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Powell Urges Broader Scope for Low-Income Lending Rules; Williams Touts Mortgage-Debt Purchases; Fed Official to Run Top Bank Regulator
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Good day. Fed Chairman Jerome Powell signaled support for applying the Community Reinvestment Act to non-bank lenders that are increasingly providing credit to individuals, particularly in the $11 trillion mortgage market. Meanwhile, New York Fed President John Williams said the Fed may be getting more bang for the buck when it buys mortgage-related debt than it does by purchasing Treasury debt. One of the Fed’s top big-bank supervisors is in line to become the acting comptroller of the currency. And The Wall Street Journal today hosts its CEO Council summit, featuring interviews with Janet Yellen, Jamie Dimon and others.
Now on to today’s news and analysis.
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Powell: Apply Low-Income Lending Rules for All Consumer Credit
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Fed Chairman Jerome Powell, seen in 2020, says the pandemic has had an outsize effect on minority workers and women. PHOTO: MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Federal Reserve Chairman Jerome Powell said rules on lending in low-income communities should be extended to cover all firms providing consumer credit, not just banks. “Like activities should have like regulation,” Mr. Powell said, speaking to the National Community Reinvestment Coalition, a fair-lending advocacy group. The remarks signaled Mr. Powell’s support for efforts to overhaul a more-than-40-year-old law called the Community Reinvestment Act to encompass non-banks that increasingly provide the bulk of credit to individual borrowers, particularly in the $11 trillion mortgage market.
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New York Fed’s Williams: Fed Far From Achieving Job, Inflation Goals
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Federal Reserve Bank of New York President John Williams said that while the U.S. economy is likely to have a very strong year, there is no imminent need for the central bank to pull back on its aggressive monetary policy support.
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Yellen to Appoint Senior Fed Official to Run Top Bank Regulator
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Treasury Secretary Janet Yellen plans to appoint Michael Hsu, associate director of the Fed's bank supervision and regulation division, as acting comptroller of the currency, overseeing the largest U.S. financial firms, according to a person familiar with the matter.
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Derby's Take: Fed’s Williams Flags Potency of Mortgage Bond Buying
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The U.S. housing market is on fire, so why is the Federal Reserve still offering support to that part of the financial system? According to Federal Reserve Bank of New York President John Williams, it is because the Fed may get more bang for the buck when it buys mortgage-related debt than it does with its larger monthly purchases of Treasury debt. Read more.
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Key Developments Around the World
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Treasury Expects to Borrow $1.3 Trillion Over Second Half
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The U.S. government plans to borrow nearly $1.3 trillion over the coming quarters with federal spending picking up following the Covid relief package enacted in March, the Treasury Department said Monday.
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RBA Remains Dovish Even as GDP Forecasts Revised Upward
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The Reserve Bank of Australia remains committed to keeping interest rates near zero for another three years at least even as the economy surges back to life, bringing with it rapidly rising house prices and a fast-paced tightening of the job market.
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Bidenomics Takes Root in Europe’s Economically Fragile South
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The global policy trend of heavy fiscal stimulus, led by the U.S., faces a test case in Southern Europe, with Italy, Greece and Spain once again running big budget deficits and planning to spend on a grand scale.
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Financial Regulation Roundup
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Fidelity Halves Its Ant Group Valuation After Beijing’s Clampdown
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U.S. mutual-fund giant Fidelity Investments has drastically changed its view of what Jack Ma’s Ant Group Co. is worth after China’s regulatory crackdown on the financial-technology giant severely dented its growth prospects.
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DNB Faces $48.1 Million Fine for Anti-Money-Laundering Inadequacies
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DNB ASA on Monday confirmed Norway’s financial supervisory authority will impose a fine of 400 million Norwegian kroner ($48.1 million) for inadequate compliance with anti-money-laundering rules and legislation.
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8:30 a.m.: U.S. Commerce Department releases March international trade data
1 p.m.: Dallas Fed’s Kaplan speaks to North Texas Commercial Association of Realtors and Real Estate Professionals; Minneapolis Fed’s Kashkari, San Francisco Fed’s Daly speak virtually to Economic Club of Minnesota
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9:30 a.m.: Chicago Fed’s Evans speaks at virtual conference on the state of U.S. and world economies
10 a.m.: European Central Bank’s Lane speaks on online panel at Official Monetary and Financial Institutions Forum event
12 p.m.: Cleveland Fed’s Mester speaks on economic outlook at Boston Economic Club virtual event
7:50 p.m.: Bank of Japan releases March 18-19 meeting minutes
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Barclays: Fed Will Soon Need to Boost Rates in Rate-Control Tool Kit
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Pressure is building on the Federal Reserve to raise interest rates, albeit in a technical fashion, Barclays Capital said Monday, noting in a report to clients that “most of the conditions are in place for the Fed to raise its administered interest rates.” That means the reverse repo rate could be lifted off zero percent and the interest on excess reserves rate bumped up from 0.10% at the next Federal Open Market Committee meeting. The bank said the federal-funds rate has softened enough, other money-market rates are at zero or are negative, banks are facing pressure in this rate environment, and demand for reverse repo operations continues to mount. While the two rates are quite meaningful to markets, the Fed has changed them before and stressed it had nothing to do with monetary policy.
—Michael S. Derby
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Asia’s Lopsided Economic Booms Store Problems for the Future
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South Korea and Taiwan reported better-than-expected economic growth as exports boomed, though domestic demand hasn’t, which is causing problems that will be exacerbated if the trend continues unabated, Mike Bird writes.
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U.S. manufacturing activity continued to expand solidly in April, although supply-chain constraints remain a challenge. The Institute for Supply Management's Manufacturing Report on Business PMI rose to 60.7 from 64.7 in March. (Dow Jones Newswires)
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U.S. construction spending rose 0.2% in March compared with February to a seasonally adjusted annual rate of $1.513 trillion, data from the Commerce Department show. The reading is well below the 1.8% rise expected by economists polled by The Wall Street Journal and follows a revised 0.6% drop in February. (DJN)
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Retail sales in Germany rose 7.7% on month in March in calendar and seasonally adjusted terms, data from statistics agency Destatis showed Monday, beating forecasts and posting their strongest increase since restrictions were imposed in March 2020 due to the coronavirus pandemic. (DJN)
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Economists surveyed by the Bank of Mexico in April increased their median GDP growth forecast for this year to 4.8% from 4.5% the previous month, and raised expectations for year-end consumer price inflation to 4.6% from 4.1%. (DJN)
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Hong Kong’s economy grew 7.8% in real terms in the January-to-March period from a year earlier, according to advance estimates released by the government on Monday, ending an on-year contraction in the preceding six quarters. (DJN)
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This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
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