US current account deficit falls to $ 107.5 bn in Q3

Updated 19 December 2012
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US current account deficit falls to $ 107.5 bn in Q3

WASHINGTON: The US current account trade deficit narrowed in the July-September quarter to the smallest level since late 2010, but the improvement may not last.
The deficit fell to $ 107.5 billion in the third quarter, down 9 percent from the second quarter imbalance of $118.1 billion, the Commerce Department reported yesterday. It was the lowest trade gap since the final three months of 2010.
The current account is the broadest measure of trade. It tracks the sale of merchandise and services between nations as well as investment flows. Economists watch the current account as a sign of how much the United States needs to borrow from foreigners.
Many economists predict the deficit will widen in coming quarters, in part because a global slowdown is dampening demand for American exports.
A debt crisis has pushed much of Europe into recession. The region accounts for about one-fifth of US export sales. And other major export markets, including China, India and Brazil, have experienced slower growth.
The current account deficit hit an all-time high of $ 800.6 billion in 2006. It then shrank after a deep recession reduced US demand for foreign goods by a greater amount than US export sales diminished. The trade gap began widening again after the recession ended in June 2009.
The improvement in the current account in the third quarter reflected a decline in the deficit on goods and a small increase in the surplus on services, led by a gain in foreign earnings made by US companies providing financial services, insurance and professional services. The surplus on investment earnings narrowed to $ 50.8 billion, down from $ 52.1 billion in the second quarter.

The narrowing of the deficit in the third quarter left it at a level equivalent to 2.7 percent of the total economy, down from 3 percent in the second quarter. The third quarter deficit represented the smallest percentage of the economy since the spring of 2009.
Paul Ashworth, chief US economist at Capital Economics, said that most of the improvement reflected a decline in America's foreign oil bill. He predicted that the deficit will remain close to 3 percent of the total economy or slightly below through all of next year.
The deficit in the monthly trade report, which just tracks merchandise and services, increased in October as US exports fell by a larger margin than imports, a development that was seen as a sign that slower global growth was beginning to weigh on the US economy.
The overall economy grew at an annual rate of 2.7 percent in the July-September quarter, but many economists believe growth has slowed to less than 2 percent in the current quarter. They believe that consumers and businesses have grown more cautious about spending and making investments because of the uncertainty over what Congress will do about the "fiscal cliff."
That is the term used for the increases in taxes and spending cuts that will occur automatically in January unless Congress and President Barack Obama reach a budget deal to avert them. Economists have warned that the adverse impact on the economy will be great enough to push the country back into a recession.
Meanwhile, confidence among US homebuilders inched upward this month to the highest level in more than six and a half years as builders reported the best market for newly built homes since the housing boom.
The National Association of Home Builders/Wells Fargo builder sentiment index released yesterday increased to 47, up 2 points from a revised 45 in November. That's the highest reading since April 2006, just before the housing bubble burst.
Readings below 50 suggest negative sentiment about the housing market. The last time the index was at or above that level was in April 2006, with a reading of 51. It has been trending higher since October 2011, when it stood at 17.


Wells Fargo to pay $1B for mortgage, auto lending abuses

Updated 20 April 2018
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Wells Fargo to pay $1B for mortgage, auto lending abuses

  • Fine the latest in a series of setbacks for US bank
  • Federal Reserve in February prohibited lender from growing assets until governance issues addressed

Wells Fargo will pay $1 billion to federal regulators to settle charges tied to its mortgage and auto lending business, the latest chapter in years-long, wide-ranging scandal at the banking giant. However, it appears that none of the $1 billion will go directly to the victims of Wells Fargo’s abuses.
In a settlement announced Friday, Wells will pay $500 million to the Office of the Comptroller of the Currency, its main national bank regulator, as well as a net $500 million to the Consumer Financial Protection Bureau.
The action by the CFPB is notable because it is the first penalty imposed by the bureau under Mick Mulvaney, who President Trump appointed to take over the consumer watchdog agency in late November. The $500 million is also the largest penalty imposed by the CFPB in its history, the previous being a $100 million penalty also against Wells Fargo, and matches the largest fine ever handed out by the Comptroller of the Currency, which fined HSBC $500 million in 2012.
The fine against Wells Fargo had been expected. The company disclosed last week that it was in discussions with federal authorities over a possible settlement related to its mortgage and auto lending businesses, and that the fine could be as much as $1 billion.
The settlement also contains other requirements that would restrict Wells Fargo’s business. The bank will need to come with a risk management plan to be approved by bank regulators, and get approval from bank regulators before hiring senior employees.
“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” said Wells Fargo Chief Executive Tim Sloan in a statement.
The $500 million paid to the Comptroller of the Currency will be paid directly to the US Treasury, according to the order. The $500 million paid to the CFPB will go into the CFPB’s civil penalties fund, which is used to help consumers who might have been impacted in other cases. But zero dollars of either penalty is going directly to Wells Fargo’s victims.
The bank has already been reimbursing customers in its auto and mortgage businesses for these abuses. Wells Fargo has been refunding auto loan customers since July and been mailing refund checks to impacted mortgage customers since December.
While banks have benefited from looser regulations and lower taxes under President Trump, Wells Fargo has been called out specifically by Trump as a bank that needed to be punished for its bad behavior.
“Fines and penalties against Wells Fargo Bank for their bad acts against their customers and others will not be dropped, as has incorrectly been reported, but will be pursued and, if anything, substantially increased. I will cut Regs but make penalties severe when caught cheating!,” Trump wrote on Twitter back in December.
The abuses being addressed Friday are not tied directly to Wells Fargo’s well-known sales practices scandal, where the bank admitted its employees opened as much as 3.5 million bank and credit card accounts without getting customers’ authorization. But they do involve significant parts of the bank’s businesses: auto lending and mortgages.
Last summer Wells Fargo admitted that hundreds of thousands of its auto loan customers had been sold auto insurance that they did not want or need. In thousands of cases, customers who could not afford the combined auto loan and extra insurance payment fell behind on their payments and had their cars repossessed.
In a separate case, Wells Fargo also admitted that thousands of customers had to pay unnecessary fees in order to lock in their interest rates on their home mortgages. Wells Fargo is the nation’s largest mortgage lender.
Wells Fargo has been under intense scrutiny by federal regulators for several months. The Federal Reserve took a historic action earlier this year by mandating that Wells Fargo could not grow larger than the $1.95 trillion in assets that it currency held and required the bank to replace several directors on its board. The Federal Reserve cited “widespread abuses” as its reason for taking such an action.
This settlement does not involve Wells Fargo’s wealth management business, which is reportedly under investigation for improprieties similar to those that impacted its consumer bank. Nor does this involve an investigation into the bank’s currency trading business.
Consumer advocates have been critical of the Trump administration’s record since it took over the CFPB late last year. However, advocates were pleased to see Wells Fargo held to account.
“Today’s billion dollar fine is an important development and a fitting penalty given the severity of Wells Fargo’s fraudulent and abusive practices,” said Pamela Banks, senior policy counsel for Consumers Union.