Happy Thursday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
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THE BIG DEAL–Wells Fargo CEO steps down amid calls for removal: Wells Fargo announced Thursday that CEO and president Timothy Sloan has resigned as the embattled bank struggles to escape from unprecedented penalties and scrutiny from federal regulators.
The bank announced Thursday that Sloan will immediately step down as Wells Fargo’s chief executive, president and a board member, and will retire from the company entirely on June 30.
C. Allen Parker, Wells Fargo’s former general counsel, was elected by the bank’s board to serve as interim chief executive, president and member of the board.
Sloan said in a Thursday statement that he will “step aside and devote my efforts to supporting an effective transition” as a growing number of top Democratic lawmakers called for his removal.
“We have made progress in many areas and, while there remains more work to be done, I am confident in our leadership team and optimistic about the future of Wells Fargo,” Sloan said in a statement.
“However, it has become apparent to me that our ability to successfully move Wells Fargo forward from here will benefit from a new CEO and fresh perspectives.” I’ll tell you how we got here.
Scandals, scandals, scandals:
- Wells Fargo has paid more than $1 billion in fines and legal settlements since September 2016 over a series of sales scandals.
- The Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $100 million in September 2016 over allegations that the bank opened and charged customers fees for millions of accounts opened without their consent.
- Wells also paid $1 billion in April 2018 to settle charges alleged by the CFPB and Office of the Comptroller of the Currency (OCC) that the bank failed to make promised interest rate adjustments on mortgages and auto loans, which led to hundreds of foreclosures and car repossessions.
Political pressure:
- Sloan’s efforts failed to convince Democratic lawmakers and federal bank regulators that Wells Fargo had become a safer, more responsible bank.
- Sloan was excoriated by a bipartisan group of Financial Services panel members in both parties during the March hearing, which concluded with the committee’s chairwoman, Rep. Maxine Waters (D-Calif.), calling for federal regulators to fire Sloan.
- Democratic Sens. Sherrod Brown (Ohio), the ranking member of the Senate Banking Committee, and Elizabeth Warren (Mass.) also wrote to federal regulators last week to demand Sloan’s removal.
Unhappy regulators:
- Fed Chairman Jerome Powell said in a press conference last week that Wells Fargo had “a lot of work to do” before it would be released it from its asset cap–a penalty never before imposed by the central bank.
- And OCC spokesman Bryan Hubbard said after Sloan’s March 12 testimony that “We continue to be disappointed” with Wells Fargo’s “performance under our consent orders,” a rare public reprimand from the regulator.
LEADING THE DAY
Trump vows to keep Special Olympics funding after uproar: President Trump said Thursday that he’s overruled his administration officials who sought to zero out funding for the Special Olympics in their budget proposal.
“The Special Olympics will be funded. I just told my people, ‘I want to fund the special Olympics,’ ” Trump told reporters as he departed the White House for a campaign rally in Michigan.
“I heard about it this morning,” he added. “I have overridden my people. We’re funding the Special Olympics.”
Trump added that he’s been to the sporting event personally, calling it “incredible.”
The Hill’s Brett Samuels has more on the controvery here.
How we got here: Education Secretary Betsy DeVos has faced mounting scrutiny from lawmakers in both major parties after the department’s budget proposal for fiscal year 2020 did not include funding for the program.
The Education Department’s proposal was unlikely to go forward in Congress given the widespread opposition to the $17.6 million in cuts to the program.
DeVos takes heat: Trump reversed his administration’s position nevertheless, undermining DeVos hours after she had defended the decision to Senate appropriators.
DeVos has said that while she personally supports the event, the Special Olympics raises more than $100 million in private donations and that there are other important programs that need federal funds. During the Senate hearing, she hit back at critics.
“I love Special Olympics. I have given a portion of my salary to Special Olympics. I hope all of this debate inspires private contributions to Special Olympics,” DeVos told Sen. Dick Durbin (D-Ill.) during a heated exchange.
“Let’s not use disabled children in a twisted way for your political narrative, that is just disgusting and shameful and I think we should move on from that,” she added.
House panel approves marijuana banking bill: The House Financial Services Committee on Wednesday approved legislation that would allow banks to work with marijuana businesses that are legal under state law.
The SAFE Banking Act was approved by the committee in a 45-15 vote, sending the bill to the full House.
The bill, introduced by Rep. Ed Perlmutter (D-Colo.) with 152 Democratic and 12 Republican co-sponsors, would allow banks to work with dispensaries, growers and other cannabis businesses, bringing traditionally cash enterprises into the financial system.
“Mr. Perlmutter may now take his victory dance up and down the aisle,” Financial Services Committee Chairwoman Maxine Waters (D-Calif.) said after the vote.
Currently, federal law prevents banks from servicing marijuana businesses, even as states increasingly are allowing the legal use of cannabis. Banks have been pushing for Congress to clear up the legal ambiguity to allow them to tap into a growing and lucrative industry and bring that money into the financial system. The Hill’s Alex Gangitano tells us more about the measure here.
What comes next: The bill should clear the House fairly easily. Cannabis legalization in some capacity has broad support among Democrats, and the party’s base is rapidly moving in favor of ending the federal ban on the drug. Allowing banks to serve legally compliant companies is less controversial, so the bill shouldn’t have trouble passing the Democratic-controlled House.
But the bill faces significant obstacles in the Senate, where the Republican majority has little interest in the measure. Sen. Mike Crapo (R-Idaho), chairman of the Senate Banking Committee, is from one of three states where cannabis is illegal in all forms. While he hasn’t spoken out on the banking bill, it’s not expected to be priority for his panel.
And while Senate Majority Leader Mitch McConnell (R-Ky.) has spearheaded efforts to legalize hemp, cannabis’ non-psychoactive relative, he’s denounced cannabis as “an illicit cousin which I choose not to embrace.”
Controversial Fed pick gains support in GOP Senate: President Trump’s controversial nomination of conservative economist and former campaign adviser Stephen Moore to the Federal Reserve Board is slowly winning support from Republican senators.
Economists across the political spectrum recoiled at Trump’s choice of Moore, a commentator fiercely loyal to the president and a sharp critic of the Fed, raising questions about his independence and academic gravitas.
But a number of GOP senators are declaring their support for Moore, an opinion contributor for The Hill, while others have signaled openness to his nomination. I explain why here.
Unconventional, but in a good way? Moore’s supporters say he would shake up and add a fresh, conservative perspective to a central bank led by establishment-friendly, consensus-oriented academics.
While boosters acknowledged his often-combative tone and unconventional views would be an outlier at the Fed, they said Moore could offer a useful counterbalance.
- “I’ve known Stephen Moore for a long time. He would be an independent voice at the Fed, and that’s not all bad,” said Sen. Richard Shelby (R-Ala.), the former chairman of the Senate Banking Committee.
- Both GOP Sens. Ted Cruz (Texas) and Rand Paul (Ky.), who’ve opposed some of Trump’s other Fed nominees, said Tuesday that they’d vote to confirm Moore.
- “On paper, he looks like a great nominee. I’m most likely going to support him, and I look forward to seeing the confirmation hearing,” said Sen. Thom Tillis (R-N.C.).
Concerns about independence: For centrist Republican senators, Moore could be a tough decision because of his close ties to Trump and fierce criticism of the current Fed regime. Moore has also raised concerns from critics and many advocates in the banking industry who worry he could undercut the Fed’s independence.
- Sen. Susan Collins (R-Maine) said Tuesday that she’s “concerned that he has said that he felt the chairman of the Fed can be fired.”
- But Sen. Mike Rounds (R-S.D.) who sits on the Banking Committee, said Tuesday that he expects to support Moore and believes the potential Fed governor would moderate his tone if he’s confirmed to the bank. “Once these governors are brought in, and they recognize that they have an extended term in office, they seem to grow even more independent,” Rounds said. “So that doesn’t really concern me at this stage in the game.
Senate panel approves GOP budget that slashes spending: The Senate Budget Committee on Thursday approved a GOP-backed budget resolution that would allow for draconian spending cuts by reducing both defense and non-defense spending for 2020.
The resolution advanced in an 11-8 vote along party lines.
“This budget represents an important first step toward addressing our country’s fiscal challenges and provides a path for us to begin working together to achieve real deficit reduction,” said Committee Chairman Mike Enzi (R-Wyo.). “I hope that this budget will mark the beginning of a serious conversation on issues that Congress has been content to ignore for too long.”
Budget resolutions do not carry the force of law, and in recent years they have been seen largely as political messaging documents. But the measure represents a marker in spending negotiations and serves as a Senate GOP counterpoint to President Trump’s budget proposal.
More budget news: House Democrats say they are getting closer to an internal deal on a budget resolution that would increase non-defense spending faster than defense spending, a reversal from recent years.
GOOD TO KNOW
- President Trump on Thursday signed an executive order allowing Congressionally-approved 1.9 percent pay raises for federal workers to go into effect, retroactive to January 1.
- The Chinese government has made proposals in trade talks with the U.S. to curb technology transfer practices that are being targeted by the Trump administration, Reuters reported Wednesday.
- Top lawmakers on the House and Senate’s tax-writing committees on Thursday offered bipartisan legislation aimed at making improvements to the IRS.
- The U.S. economy grew by 2.2 percent in the fourth quarter of 2018, down from earlier estimates of 2.6 percent, according to federal data released Thursday.
- The Department of Housing and Urban Development (HUD) on Thursday charged Facebook with encouraging and enabling housing discrimination through its targeted advertising practices.
- And HUD told Twitter and Google last year that they are under investigation for allegedly enabling discriminatory ad practices, according to The Washington Post.
- Two freshmen Democratic lawmakers from Illinois on Thursday offered legislation that would ease the GOP tax law’s cap on the state and local tax (SALT) deduction, though not completely repeal it.
ODDS AND ENDS
- JPMorgan Chase is cutting hundreds of employees in its asset and wealth management divisions, Bloomberg News reported.
- Op-Ed: Meg Lundsager, a public policy fellow at the Wilson Center, argues why the U.S. and Europe are “rightly anxious” about the “budding Italy-China relationship.”