U.S. Household Net Worth Rose by $2.07 Trillion in 3rd Quarter - ABI

The Federal Reserve reported yesterday that U.S. household net worth — the value of all assets such as stocks and real estate minus liabilities like mortgages and credit-card debt — rose by 1.9 percent or $2.07 trillion in the third quarter to $109.04 trillion, the Wall Street Journal reported. That was a smaller increase than the revised $2.278 trillion advance in the second quarter. The figures are from a quarterly report known as the Flow of Funds, which tracks the aggregate wealth of all U.S. households and nonprofit organizations. The report provides no details of how that wealth is distributed between households, and the figures aren’t adjusted for inflation.

U.S. Companies Feel the Pinch as Tariff Costs Start to Mount - ABI

American companies that import products are paying record amounts in customs duties as more tariffs imposed by the Trump administration take effect, the Wall Street Journal reported. Tariff collections topped $5 billion in October, according to data from the Treasury Department and from Census Bureau data analyzed and released by Tariffs Hurt the Heartland, a lobbying coalition of manufacturing, farming and technology groups. President Trump campaigned on an aggressive trade agenda, and from early this year has imposed or considered tariffs on thousands of products from dishwashers to semiconductors. U.S. revenue from tariffs has begun to build rapidly only in the last few months, as more of the levies have taken effect. The amount of tariffs being paid by U.S. importers has doubled since May, including an increase of more than 30 percent from August to October, according to the data. The sum has risen through the year as steel and aluminum tariffs were applied to imports from a growing group of countries, then surged in October, which was the first full month in which U.S. tariffs were in place on a full $250 billion of imports from China.

SEC to Consider Stricter Shareholder-Proposal Rules - ABI

The chairman of the U.S. Securities and Exchange Commission (SEC) said on Thursday that the regulator will consider stricter rules for submitting shareholder proposals at annual meetings, including the ownership and resubmission threshold, Reuters reported. Jay Clayton, outlining the regulator’s agenda for 2019, said that the SEC would also consider subjecting proxy advisory firms to stricter requirements for transparency and conflict-of-interest disclosure. Last month, Reuters reported that the SEC was poised to consider changes to the rules that allow company shareholders to advance special resolutions on charged issues like climate change and gun violence. Industry groups say the rules allow special interests and proxy advisory firms that recommend how investors should vote to hijack corporate boardrooms with costly demands. The move could set up the SEC for a clash with investors, who worry any rule changes would diminish their ability to hold company management accountable.

U.S. Bank Regulator Airs Caution on Leveraged Loan Market - ABI

A U.S. bank regulator believes that banks should be increasingly aware of activity in the leveraged lending market, cautioning rapid growth in that sector by nonbanks could pose future risks to the financial sector, Reuters reported. The U.S. Office of the Comptroller of the Currency (OCC) highlighted loans to highly-indebted companies in its semiannual risk report issued yesterday. While lending by banks in that sector does not seem exceedingly risky, the OCC cautioned near-record issuance in that sector, driven by nonbanks like private equity firms and hedge funds, merits closer attention. Leveraged lending has attracted some attention in Washington of late. Sen. Elizabeth Warren (D-Mass.) pressed regulators earlier this month about underwriting standards in that market. The Federal Reserve is also hearing more from concerned parties about the leveraged loan market and how it could complicate future economic downturns.

U.S. Economy Grew at 3.5 Percent Rate in Third Quarter - ABI

Sen. Chuck Grassley (R-Iowa) and Sen. Sheldon Whitehouse (D-R.I.) yesterday unveiled legislation that could make the chapter 11 bankruptcy process cheaper and faster for companies that file for protection with about $2.5 million or less in debt, the WSJ Pro Bankruptcy reported. The "Small Business Reorganization Act of 2018" creates a new voluntary process with incentives for owners who want to keep ownership stakes and protections for creditors who want to be repaid quickly and reliably. The process applies to companies that file for chapter 11 protection with about $2.5 million of debt or less. The bill could cut the cost of bankruptcy by requiring companies to file a repayment plan within 90 days and eliminating half of the two-step process for judges to approve that plan. The quick deadline is meant to get money into the hands of creditors faster and under supervision by a new court-appointed financial professional. Federal lawmakers have tried twice before to make it easier for small businesses to survive using bankruptcy, but bankruptcy experts said neither effort was successful. A 2014 report from ABI's Chapter 11 Reform Commission found “significant and troubling issues” for small and middle-market companies. The legislation would also cut costs by eliminating the automatic appointment of an unsecured creditors committee, an oversight group that typically pressures company executives to get their firm out of bankruptcy quickly and put forth the most money possible toward repayment. (Read More)

Amendments to the Federal Rules of Bankruptcy Procedure Take Effect Tomorrow - ABI

Small businesses around the country say that they are bracing for the latest round of tariffs, which could cut into already-thin profits and leave them with little recourse but to pass on additional costs to consumers beginning this holiday season, the Washington Post reported. And while larger retailers such as Walmart, JC Penney and Amazon say they have already locked in low-priced inventory for the holidays, independent retailers tend to rely on third-party suppliers to import products for them, giving them little control over where their goods come from, or how much they cost. “Larger retailers may be able to find alternative sources or be able to absorb a price increase without passing the cost on to their customers,” said David French, senior vice president of government relations for the National Retail Federation. "But the smaller you are, the more vulnerable you are to the impact.” Analysts say the tariffs — which begin Monday at 10 percent and will rise to 25 percent on Jan. 1 — are likely to trickle down to retailers and consumers in the coming weeks and months, raising the prices of everyday household goods. (See More)

Small Banks to Get Relief From Post-Crisis Financial Rules - ABI

The Federal Deposit Insurance Corp. proposed easing rules for small banks as part of a broader Trump administration effort to loosen restrictions put in place after the financial crisis, the Wall Street Journal reported. Under a plan approved unanimously yesterday by the FDIC, banks with less than $10 billion in assets could be subject to a single leverage ratio for their capital holdings, replacing a more complex set of requirements that applies to larger banks. The minimum ratio small banks must meet to get the relief would be 9 percent of equity to total assets. The proposal would implement a provision of a bank-deregulation law signed by President Trump in May that required regulators to set the community-bank leverage ratio between 8 percent and 10 percent. The FDIC also released a proposal to increase the threshold for full appraisals in residential real-estate transactions to $400,000 from $250,000, potentially easing a hurdle for getting home mortgages across much of the country. That means sales under $400,000 wouldn’t require an appraiser to review the home as part of the mortgage process.

Credit Set for Worst Year Since 2008 as Crashes Roil Market - ABI

Credit markets are set for the worst year since the global financial crisis as investors abandon hope of a late-2018 rally, Bloomberg reported. High-yield and investment-grade notes are headed for losses in both euros and dollars, the first time all four asset classes have posted negative total returns since 2008, based on Bloomberg Barclays indexes. It’s been an exceptionally volatile month, with headlines on companies including CMC di Ravenna SC and Nyrstar NV triggering the biggest weekly jump in euro high-yield spreads in almost seven years, while dollar investment-grade spreads are at a two-year high amid a sell-off triggered by General Electric Co.’s woes.

New York Fed Chief Expects Gradual Rate Rises - ABI

New York Fed President John Williams said he expects the U.S. central bank to press forward with its slow and steady pace of rate rises, the Wall Street Journal reported. “We are going to be doing what we’ve been doing, as best we can” and pursue “a gradual path” of getting back to more normal interest rates, Williams said yesterday. “Interest rates are still very low. We’ve raised them but they are still at a low level.” Williams, who also serves as vice chairman of the interest-rate setting Federal Open Market Committee, didn’t offer much in the way of specific guidance about the outlook for rates. Fed officials are widely expected to raise what’s now a short-term interest-rate target range that stands at between 2 percent and 2.25 percent next month and to press forward with more increases next year.

Student Delinquencies Up as U.S. Household Debt Hits Another Record - ABI

The total debt shouldered by Americans has hit another record high, rising to $13.5 trillion in the last quarter, as student-loan delinquencies jumped, Reuters reported. Flows of student debt into serious delinquency - of 90 or more days - rose to 9.1 percent in the third quarter from 8.6 percent in the previous quarter, the Federal Reserve Bank of New York reported on Friday. That propelled the biggest jump in the overall U.S. delinquency rate in seven years. Total household debt, driven by a $9.1 trillion in mortgages, is now $837 billion higher than its previous peak in 2008, just as the last recession took hold and brought on massive deleveraging across the United States. Indebtedness has risen steadily for more than four years and sits more than 21 percent above a trough in 2013. The $219 billion rise in total debt in the quarter ended September 30 was the biggest jump since 2016.