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American Banker – The warning signs in consumer credit data

US households are borrowing more than ever to buy homes and cars, pay for college and even finance every day purchases. The Federal Reserve Bank of New York said in September that consumer debt hit a record $12.96 trillion in the third quarter of 2017, as student and auto loan totals reached all-time highs and mortgage and credit card debt crept closer to pre-financial-crisis levels. It’s an eye-popping figure to be sure, but should lenders be spooked by it? The New York Fed has noted that its data is not adjusted for inflation, and the cost of goods and services has risen by more than 10% since 2008, the last time total consumer debt neared the $13 trillion mark. Moreover, the US population has increased by about 7% during that span, which means that, on a per capita basis, consumer debt is actually lower than it was a decade ago. Another sign that households are managing their debt reasonably well: Foreclosures hit a new historical low in the third quarter, according to the New York Fed. Still, there are reasons to be concerned about rising debt levels. The personal savings rate hit a 12-year low at the end of 2017, which means that many households likely do not have enough of a financial cushion to weather sudden economic shocks, like a major medical bill or a busted refrigerator. Delinquencies on all types of consumer loans, while nowhere near 2009 and 2010 levels, have started to tick up in recent quarters. Factor in slow wage growth and high housing costs in many urban markets and it is not hard to imagine many households struggling to keep pace with their monthly bills. It’s too soon to say what this all means for banks, but not too soon point out the warning signs. Here they are.

Trump’s $1.5T infrastructure plan shifts funding burden to states, private sector

The White House released the outline for President Donald Trump’s highly-anticipated infrastructure overhaul on Monday, an effort that places a larger burden on states to fund their own projects. As Trump mentioned during his State of the Union address last month, the plan calls for $1.5 trillion over the course of the next decade to overhaul the nation’s roads, bridges, airports and even broadband distribution. The funds are expected to result from a combination of public and private assistances, with the federal government contributing around $200 billion. Of that $200 billion, half will be dedicated to what the administration is calling an “Incentives Program,” where grants will be awarded to states to fund projects that can spur additional outside investment. For these initiatives, federal dollars are to be used to fund a maximum of 20% of the cost, a big policy reversal from the current funding structure where government money can account for as much as 80% of highway repairs. Twenty-billion dollars will be put toward expanding infrastructure financing programs, including an effort to increase the number of credit programs, and another $20 billion is to be allocated toward innovative, “transformative projects.”To address the needs of rural America, where some believe it could be more difficult to raise funds and attract investment, the White House proposes that $50 billion be awarded to those states’ governors in the form of block grants. With the US government committing just $200 billion to the effort, which the White House has said will come from cuts to other programs, it is largely up to states and localities to work with the private sector to raise the rest of the cash to fund needed infrastructure initiatives. The administration is hopeful the revamp will continue to stimulate economic growth. As previously reported by FOX Business, manufacturers are looking to the plan as not only a way to create direct spending and new jobs, but also to increase intra-industry efficiency.

Equifax breach might have been worse than anyone thought

A new revelation shows Equifax’s massive data breach, which occurred last year and affected about 145.5 million consumers, may have been worse than anyone thought. But this isn’t the first time the credit agency revealed the breach was more damaging than initially announced. Back in October, Equifax revealed the data breach was bigger than they first thought, moving the number of victims up from 143 million to 145.5 million. But now, confidential documents Equifax provided to the Senate Banking Committee showed additional information such as tax IDs and driver’s license details were also accessed during the hack. And now, some interest groups are urging Congress to hold Equifax accountable and pass consumer protection bills. US PIRG, a federation of state public interest research groups, is urging Congress to pass pro-consumer privacy and data security bills introduced in the five months since the breach was first reported. “Why did it take Equifax so long to disclose this additional stolen information?” asked Mike Litt, US PIRG consumer campaign director. “And why hasn’t Equifax directly notified consumers about this yet?” “In addition to raising more questions over Equifax’s many failures, these new revelations show the urgent need for action,” Litt said. “For starters, the Consumer Financial Protection Bureau should complete its investigation into the breach. In the meantime, Congress should pass legislation now.”

US PIRG listed several bills introduced in Congress that it supports, and says would support consumers including S. 2289, the Data Breach Prevention and Compensation Act, S. 1816, the Freedom from Equifax Exploitation Act and S. 2362, the Control Your Personal Credit Information Act. “There are already several good bills just sitting there,” Litt said. “Will it take an even worse breach for Congress to pass them?” And it may take an act from Congress to make any meaningful changes for Equifax as CFPB Acting Director Mick Mulvaney said the agency is enforcing the law but not being aggressive under his leadership. “We’re not pushing the envelope,” Mulvaney said Sunday on CBS. “We’re taking a different attitude toward the job, but the priorities have not changed.” Mulvaney explained he is taking this new approach because the CFPB is “perhaps the most unaccountable bureau or agency there is.” “We want to run that place with a good deal of humility and prudence,” Mulvaney said. “This bureau is unlike any other federal bureaucracy. It’s run by one person. Right now me.”

Elon Musk says the new SpaceX Falcon Heavy rocket crushes its competition on cost

–  SpaceX CEO Elon Musk reveals a new detail about the company’s new Falcon Heavy rocket.

–  A maxed-out version of the rocket would cost $150 million per launch, Musk said in a tweet Monday.

–  That is a quarter of a billion dollars less than SpaceX’s next closest competitor.

SpaceX is even further out in front of the rest of the space industry than previously thought, according to CEO Elon Musk, who claimed on Monday that a “fully expendable” Falcon Heavy would cost only $150 million — about $250 million cheaper than the closest competition. The company’s Falcon Heavy rocket became the most powerful commercial rocket in the world after SpaceX successfully completed its first launch on Tuesday. SpaceX has said previously the cost of each launch Falcon Heavy launch starts at $90 million. But that price tag — a fraction of the cost of the next biggest rockets from competitors United Launch Alliance (ULA) and Arianespace — was a best case scenario. It was unclear how much above the $90 million price tag a fully expendable version of Falcon Heavy would cost. Then, on Monday, Musk tweeted: “A fully expendable Falcon Heavy … is $150 [million],” Musk tweeted. That’s about a quarter of a billion dollars less than the next best thing. A fully expendable rocket is the maxed-out version, in which SpaceX would not try to conserve fuel or weight to recover parts of the rocket. The company built Falcon Heavy out of three of the company’s Falcon 9 rockets, which has now completed dozens of successful launches over the last few years. By landing the rocket’s first stage, SpaceX is able to recover and reuse the largest piece of each vehicle, which had traditionally been discarded after a launch. Part of last week’s successful launch was the recovery of two of Falcon Heavy’s three rocket boosters, which landed side-by-side on concrete pads at Cape Canaveral, Florida. It is unclear how ULA, a Boeing and Lockheed Martin joint venture, will respond to Falcon Heavy. ULA’s most powerful rocket, the Delta IV Heavy, costs upward of $400 million per launch. Musk said after Falcon Heavy’s launch that he wants “a new space race,” saying he thinks the rocket’s success will “encourage other companies and countries” to be ambitious in the same way as SpaceX.

Posted by: pharbuck on February 12, 2018
Posted in: Uncategorized