing Finance Agency within Housing and Economic Recovery Act 
  2. Reforms that will require congressional action.

Here are only a few snippets from the ICBA’s principles for GSE reform. Check out the full white paper here.

1. The GSEs must be allowed to rebuild their capital buffers.

The first step in GSE reform requires the FHFA, the GSEs’ safety and soundness regulator, to follow the mandates prescribed in the 2008 Housing and Economic Recovery Act (HERA), namely, to restore the GSEs to a safe and sound condition. Regardless of which approach or structure reform takes, the existing system must be well capitalized to prevent market disruption or additional taxpayer support in the event of one or both GSEs requiring a draw from the U.S. Treasury during what’s likely to be a lengthy debate and transition period to any new structure or system.

2. Lenders should have competitive, equal, direct access on a single- loan basis.

The GSE secondary market must continue to be impartial and provide competitive, equitable, direct access for all lenders on a single- loan basis that does not require the lender to securitize its own loans. Pricing to all lenders should be equal regardless of size or lending volume.

3. An explicit government guarantee on GSE MBS is needed.

 the market to remain deep and liquid, government catastrophic-loss protection must be explicit and paid for through the GSE guaranty fees, at market rates. This guarantee is needed to provide credit assurances to investors, sustaining robust liquidity even during periods of market stress.

“Community banks depend on Fannie Mae and Freddie Mac for direct access to the secondary mortgage market, which promotes lending in local communities and offers an alternative to the largest and riskiest financial institutions,” ICBA President and CEO Camden Fine said.

“ICBA and the nation’s community bankers urge Congress and the Trump administration to end the destructive sweep of the GSEs’ earnings directly to government coffers, put the GSEs on sound financial footing, support equitable access to the housing-finance system, and protect taxpayers from another housing crisis,” Fine continued. 

Article source:

Final Jeopardy for Richard Cordray

On April 5, 2017, Richard Cordray, the director of the Consumer Financial Protection Bureau, gave his semi-annual testimony before the House Financial Services Committee. Jeb Hensarling, the committee’s chairman, spent several minutes grilling the former Jeopardy! champion on a passage about CFPB stonewalling in my National Review article, The Tragic Downfall of the Consumer Financial Protection Bureau

The unwritten policy [of the oversight unit’s supervising attorneys] was “never give them what they ask for”… Soon, a career professional in the unit who had resisted pressure to engage in witness coaching and other unethical practices was reprimanded for insubordination and reassigned. The inspector general investigated and issued a report to Cordray that concluded the reprimand was unwarranted and the supervisors had engaged in obstruction.

Cordray testified that the article was based on hearsay and opinion, and that he was uncertain which incident the excerpt described. The sparring continued until Hensarling revealed he knew little beyond what he’d read. The director then said he was unaware of any published report, and the chairman moved on.

Media stories about the hearing barely mentioned the exchange, but the reprieve was temporary. While the serious nature of the conduct uncovered by the investigation certainly warranted a published report, the inspector general, whose only other client is the Federal Reserve, had been reluctant to anger the bureau. The report was not just unpublished – it was camouflaged.

The passage in the article, like the additional facts below, was based not on hearsay, but rather on interviews with witnesses to, among other things, the presentation of the investigation’s findings and recommendations. The facts are disturbing.

The career professional, X, had received glowing performance reviews and awards during many years of federal service. She and a former Democratic senate staffer were hired in 2013 to help the two oversight supervisors respond to document and information requests. The former staffer handled congressional inquiries, while X was assigned the less dangerous inspector general investigations. One of the supervisors often told X that Cordray berated her whenever inspector general reports included negative findings, and therefore any such findings would be considered X’s failure.

In team meetings, the supervisors instructed both junior attorneys to construe requests as narrowly as possible, and encouraged them to summarize rather than produce original documents. For example, if congress or the inspector general requested certain emails, the attorneys should produce a spreadsheet selectively describing the messages, but not the actual emails. The supervisors attempted to shield themselves from liability with comments like “that’s what I would do, but it’s up to you.”

The supervisors also instructed the junior attorneys to prepare CFPB employees for investigators’ interviews by presenting possible questions and suggesting the interviewees’ answers; telling interviewees to intentionally misinterpret questions whose answers would reveal CFPB shortcomings; forbidding employees from bringing documents to interviews to refresh their memories (the investigators might request copies); and ordering interviewees not to name other employees who might help the investigators (the inspector general’s office was denied direct access to the CFPB’s intranet, which contained policies, procedures, and employees’ titles and contact information). The junior attorneys were to attend all interviews, and the supervisors would debrief the interviewees afterward.

The supervisors themselves engaged in witness coaching. For example, during a prep session for a 2013 investigation of the computer systems that protect consumers’ personal information collected by the CFPB, one of the supervisors instructed a senior technology employee not to tell investigators he had recommended security controls that the bureau had not implemented.

Frustrated that X was not following her “advice,” one of the supervisors ordered X to copy her on all project-related emails and include her in all telephone calls with document-producing employees. During one such call on December 2, 2013, the supervisor suggested an employee in the Consumer Response division provide a summary in lieu of requested documents. The employee privately told X he felt uncomfortable doing so, and produced the original documents. The supervisor was furious.

On January 10, 2014, X initiated a confidential meeting with the CFPB general counsel to express her concerns about the unethical and possibly illegal practices. When they met again on March 4, 2014, X said the problem had worsened and she would probably file a grievance against the supervisor. The general counsel discouraged the grievance, and then told the supervisor about the meeting.

Two days later, the supervisor slapped X with a formal reprimand. The general counsel sent the inspector general a copy and said that the insubordinate employee responsible for the CFPB’s slow document production had been dealt with. The next day, X asked the inspector general’s office to investigate the supervisors’ obstruction and the reprimand designed to cover it up, and subsequently filed a grievance.

The inspector general’s office conducted a thorough investigation and confirmed X’s allegations. On May 13, 2014, an associate inspector general sent a letter to one of the supervisors and the CFPB general counsel describing some of the most egregious practices. The office then issued the bureau “protocols” it would have to follow to prevent future obstruction. Shortly thereafter, senior officials from the office met with Cordray, the CFPB general counsel, and the two supervisors to discuss the investigation findings and protocols.

On June 2, 2014, the CFPB settled X’s grievance by expunging the supervisor’s reprimand and performance review from X’s record and transferring her out of the oversight unit. Like the consent orders signed by most CFPB enforcement targets, the settlement agreement included no admission of facts or wrongdoing, and made no mention of the inspector general’s investigation.

Based on my experiences as a staffer on the Financial Services Committee the following year, the bureau’s oversight unit never curbed its improper practices in congressional oversight inquiries.

Hensarling began the April 5 hearing by calling for the president to remove Cordray for cause, which the law defines as “inefficiency, neglect of duty, or malfeasance in office.” The inspector general is likely to comply with congressional requests for documents and information regarding this matter.



Article source:

Bunk Beds