THE TICKER

Mark it a banner day in Washington for the big banks. On Thursday morning, an A-team of regulators lined up before the Senate Banking Committee and largely agreed to dial back restrictions imposed on the industry after the financial crisis. And in the afternoon, the largest financial institutions all passed the first round of the annual stress tests administered by the Federal Reserve, supplying a fresh argument for Republicans angling to ease up on Wall Street. 

The back-and-forth at the Senate hearing revealed what appears to be an emerging consensus among those in power about where the industry’s cops on the beat can relax enforcement. Led by Fed governor Jerome Powell, the regulators singled out the Volcker Rule, which prohibits banks from making certain kinds of risky investments for their own gain, as ready for a trim. Powell argued the other safety measures built into the law — namely its capital and liquidity requirements and the stress tests — reduce the urgency of Volcker’s ban on proprietary trading. 

“It gives a little more freedom to think about how we can draw back the scope of Volcker and make it less burdensome,” he said. Further, Powell said, those implementing the rule went “well beyond what’s in the statute.” He said the Fed would likely support a “significant tailoring” of Volcker so it would apply only to those banks with big trading books. And he said regulators could redefine what qualifies as a trading account. 

Strikingly, Powell got an amen from the only moderate Democrat on the panel who showed up for the hearing, Sen. Heidi Heitkamp of North Dakota. “Many current and former regulators publicly state the Volcker Rule is way too complicated,” she said. “It’s my experience when a rule is too complicated, there isn’t much compliance, so it doesn’t really get you what you need.” Add that to Sen. Jon Tester (D-Mont.) — also on the banking committee and up for reelection next year in a red state — telling me Wednesday that he’s keeping an open mind on Volcker changes, and you’ve got a germ of bipartisan agreement for rolling back the rule. 

But Powell and company don’t need new legal authority to relent from applying it. The Treasury report last week that presented the Trump administration’s plan for weakening the 2010 Dodd-Frank Act also spelled out which recommendations could be carried out by regulators alone. Nine of the 17 Volcker tweaks the report suggests wouldn’t require anything from Congress. 

The good news for banks kept coming. All 34 banks that had to submit so-called capital plans to the Fed for their annual stress tests — another Dodd-Frank legacy — cleared the first hurdle of that process. The second one comes next week and will include a determination about whether the banks can proceed with payouts to investors. The entire exercise is meant to regularly check the health of banks by running the numbers on how they’d fare in the event of another economic crisis. 

The banks have complained about the compliance burden imposed by the tests. Now, regulators and policymakers are mulling whether to tweak their scope and frequency as part of the deregulatory push. Powell testified Thursday that as banks get stronger, regulators should look to exempt smaller institutions from the requirement altogether and pare it back for others.

“As we consider the progress that has been achieved in improving the resiliency and resolvability of our banking industry, it is important for us to look for ways to reduce unnecessary burden,” he said in his prepared testimony. The banks couldn’t have said it better themselves. 
 

MARKET MOVERS

--As Senate Republicans revealed their highly-anticipated health-care draft, U.S. stocks were on the rise Thursday, driven by health-care sector gains. Health-care stocks have seen a boost all week over news of the emerging bill, CNBC reported. 

That makes sense, since the bill includes a lot for insurers to love. All told, the package cuts taxes on corporations and the wealthy by roughly $1 trillion over a decade. The AP has a breakdown here

--Shares of panel manufacturers surged Thursday after President Trump suggested to supporters at an Iowa rally that he would want solar panels on his proposed border wall, Bloomberg reported.

“We’re thinking of something that’s unique, we’re talking about the southern border. Lots of sun, lots of heat,” Trump said Wednesday at his rally. “We’re thinking about building the wall as a solar wall, so it creates energy, and pays for itself. And this way Mexico will have to pay much less money, and that’s good. Is that good?”

It’s the second time this month that Trump has made the suggestion, and Bloomberg noted that “SunPower Corp. jumped 13 percent to $8.69 at the close in New York, Canadian Solar climbed 7.7 percent and JinkoSolar Holding Co. rose 4.4 percent.”

Thanks to a provision in the House and Senate bills, health insurance CEOs stand to get a raise.
Max Ehrenfreund
At a factory in South Carolina, President Trump proclaimed, “We are going to fight for every last American job.” Now workers are going to lose their jobs.
Danielle Paquette
Carrier's plant in Indianapolis — the poster child for President Trump's pledge to save US jobs — is planning layoffs next month.
CNBC
POCKET CHANGE

-- Uber's rocky ride continues. A new report says the company knew that a former Google engineer had stolen trade secrets when they hired him, according to a report by the Associated Press based on a new court filing.

The ride-hailing company hired Anthony Levandowski to work on self-driving cars, AP reported, and the filing alleges that CEO Travis Kalanick had told him to leave the stolen information behind. Uber fired Levandowski last month. And Kalanick stepped down from his role as CEO Tuesday.

As Uber has grappled with the leadership turmoil that led to its chief executive’s resignation this week, its much-smaller rival has built market share and expanded aggressively, even as its founders counsel humility.
Wall Street Journal
OPINIONS
The market doesn’t expect a reduction in the Fed's balance sheet to go very far or add much to the supply of bonds.
David Ader, Bloomberg
Proposing to abolish the state and local tax deduction is the best GOP reform hope.
Donald Luskin, WSJ
THE REGULATORS

— Hedge fund wariness of sharing proprietary information with federal regulators who they believe take a less-than-rigorous approach to cybersecurity spilled into the open this week. A Renaissance Technologies executive told an industry conference that the $65 billion hedge fund is resisting a request by the CFTC to hand over its source code — out of concern it could leak, the New York Post reports. A CFTC spokesperson says the agency made no such request. 

Once confirmed as permanent chairman of the U.S. Commodity Futures Trading Commission, J. Christopher Giancarlo, now the regulator's acting chair, will keep the heat on derivatives and commodities markets with tough policing, he said on Thursday.
Reuters
DAYBOOK

Today

  • The Global Business Dialogue will host a discussion on trade with North America and with the European Union on Friday.

 

THE FUNNIES

From The Post's Tom Toles: 

BULL SESSION

Trump admits he never had tapes of conversations with ex-FBI head James B. Comey:

 

Four ways the Senate health-care bill could fall apart: 

Health-care bill faces opposition from Democrats, four GOP senators:

Watch: 'Pizzagate' gunman recorded this video on his drive to D.C.: