Sen. Sanders Unveils Legislation to Place Cap on Size of Financial Institutions - ABI

Sen. Bernie Sanders (I-Vt.) yesterday unveiled legislation that would place a hard cap on the size of financial institutions, the Washington Post reported. Sanders’ bill would bar financial institutions from holding assets, derivatives and other forms of borrowing worth more than 3 percent of the entire U.S. economy, or $584 billion in today’s dollars. The legislation would force federal regulators to break up six different Wall Street firms — JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — as well as insurance giants such as Prudential Financial and MetLife. Collectively, the targeted firms hold more than $13 trillion in assets, according to Sanders aides. Prospects for the bill are unfavorable, however, with a Republican Congress and President Trump in office.

Toys “R” Us Comeback in Works as Bankruptcy Auction Canceled - ABI

There might be a second act for Toys “R” Us, which shut down hundreds of stores over the summer: A group of investors said in a bankruptcy court filing that it's scrapping an auction for Toys “R” Us assets, The Associated Press reported. The investors believe they'll do better by potentially reviving the toy chain, rather than selling it off for parts. The investors said they'll work with potential partners to develop new ideas for stores in the U.S. and other countries "that could bring back these iconic brands in a new and re-imagined way." Toys “R” Us suffocated under a staggering $5 billion debt load before liquidating its U.S. assets this year. A leveraged buyout hobbled the company, and hundreds of stores were shuttered in June to the dismay of children and numerous generations of one-time children. The seeming end of Toys “R” Us rippled through the toy industry and beyond. When the company closed the doors at some 800 stores, more than 30,000 people lost their jobs. Less than a month later, Mattel said it would cut more than 2,200 jobs partly because of lost sales to Toys “R” Us. Economists were caught off guard that month by the slow growth in jobs. In addition to the debt it was saddled with by its private-equity owners, Toys “R” Us found itself in a battle to its seeming death with and other big toy sellers.

Fed’s Powell Says Strong Economic Path ‘Not Too Good to Be True’ - ABI

Jerome H. Powell, the Federal Reserve chairman, said yesterday that the American economy is enjoying an unusual but sustainable period of low unemployment and low inflation. He described the current moment, and the Fed’s expectation that it will continue, as “not too good to be true,” the New York Times reported. Inflation is hovering around the 2 percent annual pace that the central bank regards as optimal while the unemployment rate has remained close to 4 percent for the last year. Economists have long regarded low unemployment as a harbinger of higher inflation, and there is no precedent in modern American history for both economic indicators to remain at such low levels. But Powell said that there was reason to believe this time could be different. He said that the Fed’s success in holding down inflation in recent decades has reinforced public expectations that inflation would stay low, and that, in turn, is helping to keep inflation low. “These developments amount to a better world for households and businesses, which no longer experience or even fear the scourge of high and volatile inflation,” Powell said yesterday.

Elizabeth Warren and a Scholarly Debate Over Medical Bankruptcy That Won’t Go Away - Forbes

Elizabeth Warren describes medical bills as "the leading cause of personal bankruptcy" in the United States. She bases that opinion in part on her own research, in which she and her collaborators surveyed people who had experienced personal bankruptcy, asked them whether they'd experienced health-related financial distress, and concluded that 60% of all bankruptcies in the U.S. result from illness or injury.  An article in the New England Journal of Medicine this spring convincingly argued that Warren's estimates were seriously exaggerated due to faulty research methods. I'll briefly summarize that critique. But more importantly, I'll explain why even revised bankruptcy estimates still overstate the contribution of healthcare costs to American bankruptcy rates.

Fed Rethinks How to Define a Big Bank - ABI

The Federal Reserve could broaden the number of banks receiving regulatory relief from Trump-appointed officials under an initiative that changes how it defines a big bank, the Wall Street Journal reported. As part of a series of rule changes still under development, the Fed is preparing to revise asset-size and other thresholds in its capital and liquidity rules. The changes could lead to lower regulatory costs for some large U.S. banks, including Capital One Financial Corp., PNC Financial Services Group Inc. and U.S. Bancorp. It is less clear that the changes will help gigantic firms the Fed considers “systemically important” to the global financial system, such as Citigroup Inc. and Goldman Sachs Group Inc. Likely candidates for the rule changes include the liquidity coverage ratio, which requires banks to hold assets they can easily convert to cash in a pinch, and “advanced approaches” rules, one of several capital regulations that limit banks’ borrowing. Fed Vice Chairman for Supervision Randal Quarles, who is set to testify today before the Senate Banking Committee, has previously said those rules are worth revisiting.

Two U.S. Senators Are Applying for Bailout Money for Farmers Under White House Program - ABI

Two U.S. Senators — Sens. Charles E. Grassley (R-Iowa) and Jon Tester (D-Mont.) — are applying for federal money under a $12 billion bailout program set up by the White House to help farmers hurt by trade hostilities, the Washington Post reported. Grassley pressed the Trump administration this spring to relieve farmers who have been pummeled by Chinese tariffs on their exports amid the wider trade war. Tester has also criticized the impact of the tariffs on farmers and called on the administration to help Montana ranchers. The Agriculture Department confirmed last week it has already sent more than 7,800 bailout checks totaling over $25 million to farmers across the country. The assistance is intended to help farmers survive the trade war with China, which has dramatically widened in scope this month after the U.S. announced it would target another $200 billion in Chinese goods.

Bankruptcy Watchdogs Push Congress for a Raise - ABI

The legal professionals who ensure people going through bankruptcy aren’t hiding assets are pushing lawmakers for their first pay raise since 1994, saying the robust oversight of the country’s personal-bankruptcy system is at stake, the Wall Street Journal reported. In a hearing yesterday before the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, consumer-bankruptcy experts said the pay for the watchdogs, called bankruptcy trustees, should be doubled to $120 per case. The experts said trustees play a vital role in the bankruptcy process, but for most bankruptcy cases, they get only a flat fee, currently $60 — far less than what they could earn for other legal work. Roughly 1,100 trustees monitor chapter 7 cases, the most widely used form of bankruptcy for individuals. But during the hearing, experts testified that they worried that the stagnant pay would lead to fewer competent, honest applicants. Last year, 20 candidates applied for every open chapter 7 trustee position, down from 58 in 2010, according to the Justice Department, which runs the program. At the hearing, Rep. Tom Marino (R-Pa.) agreed with witnesses, calling trustees “vitally important” to the bankruptcy system. Co-sponsor of a bipartisan bill that would raise trustees’ pay, Rep. Marino said that lawmakers agree the increase is necessary but they have “different paths to getting there,” referring to who should pay for it. Ariane Holtschlag of the Law Office of William J. Factor, Ltd. (Chicago), a member of ABI’s Commission on Consumer Bankruptcy, was among those who testified.

Fed Expected to Raise Interest Rates and Signal More Hikes are Coming - 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.

Shoppers Love Rewards Credit Cards, but Retailers Are Not Big Fans - ABI

While consumers have become addicted to credit cards with generous rewards programs, retailers are trying to cut them off, the Wall Street Journal reported. Large merchants including Inc., Target Corp. and Home Depot Inc. are pushing for the right to reject some rewards credit cards, which typically carry higher fees for merchants. They are likely to opt out of a roughly $6.2 billion settlement Visa Inc., Mastercard Inc. and several large banks recently reached with merchants and continue to make their case in court. The retailers are trying to end the card networks’ “honor all cards” rule, which requires merchants that accept Visa- or Mastercard-branded credit cards to take all of them. If merchants could pick and choose among Visa or Mastercard credit cards, those with the highest merchant fees — and most generous rewards — likely would be on the chopping block. Ultimately, though, the retailers are looking for bargaining power that could help them lower fees across the board. Rewards credit cards such as JPMorgan Chase & Co.’s Sapphire Reserve, Capital One Financial Corp’s Venture and Citigroup Inc.’s Double Cash are wildly popular among consumers for their perks like cash back, airfare and hotel stays. Some 92 percent of all U.S. credit-card purchase volume is currently charged on rewards credit cards, up from 86 percent in 2013 and 67 percent in 2008, according to estimates from Mercator Advisory Group Inc., a payments research and consulting firm.

U.S. Consumer Confidence Hits 18-Year High - ABI

Consumer confidence hit an 18-year high in September, a positive indicator for spending going into the holiday shopping season, as robust job growth and a strong economic outlook bolstered Americans’ expectations for the future, the Wall Street Journal reported. The Conference Board, a private research group, said yesterday that its index of consumer confidence rose to 138.4, up from 134.7 in August — the highest level since September 2000, which represented the late stages of the 1990s technology boom. An index reading of 100 represents how households saw the economy in 1985. The report came on the heels of a separate University of Michigan survey that said sentiment jumped in early September to the second-highest level since 2004 — behind only the reading in March of this year.