Analysis | The Finance 202: Senate Democrats apply new pressure to Deutsche Bank and Trump organization – The Washington Post

Posted on June 7, 2019

THE TICKER

Senate Democrats are moving to tighten the screws on Deutsche Bank over the firm’s dealings with the Trump and Kushner organizations.

Seven Democrats on the Senate Banking Committee wrote to the Federal Reserve on Thursday, requesting it probe whistleblower allegations, first reported by the New York Times last month, that Deutsche Bank buried suspicious activity from accounts associated with President Trump and his son-in-law and senior White House adviser Jared Kushner.

The letter, led by Sen. Chris Van Hollen (D-Md.), asks if the Fed is already looking into whether Deutsche Bank ignored red-flag reports from its own anti-money-laundering experts to protect a pair of powerful and lucrative clients of its private wealth management division. The senators sent the letter to Federal Reserve Chair Jerome H. Powell and New York Federal Reserve President John Williams.

“Only by conducting a thorough review of this activity can we better what happened in these cases; what practices, procedures, or personnel may need to be changed at the bank; and what regulators should do to ensure the Federal Reserve’s ability effectively to monitor compliance with Anti-Money Laundering Laws,” the letter reads. Others on the letter include Sen. Sherrod Brown (Ohio), the top Democrat on the panel, and 2020 presidential candidate Sen. Elizabeth Warren (Mass.).

A Fed spokesperson in Washington said they have received the letter and plan to respond. A Deutsche Bank spokesman declined to comment.

The Times story details how the bank’s anti-financial crime team, based in Jacksonville, Fla., compiled “multiple suspicious activity reports involving different entities that Mr. Trump owned or controlled,” according to three former employees. One of the specialists found “money had moved from Kushner Companies to Russian individuals.” They recommended the bank report the activity to regulators at the Treasury Department. Instead, executives with the private wealth division decided to do nothing, the paper reported.

The bank is already facing intense scrutiny from congressional Democrats over its ties to Trump’s business empire. It has been the only major financial firm willing to back Trump over the last two decades, after a string of bankruptcies rendered him persona non grata on Wall Street. It still holds $300 million in outstanding debt from Trump — and it continues to make headlines for allegations of misconduct and money laundering on behalf of its clients.

Also on Thursday, for example, the European Commission announced it will review past money-laundering cases at E.U. banks, with a focus in part on Deutsche Bank, to determine how to improve its own rules.

The bank has faced some eye-popping penalties — $700 million in 2017 alone — for its conduct. And it is no stranger to punitive action from the Fed. In 2017, the regulator downgraded Deutsche Bank’s U.S. operations to “troubled condition” status, “a rare censure for a major financial institution that has contributed to constraints on its operations,” the Wall Street Journal reported last year. “It also means the bank has had to clear decisions about hiring and firing senior U.S. managers with Fed overseers. Even reassigning job duties and making severance payments for certain employees require Fed approval.”

The House Financial Services and Intelligence committees have subpoenaed Deutsche Bank for records related to Trump’s businesses. The president lost a bid in federal court last month to block the bank, and Capital One, from complying with the subpoenas — a decision the Trump team has appealed.

MARKET MOVERS

— Stocks extend gains. WSJ’s Jessica Menton and Paul Davies: “The Dow Jones Industrial Average advanced for a fourth consecutive session Thursday, buoyed by supportive commentary from global central banks that helped shore up investor confidence earlier this week. The blue-chip index climbed 181.09 points, or 0.7%, to 25720.66. The S&P 500 rose 17.34, or 0.6%, to 2843.49, and the tech-heavy Nasdaq Composite added 40.08, or 0.5%, 7615.55. All three major indexes are up at least 2.2% this week, and the Dow is on pace to snap a six-week losing streak.”

— NY Fed Prez: Trade war hurts, but no decision on rates. Reuters’s Richard Leong and Ann Saphir: “New York Federal Reserve Bank President John Williams said Thursday that concerns about escalating trade tariffs and slowing global growth are boosting uncertainty and holding back business investment, but he is keeping an open mind on interest rates… The Fed may leave interest rates where they are, and may need to ‘adjust’ them, Williams said… ‘My baseline (economic view) is a very good one.'”

— Econmists expect solid jobs report. Bloomberg’s Jeff Kearns: “Economists expect U.S. payroll gains cooled last month to a still-solid pace that’s down somewhat from the prior reading but still in line with consistent signs of a broadly robust job market. Nonfarm employment increased by 175,000, according to Bloomberg’s survey, a level that would be down from April’s 263,000 but still well above what economists consider sufficient to accommodate labor-force growth. The unemployment rate is projected to remain at a 49-year low of 3.6% while annual wage gains hold for a third month at 3.2%, near the strongest pace of the economic expansion.”

TRUMP TRACKER

TRADE FLY-AROUND:

Mexico aims to avoid tariffs with a possible deal: “U.S. and Mexican officials are discussing the outlines of a deal that would dramatically increase Mexico’s immigration enforcement efforts and give the United States far more latitude to deport Central Americans seeking asylum, according to a U.S. official and a Mexican official who cautioned that the accord is not final and that [Trump] might not accept it,” my colleagues Nick Miroff, David J. Lynch and Kevin Sieff report.

Trump remains the wild card: “Officials from both countries said they did not know whether the terms would assuage Trump and remove the tariff threat; Trump plans to charge a 5 percent tariff on Mexican goods entering the United States unless Mexico can show it will take steps to reduce the flow of migrants to the U.S. border,” Nick, David and Kevin report.
His latest comments: “Something pretty dramatic could happen,” Trump said, referring to the talks with Mexican officials, which continued Thursday. “We’ve told Mexico the tariffs go on. And I mean it, too.”
“Mexico is putting a limit on its offer: “Mexican negotiators also made clear that they will withdraw the offer if Trump makes good on his threat to impose tariffs, telling their U.S. counterparts that the economic damage would undermine Mexico’s ability to pay for tougher immigration enforcement.”
The terms of Mexico’s possible deal: “Mexican officials have pledged to deploy up to 6,000 national guard troops to the area of the country’s border with Guatemala, a show of force they say will immediately reduce the number of Central Americans heading north toward the U.S. border.”
Key Democrat says he would immediately push back: “On Capitol Hill, House Ways and Means Committee Chairman Richard E. Neal (D-Mass.) said he would introduce a resolution of disapproval if the president proceeds with the tariffs. Lawmakers could thwart Trump’s import tax plan only if they can deliver a two-thirds vote, enough to override a presidential veto.”

— Trump to make key Chinese tariff decision after G-20: The president “said on Thursday he would decide whether to carry out his threat to hit Beijing with tariffs on at least $300 billion in Chinese goods after a meeting of leaders of the world’s largest economies late this month,” Reuters’s Steve Holland and Stella Qiu report.

— Fed, IMF: Trade war could sap global growth: “Officials of the U.S. Federal Reserve and International Monetary Fund warned separately on Thursday that global trade tensions and rising tariffs posed an increasing risk to decades of U.S. expansion, as well as to the global economy,” Reuters’ Jason Lange and Howard Schneider report…

“Indeed, tariffs on Mexican imports amount to the U.S. taxing its own products since many items that cross the border are intermediate goods used by American producers, Dallas Federal Reserve Bank President Robert Kaplan said in an appearance at Boston College… The escalating trade disputes or an abrupt downturn in financial markets could pose substantial ‘material’ risks for the U.S. recovery, the [IMF] said in a report on the U.S. economy.”

— The Trump administration pushed for Opportunity Zones. Are they working?: “Part of the Tax Cuts and Jobs Act of 2017 was a provision known as Opportunity Zones that was designed to significantly boost the fortunes of low-income communities. Like many previous government tax-incentive efforts to spark investment in distressed areas, the provision offers tax benefits to those who invest in these neighborhoods. Some experts say it will significantly boost their fortunes, but others aren’t as enthusiastic,” Dan Weil reports for The Post. “Governors in all 50 states and five U.S. territories have designated opportunity zones — more than 8,700 in total.”

“Unlike past programs, tax benefits are unlimited. But there are experts who worry that some of the investment may not benefit the intended targets.”

— White House invites Trump business allies to help with Middle East plan: “The White House has invited some of President Donald Trump’s key allies in the business world to an event later this month in Bahrain intended to kick-start the administration’s long-awaited Middle East peace plan,” CNBC’s Brian Schwartz reports. “ . . . Yet while Palestinian leaders and executives have rejected invitations to attend the Bahrain summit, the administration is turning to corporate allies who have business interests in the region to take part in the deliberations.”

“Tom Barrack, a loyal supporter of the president and the CEO of real estate investment firm Colony Capital, will be heading to the event slated to start on June 25 at the Four Seasons in Bahrain’s capital, Manama . . . Blackstone CEO Steve Schwarzman, BlackRock CEO Larry Fink and Goldman Sachs’ Dina Powell are among the heavy hitters who have been invited to the gathering dubbed ‘Peace to Prosperity,’ according to people familiar with the planning.”

POCKET CHANGE

— Chamber chief used group’s private jet for extensive personal travel. WSJ’s Brody Mullins: “One Saturday morning last month, U.S. Chamber of Commerce President and Chief Executive Thomas Donohue arrived in Greece with his girlfriend and another couple after an overnight flight on a Gulfstream jet provided by the chief advocacy group for American corporations.

“After a week sailing in the Greek islands, Mr. Donohue continued on the jet to Tokyo and Beijing for three days of business meetings before returning on it to Washington. The total cost? At least $600,000, according to estimates by four private-jet-service companies… It is an unusual perk granted to Mr. Donohue: the use of a corporate jet service for personal and business trips. The Chamber pays for all of Mr. Donohue’s business trips. But the group also picks up nearly all the costs when Mr. Donohue is flying on vacation…

“On Wednesday afternoon, after the Journal told the Chamber that it could publish an article about Mr. Donohue’s flights as soon as Thursday, the Chamber’s board of directors, which meets today in Washington, announced that Mr. Donohue would be stepping down as president and CEO in 2022.”

— Walmart’s struggles to implement robots: “The nation’s largest private employer has unleashed an army of robots into more than 1,500 of its jumbo stores, with thousands of automated shelf-scanners, box-unloaders, artificial-intelligence cameras and other machines doing the jobs once left to human employees,” my colleague Drew Harwell reports. “The swarm is already remaking how the retailer’s more than 1 million U.S. ‘associates’ go about their daily work. Given the chain’s ubiquity across the country, the local Walmart store also is likely to become the first place millions of Americans meet a real-life, working robot.”

“But the rise of the machines has had an unexpected side effect: Their jobs, some workers said, have never felt more robotic. By incentivizing hyper-efficiency, the machines have deprived the employees of tasks they used to find enjoyable. Some also feel like their most important assignment now is to train and babysit their often inscrutable robot colleagues.”

— Goldman CEO: Marcus would get more praise as a Silicon Valley startup. CNBC’s Hugh Son: “Less than three years into its pivot to retail banking for the masses, Goldman Sachs CEO David Solomon still feels like an underdog.

The firm’s Marcus business gathers $1 billion in deposits a month and recently announced its first credit card with Apple, but that progress has yet to be reflected in Goldman’s stock, which trades at a discount compared with rivals… ‘If we were out in Silicon Valley and made 20% of the progress that we’ve made, we would get a lot of credit and people would be throwing money at us to own a piece of this business,’ [Solomon told Marcus workers this week]. ‘But nestled inside little old Goldman Sachs, we’re just going to have to prove it over time.'”

MONEY ON THE HILL

— Tlaib releases UBI-esque plan: “Rep. Rashida Tlaib (D-Mich.) has released a plan to spend trillions of federal dollars on direct cash subsidies to working class and poor Americans, including the unemployed and those with no earnings,” my colleague Jeff Stein reports. “Tlaib’s bill would give direct cash help to those at the bottom of the income distribution — annually offering $3,000 to individuals and $6,000 to families — in an attempt to reduce poverty in the United States and bolster the wages of the poor.”

“ . . . Tlaib’s plan offers the full $3,000 or $6,000 credit to those with no income — a significant break from orthodoxy among more centrist Democrats, who have traditionally argued giving federal cash to the unemployed will discourage them from finding jobs.”

THE REGULATORS

THE FUNNIES

From The Post’s Tom Toles: