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The top bosses of JPMorgan, Morgan Stanley, Citigroup and other Wall Street banks will warn lawmakers that capital hikes and new regulations will hurt the economy, according to prepared congressional testimony published on Tuesday.
The CEOs of the country’s eight largest banks will appear before the Senate Banking Committee on Wednesday. The hearing comes amid a fierce industry campaign to kill the “Basel Endgame” proposal, which overhauls how banks must calculate their loss-absorbing capital, and as regulators roll out fair lending and fee-cap rules, among other consumer rules.
The Basel rule, being drafted by bank regulators led by the U.S. Federal Reserve, would “unjustifiably and unnecessarily” increase capital requirements by 20% to 25% for the largest banks, forcing them charge more for services or stop offering them altogether, Dimon will warn.
“If enacted as drafted, this proposal will fundamentally alter the U.S. economy in ways that the Federal Reserve has not studied or contemplated,” he will say, according to the prepared testimony published by the Committee on Tuesday.
Other new consumer regulations also show an “alarming” lack of rigorous economic analysis, Dimon will also say.
Regulators say new rules, including capital hikes, are necessary to protect the banking system from unforeseen shocks, especially after three banks collapsed earlier this year.
Citigroup’s Fraser, however, warned the United States against “inadvertently” upending its financial system in response to what were “isolated” bank failures.
The other CEOs appearing are: Bank of America’s Brian Moynihan, Wells Fargo’s Charles Scharf, Goldman Sachs’ David Solomon, Morgan Stanley’s James Gorman, State Street’s Ronald O’Hanley, and BNY Mellon’s Robin Vince.
The hearing offers the CEOs an opportunity to try to convince key moderate Democratic senators that the rules could stifle lending, hurting small business and consumers.
Gorman will say that the Basel rules are “wholly unnecessary … harming the competitiveness of the U.S. economy and driving more activity to the less regulated parts of the financial services industry.”
Wells Fargo CEO Charlie Scharf, meanwhile, said he was confident that the bank’s management had the experience to “address all of our risk, control, and regulatory issues,” in order for regulators “to consider closing our open consent orders.”
The bank is still operating under an asset cap that prevents it from growing until regulators deem that it has fixed problems from a fake accounts scandal. It still has nine open consent orders from banking regulators who require additional oversight of its practices.
In just a moment, Senator Roger Marshall is going to tell us about Joe Biden’s $106 billion foreign aid plan and whether there will be any meaningful border security changes, but first, I want to update on a number of worrisome economic headlines.
The recent forecasting survey by the National Association of Business Economist (NABE) shows 50% expect recession and the rest only 1% growth. The November FOX poll found that 78% of voters rate the economy negatively, and inflation remains a top concern.
Over at Investor’s Business Daily, the TIPP poll which has been rated the most accurate and objective of all the polls, that one says 50% believe we are currently in recession, 64% believe recession is likely in 2024, and 80% are simply concerned about a recession next year.
Interestingly, 41% of Democrats think we’re in a recession, 58% of Republicans do, and 52% of independents and the New York Fed Interest rate model is now predicting 52% recession probability over the next year.
Meanwhile, manufacturing has been contracting for 13 straight months. The Index of Leading Indicators, LEI has fallen 19 straight months. The money supply is shrinking.
Business investment is falling and the yield curve is upside down with short rates higher than long rates.
On the plus side, the stock market has been doing well and market interest rates have fallen significantly, even while the Fed is standing pat. A resilient labor market showed some cracks in today’s JOLTs report. Job openings fell precipitously. Inflation has come down, but prices are still high and real wages are still falling and the Biden administration foolishly continues to pursue its big government socialist green new deal that is keeping fossil production low and fossil prices still too high, even though they have come down a bit.
Since early 2020, federal spending has increased $9 trillion and 60% of it has been monetized by the Fed according to former Federal Reserve Governor Kevin Warsh.
There’s your fiscal and monetary inflation, which unfortunately has washed out much of the productivity and wage gains of the Trump Tax and Jobs Act of 2017.
So, almost surely, the economy is heading for a significant slump. It suffered inflationary recession in the first half of 2022 and it may be headed for deflationary recession in 2024, but there is a way out. There is a cure. How about spending less, taxing less, regulating less and fracking more? How about putting big government socialism into a deep-dug grave?
You replace it with economic freedom, where free market capitalism is the best path to prosperity. Growth makes people happier and America could use more of both. That’s my riff.
This article is adapted from Larry Kudlow’s opening commentary on the December 5, 2023, edition of “Kudlow.”
U.S. antitrust enforcers are investigating ExxonMobil’s plan to acquire Pioneer Natural Resources, which would be the largest oil-and-gas deal in two decades, according to securities filings.
The Federal Trade Commission has sought additional information from the companies about the deal, a step it takes when reviewing whether a merger could be anticompetitive under U.S. law, Pioneer disclosed in a filing Tuesday. Merger investigations on average take about 10 months to complete, according to data compiled by law firm Dechert.
The FTC, which shares antitrust authority with the Justice Department, can sue in court to block a merger or decline to take action, effectively clearing the deal. Companies sometimes cancel deals when they learn an antitrust agency plans to sue to stop the transaction. The agencies annually investigate about 2% to 3% of the deals that are large enough to require reporting to the government.
Exxon in October proposed to buy Pioneer in a $59.5 billion all-stock deal, a takeover that would make Exxon the largest oil producer in the Permian Basin of West Texas and New Mexico, the most active U.S. oil field. It would be Exxon’s largest deal since its $75 billion merger with Mobil in the late 1990s.
“We’re working to provide requested information,” Exxon spokeswoman Michelle Gray said in a written statement. “From an anti-competitive perspective, it’s critical to remember the combined companies represent approximately 5% of the total U.S. oil and gas production.”
Oil companies’ shares fell as U.S. crude prices dropped Tuesday. Exxon shares fell almost 2% Tuesday to $100.44. Pioneer shares also fell 2% to $225.78.
Some oil executives and deal makers had anticipated a recent series of acquisitions would draw federal antitrust scrutiny. But antitrust regulators have rarely taken measures to thwart deals involving oil producers, often taking the view that their products compete globally.
Investors expect larger oil companies to continue scooping up smaller rivals. As top-tier drilling spots have become harder to find in the Permian, executives have realized they can extract more value out of their land by selling it than by drilling it.
Two weeks after Exxon announced its plans, Chevron said it would buy Hess in a $53 billion all-stock deal. Occidental Petroleum is in talks to purchase CrownRock, a large private oil company in the Permian, for more than $10 billion, The Wall Street Journal reported last week.
Some analysts have argued Exxon and Pioneer together make up a negligible portion of global oil production, and that the deal couldn’t affect prices for oil or fuel. Exxon said it could save billions of dollars in value via synergies by bringing its operations to Pioneer’s land, and played down the need to make cuts to head count.
Exxon Chief Executive Darren Woods said the deal would increase U.S. energy security and benefit consumers by bringing the oil company’s technical prowess and financial wherewithal to bear on shale resources.
More than half of U.S. shale oil production comes from the Permian Basin. Pioneer’s acreage is some of the region’s best, with some 16 years of drilling locations left at its current pace of operations, according to energy analytics firm Enverus.
Exxon has said the companies could pump 2 million barrels of oil a day by 2027 in the Permian. The region currently produces nearly 6 million barrels a day, according to the Energy Information Administration.
The FTC issued the investigative request to the companies on Monday. Pioneer said the companies are cooperating and still expect the deal to be completed in the first half of 2024.
In 2016, oil-field service companies Halliburton and Baker Hughes canceled a nearly $35 billion tie-up after the Justice Department and regulators in other countries pushed back. Those companies provide equipment and services to oil producers like Exxon.
The FTC during the Biden administration has taken a tough stance on mergers, although its court record is mixed, particularly when it tried to block large technology deals.
The commission under Chair Lina Khan has taken action in court to challenge 11 deals, including acquisitions by Meta Platforms and Microsoft. Nineteen firms have abandoned deals after coming under FTC investigation, including five that were called off after the FTC sued to block them.
Amazon launched a deal for students on Tuesday morning that will help them access cheaper plane tickets to fly home for the holidays.
The e-commerce giant and StudentUniverse sold out its first 1,000-ticket tranche of $25 domestic flights after opening the booking window in the morning as part of a holiday travel promotion for Prime Student members.
They will put two more sets of 1,000 tickets up for grabs to eligible customers on Wednesday and Thursday. For both days, that will happen at 12 a.m. PST, Amazon said.
Amazon and StudentUniverse will only allow “current & valid” Amazon Prime Student members that have activated the holiday $25 flight deal to take advantage of it, according to the promotion’s terms and conditions.
“As travel costs continue to rise, we’re happy to help make flying more affordable for Prime Students who want to spend this important time with family and friends,” Amazon Vice President of U.S. Prime and Marketing Tech Carmen Nestares said. “It’s another way we’re delivering incredible savings, value, and convenience to our Prime Student members each year.”
The winter holiday period typically sees a lot of travel. Last year, about 112.7 million people in the U.S. were expected to do so, including 7.2 million by flying, according to AAA.
Prime Student members can only put the deal toward a single round-trip or one-way ticket for a domestic flight in basic economy or the main cabin, according to the terms and conditions. For such tickets, the departing flight has to be scheduled for sometime between Dec. 8-25, while it must be in the Dec. 8 to Jan. 14 timeframe for the flight coming back.
It also cannot be used for someone other than the Prime Student member, StudentUniverse said.
Prime Student subscribers that didn’t score tickets will have the opportunity to get $25 slashed from the cost of holiday flights. That, Amazon said, will come by way of a promotional code provided by StudentUniverse.
Amazon has worked with StudentUniverse on Prime Student travel benefits for a couple years.
The student-focused travel site, owned by Flight Centre Travel Group, operates in a few other countries in addition to the U.S. It has been around since 2000.
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