The Biden administration suddenly took action against the banking industry.
On January 17th local time, the White House and the Consumer Financial Protection Agency (CFPB) jointly issued new regulatory regulations, which proposed that banks can only charge overdraft customers the breakeven costs they incur to make up for the overdraft. This new regulation may affect approximately 175 of the largest banks and credit cooperatives in the United States. According to CFPB data, since 2000, American consumers have paid approximately $280 billion (approximately RMB 2 trillion) in bank overdraft fees.
The background of this new regulation is that US President Biden raised the issue of "garbage fees" in his 2023 State of the Union address, which was part of the Biden administration's crackdown on so-called "garbage fees". Biden said in his latest statement on Wednesday, "Banks call it service - I call it exploitation.". Overnight in the US stock market, banking stock indices all fell, with the overall banking index KBW Bank Index (BKX) closing down nearly 0.7% for six consecutive trading days.
In addition, Goldman Sachs' latest financial report has sparked heated discussions on Wall Street. As of the end of the fourth quarter of 2023, Goldman Sachs Asset Management's balance of self owned fund investments was 16.3 billion US dollars. Compared to the end of 2022, the reduction scale reached 13.4 billion US dollars (approximately RMB 96 billion), and it has been reduced for four consecutive quarters. The financial blog ZeroHedge commented that while Goldman Sachs is reducing its holdings, its analysts are loudly bullish, and Goldman Sachs clients who listen to advice may be buying stocks that Goldman Sachs has sold itself.
White House releases
On January 17th local time, the White House and the Consumer Financial Protection Agency (CFPB) jointly issued new regulatory regulations, which proposed that US banks can only charge overdraft customers the breakeven costs they incur to make up for their overdrafts - or comply with specific limits set by the institution. This will effectively eliminate the average $35 fee currently paid by customers due to bank account overdraft.
According to the proposal released on Wednesday, CFPB is considering setting limits of $3, $6, $7, or $14.
The new regulations will apply to companies with assets exceeding $10 billion, which means that approximately 175 of the largest banks and credit cooperatives in the United States will have to comply with this regulatory new regulation.
According to CFPB data, since 2000, American consumers have paid approximately $280 billion (approximately RMB 2 trillion) in bank overdraft fees. During this period, due to the booming development of consumer debit cards directly linked to checking accounts, large banks saw a sharp increase in annual income from overdraft fees.
"For a long time, some banks have been charging excessively high overdraft fees, often causing the most severe blow to the most vulnerable Americans, while banks continue to raise their bottom line," US President Joe Biden said in a statement about the new rules on Wednesday. "Banks call it service - I call it exploitation."
Overnight in the US stock market, banking stock indices all fell, with the overall banking index KBW Bank Index (BKX) closing down nearly 0.7% for six consecutive trading days; The KBW Nasdaq Regional Banking Index (KRX) and the S&P Regional Banking ETF (KRE) closed down approximately 0.6% and 0.4% respectively. Among them, JPMorgan Chase fell more than 2% at one point in the market and ultimately closed down 0.5%; Citigroup and Bank of America closed down about 1%, Goldman Sachs closed down 0.9%, and JPMorgan Chase fell more than 0.5%.
In addition, CFPB is also considering incorporating overdraft projects into a stricter regulatory framework.
CFPB director Rohit Chopra said in a statement, "Today, we propose rules to fill a long-standing loophole that allows many large banks to turn overdrafts into a huge garbage collection machine."
According to the proposal, banks and credit cooperatives that exceed the $10 billion threshold must disclose the interest rate for overdrawn loans and determine a person's ability to repay the overdrawn loan.
The public's feedback on the proposal will be closed on April 1st, after which the CFPB will propose final regulations. The CFPB expects this regulation to take effect in October 2025.
It should be pointed out that US President Biden raised the issue of "garbage fees" in his 2023 State of the Union address, which is part of the Biden administration's crackdown on so-called "garbage fees", many of which are charged to consumers without much notice and do not reflect the actual cost of services.
According to CNBC, banking and trade groups strongly opposed to any changes to overdraft rules have begun to mobilize opposition, and it is expected that this opposition will only grow. Earlier in January this year, the Consumer Bankers Association launched a website to promote the value of overdraft services and why government directives are misled.
Sell 96 billion yuan recklessly
On January 16th local time, Goldman Sachs, the world's leading investment bank, released its financial report for the fourth quarter of 2023, which showed a revenue of $11.32 billion in the fourth quarter of last year, higher than the expected $10.8 billion; The net profit was 2.01 billion US dollars, a year-on-year increase of 51%, and the diluted earnings per common share (EPS) was 5.48 US dollars, both far exceeding analyst forecasts.
From the full year performance of 2023, Goldman Sachs achieved a revenue of $46.25 billion, a year-on-year decrease of 2%; The net profit was 8.52 billion US dollars, a decrease of 24% year-on-year. This is the lowest profit point for Goldman Sachs in the past four years since 2019, with profit decline second only to Citibank.
Another data that the market is paying attention to is the investment situation of Goldman Sachs Asset Management's own funds. According to Goldman Sachs Asset& According to the latest financial documents from the wealth management department, as of the end of the fourth quarter of 2023, Goldman Sachs Asset Management's balance of self owned fund investments was 16.3 billion US dollars. Compared to the end of 2022, the reduction scale reached 13.4 billion US dollars (approximately RMB 96 billion), and it has been reduced for four consecutive quarters.
According to the financial report, Goldman Sachs' main investment directions for its own funds are securities, loans, and bonds. The report shows that out of the $13.4 billion decrease in investment principal, only a small portion of the changes related to market fluctuations occurred, while $12.9 billion was related to holdings reduction/debt maturity.
However, in response to Goldman Sachs' massive reduction in holdings, financial blog ZeroHedge commented that just as Goldman Sachs' principal investment decreased by $4 billion in the fourth quarter of 2023, analysts at Goldman Sachs suddenly became bullish and continuously raised their US stock target price. Even worse, Goldman Sachs clients who listened to his advice may have bought stocks that Goldman Sachs had to sell itself.
Among them, David Kostin, Chief Securities Strategy Analyst at Goldman Sachs, stated in a mid November 2023 report that the only thing investors need to do now is hold stocks and raise the S&P 500 index's forecast for 2024 to 4700 points; Just one month later, Kostin once again raised his target level to a historic high of 5100 points.
With the latest financial report disclosure, Goldman Sachs' move of "selling while singing long" is causing heated discussions on Wall Street.
In addition, the latest financial report also shows that as of the end of December last year, Goldman Sachs had 45300 employees, a decrease of 1% from the third quarter and nearly 7% from the same period last year. The bank laid off thousands of employees in 2023, and the scale of layoffs in January last year was the largest since the 2008 financial crisis.