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Wednesday 03.29.2017

House Committee Passes Bill To "Audit The Fed"

The Republican-controlled Committee on Oversight and Government Reform approved a bill earlier today to allow for a congressional audit of the Federal Reserve's monetary policy, a proposal Fed policymakers have opposed and likely faces a difficult path to final approval in the Senate. Under the bill, the Fed’s monetary policy deliberations could be subject to outside review by the Government Accountability Office.

While similar bills have garnered some support from Democrats in the past, they uniformly spoke against the current proposal during a meeting of the House of Representatives suggesting the current iteration would face stronger resistance from an increasingly polarized environment in Washington D.C..

The House previously passed similar versions of this legislation twice before in 2012 and 2014, with dozens of Democrats joining nearly unanimous Republican support. That said, those bills both died in the Senate and likely would have faced a Presidential veto from Obama had they survived anyway.

That said, Trump expressed interest in passing such legislation multiple times during the 2016 campaign cycle which means the 3rd time might just be the charm for Republicans.

In a decade, many fast-food restaurants will be automated, says Yum Brands CEO

AI, robots and automation could replace humans in the food services industry "by the mid [2020s]," Yum Brands CEO Greg Creed told CNBC on Tuesday.

The Yum executive says his company, which owns several fast-food restaurant brands, including Pizza Hut, KFC and Taco Bell, has already set up automated kiosks in Shanghai, China. In one case a Pizza Hut customer is greeted by a robot, he said.

Still, that doesn't mean humans will be obsolete, he said. "We don't make a lot of things until customers order," Creed said. "I'm not sure we're going to have robots replace people."

But robots are already being used on factory floors around the world, and while they aren't threatening jobs today, Creed says advances in technology will eventually lead to less work. "I don't see it changing people's jobs in the short term."

Consumer confidence hits 16-year high in boost to economy

U.S. consumer confidence surged to a more than 16-year high in March amid growing labor market optimism while the goods trade deficit narrowed sharply in February, indicating the economy was regaining momentum after faltering at the start of the year.

The economy’s strengthening fundamentals were underscored by other data on Tuesday showing further increases in house prices in January. Robust consumer confidence and rising household wealth from the home price gains suggest a recent slowdown in consumer spending, which has hurt growth, is likely temporary.

“We think that real consumption will firm moving forward,” said Daniel Silver, an economist at JP Morgan in New York. “It looks likely that the recent spending data were held down by some temporary factors related to unusually mild weather and a delay in tax refund issuance.”

The Conference Board said its consumer confidence index jumped 9.5 points to 125.6 this month, the highest reading since December 2000. Consumers’ assessment of both current business and labor market conditions improved sharply in March. They also anticipated an increase in their incomes. The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the strongest since 2001.

6.5 Million Taxpayers Paid $3 Billion in Obamacare Penalties in 2016

Approximately 6.5 million taxpayers paid $3 billion in Obamacare penalties for not having health insurance in 2016, according to preliminary data from the Internal Revenue Service Commissioner John Koskinen.

Beginning in 2014, the Affordable Care Act’s individual mandate required that Americans purchase health care coverage or pay a penalty to the Internal Revenue Service.

While the number of taxpayers paying the penalty has declined since 2014, the total amount in penalties paid to the IRS has increased since then. In 2014, individuals without insurance had to pay the greater penalty of either a flat fee of $95 or 1 percent of the household’s adjusted gross income in excess of the threshold for mandatory tax filing. In 2016, those penalties increased to a flat fee of $695 or 2.5 percent of the adjusted gross income.

In 2014, Koskinen’s preliminary data showed that there were 7.5 million taxpayers who paid a total of $1.5 billion in Obamacare penalties. Final data from the IRS, however, showed those numbers increase to 8.1 million taxpayers paying a total of $1.7 billion in Obamacare penalties.

Toshiba's Westinghouse to file for U.S. bankruptcy Tuesday

U.S. nuclear developer Westinghouse Electric Co plans to seek bankruptcy protection from creditors on Tuesday as it struggles to limit losses that have thrown its Japanese parent Toshiba Corp into crisis, people familiar with Toshiba's thinking said.

Pittsburgh-based Westinghouse, crippled by cost overruns at two U.S. power plant projects in Georgia and South Carolina, will file for protection under Chapter 11 of the U.S. Bankruptcy Code, the people told Reuters on Tuesday. One of the sources has direct knowledge of the decision and one has been briefed on the matter.

Toshiba media representatives could not immediately be reached for comment after business hours. On Monday, the company said it was premature to comment on a potential bankruptcy. Westinghouse declined to comment. A Westinghouse bankruptcy filing will help limit future losses for Toshiba.

The move will trigger complex negotiations between the Japanese conglomerate, its U.S. unit and creditors, and could embroil the U.S. and Japanese governments, given the scale of the collapse and U.S. government loan guarantees for new reactors. A Westinghouse bankruptcy is a "concern" for the administration of U.S. President Donald Trump, which is in touch with the Japanese government on the matter, an administration official told Reuters on Tuesday.

Denver Broncos Hope To Not Play Another Season At Stadium Sponsored By Retailer That Doesn’t Exist

The Denver Broncos played all of the 2016 NFL season at Sports Authority Field, a stadium named for a retailer that went bankrupt a little more than a year ago. The 2017 season is still many months away, but the Sports Authority name still looms over the Broncos’ home turf.

Hilco Streambank, a company that helps companies value and sell their intellectual property, had been trying to sell the naming rights to the venue that everyone just calls Mile High Stadium, but not only does the NFL have to approve a new sponsor, the cost for naming rights may be prohibitive.

Sports Authority got a deal on the Mile High naming rights when it took them over from Invesco in 2011. Anyone looking to slap their brand on the field would need to sign a new naming rights contract, which comes at top dollar, especially since the Broncos are only one year removed from a Super Bowl win.

The team and the stadium district took the naming contract back before football season began last year. They may have been skittish to commit to a new sponsor after Sports Authority went out of business and the original sponsor, Invesco, sold the contract because it no longer sold its products directly to consumers.

Yellen: Banks play vital economic role in poor communities

Federal Reserve Chair Janet Yellen said Tuesday that U.S. banks must do all they can to promote economic development in low-income areas where high unemployment has persisted despite the overall job market's significant gains.

Yellen told community development groups that banks are needed not just to provide home mortgages in low- and moderate-income neighborhoods but also to support educational opportunities and to bolster the development of small businesses.

Yellen noted that this is the 40th anniversary of the Community Reinvestment Act, which requires banks to meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods. She said the Fed takes the law's requirements seriously, including making public each bank's performance ratings under the law.

Over the past four decades, Yellen said, the law has "helped channel capital into communities, and, in the process, supported innovative and effective approaches to community development." Yellen noted that the Fed recently revised its guidance to clarify how it and other bank regulators plan to assess banks' support for workforce development in low-income neighborhoods.

Ford investing $1.2 billion in three Michigan auto plants

Lawmakers Can Make America Great Again by Unlocking Our Oil and Gas Supply

American lawmakers would be wise to embrace the ongoing energy revolution. The Baker Hughes oil rig count for the United States increased on Friday for the 10th consecutive week to 809 operating rigs, resulting in a 20-rig increase from the week before and a 345-rig addition in the past 12 months.

While OPEC countries have done their best to keep oil prices high by cutting back on production, America’s energy wealth and free markets have frustrated these efforts. The Energy Information Administration pegs current gasoline prices at $2.32 per gallon—down 36 percent from the 2014 high of $3.64 per gallon.

At the Nov. 30 OPEC meeting, member countries agreed to production cuts of 1.2 million barrels per day with the goal of decreasing global inventories and increasing prices.

However, the biggest obstacle between OPEC and its goal of higher prices is American oil production. American producers have taken advantage of elevated oil prices, bringing more rigs online. As a result, American oil inventories have increased by over 41 million barrels since the OPEC announcement.

Hedge fund exec whose former firm was linked to Madoff jumps to his death

An executive whose former hedge fund invested $7 billion in Bernard Madoff's Ponzi scheme jumped 20 stories to his death from a high-rise Manhattan hotel, police said.

Charles Murphy was found dead on the fourth-floor terrace of the Sofitel hotel on Monday, according to a police source. "We are extremely saddened by this news," said John Paulson, the president of Paulson & Co., a separate hedge fund where Murphy worked at the time of his death. "Charles was an extremely gifted and brilliant man, a great partner and a true friend."

Murphy once worked for Fairfield Greenwich, which invested about $7 billion with Madoff and was later sued by investors who lost money. The fund agreed to an $80 million settlement.

Madoff was arrested in December 2008 for running the world's largest Ponzi scheme and defrauding investors of $20 billion. He pleaded guilty to fraud charges. Now 78, he is serving 150 years in a federal prison in North Carolina. One of Madoff's two sons, Mark, hanged himself on the second anniversary of his father's arrest.

Fed's Fischer Says Two More 2017 Rate Hikes Seem About Right

Federal Reserve Vice Chairman Stanley Fischer said the Federal Open Market Committee’s median estimate for two more rate hikes this year “seems about right.” “That’s my forecast as well,” Fischer said in an interview with CNBC on Tuesday.

U.S. central bankers are gradually removing monetary stimulus as inflation moves back to their 2 percent target. Fed officials forecast they would raise interest rates two more times this year after hiking earlier this month, according to their predictions released March 15.

Fischer said the U.S. central bank is watching fiscal policy negotiations between Congress and the White House without prejudging the outcome. Watching and waiting “is the sensible thing to do,” he said, because proposals will be “different” as they work through the legislative process.

He said the failure of the health-care bill on Friday may have changed his “internal calculus,” but not the overall outlook. Fischer’s term as vice chairman expires in June 2018. When asked if he would stay on at the central bank as a governor, Fischer said, “Well of course I have considered it.” “It has only been done once in all the Fed’s history,” he added. “I don’t have to make a decision about that right now.”

`Deep Subprime' Becomes Norm in Car Loan Market, Analysts Say

About a third of the risky car loans that are bundled into bonds are considered “deep subprime,” a level that has surged since 2010 and is translating to higher delinquencies on the loans, according to Morgan Stanley.

Consumers are falling behind on most subprime car loans, but deep subprime borrowers have deteriorated fastest, the analysts said. Sixty-day delinquencies for bonds backed by these loans have risen 3 percentage points since 2012, compared with just 0.89 percentage points on all other subprime auto securities, Morgan Stanley’s Vishwanath Tirupattur, James Egan and Jean Ng said in a report dated March 24.

“The securitization market has become more heavily weighted towards issuers that we would consider deep subprime,” the strategists wrote. “Auto loan fundamental performance, especially within ABS pools, continues to deteriorate.”

The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5 percent from 5.1 percent since 2010, Morgan Stanley said. The researchers define deep subprime as lenders with consumer credit grades known as FICO scores below 550. The scale from Fair Isaac Corp. ranges from 300 to 850 and while there’s no firm definition of subprime, borrower scores below 600 are in general considered high credit risks.

Kiss your bank teller goodbye

Artificial intelligence (AI) will become the primary way banks interact with their customers within the next three years, according to three quarters of bankers surveyed by consultancy Accenture (ACN.N) in a new report.

Four in five bankers believe AI will “revolutionize” the way in which banks gather information as well as how they interact with their clients, said the Accenture Banking Technology Vision 2017 report, which surveyed more than 600 top bankers and also consulted tech industry experts and academics.

Artificial intelligence — the technology behind driverless cars, drones and voice-recognition software — is seen by the financial world as a key technology which, along with other “fintech” innovations such as blockchain, will change the face of banking in the coming years.

More than three quarters of respondents to the survey believed that AI would enable more simple user interfaces, which would help banks create a more human-like customer experience.

Layoffs to begin for Rexnord Corp. workers

The first Rexnord Corp. employees facing layoffs were notified Monday as the ball-bearings plant on Indianapolis' west side moves to a new plant in Monterrey, Mexico.

A list of 23 names was posted Monday morning, said United Steelworkers Local 1999 union representative Gary Canter. He said the employees were given two weeks notice.

"As machines go out, as people are freed up, there will be more layoffs coming," Canter said. Employees have already been packing up machinery, and Canter said some areas of the plant are "wiped out." Before the move, Canter said the union represented about 300 employees, but months later is down to around 260 after a wave of retirements. The Indy Star previously reported employees will be offered a severance agreement of $2,000, plus one week of salary for every year they spent at the company.

Canter has worked at Rexnord for eight years but said at this point he is coping one day at a time. Many employees were hoping pressure from President Donald Trump would convince the company to change its plans.

The Coming Government Shutdown

Health care dead. Tax cuts in doubt. Is a government shutdown next? And when? Details coming up, as the news folks say. But first to the narrow canyons and broad shoulders of Wall Street… We wondered yesterday if the post-health care market swoon would trigger another round of “buying the dip.” It seems we have our answer…

The Dow was up a dip-buying 150 points today. The S&P tacked on another 17 points. The Nasdaq added 35. Must be all those tax cuts and infrastructure dollars coming down the pike now that health care passed… Now, if you enjoyed last Friday’s health care fireworks… they may have just been the opening salvo… A government shutdown could be one month away.

The federal government’s current funding expires at the close of April. And as TheWall Street Journal reminds us today, Congress only has 12 legislative workdays to stow their axes and hammer out a new spending bill. No bill by April 28… and the government shuts down. Partially shuts down, really… The Marines won’t drop their rifles. The TSA will still be body-searching Grandma. The Social Security Administration will mail its checks.

But if you planned on visiting the Washington Monument this spring… well… And if Washington is choked with gridlock now, how about a government shutdown into the bargain? Trump has sent Congress an emergency request for $30 billion in extra funding for defense and $3 billion for border security — including $1.5 billion for “the wall.” He also wants $18 billion in cuts from unspecified domestic programs. But Democrats say no butter… then no guns… and no deal.

Flint and Michigan Agree to Settle Water Suit for Almost $100 Million

Millennials saving more for their kid's college than for retirement, poll finds

Parents often hope for a better future for their children. For Millennial parents, a better future means one without the burden of student loan debt.

In an attempt to lay the groundwork for a debt-free future for their kids, many Millennials are putting their children’s college savings fund ahead of their own retirement fund.

Roughly one in five (19%) Millennial parents who responded to a survey by TD Ameritrade said saving for their child’s education is their top financial priority, equal to the number that identified emergency savings as their number one priority. Retirement savings came in third, at 15% of parents.

Findings from the new survey suggest Millennials would rather not see their children in the same boat in the future -- which is to say, still chipping away at their student loan debt when their own kids graduate.

Wells Fargo fails test of community lending: bank

A U.S. bank regulator has flunked Wells Fargo (WFC.N) on a national scorecard for community lending, the bank said on Tuesday as it tries to repair its reputation after a phony-accounts scandal.

The Office of the Comptroller of the Currency deemed Wells Fargo a bank that "needs to improve" under the Community Reinvestment Act, a law meant to promote lending to poor neighborhoods, the bank said.

Wells Fargo had previously boasted an "outstanding" score on CRA. The new ranking gives regulators a greater say over day-to-day matters, such as branch openings. In September, Wells Fargo admitted that employees wrongly created as many as 2 million accounts without customer approval.

The OCC gave Wells Fargo high marks for all-around service, but the past scandal led to the downgrade. "Violations across multiple lines of business within the bank (resulted) in significant harm to large numbers of customers," the OCC said in its filing.

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