Congressional Democrats — with new momentum in their legal fight to investigate President Trump’s conduct and records — are pressing Deutsche Bank for more information on a report that the firm ignored red flags about suspicious activity from the Trump and Kushner organizations. Trump's son-in-law Jared Kushner is now a senior White House adviser.
The development brings even more political heat to the only major financial firm willing to bank Trump over the past two decades as he suffered a series of bankruptcies and defaults — and which still holds $300 million in outstanding debt from the now-president. Deutsche Bank also faced enormous fines — $700 million in 2017 alone — for money laundering and misconduct on behalf of clients. Its shares hit a record low on Monday.
Democrats on the Senate Banking Committee plan to press the issue with federal financial regulators at a hearing today. Ohio's Sherrod Brown, the top Democrat on the panel, and Sen. Chris Van Hollen (D-Md.) set the stage in a Monday letter to Deutsche Bank CEO Christian Sewing asking for details about events described in a New York Times report from Sunday.
That story alleges that over 2016 and 2017, Deutsche’s in-house anti-money-laundering experts recommended passing suspicious transactions involving Trump and Kushner-controlled entities along to the Treasury Department for further investigation. But executives in the bank’s private wealth management division buried the reports instead.
Brown plans to lead off his questioning today of the Treasury Department’s top financial crimes enforcer and the FBI’s section chief for financial crimes by highlighting the report.
“We need to get to the bottom of what happened here,” Brown will say, according to a copy of his opening statement shared with The Finance 202. “Everyone has to follow anti-money laundering laws and rules — you don’t get an exemption if you have a rich and powerful client. And we have to hold financial institutions accountable if they break the rules.”
And House Financial Services Committee Chairwoman Maxine Waters (D-Calif.), who along with House Intelligence Committee Chairman Adam Schiff (D-Calif.) last month subpoenaed Deutsche Bank for records relating to its extensive dealings with Trump, did not have a comment by press time.
Democratic lawmakers have some wind at their backs as they press their case. A federal judge on Monday blocked Trump’s bid to kill another House subpoena — this one to his accounting firm, Mazars USA, for years of his financial records. In a forceful ruling, U.S. District Judge Amit P. Mehta wrote it is “not for the court to question whether the [House Oversight and Reform] Committee’s actions are truly motivated by political considerations,” and declined a request from Trump’s lawyers to stay his order for more than seven days.
Trump criticized the ruling:
A federal judge in Manhattan could follow suit Wednesday when he holds a hearing on a similar attempt by the Trump team to block House subpoenas of Deutsche Bank and Capital One. Trump’s lawyers have made the same argument there that fell short in the Mazars case: That Democratic lawmakers behind the document demands are motivated by improper political considerations.
(Still, House Democratic leaders are divided over how, broadly, to approach attempting to hold Trump to account. Speaker Nancy Pelosi (D-Calif.) faced down a number of her lieutenants eager to begin impeachment proceedings in a heated Monday night meeting, after the White House blocked former counsel Don McGahn from testifying to the House.)
The New York Times report prompted an angry response from Trump on Monday — but not over the story’s central claim that Deutsche Bank overlooked potentially shady transactions involving Trump entities. He bristled rather at the story’s statement that the German bank has been the only major financial firm willing to extend him credit:
....fashioned, but true. When you don’t need or want money, you don’t need or want banks. Banks have always been available to me, they want to make money. Fake Media only says this to disparage, and always uses unnamed sources (because their sources don’t even exist)......— Donald J. Trump (@realDonaldTrump) May 20, 2019
.....was very good and highly professional to deal with - and if for any reason I didn’t like them, I would have gone elsewhere....there was always plenty of money around and banks to choose from. They would be very happy to take my money. Fake News!— Donald J. Trump (@realDonaldTrump) May 20, 2019
The New York Times reporter who wrote the Deutsche Bank piece challenged Trump's claim:
This is not true. I have spent a long time looking into this, and @DeutscheBank was the only bank willing to lend to @realDonaldTrump for 20 years because of his pattern of defaults and the bank’s hunger for growth in the US. https://t.co/Qh4siSpEgM— David Enrich (@davidenrich) May 20, 2019
Trump's tweet thread belongs to a tradition of defensive comments about his net worth, as The Post's Catherine Rampell points out. "One theory is that, maybe, if Trump’s tax returns or other financial records become public, his supporters would learn that he’s not nearly as rich as he says,” she writes. “Another is that his finances are not exactly on the up and up. Of course, both explanations could be true.”
For its part, Deutsche Bank released a statement Monday denying the Times report. “At no time was an investigator prevented from escalating activity identified as potentially suspicious. Furthermore, suggestion that anyone was reassigned or fired in an effort to quash concerns relating to any client is categorically false,” the bank said.
It’s worth noting, however, that the whistleblower at the heart of the Times story never made the first claim the denial addresses. Rather, she says, she presented her best case for submitting a report to Treasury on the suspicious activity she uncovered, but senior executives with the bank’s private banking division decided against her recommendation.
Now, Congressional Democrats intend to pick up where those executives left off.
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— Powell raises concern about business debt. The WSJ's Nick Timiraos and Andrew Ackerman: "Federal Reserve Chairman Jerome Powell said financial regulators must take seriously potential dangers that rising levels of business debt pose to the U.S. economy but said some comparisons to last decade’s subprime-mortgage bubble overstate the risks... Views about the risks from rising corporate borrowing 'range from "This is a return to the subprime-mortgage crisis" to "Nothing to worry about here,"' said Mr. Powell. 'At the moment, the truth is likely somewhere in the middle.'"
— China talks stall: Both the U.S. and China appear to be digging in for a prolonged trade war. To review: Since Trump and his administration accused China of backing away from a deal, the United States has doubled tariffs on $200 billion in Chinese imports; China has promised to retaliate with tariffs on $60 billion in U.S. goods by June 1; the United States is considering imposing tariffs on all remaining approximately $300 billion in Chinese imports not currently taxed; and at the end of last week, it sought to blacklist Huawei, one of China’s leading technology companies. Meanwhile, the promise of talks have fizzled.
- China tells Washington to cool it: Frustrated with the moves against Huawei, Chinese Foreign Minister Wang Yi called Secretary of State Mike Pompeo on Saturday to tell the United States to not “go too far,” the state-run Xinhua reported.
- What deal?: After Trump repeated Sunday that China walked away from a deal, China said the president was mistaken. “We don’t know what this agreement is the United States is talking about,” Foreign Ministry spokesman Lu Kang told reporters on Monday. “Perhaps the United States has an agreement they all along had extravagant expectations for, but it’s certainly not a so-called agreement that China agreed to.”
- Trump-Xi meeting?: The president says he will meet at the upcoming G-20 summit in Japan with President Xi Jinping, but thus far China has refused to confirm those details. Beijing has also denied knowing anything of Treasury Secretary Steven Mnuchin’s desire to come to China to resume negotiations.
- U.S. Ambassador to Tibet: U.S. Ambassador Terry Branstad is also set to visit Tibet this week, which according to Reuters is the first time a U.S. ambassador has visited the region since 2015.
- Google announced on Monday it has suspended some of its business with Huawei in compliance with the Commerce Department’s decision to put the company on what's effectively an export blacklist.
- Possible reprieve: After Huawei shares sharply fell on Monday, the Commerce Department announced it was granting U.S. companies a license to keep doing business with the tech company for three months, according to a report by James Politi, Demetri Sevastopulo and Kiran Stacey in the Financial Times.
David Dollar, senior fellow in the John L. Thornton China Center at the Brookings Institution, broke down for Brent why he thinks the two sides are still so far away from a deal.
- The stalemate: “The U.S. would like all of [trade demands] codified in laws passed by the National People’s Congress, and the Chinese prefer to implement through State Council regulations which have status of law in China," Dollar said. "Also, the Chinese want the U.S. to pull back on all the tariffs they’ve aimed at China, and the U.S. would like to leave all of them or at least most of them in place until the U.S. sees Chinese implementation. So frankly, they are very far apart."
- How could China respond?: “I think it is extremely unlikely that China in some sense would cave in and agree to everything that the U.S. is asking. I just find that inconceivable and the Chinese seem to be digging in for a long trade war," he said. "I think the Chinese have been very consistent: they are willing to make a deal, they are willing to compromise.”
- Trump and Xi at G-20: “To me, it seems impossible that they would have worked out a deal that those two could then ratify, so I think the best case scenario is that the two have a good meeting and maybe each of their economies is deteriorating in the background and then they to agree to tell their negotiators to make a compromise, find an agreement.”
… But while prospects with China sour, USMCA talks are looking slightly more promising. Trump announced on Friday that the United States would lift its steel and aluminum tariffs, which Sen. Chuck Grassley (R-Iowa) had said was necessary before the Senate Finance Committee that he chairs moved forward on the New NAFTA.
- Not so fast: House Ways and Means Committee Chairman Richard Neal (D-Mass.) said after the announcement that House Democrats “continue to have a number of substantial concerns” about the new NAFTA deal.
- Pence is in selling mode:
Heading to Florida to speak with business leaders & hardworking Americans about how the #USMCA is a better deal for American business & American workers! Then we’re visiting Jacksonville Naval Complex to thank those serving!— Vice President Mike Pence (@VP) May 20, 2019
- Canada has a limited window to act: As Vox’s Jen Kirby reports, “Canada has a short window to pass the USMCA this year — its Parliament adjourns June 21, after which everyone will head home to campaign for federal elections in October.” Canadian Foreign Minister Chrystia Freeland said the lifting of the tariffs means it’s “full steam ahead,” per Reuters’s Steve Scherer. Freeland also said she would be contacting Democrats to talk about their concerns.
— Justice Department reportedly leaning against T-Mobile takeover: “The Justice Department is leaning against approving T-Mobile U.S. Inc.’s proposed takeover of Sprint Corp., according to a person familiar with the review, even after the companies won the backing of the chairman of the Federal Communications Commission,” Bloomberg News’s David McLaughlin reports.
“Opposition to the deal by the Justice Department’s antitrust chief, Makan Delrahim, would mark a rare break with the FCC. The two agencies work side by side on merger reviews and typically emerge on the same page about whether to approve deals.”
— Ford to cut 10 percent of global workforce: “Ford Motor Co. will cut roughly 10 percent of its global salaried staff by August as part of a companywide “redesign,” the company told employees Monday,” my colleague Rachel Siegel reports. “The move will eliminate 7,000 white-collar jobs and save the U.S. auto giant about $600 million a year.”
“The cuts represent the latest phase of Ford’s global restructuring, meant to make the company more agile and less bureaucratic in the face of industry tumult that has forced carmakers to pivot away from sedans and shutter plants nationwide.”
— Top four congressional leaders head to the White House: “The four top party leaders will meet on Tuesday morning to begin talks on a potential deal to raise the budget caps, as well as a possible boost to the debt ceiling, according to multiple sources, although any agreement will be hard to reach,” Politico’s John Bresnahan and Heather Caygle report. “Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Mitch McConnell (R-Ky.), Senate Minority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Kevin McCarthy (R-Calif.) will attend the session, as well as their top aides.”
“Acting White House Chief of Staff Mick Mulvaney, Acting Office of Management and Budget Director Russ Vought, and Treasury Secretary Steven Mnuchin will take the lead for the Trump administration in the negotiations, the sources added. Without action by Congress and the White House, the Pentagon faces a cut of $71 billion under current law, while domestic programs would be slashed $55 billion.”
— Harris announces gender pay gap plan: “Senator Kamala Harris of California on Monday announced a proposal to close the gender wage gap by requiring larger companies to certify that men and women are paid equally, in an effort to combat wage discrimination on a federal level,” the New York Times’s Astead W. Herndon reports.
“Unlike previous federal legislation regarding the pay gap, which asked workers to report or sue their employer if discrepancies were suspected, Ms. Harris’s plan would proactively force companies with 100 or more employees to obtain an “equal pay certification” every two years, showing that they were paying men and women the same for analogous work, her campaign said.”
— Crowley, Daschle join cannabis company board: “Northern Swan Holdings Inc., an investment firm betting on hemp and marijuana cultivation in Colombia, has enlisted a pair of former Democratic lawmakers as it tries to navigate complicated cannabis regulations around the globe,” Bloomberg News’s Craig Giammona reports. “Joe Crowley, a former high-ranking New York congressman who lost a primary to Alexandria Ocasio-Cortez last year, and Tom Daschle, a former U.S. Senate majority leader from South Dakota, have joined Northern Swan’s advisory board, the latest politicians to jump into the legal cannabis industry.”
— Regulators leave almost half their fines uncollected. WSJ's Dave Michaels: "Wall Street watchdogs often tout the fines they levy on alleged wrongdoers. Yet much of that money is never collected. The Securities and Exchange Commission over five fiscal years that ended in September 2018 took in 55% of the $20 billion in enforcement fines set through settlements or court judgments, according to agency statistics. During the prior five years, from 2009 through 2013, the SEC collected on 60% of $14.6 billion...
"The SEC has struggled for years to get defendants to pay their fines, although some are almost certain to avoid payment forever... The SEC’s challenge is that, like companies that are owed money, it doesn’t have the right to seize a debtor’s property or assets to extract payment. Instead, it relies on a time-consuming and litigious process of filing liens against defendants or going to court to seek contempt orders."
- Kohl’s, Nordstrom, JCPenney, Urban Outfitters and Home Depot are among the big names reporting their Q1 earnings, per Kiplinger.
- The American Enterprise Institute holds an event on “how the baby boomers stole the millennials’ economic future.”
- The Heritage Foundation holds an event on the gender wage gap.
- A hearing in Manhattan federal court is scheduled over the Trump Organization and the president’s three adult children’s efforts to prevent Deutsche Bank and Capital One from providing financial records to Congress on Wednesday.
- Treasury Secretary Steven Mnuchin testifies in front of the House Financial Services Committee on Wednesday.
- The House Ways and Means Subcommittee on Trade holds a hearing on enforcement in the new NAFTA on Wednesday.
- Lowe’s, Advance Auto Parts and Targets are among the big names reporting their Q1 earnings, on Wednesday, per Kiplinger.
- The Federal Reserve Federal Open Market Committee releases minutes of its May 1 meeting on Wednesday.
- Intuit, Hewlett Packard Enterprise, Best Buy, Weibo, Hormel Foods, Lions Gate Entertainment are among the big names reporting their Q1 earnings on Thursday, per Kiplinger.
- The Census Bureau and the Department Housing and Urban Development jointly release April numbers on new home sales on Thursday.
- The National Economists Club hosts the Brookings Institute’s Aaron Klein for an event on the marijuana industry and banking on Thursday.
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