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Washington, DC – JPMorgan Chase today announced the grand opening of its first branch in Greater Washington, D.C. and made several new investments to increase economic and wage growth in the region.

Earlier this year, the firm announced it would open 70 new branches, hire 700 new employees, commit $4 billion to regional home and small business lending and $500 million to affordable rental housing and $25 million in philanthropy to drive inclusive regional economic growth.

Specifically, today, the firm is:

Opening the first retail branch in Greater Washington at McPherson Square in Washington, D.C., offering a sneak peak of the new Anacostia location to community partners, and said it will open a total of six new branches by the end of the year,
Making a $1.6 million philanthropic investment to support underserved areas in the region,
Hiring 80 new employees by the end of the year, and
Increasing local wages to no less than $18/hour, up from $16.50/hour.
“Greater Washington is a great place to live and do business. We’re incredibly excited to open our first branch in the region,” said Peter Scher, Chairman of the Mid-Atlantic Region and Global Head of Corporate Responsibility, JPMorgan Chase. “As the region continues its extraordinary growth, we want to play our part in creating economic opportunity for more people here.”

Greater Washington Branch Openings

By the end of the 2018, Chase branches will have opened at six locations including 1401 New York Avenue NW (McPherson Square), 2200 Martin Luther King, Jr. Avenue SE (Anacostia), 3100 14th Street NW (Columbia Heights), 3900 Minnesota Avenue NE (Ward 7/Benning), 1111 New Jersey Avenue SE (Navy Yard/Capital Riverfront), and 2825 Wilson Blvd (Clarendon) in Arlington.

At least 20 percent of new Chase branches will be built in low and moderate income communities including Wards 7 & 8 in Washington, D.C., Prince George’s County, and neighborhoods in Baltimore.

Supporting the Community and Employees

Each new Greater Washington branch will employ seven to nine employees, including bankers, tellers and branch managers. Entry-level employees in each branches will be paid no less than $18.00/hour and will receive the firm’s full benefits package, which is valued at an average of $12,000 annually per employee in this pay range. It includes health care coverage and retirement savings, as well. To help ease the burden of out-of-pocket medical expenses, the firm also recently reduced medical plan deductibles by $750 per year for employees making less than $60,000.

“We are so proud that our branches are now a part of the Greater Washington community, such an important region in the country, and to be able to help more of our customers here,” said Thasunda Brown Duckett, CEO of Chase Consumer Banking. “Our branches are all about people, from our customers to our employees. We’ve designed these new branches to be a reflection of the communities they’ll serve.”

To help design and build the new branches, JPMorgan Chase partnered with local, community based vendors and small businesses to ensure a diverse set of suppliers were engaged.

Additionally, the firm teamed up with Arts on the Block, a nonprofit that works with middle and high school youth, to create works of art inspired by local neighborhoods. Built through a series of mosaic tiles, these art apprentices created and installed murals in and outside of the three new branches in Benning, Anacostia and Shaw. Gaining real world design experience throughout the process, the apprentices met with the local community members to explore the rich history, diversity and cultural meanings of each neighborhood to come up with a unique design pattern for each space.

The McPherson Square branch is also home to a brick wall that was transferred from the remains of an historic Baltimore row house to the new branch in downtown Washington.

Investing in Economic Opportunity

JPMorgan Chase is investing $25 million to drive more inclusive regional growth. Specifically, as part of the $1.6 million philanthropic investment announced today, the firm will help people develop the skills they need to secure in-demand jobs, help minority-owned businesses expand, revitalize neighborhoods and improving consumer financial health.

Washington Area Community Investment Fund (WACIF) ($200,000): As part of its ASCEND Capital Accelerator 2.0 WACIF will provide 18-22 minority and women-owned small to mid-sized businesses in the construction industry with technical assistance and tailored loan products to assist in developing new business.
Urban Ed ($150,000/1 year): UrbanEd, located in Anacostia, will provide approximately sixty participants with career coaching, technical training in IT and cybersecurity, as well as job placement to STEMAcad students in Ward 7 & 8 in Washington, D.C.
Capital Impact Partners (CIP) ($75,000/6 months): CIP will develop a multi-year program that provides the foundation for providing capital and capacity building to minority small business owners in Greater Washington.
Enterprise Community Partners, Inc. ($200,000/2 years): This initiative works with the faith community to create or preserve 250 affordable housing units through development, organizational capacity building and one-on-one technical assistance. Working in LMI communities, the group works to remove barriers to accessing affordable housing and enhance overall outcomes for those in need.
Latino Economic Development Corporation of Washington DC (LEDC) ($200,000/1 year): LEDC will provide technical assistance and access to capital for approximately 20 small businesses in the commercial corridors in Wards 7 and 8 as a part of the ASCEND 2020 team. The support is designed to protect LMI business owners from displacement due to development in Wards 7 and 8.
Coalition for Nonprofit Housing and Economic Development (CNHED) ($717,000/2 years): Three separate commitments to CNHED aim to connect LMI residents to economic and affordable housing opportunities through the Mayor’s Landlord Fund, which included furthering best practices with Houston based- Corporation for Supportive Housing ($12,000) as well as working with universities and hospitals to increase the rate at which they contract and hire minority owned firms.
Leadership Edge ($50,000): JPMorgan Chase offered the firm’s in-house leadership training, Leadership Edge, to local nonprofits as part of a broader effort to strengthen nonprofit capacity. Washington, D.C. is the second city, after Chicago, to pilot the program.
“When we give our residents the skills and opportunities they need to get well-paying jobs, we reduce the likelihood that they’ll move out of the communities where they want to live,” said Roxanne J. Williams, President, UrbanEd. “As JPMorgan Chase grows in the Greater Washington region, it’s good to know they want the whole community to grow with them, and I’m proud to partner with them to help train a stronger and better workforce in Ward 7 & 8.”

Commitment to Greater Washington

JPMorgan Chase has been doing business in the Greater Washington region since 1999 and this expansion means the firm will open up to 70 new branches and hire up to 700 new employees.

JPMorgan Chase currently serves more than 2 million consumers and over 70,000 business clients in Greater Washington. In addition to offering local customers access to its award-winning banking services supporting job and local economic growth, JPMorgan Chase will bring the best of its business and philanthropic efforts to drive inclusive growth and help create opportunity for more area residents.

About the JPMorgan Chase
JPMorgan Chase (NYSE: JPM) is a leading global financial services firm with assets of $2.6 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. A component of the Dow Jones Industrial Average, JPMorgan Chase serves millions of customers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase is available at www.jpmorganchase.com.

The latest World Economic Outlook report projects that global growth will remain steady over this year and next, at last year’s rate of 3.7 percent. This growth exceeds that achieved in any of the years between 2012 and 2016, and it occurs as many economies have reached or are nearing full employment and as earlier deflationary fears have dissipated. Thus, policymakers still have an excellent opportunity to build resilience and implement growth‑enhancing reforms.

Last April, at the time of our last World Economic Outlook, the world economy’s broad‑based momentum led us to project a 3.9 percent growth rate for both this year and next. Considering developments since then, however, that number now appears overoptimistic. Rather than rising, growth has plateaued at 3.7 percent. There are clouds on the horizon. Growth has proven to be less balanced than we had hoped. Not only have some downside risks that the last WEO identified been realized, the likelihood of further negative shocks to our growth forecast has risen. In several key economies, moreover, growth is being supported by policies that seem unsustainable over the longer term. These concerns raise the urgency for policymakers to act.

Growth in the United States, buoyed by a pro‑cyclical fiscal package, continues at a robust pace and is driving U.S. interest rates higher, but U.S. growth will decline once parts of its fiscal stimulus go into reverse. Notwithstanding the present demand momentum in the U.S., we have downgraded its 2019 growth forecast, owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation.

China’s expected 2019 growth is also marked down. Domestic Chinese policies are likely to prevent an even larger growth decline than the one we project, but at the cost of prolonging internal financial imbalances.

Overall, compared with six months ago, projected 2018‑2019 growth in advanced economies is 0.1 percentage point lower, including downgrades for the euro area, the United Kingdom, and Korea. The negative revisions for emerging market and developing economies are more severe, at minus 0.2 and minus 0.4 percentage point respectively for this year and next year.

These revisions are also geographically diverse, encompassing important economies: In Latin America, notably, Argentina, Brazil, and Mexico. In emerging Europe, notably, Turkey. In South Asia, notably, India. In East Asia, notably, Indonesia, Malaysia, also the Philippines. In the Middle East, Iran. And in Africa, South Africa. Although some petroleum exporters, including Nigeria, Kazakhstan, Russia, and Saudi Arabia, are going to benefit from higher prices. Broadly speaking, though, we see signs of lower investment in manufacturing, coupled with weaker trade growth.

With their core inflation rates largely quiescent, advanced economies continue to enjoy easy financial conditions, but this is not true in emerging and developing economies, where financial conditions have tightened markedly over the past six months, as the new Global Financial Stability Report will explain in detail. And you will have that briefing tomorrow.

The chart that accompanies the blog version of this shows that there has been a preponderance of interest rate increases. For emerging and developing economies, gradually tightening U.S. monetary policy, coupled with trade uncertainties and, for countries such as Argentina, Brazil, South Africa, and Turkey, distinctive factors have discouraged capital inflows, weakened currencies, depressed equity markets, and pressured interest rates and spreads. The high levels of corporate and sovereign debt built up over years of easy global financial conditions, which the latest Fiscal Monitor will document, constitute a potential fault line. And you will hear more about that as well tomorrow.

Importantly ‑‑ and I want to stress this ‑‑ we do not see recent developments as part of a generalized investor pullback from emerging and frontier markets, nor do we expect the current problem cases necessarily to spill over to countries with stronger fundamentals. Many emerging economies are managing relatively well, given the common tightening they face, using established monetary frameworks based on exchange rate flexibility. But there is no denying that the susceptibility to large global shocks has risen. Any sharp reversal for emerging markets would pose a significant threat to advanced economies, as emerging market and developing economies’ GDP now constitutes about 40 percent of world GDP at market exchange rates.

Other downside risks that now appear more prominent for the near term relate to further disruptions in trade policies. Two major regional trade arrangements are in flux. The U.S.‑Mexico‑Canada agreement still awaits legislative approval. And the European Union, where the exit terms of Brexit ‑‑ of Britain, of the U.K. are being negotiated. U.S. tariffs on China and, more broadly, on auto and auto part imports may disrupt established supply chains, especially if met by retaliation. And we have some simulations on this in the new World Economic Outlook.

Reflecting these developments, news‑based indicators of policy uncertainty have spiked recently, even if advanced country asset markets remain less concerned. The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies.

Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks. To gauge the severity of the threats to growth, one must ask how governments could respond if risks are realized and widespread recession ensues. The answer is not comforting. Mechanisms of multilateral global policy cooperation are under strain, notably in trade, and need strengthening. Governments have less fiscal and monetary ammunition than when the global financial crisis broke out 10 years ago. And they, therefore, need to build their fiscal buffers and enhance resilience in other ways, including by upgrading financial regulatory regimes and enacting structural reforms that raise business and labor market dynamism.

Despite the possibility of less political space in some countries, making consensus on sound policies often harder to reach, there will not be a better time than now for positive action.

Given the uncertainties of the moment, it is too easy to lose sight of the longer‑term forces and challenges that have brought us to the current economic and political crossroads and will shape the longer‑term future. Perhaps the biggest secular challenge for many advanced economies centers on the slow growth of workers’ incomes. Perceptions of lower social mobility and, in some countries, inadequate policy responses to structural economic change.

Emerging market and developing economies are diverse and face an array of longer‑term challenges, ranging from improving investment environments to reducing labor market duality to upgrading educational systems. The dangers of climate change loom in the background but are rapidly intensifying.

Regardless of income level, all countries must prepare their workforces for the ways that new technologies will change the nature of work. Ensuring that growth is inclusive is more important than ever. And unless growth can be made more inclusive than it has been, centrist and multilateral approaches to politics and policy will become increasingly vulnerable, to the detriment of all.

With that, we will welcome your questions.

QUESTIONER: You have mentioned several risks related to the world economy, such as trade policies [and/in] the emerging markets. Could you predict how big the impact can be on the global economy and also on China’s economy? And could you give us the worst‑case scenario?

MR. OBSTFELD: Well, we have run some scenarios in the World Economic Outlook. And, you know, I am not sure that we incorporate absolutely the worst case. We try to look at the kind of actions that have been talked about and retaliation against those actions. We also try to incorporate what we think are fairly realistic effects on policy uncertainty, which can hurt investment, and on confidence, which affect asset markets. But it is definitely possible in those scenarios to take close to a percentage point off of world GDP growth if all countries act and retaliate.

Now, in terms of China, our forecast for next year, for 2019 growth, has been downgraded due to the tariffs that we have actually seen on the $200 billion of imports into the U.S. And that is an impact on China of 0.7 percent of GDP relative to our baseline forecast. We assume, however, that 0.5 percentage point of that is offset by the Chinese authorities’ stabilization of the domestic economy, leading to a net fall of 0.2 percent. That set of actions, by the way, also reduces our forecast of U.S. growth for next year because we factor in China’s retaliation.

QUESTIONER: To Mr. Obstfeld, the World Economic Outlook emphasizes two points especially about Brazil. One is about the need for social reforms, especially the social security. And also, the stance of monetary policy in Brazil is supposed to be accommodative, especially because we have high unemployment and the growth is not so strong. So, what do you expect for the new administration in Brazil, no matter who is going to be the President, to achieve those two policies?

MR. MILESI FERRETTI: Yes, indeed. The key policy issue facing Brazil is high public debt and the high burden of pension spending, early retirement. And in order to stabilize the debt‑to‑GDP ratio, social security reform is clearly necessary, and that will have to be a policy priority of the next administration.

Brazil’s monetary policy framework is a strong one, and that has allowed a monetary policy conduct that has been countercyclical. So, easing monetary policy to help a recovery that is still very weak. But going forward, it is really essential to show policy progress on the fiscal stabilization front also because the international environment has become more difficult. External financial conditions have become tighter. And clearly, in a situation where markets discriminate more, depending on countries’ vulnerabilities, these priorities become all the more urgent.

QUESTIONER: You seem to be suggesting in this report that, at least in the current circumstances, this is about as good as it gets; that if things continue on the same path, that we are headed for slower growth. I am wondering: If the U.S. and China are able to resolve their trade differences ‑‑ if the U.S. does not impose the car tariffs on Europe and Japan, they are able to come to some agreement there. You have seen the agreement in NAFTA, where Mexico and Canada would be spared from most of that, even if they do impose those car tariffs. If these trade tensions do go away, are we likely to see stronger growth going ahead? Or is the cycle old enough, where it is still going to be facing headwinds and we are going to see slower growth?

MR. OBSTFELD: Thank you for that, David. The possibility that China and the U.S. resolve their disagreements would be a significant upside to the forecast. You know, at some level, I think it is not surprising that we are more tentative in our optimism than we were six months ago because, if you have the world’s two largest economies at odds, that is a situation in which everyone, everyone is going to suffer. So, it would be great if the talks could lead to an accommodation in which disruptions to trade were, you know, put aside.

But, where we are now is kind of ‑‑ what we have characterized as a plateau. Back six months ago, we saw a very balanced expansion. We saw a lot of upgrades in a lot of countries, a lot of momentum, with risks evenly balanced upside and downside. And now growth is much more uneven.

And, you know, I should stress that, even if you look across the emerging market landscape and the frontier market landscape, it is not the case that there are downgrades everywhere or that all countries are doing badly. In some cases where we have downgrades, countries are still growing at fairly healthy rates. You look at a region like Latin America. I mentioned the large economies ‑‑ Argentina, Brazil, Mexico ‑‑ which naturally attract a lot of attention, but we have upgrades in the forecast for Chile, Colombia, Peru, Bolivia. You know, if you look at Africa, there are upgrades for Kenya and Uganda although, again, South Africa is a downgrade. So, it is a very mixed picture, but when you do have this sort of uneven growth and countries are not all pulling in the same direction, you do see less momentum than we were so excited about six months ago. Where things will go from here on in, we do not know.

QUESTIONER: (Through interpreter) You have referred to a possible recession and the risks that some countries’ economies are facing. What would you say about the possibility that some of the world’s economies have not learned from the crises that have occurred in the past?

MR. OBSTFELD: Well, we have a chapter in the World Economic Outlook that is being released today on the legacy of the global financial crisis. And I would say that there have been important lessons learned from that event. You know, in many countries, banks are better capitalized and are safer. The Basel III framework was developed and is being put into place. Countries continue to rely on policy frameworks that, in many cases, actually served them quite well in the global crisis itself.

Where our concerns are in the fact partially, as a legacy of the crisis and the financial disruption and the recession that it caused, many countries have higher public debts than they had before. Interest rates are still quite low in many countries, leaving less room to cut, should a new recession ensue. And even though there has been a lot of progress on financial stability ‑‑ and you will hear more about that tomorrow at the Global Financial Stability Report press conference ‑‑ there is still work to be done on the agenda, you know, importantly in the area of non‑banks and in other areas. So, this is why we recommend to countries to continue implementing structural reforms. This would increase growth. This would raise natural real rates of interest throughout the world to rebuild fiscal buffers so that they have the ammunition to respond if there is a crisis.

And I think one of the lessons of the last crisis was that fiscal policy can be very powerful in combatting recession. So, if you are in a situation where public debts are already too high, where markets might react adversely to a further increase in public debt, that could limit the positive effects of your fiscal actions. To summarize, countries have learned a lot, but there is certainly more work to be done to prepare for the next recession.

QUESTIONER: Now that the uncertainty in the NAFTA and the Presidential elections in Mexico have finished, you still cut your prospects for Mexico. I want to know: What is the issue that this is slowing our increase in the economy. And if you would please tell me which is the main challenge that you see for the new Mexican government in Mexico.

MR. MILESI FERRETTI: The growth prospects for Mexico have been marked down slightly compared to our forecast in April. We forecast 2.2 percent growth for this year, 2.5 growth for next year. I think there are two main factors at play to explain the downward revisions: The first one is that data, particularly for the second quarter of this year, was quite weak. So that is naturally going to affect the level of growth for this year. And there is still a persistent uncertainty concerning trade, even though, clearly, the agreement that has been reached, if ratified, can help lift that uncertainty. But we also have some downward revision for next year of U.S. growth, which is, of course, very meaningful for the Mexican economy.

You asked about the challenges for the new administration. I would say two things:

On the more traditional economic policy front, I think building on the strength of the policy framework a strong, independent central bank and a robust fiscal policy framework can still be improved. But still is a robust fiscal policy framework important to build on the strength of these institutions. I think we have a chapter in the WEO that documents how important the strength of those institutions is for the credibility of monetary policy, for anchoring inflation expectations.

I would say the second set of challenges relates to the structural conditions to continuing the fight against corruption, reducing crime because those are clearly factors that are affecting confidence, that are affecting the level of investment, even though, again, the macro policy management has been very strong. And it is also very important to build on the successes in the reforms that have already been implemented because they give potential for higher growth in the future for the Mexican economy.

QUESTIONER: In terms of your cutoff time, when was that for the World Economic Outlook? And if you could then comment as subsequent to that: The economic stimulus plan and job summit in South Africa. The latest developments in terms of Italy, with the fiscal deficit. And then also in terms of Brexit, is it more likely to get a no deal? Or what is your ‑‑ in terms of the latest developments?

MR. OBSTFELD: I did not hear the very first part of the question.

QUESTIONER: The cutoff time for the World Economic Outlook. When do you finalize the World Economic Outlook? Because I think the ones that I have mentioned are subsequent maybe to that. And whether that makes an impact.

MR. OBSTFELD: OK. And then there was the South African job summit.

QUESTIONER: And stimulus plan. And Italy, what has happened in terms of the fiscal deficit, which I presume is also subsequent to that. And then also just in terms of Brexit negotiations.

MR. OBSTFELD: When was our cutoff date? Do you remember when we got the last submissions?

MR. MILESI FERRETTI: Well, de facto, we finalized right after the tariffs were imposed on China. So those are incorporated. It must have been the 17th, just after mid‑September.

MR. OBSTFELD: On the South African job summit and stimulus plan, I will punt that to the African regional briefing at the end of the week because they are following developments more closely than we are.

The issues of Italy and Brexit are, you know, of more systemic significance. Our concern about Italy is that there is a real imperative for the fiscal policy to maintain confidence, the confidence of markets. And we have seen spreads increase over the past months. This has certainly contributed to our downgrade of Italian growth and makes the economy more susceptible to shocks. So, we think it is important that the government operate within the framework of the European rules, which are also important for the stability of the eurozone, itself.

On Brexit, our baseline forecast, which underlies our forecast for the U.K. and for the eurozone, is that a deal will be reached. It will be one in which trade in goods is essentially tariff‑free, which would allow most supply chains to remain intact. It is one in which the regime for financial services would be, you know, quite favorable to the U.K. And I recognize that that is an optimistic scenario, but we tend to assume that when some set of economic arrangements is clearly in the joint interest of the negotiators, that somehow, they will manage to make this come about.

Obviously, if this does not come about, if there are arrangements which are more restrictive of trade, which put up more barriers which disrupt supply chains, then this is going to be more challenging for both the U.K. and its eurozone partners. And there are some very critical areas where, you know, a technical agreement does have to be reached; for example, on how to handle clearing of derivatives over the transition from old arrangements to new arrangements.

We know the negotiators have been working very hard. In fact, there has been a remarkable amount of progress on a lot of issues, and this often goes unnoted. But there are some very key elements that have not been resolved and that seem very difficult. So, until we get more information, we will keep with our assumption that reason and good policy will prevail. And hopefully we will be proven right.

QUESTIONER: Hi, Maury. Well, you definitely picked a nice place for your farewell Annual Meetings. So, thank you for that. And thank you for your service. You have always been very gracious with the media, and that is not something we can take for a given these days. So, thank you for that.

My question is about monetary policy. We saw the People’s Bank of China ease monetary policy I think yesterday. We seem to be seeing this divergence, where the Fed is tightening faster than other central banks. I was just wondering if you could talk about how you see that rippling through the global economy.

MR. OBSTFELD: Thank you for those kind words, Andrew. It has been a pleasure to work with you over these several years as well.

On the Fed, we have actually been seeing this story for a long time, starting perhaps with the taper tantrum but also the dollar’s strong appreciation, starting in the summer of 2014. So, it is not like news that the U.S. has been recovering from the aftermath of the global financial crisis more quickly than other advanced economies. What has been added into the mix perhaps is that the pace of the recovery in the U.S. has been boosted. I would not even call it the recovery. The U.S. has recovered. The pace of expansion has been boosted by a pro‑cyclical fiscal policy, which is arguably leading the Fed to raise interest rates more quickly than it otherwise would. We, like, you know, the Fed’s dot plots are forecasting one more hike this year in December, which will bring the total number to four for this year. And this naturally leads to some dollar strength. It leads to increases in interest burdens for indebted sovereigns and corporates. So, it does carry some risks, which is why the general strength of the policy framework is so important.

Many emerging economies have been navigating this quite well for some time. It is also true over this period that there have been periodic concerns about China’s growth. You know, when I came to the Fund in September of 2015 ‑‑ this was shortly after the RMB devaluation and the switch in China’s exchange rate regime ‑‑ you know, we had a period of several months of concerns. So, this has also been a theme. So, we should not place too much weight, I think, on the short‑term developments.

China’s growth in the first half of this year was very strong. There have certainly been indicators of less robust growth more recently, but, you know, remember that in line with our advice and in line with what the Chinese authorities also have strongly endorsed, there have been attempts to tighten up the financial sector, particularly the non‑bank sector, and to reduce the pace of credit growth which, you know, everyone agrees is too high and has been a potential risk. And it was completely predictable that this would somewhat slow Chinese growth. Now, you know, on top of that, growth in China has arguably been affected by trade tensions with the United States.

What we have recommended, what our mantra has been for a while is that the Chinese authorities should de‑emphasize the quantity of growth and think more about the quality of growth, i.e. the sustainability of growth longer term and its resilience to financial instability events. And our advice to China is to sort of stay the course. And they are naturally taking some steps on the monetary front like the action you mentioned to shore up the economy. But they do have to balance those actions against the need to achieve a more stable financial sector to achieve more deleveraging than they have to exert better control over local government, government financing. And it is definitely going to be a balancing act for them going forward.

But, again, you know, markets often tend to put tremendous weight on the most recent developments and perhaps exaggerate them. And much of what we are seeing now, we have seen at various times, in various forms over the last couple of years. So, it is not totally new.

QUESTIONER: Thank you for your information about the World Economic Outlook.

My question. I am from Somalia, East Africa. My question is: How about the expectations of economic growth developments in 2019 and 2020 in Africa, compared with developing countries? And what are the suggestions that you have or recommendations to them?

MR. OBSTFELD: As I indicated, Africa is incredibly diverse; so, it is hard to summarize, and it is easy to oversimplify. You know, there are a number of economies that are doing quite well. There are countries like South Sudan which have quite negative growth rates, suffering civil strife. And this creates a very varied picture. Overall, we are projecting ‑‑ and Gian Maria can correct me ‑‑ that African growth is rising. It is rising in the nearer term to somewhere around 4 percent. And that, unfortunately, is a rate of growth that is really not sufficient to meet Sustainable Development Goals, to fully employ a rapidly growing workforce.

Just broadly speaking, while different economies face different challenges, there is a real need for very thoroughgoing and ambitious structural reforms in Africa that would: raise efficiency; bring people, particularly young people, into the labor force; in many countries where debt is high, put it on a more sustainable course; and in many countries, also to improve governance, which is a very big problem in a number of countries. I do not know if you want to add to that, Gian Maria.

MR. MILESI FERRETTI: Maybe just to add that the aggregate growth rate for the continent is held down by the fact that the three largest economies are not performing up to their potential. Nigeria’s growth, 1.9 percent this year; 2.3 next year. South Africa, only 0.8 percent this year. Angola, contracting by 0.1 percent this year. So, the aggregate ‑‑ over 3 percent this year, close to 4 percent next year ‑‑ is despite the largest economies in the continent doing poorly. The continent could do much better once these economies are on a more solid footing, particularly South Africa and Nigeria because they are really large and affect a number of countries in their neighborhood.

QUESTIONER: I am wondering ‑‑ because this is Indonesia, and we are hosting the meetings here. I think it is important for us to also understand what the World Bank or the IMF thinks about the Indonesian economy. You already mentioned about Indonesia as one of the emerging economies today. However, we see that there is a lot of heated discussion on how the dollar has increased against the Indonesian rupiah. Also, emphasizing on ‑‑ Indonesia will face the general election, a major election next year. So how do you think that Indonesian policy should do in order to stabilize their economy?

And also, what do you think about how Indonesia’s economy could strive today, in today’s economy because there are a lot of recessions going on also.

Thank you.

MR. OBSTFELD: Well, I think it is important to realize, No. 1, that the gradual tightening of monetary policy in the U.S., the approach of more tightening in the euro area, and the general tightening of financial conditions facing emerging markets throughout the world is a common factor that a number of countries are contending with. You know, it is easy from the perspective of one’s own country to talk about the weakness of the currency; but if you take a broader view of the world, you might talk more naturally about the strength of the dollar. And I think that is what we are seeing.

One way to gauge this is to note that, even though the rupiah this year has depreciated against the dollar by something like 10 percent, its depreciation on a weighted effective basis against its trade partners is only 4 percent, so one does not want to exaggerate the extent of the issue. So that is important to keep in mind.

The Indonesian growth story has been a real success story. And even though we have downgraded our growth forecasts for the next couple of years due to a number of factors ‑‑ tighter global financial conditions, oil prices, the effect of U.S.‑China trade tensions ‑‑ and how those might affect Indonesia, growth is still expected to be fairly strong. And this provides an opportunity for the government to, you know, bring up the level of what it does for the Indonesian people to something more consistent with the growing incomes that the population enjoys.

For countries of Indonesia’s income level, we would think that there might be a higher level of tax revenue, which would allow investments in the educational system, in infrastructure, in the social safety net, all of which would be very beneficial I think to the people. So, our sort of advice really to all countries of Indonesia’s income status is to look at those issues, to try to raise the agility of the workforce, to raise the human capital of the workforce, to fight further against inequality, which has come down in Indonesia in recent years.

QUESTIONER: Pakistan’s government has announced that this week, it will seek an emergency bailout from the Fund. Can you talk about the challenges facing its economy and its ability to finance itself?

MR. OBSTFELD: As far as I know, we have read the news stories too. We have not been formally approached yet. As with any member in good standing, they are certainly entitled to request financial support from the Fund. So, we will be listening very, very attentively when and if they come to us.

Pakistan is suffering from a number of imbalances: A very large fiscal imbalance. A large current account imbalance. They also have a low level of reserves and a currency that is too rigid and overvalued. As a result, they are having financing gaps. I assume that is what they will want to talk to us about.

Their government has expressed a desire to enact deep structural reforms that might break the cycle of Pakistan needing financial support from the Fund. Frequently, they have had programs in the past several times. And, you know, that is a very good sign going forward.

So, again, when Mr. Azour gives the briefing for his region toward the end of the week, he may have more for you on that, but that is all I have now.

QUESTIONER: Thank you very much. I am happy that the question which was put just before me referred to Pakistan. My question was actually a part of the question that he had raised.

First of all, I am 82 years old, maybe, possibly the oldest person in the gathering today. I have been attending the IMF’s World Economic Outlook gathering for the last many years, and I have met all the past, previous MDs of the IMF. I have two questions to ask:

First of all, there has been a lot of transition, changes in the entire financial world all over the globe. The IMF’s policy, as it stands today, which was a few years before, do you think with the change in the financial situation all over the world, the IMF will go through some change in its policy in the near future? That is one question.

The second question is: Pakistan today has a new government. And, as you said, we are facing a lot of challenges. Of all the challenges, if I take as, No. 1, Pakistan is at the moment in the gray list, and there is a fear that it might return to black, but there is a lot of effort that we get out of this problem. How do you view the optimism that comes from Pakistan to get out from the gray and take back their regional position?

You spoke about China. China and Pakistan are two very close friends. I would like your opinion on the China‑Pakistan economic corridor. There has been a lot of work going on in terms of the progress of Pakistan’s [western] areas, roads, and other things. How does the IMF view the relationship and the development progress that is coming from China to Pakistan?

MR. OBSTFELD: Thank you for those questions, Hassan. And may you attend many more Annual Meetings. I will not be here, but hopefully you will.

On the financial system, finance is very dynamic and has evolved and continues to evolve. One of the important evolutions of the IMF over the years has been its much greater attention to the details of financial markets. Back in 1980 or so, there was no Financial Stability Report. And, in fact, the Fund began a Capital Markets Report within the confines of my department, the Research Department. And that proved so influential that it ultimately became the flagship of our current MCM, Monetary and Capital Markets Department, which did not exist back in 1980. It just was not thought of as being part of the main sort of macro framework that the Fund worried about. If you come to the briefing that my colleague, Mr. Adrian, will give tomorrow with his staff, you will see the results of that in its full glory.

I think one of the lessons we have learned ‑‑ and this goes to the lessons of the crisis ‑‑ is, you know, you have to watch financial markets very carefully because they change. They evolve. Particularly when you put constraints on them, regulatory constraints, they evolve in such a way as to evade them. A lot of the work we do through our Financial Sector Assessments, through our analysis, is to try to track this and not to be always in a situation where we are fighting the last war. So that is a real challenge going forward that we take very seriously.

On Pakistan, this is obviously a country with immense potential. Again, our job at the Fund ‑‑ through our surveillance, through our capacity development ‑‑ is to help our members try to attain their potential. If we enter into discussions later this week on a possible program, that will be another opportunity to try to make progress. And, again, as I said, the government seems to have the idea, which is a good idea, of making durable progress. So, if that can happen, that would be terrific for Pakistan and its people.

On cooperation with China, this has definite potential benefits but also risks. Pakistan needs more infrastructure, as you said, and this is a source of infrastructure and connectivity, but it is also important that the design of projects, the governance of projects be sound and that excessive debts which cannot be repaid are avoided because that just leads to financial instability and to lower growth.

QUESTIONER: You said that some countries, especially the emerging countries, are responding in different ways towards the economic situation. In the case of Indonesia, with the uncertainty we are still trying to boost our ‑‑ and to maintain our infrastructure development. And we are looking for a new financing scheme. What do you think about this strategy to respond to the situation of the economy?

MR. OBSTFELD: Well, Indonesia definitely needs more and better infrastructure along a number of dimensions, so the efforts that the government has made are very welcome.

We also think that Indonesia could benefit even more from a further opening to foreign direct investment, which could supply a greater degree of its infrastructure needs.

Indonesia is a rapidly growing economy. It is a huge market. Foreign direct investors will find it very attractive in a setting where they are facing fewer regulations or fewer restrictions. I think, for Indonesia, this is possibly a very attractive way forward.

MS. AMR: Thank you very much, Maury. This is your last World Economic Outlook press conference. Is there anything you would like to say that the media?

MR. OBSTFELD: Yes. Thank you, Wafa. I am going to return Andrew’s compliment now.

One of the most satisfying and, I think, important functions of the job of the Economic Counselor of the IMF is to give these press conferences and to interact with the press. This is obviously important to you. It is your job. But also, I think it is important to the effectiveness of the Fund.

We put a lot of effort, a tremendous amount of effort into preparing for these press conferences and to thinking about how we can best respond to your questions.

You, in the press, and we are actually partners in educating people about the economic issues that are very central to their lives. Your demand for clear communication from us helps us to bring our message closer to those who we seek to help, which are the populations of our 189 member countries.

Your questions, particularly when they are hard questions, also help to raise our credibility in the long run, no matter how uncomfortable they might make us in the short run, because they keep us accountable. And the public sees that we are accountable.

I want to say thank you to you for all that you do. You help us to present an alternative vision to those who deride experts and expertise, and that is very important in today’s world.

The International Monetary Fund staff and Argentina authorities have reached an agreement on a set of strengthened economic policies that will underpin the 36-month Stand-By Arrangement (SBA) approved on June 20, 2018. Subject to IMF Executive Board approval, the revised Arrangement front loads IMF financing, increasing available resources by US$19 billion through the end of 2019, and brings the total amount available under the program to US$57.1 billion through 2021. The resources available under the program would no longer be treated as precautionary and the authorities intend to use IMF financing for budget support.

IMF Managing Director Christine Lagarde issued the following statement on the staff-level agreement:

“Argentina has developed a strengthened economic plan that is aimed at bolstering confidence and stabilizing the economy. At the core of the new plan is a fiscal policy aimed at strengthening its fiscal position and having a sustainable, appropriately financed budget, a strong monetary policy focused on reducing inflation, a floating exchange rate policy without intervention.

“A central element of the authorities’ plan will be to reach budgetary balance by 2019, one year earlier than previously intended, and to move to a 1 percent primary surplus in 2020. These decisive steps will reduce the government’s financing needs and bring down public debt. Congressional approval of the 2019 budget will be an essential next step.

“Persistently high inflation continues to erode the foundation of economic prosperity in Argentina and the burden of high inflation is predominantly borne by society’s most vulnerable. To tackle inflation, the authorities will shift towards a stronger, simpler, and verifiable monetary policy regime, replacing the inflation targeting regime with a monetary base target. This new framework will contain the supply of money, and keep short-term interest rates at their currently high levels, aiming to bring down inflation and inflation expectations decisively and rapidly.

“The Central Bank of Argentina has decided to adopt a floating exchange rate regime without intervention. In the event of extreme overshooting of the exchange rate, the BCRA may conduct limited intervention in foreign exchange markets to prevent disorderly market conditions. More details of this revised framework will be announced by the BCRA today.

“From the beginning, the Argentine authorities have made protecting the most vulnerable people in society a top priority in their economic reform plan. This remains a crucial component of this revised plan and is fully supported by the IMF. As part of this commitment, social assistance spending will need to remain above a certain level. The authorities will also expand the coverage of the government’s universal child allowances and of health plans for lower income households. Additionally, if social conditions were to worsen, the budget allocation for social priorities will be further increased and accommodated within the Stand-By Arrangement.

“The Fund remains fully committed to helping Argentina tackle the challenges it faces. I support Argentina’s revised reform plan and believe it will be instrumental to restoring market confidence in the government’s ambitious economic agenda and to protecting the most vulnerable from the burden of the needed policy adjustment.

“I will seek the approval of this strengthened proposal with the IMF’s Executive Board.

“A great deal of work remains to be done if Argentina is to respond effectively to the current challenging circumstances. That effort is just beginning. The IMF is committed to continue supporting the Argentine authorities in their efforts.”

NEW YORK – Wells Fargo (NYSE: WFC) announced that Vince Toye has been appointed head of Community Lending and Investment (CLI), reporting to Mark Myers, head of Commercial Real Estate. Wells Fargo’s nationwide CLI team lends to, and invests in, communities and businesses in support of Wells Fargo’s commitment to economic development, job creation and affordable housing.

“Vince is a proven leader in affordable housing and community development finance,” Myers said. “I am confident that his passion for this work, paired with Wells Fargo’s deep commitment to affordable housing and community development, will result in our CLI platform continuing to grow in its impact as we help support communities across the U.S.”

Most recently, Toye was government-sponsored enterprise head of production for Wells Fargo Multifamily Capital, which specializes in financing through Fannie Mae and Freddie Mac programs. In that role, he worked closely with the CLI team on the financing of many affordable housing developments. Toye also held multifamily capital and community development lending roles for Wells Fargo predecessors Wachovia and First Union and was previously responsible for Multifamily Customer Management at Fannie Mae.

“Wells Fargo has long been a leader in community lending and investment, and I look forward to building on that success to further the impact we have on the communities with the greatest needs,” Toye said. “By increasing collaboration across the bank, including with other parts of the Commercial Real Estate platform, we can bring together more resources and financial solutions to support the development of affordable housing and other community projects at a time when the need for such projects seems limitless.”

Wells Fargo is the top investor in affordable, multifamily housing in the U.S.1, as well as an active lender for affordable housing projects, financing over the last six years the creation of more than 200,000 affordable units for families, veterans, seniors and previously homeless individuals.

Recent CLI projects financed by Wells Fargo include:

Edwin’s Place, which will provide 126 units of supportive and affordable housing in Brooklyn, New York, was financed through $70 million in debt and equity from Wells Fargo. All 126 units will provide affordable housing for individuals earning up to 40 percent, 50 percent or 60 percent of the area median income, and 88 units will be reserved for formerly homeless individuals and families, including veterans and those with special needs. Breaking Ground and the African American Planning Commission are partnering to develop the project, with the African American Planning Commission providing on-site supportive services like mental health referrals, job readiness training and financial literacy workshops. Wells Fargo’s $32 million in equity and $38 million in debt closed June 28, 2018.
In Los Angeles, a nearly $15 million New Markets Tax Credit investment form Wells Fargo is supporting the construction of the Anita May Rosenstein Campus of the Los Angeles LGBT Center, the world’s largest provider of programs and services for LGBT people. The 215,000-square-foot Campus will provide critical services and housing for at-risk seniors and youth. Client visits to the Center are expected to increase to 50,000 visits each month with the opening of the new campus. Wells Fargo closed on its New Markets Tax Credit investment in June 2017, and the Campus is scheduled to open in early 2019.
Through the Wells Fargo Works for Small Business®: Diverse Community Capital program, Wells Fargo awards lending and grant capital to Community Development Financial Institutions (CDFIs) that in turn use those funds to deliver responsible, affordable financial products to diverse small business owners. In June, Wells Fargo announced the fifth round of awardees, and the program’s original $75 million commitment will be met by the end of 2018. The program was recently extended with an additional commitment from the Wells Fargo Foundation of $100 million in grant capital to be awarded to CDFIs through 2020.

About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 8,050 locations, 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 38 countries and territories to support customers who conduct business in the global economy. With approximately 265,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 26 on Fortune’s 2018 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) fell in July for the second consecutive month, dropping 4.2 points to 86.5, after reaching survey highs in April and May. The decline can be attributed to decreases in four of the six HPSI components. The net share of survey respondents who said now is a good time to buy a home fell 4 percentage points, and the net share who said it is a good time to sell a home fell 6 percentage points. Additionally, the net share who said that home prices will go up in the next 12 months decreased 7 percentage points. More Americans also expressed a decreased sense of job security, with the net share who said they are not concerned about losing their job falling 11 percentage points in July.

“Home purchase sentiment seems to have reached a plateau, with potential home sellers likely struggling to find a home to buy amid slow supply growth, expectations for rising mortgage rates, and significant home price increases,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Survey respondents cite ‘high home prices’ as the top reason why it is both a good time to sell a home and bad time to buy a home. This suggests a contributing factor to the low supply of existing homes for sale is that current owners are reluctant to trade up in a rising price market. Additionally, the shares of consumers citing favorable mortgage rates as a reason why it’s a good time to buy or sell a home both dropped to fresh survey lows.”

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae’s 2018 Home Purchase Sentiment Index (HPSI) decreased in July by 4.2 points to 86.5. The HPSI is down 0.3 points compared with the same time last year.

The net share of Americans who say it is a good time to buy a home fell 4 percentage points from last month to 24%.
The net share of those who say it is a good time to sell fell 6 percentage points from last month’s survey high to 41%.
The net share of those who say home prices will go up fell 7 percentage points to 39%, falling under 40% for the first time since December 2016.
The net share of Americans who say mortgage rates will go down over the next 12 months rose 1 percentage point to -52%.
The net share of Americans who say they are not concerned about losing their job fell 11 percentage points from last month to 65%.
The net share of those who say their household income is significantly higher than it was 12 months ago rose 2 percentage points to 21%, matching the survey high from May 2018.

ABOUT FANNIE MAE’S HOME PURCHASE SENTIMENT INDEX
The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

ABOUT FANNIE MAE’S NATIONAL HOUSING SURVEY
The most detailed consumer attitudinal survey of its kind, Fannie Mae’s National Housing Survey (NHS) polled approximately 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 70 percent of respondents via their cell phones (as of January 2018). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The July 2018 National Housing Survey was conducted between July 1, 2018 and July 22, 2018. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by PSB, in coordination with Fannie Mae.

DETAILED HPSI & NHS FINDINGS
For detailed findings from the July 2018 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.

The Justice Department announced today that Wells Fargo Bank, N.A. and several of its affiliates (Wells Fargo) will pay a civil penalty of $2.09 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) based on the bank’s alleged origination and sale of residential mortgage loans that it knew contained misstated income information and did not meet the quality that Wells Fargo represented. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo.

“This settlement holds Wells Fargo accountable for actions that contributed to the financial crisis,” said Acting Associate Attorney General Jesse Panuccio. “It sends a strong message that the Department is committed to protecting the nation’s economy and financial markets against fraud.”

“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” said Acting U.S. Attorney for the Northern District of California, Alex G. Tse. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted. Our office is steadfast in pursuing those who engage in wrongful conduct that hurts the public.”

FIRREA authorizes the federal government to seek civil penalties against financial institutions that violate various predicate criminal offenses, including wire and mail fraud. The United States alleged that, in 2005, Wells Fargo began an initiative to double its production of subprime and Alt-A loans. As part of that initative, Wells Fargo loosened its requirements for originating stated income loans – loans where a borrower simply states his or her income without providing any supporting income documentation.

To evaluate the integrity of its increasing volume of stated income loans, Wells Fargo subjected a sample of these loans to “4506-T testing.” A 4506-T form is a government document signed by the borrower during the loan approval process that allows the lender to obtain the borrower’s tax transcripts from the Internal Revenue Service (IRS). 4506-T testing involves comparing the tax transcripts of the borrower with the income stated on the loan application. Wells Fargo implemented 4506-T testing on two of its programs. This testing revealed that more than 70% of the loans that Wells Fargo sampled had an “unacceptable” variance (greater than 20% discrepancy between the borrower’s stated income and the income information reflected in the borrower’s most recent tax returns filed with the IRS), and the average variance was approximately 65%. After receiving these results, Wells Fargo conducted further internal testing. This additional testing, performed by quality assurance analysts, was designed to determine if “plausible” explanations existed for the “unacceptable” variances over 20%. This additional step revealed that nearly half of the stated income loans that Wells Fargo tested had both an unacceptable variance and the absence of a plausible explanation for that variance.

The results of Wells Fargo’s 4506-T testing were disclosed in internal monthly reports, which were widely distributed among Wells Fargo employees. One Wells Fargo employee in risk management observed that the “4506-T results are astounding” yet “instead of reacting in a way consistent with what is being reported WF [Wells Fargo] is expanding stated [income loan] programs in all business lines.”

The United States alleged that, despite its knowledge that a substantial portion of its stated income loans contained misstated income, Wells Fargo failed to disclose this information, and instead reported to investors false debt-to-income ratios in connection with the loans it sold. Wells Fargo also allegedly heralded its fraud controls while failing to disclose the income discrepancies its controls had identified. The United States further alleged that Wells Fargo took steps to insulate itself from the risks of its stated income loans, by screening out many of these loans from its own loan portfolio held for investment and by limiting its liability to third parties for the accuracy of its stated income loans. Wells Fargo sold at least 73,539 stated income loans that were included in RMBS between 2005 to 2007, and nearly half of those loans have defaulted, resulting in billions of dollars in losses to investors.

The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of California, with investigative support from the Federal Housing Finance Agency, Office of Inspector General.

The claims resolved by this settlement are allegations only, and there has been no admission of liability.

Bank of America Merrill Lynch, a leader in Global Commercial Card solutions, today announced that it has launched a mobile application for cardholders of prepaid cards. The app launch demonstrates the bank’s commitment to making the lives of our clients and their cardholders easier by bringing new, digital capabilities to corporate and government clients and to their customers or beneficiaries.

“Prepaid card programs can deliver considerable benefits to companies and government agencies of all sizes. In replacing checks, prepaid cards can help organizations simplify compliance, eliminate manual work, lower expenses, and reduce risks,” said Hubert J.P. Jolly, head of financing and channels for Global Transaction Services at BofA Merrill. “With the mobile app, we’re excited to bring a new level of convenience and transparency to our clients’ prepaid cardholders.”

The app is designed for cardholders who receive a reloadable prepaid card from an employer, government agency or entity with whom they do business. The key features of the mobile app include:

Viewing balances: Cardholders can check their balances while on the go.
Viewing transactions: Users have instant access to pending and posted transactions.
Finding an ATM: Users can access an interactive map that makes it easy to find a nearby ATM.
Suspending or reactivating cards: Cardholders can use the app to place a lock on their card in the event that it is lost or stolen. They can also use it to unlock their card.
Managing and receiving alerts: Users can set up email and text alerts to be notified when card balances are low, when deposits are received, and when their personal information changes.
Biometrics: For biometric-enabled devices, users can take advantage of touch or facial recognition to authenticate their device, replacing the need to input a password.

“While cardholders can already access their account information either online or via customer service phone number, the mobile app makes it even easier for them to manage their financial transactions, which they can now do regardless of their physical location,” added Jolly.

The BofA Merrill Prepaid mobile app is free and available to download from the Apple iTunes® and Google Play™ stores.

Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,100 ATMs, and award-winning digital banking with approximately 36 million active users, including 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

The near-term outlook for the U.S. economy is one of strong growth and job creation. Unemployment is already near levels not seen since the late 1960s and growth is set to accelerate, aided by a near-term fiscal stimulus, a welcome recovery of private investment, and supportive financial conditions (see Table 1). These positive outturns have supported, and been reinforced by, a favorable external environment with a broad-based pick up in global activity. Next year, the U.S. economy is expected to mark the longest expansion in its recorded history. The balance of evidence suggests that the U.S. economy is beyond full employment. However, despite good near-term prospects, a number of vulnerabilities are being built-up for the medium-term (see below).
US 2018 Art IV Concluding Statement: US Selected Economic Indicators chart

A slow but steady rise in wage and price inflation is expected as labor and product markets tighten. After spending much of the past decade below 2 percent, core PCE inflation is expected to rise modestly above that level by mid-year. So far, wages have been growing broadly in line with (relatively weak) labor productivity growth, leaving unit labor costs virtually unchanged over the past 2 years. In the next several months, as slack is further diminished, wages and unit labor costs are anticipated to increase at a modest pace. Labor force participation is expected to be broadly stable over the near-term as cyclical forces offset the downward pull of demographics.
Fiscal Policy

With this strong cyclical position as backdrop, the U.S. has cut taxes and raised both defense and non-defense discretionary spending. The resulting demand stimulus is expected to raise output, cumulatively, by 1½ percent by 2020, pushing the unemployment rate below 3½ percent. The tax changes are expected to have modestly positive supply-side effects, largely by incentivizing an increase in the capital stock and, in doing so, raising the level of potential GDP (by a cumulative 0.3 percent by 2020). Potential growth is expected to return to its longer-term trend (of 1¾ percent) by 2021. The effects of ongoing deregulation efforts could further raise the level of real GDP by a modest amount (although it is difficult to quantify such effects based on the available research and evidence).

The combined effect of the administration’s tax and spending policies will cause the federal government deficit to exceed 4.5 percent of GDP by 2019. This is nearly double what the deficit was just 3 years ago. Such a strongly procyclical fiscal policy is quite rare in the U.S. context and has not been seen since the Johnson administration in the 1960s.
US 2018 Art IV Concluding Statement: Fiscal Stance Across the Business Cycle chart

Such a procyclical fiscal policy will elevate the risks to the U.S. and global economy. This fiscal path will provide a near-term boost to the U.S. and to many of its trading partners. However, it also increases the range and size of future risks, both for the U.S. and for the global economy. These risks include:

Higher Public Debt. The increase in the federal deficit will exacerbate an already unsustainable upward dynamic in the public debt-to-GDP ratio. Even with the planned, modest fiscal consolidation that is scheduled to start in 2020, the federal debt will continue to climb, exceeding 90 percent of annual GDP by 2024.
US 2018 Art IV Concluding Statement:Federal Debt chart

A Greater Risk of an Inflation Surprise. As discussed above, the tax reform is expected to have only modest effects on potential output. As such, the planned expansionary fiscal policy raises the risk of a faster-than-expected rise in inflation as capacity constraints become more binding and the economy pushes further through full employment. Such a rapid rise in inflationary pressures would force the Federal Reserve to move at a faster pace than is currently priced in by markets, potentially creating volatility and disruptions in U.S. asset markets, tightening financial conditions, decompressing term and other risk premia, and straining leveraged corporates and households.

International Spillover Risks. The shift in the U.S. policy mix also creates important adverse risks for non-U.S. corporates, households, and sovereigns (especially those that have borrowed heavily in U.S. dollars and/or have significant rollover needs). It could also precipitate a marked reversal of capital flows, particularly to emerging markets, potentially adding to upward pressure on the U.S. dollar and worsening global imbalances. We are already starting to see symptoms of these spillover effects in other countries.

The Risk of Future Recession. Current policies build in a gradual fiscal consolidation starting in 2020, at a time when the monetary tightening cycle is expected to be at its peak. Staff forecasts assume a gradual slowdown during this period with growth leveling off at around 1½ percent, modestly below the economy’s potential growth rate. However, such a gentle convergence of output to potential from above would be historically unusual and this forecast could prove overly optimistic. The output gap could close more abruptly, through a policy-induced recession, with negative spillovers for the global economy.

Increased Global Imbalances. The U.S. external position in 2017 was moderately weaker than implied by medium-term fundamentals and desirable policies and the U.S. dollar is judged to be moderately overvalued. With the economy already at full employment, the fiscal boost to demand in the U.S. is likely to translate into higher import growth, an increase in the current account deficit (to around 3½ percent of GDP by 2019-20), upward pressure on the dollar, and a worsening of the international investment position. The higher U.S. current account deficit is expected to be matched by growing current account surpluses in other systemic economies. Global imbalances are expected to rise, with the various attendant risks that such imbalances convey (including possibly catalyzing public support for increased protectionism).

There is broad agreement that increasing federal spending on infrastructure is urgently needed. However, the planned expansion in the federal deficit will leave few budget resources available to invest in a range of urgently needed supply-side reforms—including infrastructure spending—that would help boost medium-term growth and raise living standards. Indeed, the recently approved budget bill for 2018-19 provides little incremental funding for infrastructure (despite the US$200 billion in appropriations requested by the administration). Even with the administration’s efforts (to streamline the regulatory structure, assess the viability of user fees, and expand the use of public-private partnerships and tax-preferred private activity bonds), improving U.S. infrastructure will need to be backed by a sustained increase in federal spending. This increase should be structured around competitive programs geared toward high priority projects rather than formula-based, automatic allocations. However, any increase in federal outlays on infrastructure should be designed within an overall spending envelope that allows for a steady reduction in the federal deficit and debt over the next several years.

Measures should be taken to raise the primary fiscal surplus of the general government to around 1¼ percent of GDP (1½ percent of GDP for the federal government) to put the debt-to-GDP ratio on a downward path. Specifically, such policies should include:

US 2018 Art IV Concluding Statement: Federal Debt Held by the Public chart

Reforming social security including by raising the income ceiling for contributions, indexing benefits to chained inflation, raising the retirement age, and instituting greater progressivity in the benefit structure.

Containing healthcare cost inflation through technological solutions that increase efficiency, greater cost sharing with beneficiaries, and changing mechanisms for remunerating healthcare providers.

Increasing the federal revenue-GDP ratio by putting in place a broad-based carbon tax, a federal consumption tax, and a higher federal gas tax.
Such a set of policies would both allow the public debt-to-GDP ratio to fall and create the fiscal space for policies to support low- and middle-income families, promote investments in human and physical capital, and increase medium-term growth.

Monetary Policy

In light of the planned fiscal stimulus, the Federal Reserve will need to raise policy rates at a faster pace to achieve its dual mandate. The Federal Reserve should be ready to accept some modest, temporary overshooting of its medium-term inflation goal (as is indicated in the range of FOMC participants’ forecasts). Even then, though, policy rates will likely need to rise for a time above the long-run neutral rate. FOMC participants’ median forecast suggests that both core inflation and the federal funds rate will rise at a moderately slower pace than in staff’s forecasts; this is consistent with their expectation of growth that is somewhat slower than staff’s forecasts in 2018-19. Barring a significant negative shock, the normalization of the balance sheet should proceed as outlined in the Fed’s policy normalization principles. In executing its monetary policy decisions, the Fed’s continued adherence to the principles of data dependence and clear communication will be vital. In this regard, scheduling a press conference after every FOMC meeting and publishing a quarterly monetary policy report (that details a central economic scenario, and description of risks around that baseline, that is endorsed by the FOMC) could help.
US 2018 Art IV Concluding Statement: Policy Rate chart

For most economies, the near-term, net effect of higher U.S. growth and the expected increase in U.S. interest rates is expected to be beneficial. The largest positive spillovers are likely to accrue to Canada and Mexico, given their close economic ties with the U.S. However, even under this baseline, there could still be stress, particularly for leveraged firms and households (both in the U.S. and abroad) and/or for indebted sovereigns. Indeed, some of these strains are becoming evident in a handful of countries. Presumably, if some of the downside risks outlined above materialize, the outward effects would be far more damaging for a broader set of countries.
Tax Policy

There is broad agreement on the objectives underpinning the Tax Cuts and Jobs Act (TCJA). Specifically, as pointed out by the administration, the U.S. tax code has long needed an overhaul in order to: simplify the system; make the U.S. business tax competitive; provide tax relief to lower- and middle-income Americans; lower statutory rates and broaden tax bases; increase equity (including by taxing households at similar levels of income in a uniform way, independent of their type of business or source of income); not provide income tax cuts for the wealthy; and to achieve all of these objectives without adding to the fiscal deficit.

In this regard, the Act contains many positive steps. These include efforts to reduce the scope of personal income tax deductions, lower marginal tax rates, create incentives for private investment, tackle base erosion and cross-border profit shifting, and reduce debt bias.

However, the approved tax policy changes have a high budgetary cost. In addition, the temporary nature of many provisions creates significant tax policy uncertainty and instability in the tax system. As discussed above, the authorities should seek to prevent the tax policy changes from adding to the fiscal deficit by increasing the revenue-to-GDP ratio (largely through a greater reliance on indirect taxes).

There remains scope to strengthen various provisions of the code to better achieve the objectives outlined above:

The Business Tax. The reduction in the statutory business tax rate, to around the OECD average, and the expensing of certain types of capital spending are positive changes that, taken in isolation, will help incentivize investment and lessen the motivations behind base erosion and profit shifting behaviors. The Act, though, continues to allow for the deductibility of interest with a cap as a share of earnings. Such deductibility for debt-financed investment spending that can be expensed conveys an overly generous benefit and continues to incentivize debt financing. In addition, the cap introduces a procyclical distortion into the system (the cap becomes more binding when earnings weaken which, in a downside scenario, could exacerbate strains and bankruptcies in the corporate sector). Further, the temporary nature of the expensing provision distorts the timing of firms’ investment decisions (to favor investing before the provisions expire). In order to further increase the competitiveness of the U.S. business tax and to further lessen the distortion it creates for investment decisions, it would be preferable to go further in the direction of the TCJA and move the U.S. to a cashflow tax, permanently allowing for the expensing of all capital outlays and fully eliminating the deduction for interest spending on newly-contracted debt. Finally, the decision to levy a very low, one-time tax rate on the stock of unrepatriated profits conveys significant benefits to taxpayers that chose not to repatriate profits, at a time when the federal budget is in urgent need of revenues.

The Personal Income Tax. The changes to the personal income tax have many positive aspects: they eliminate most itemized deductions, raise the standard deduction and eliminate personal exemptions, limit the deduction for state and local taxes, and reduce the cap on the mortgage interest deduction. Nevertheless, the net effect of the tax policy changes—which also include reductions in the burden of the alternative minimum tax and a reduction in the marginal rate for higher income households—provides greater benefits to those in the upper deciles of the income distribution (see chart). As a result, these changes are likely to exacerbate income polarization and will do little to address the pressing needs of the working poor (both of which are important, macroeconomically relevant issues that have been raised in past Article IV consultations). To better target tax relief to lower- and middle-income Americans and prevent reductions in the income tax for the wealthy, it would be preferable to recalibrate the rate structure in order to concentrate tax relief to those earning close to or below the median income (with tax relief phasing out for those earning above 150 percent of the median income). As part of this change, and in line with past advice, the coverage and generosity of the Earned Income Tax Credit could be increased and there is space to eliminate loopholes and special regimes for high income earners, including the carried interest provision. The combination of these proposed changes would support low- and middle-income households, strengthen private sector demand, incentivize work, and raise living standards.
US 2018 Art IV Concluding Statement: Tax Cuts and Jobs Act chart

Pass-Throughs. Allowing for a 20 percent deduction for pass-through income creates an important mechanism for high income individuals to reduce their tax obligations by recharacterizing personal income as pass-through income. This is counter to the authorities’ objectives of increasing equity—especially between those taxpayers that can, and cannot, arrange their activities to take advantage of the deduction—and simplifying the system. The TCJA does contain guardrails that limit the use of the pass-through deduction. However, it is unclear how effective those provisions will be in preventing an erosion of the personal income tax base from high income individuals or from stopping pass-throughs from redesigning their operations to maximize their ability to qualify for the 20 percent deduction.

The TCJA has the potential to significantly reshape the international tax system. The U.S. has abandoned its system of global taxation with deferral and moved to a modified territorial system that embeds anti-avoidance measures and a minimum tax on the offshore profits of U.S. multinationals. However, there is scope to strengthen the design of various of the international provisions in the Act:

To better curtail global tax competition, the minimum tax (the Global Intangible Low Taxed Income or “GILTI”) provision should be imposed on a country-by-country basis so that it falls on all profits earned in low tax jurisdictions (rather than on the average global profits of multinationals that are in excess of a deemed 10 percent return on tangible assets). As it stands, the link of this provision to worldwide profits and tangible capital will create complex and distortionary effects on firm’s global investment decisions and may dilute its effectiveness in dis‑incentivizing cross-border tax competition.

The lower tax rate for exporters (the Foreign Derived Intangible Income or “FDII”) should be eliminated to avoid the economic distortion that arises from providing a more favorable tax treatment for exports than for domestic sales. This would provide more of a level playing field for global investment decisions.

The Base Erosion Anti-Abuse Tax (or “BEAT”) will likely serve its intended function of helping to curtail various base erosion and profit shifting behaviors, but it is also likely to be punitive for a range of legitimate commercial activities that are not linked to tax avoidance. The provision also creates a broad-ranging preference for domestic over foreign production and creates new incentives for companies to rearrange their operations to avoid application of the BEAT. These shortcomings would be mitigated, and international tax planning strategies would be better contained, by only applying this provision to those transactions that are designed to transfer profits to related parties located in low tax jurisdictions.

As it stands, the far-reaching and innovative features of the TCJA create a complex array of both positive and negative spillovers for other countries, which stakeholders are still analyzing. The move to territoriality heightens the likelihood of profits and investments being shifted from the U.S. into lower tax jurisdictions (there is evidence that a similar move in the U.K. indeed increased outward investment to lower tax jurisdictions). However, the marked reduction in the statutory rate and preferential treatment for some exporters in the U.S. are important countervailing forces, and could encourage other jurisdictions to lower their tax rates, particularly when they are clearly above the new U.S. statutory rate. One potential effect of the innovative GILTI and FDII provisions is to encourage location of tangible investments abroad, a tendency that will be strengthened for those projects that generate sizable commercial payments with related parties in other jurisdictions (since these may become subject to the BEAT if such intercorporate transactions are paid from a U.S. entity). At the same time, the GILTI provision is likely to discourage offshore jurisdictions from competing for U.S. investments by reducing their tax rate below 13.125 percent. It may even provide a floor on competition in the statutory rate, to the benefit of other relatively high tax rate jurisdictions. Furthermore, the reform could encourage other jurisdictions to consider ways other than rate reduction to compete for tangible investment. These could include faster depreciation rates (or even expensing), consideration of their own version of the BEAT, or other measures designed to achieve a similar, broad anti-profit shifting goal. The final impact on other countries (some of which have expressed WTO- and treaty-related concerns) is likely to vary considerably according to their circumstances.
Trade Policy

The U.S. maintains a very open trade regime. Over the years, this has supported U.S. growth and job creation and helped raise living standards. U.S. leadership on trade has encouraged a range of countries to open their own trade regime, removing tariff and nontariff barriers. There is also broad agreement that the global economy needs to be able to rely on an open, fair, and rules-based international trade system.

However, public concern over the side-effects of open trade has increased. It is in this context that various steps have been taken, or have been proposed, by the administration to impose new tariffs or otherwise restrict imports into the U.S. These measures, though, are likely to move the globe further away from an open, fair and rules-based trade system, with adverse effects for both the U.S. economy and for trading partners. Specifically, they risk:

Catalyzing a cycle of retaliatory responses from others, creating important uncertainties that are likely to discourage investment at home and abroad.
Expanding the circumstances where countries choose to cite national security motivations to justify broad-based import restrictions. As such, this has the potential to undermine the rules-based global trading system.

Interrupting global and regional supply chains in ways that are likely to be damaging to a range of countries, and to U.S. multinational companies, that are reliant on these supply chains.
Impacting a range of countries, particularly some of the more vulnerable emerging and developing economies, through increased financial market or commodity price volatility associated with these trade actions.

The U.S. and its trading partners should work constructively together to reduce trade barriers and to resolve trade and investment disagreements without resorting to tariff and non-tariff barriers. In such discussions, specific levels of the bilateral trade balance between the U.S. and other countries should not be viewed as either an anchor or a target (given that they are determined by a range of macroeconomic and structural forces and that targeting them is unlikely to reduce a country’s overall trade deficit). Rather, the goal should be to pursue the important gains that are to be had, for all parties, from strengthening the rules-based, multilateral trading system and from securing more ambitious bilateral and plurilateral agreements on trade and investment. The size, diversity, and dynamism of the U.S. economy leaves it especially well poised to benefit from such trade and investment liberalization. However, it is possible there will be important effects on both labor markets and the income distribution from greater trade integration. The consequences for trade-affected U.S. workers should not be ignored and policy efforts should focus on mitigating the downsides through training, temporary income support, and job search assistance (including through a broader deployment of the existing trade adjustment assistance program).
Financial System Oversight

Important gains have been made in strengthening the financial oversight structure since the global financial crisis. Some useful steps are underway, to recalibrate and simplify financial regulations and to better tailor them to underlying risks:

Legislation has been enacted to raise the total asset threshold to US$250 billion for bank holding companies (BHC) to be classified as systemic. This strikes a reasonable balance between a mandatary application of enhanced prudential standards and providing the Federal Reserve with the ability to deem BHCs with assets between US$100–250 billion as systemic and subject to such standards. This change will help lessen compliance costs for medium-sized BHCs but will necessarily increase the burden on high-quality and independent supervision to manage financial stability risks. Consideration could be given to continuing to apply stress-tests at a regular frequency for those banks that have assets between US$100-250 billion. In any case, implementation of these changes should be done in a way that does not weaken the ability of supervisors to take early remediation and risk mitigation actions for BHCs with assets below US$250 billion.

Modest changes have been made to exclude custodial assets from the calculation of the Supplementary Leverage Ratio, include highly liquid municipal bonds in the definition of High Quality Liquid Assets (subject to limits and haircuts), and exempt BHCs with total assets under US$10 billion from the Volcker rule. These appear to represent appropriate tailoring of the Dodd-Frank Act framework for financial oversight.

The Federal Reserve and the Office of the Comptroller of the Currency have proposed modifying the enhanced supplementary leverage ratio (eSLR) for globally systemic important banking organizations (GSIBs) to set the ratio at 3 percent plus a buffer of 50 percent of the entity’s risk-based capital surcharge. This would make the risk-based capital requirement, rather than the leverage ratio, binding for most GSIBs. The proposal is still somewhat more stringent than international minimum standards but would reduce the buffers that have helped increase U.S. banking system resilience.

The Treasury has argued for changes to the resolution framework to strengthen the courts’ ability to deal with complex financial failures under a new special, streamlined bankruptcy procedure. This new process would complement—but not replace—the existing Orderly Liquidation Authority and more tightly circumscribe the authority granted to the FDIC—including in the use of public money—when it resolves a financial institution. It will be important that this change is implemented in a way that does not limit the flexibility of the resolution regime, hinder rapid action, or complicate cross-border resolution.

Finally, the Treasury has proposed steps to increase the transparency and analytical rigor of the FSOC’s designation process. These include comprehensive cost-benefit analysis and the provision of clear guidance for financial institutions that are designated as systemic. In assessing systemic risks, evaluations would be based on an activity-based framework and designation would be used only as a last resort (when systemic risks cannot be sufficiently mitigated through other means). These changes have the potential to strengthen the designation process but much will depend on how they are executed; clarifying the changes to the process and the implementation of those changes should be done at an early stage.

When taken in isolation, the steps proposed to better tailor financial regulations are likely to have only a modest impact on financial stability risks. However, more analysis is needed to build a clear picture of the combined effect of all these changes taken together. There are potentially important interactions between the various regulatory changes, that largely move in a procyclical direction, and the effects of the procyclical fiscal policy that is currently in place. This is of even greater concern since medium-term financial vulnerabilities have been steadily building and medium-term financial stability risks are elevated.

Future changes to financial oversight should continue to ensure that the current risk-based approach to regulation, supervision and resolution is preserved. Risk-based capital and liquidity standards should remain a central tool in incentivizing financial institutions to manage well the risks they undertake. In support of these capital and liquidity requirements, the Comprehensive Capital Analysis and Review exercise should be maintained and strengthened, including its assessment of liquidity and contagion risks. The FSOC should continue its efforts to respond to emerging threats to financial stability and, in this work, there is scope to strengthen, and more fully resource, the Office of Financial Research. Finally, the U.S. should remain engaged in developing the international financial regulatory architecture and should be fully committed to agreed international standards.

There remains a need to strengthen the oversight of nonbanks. As has been highlighted in previous consultations, there are potential weaknesses in oversight arising from the absence of harmonized national standards or consolidated supervision for insurance companies. Also, recent proposals to limit the engagement of federal authorities in international supervisory fora could prove cumbersome for the insurance standard setting process and the development of the global capital standard. Progress has been made in money market reform but there remain residual vulnerabilities in repo markets and for money market funds. There is also a need to introduce a comprehensive liquidity risk management framework for asset managers (that includes liquidity risk stress tests). Little progress has been made in reforming the housing finance system and the government sponsored enterprises. Finally, impediments to data sharing among regulatory agencies remain and there are data blind spots, particularly related to the activities of nonbanks, that preclude a full understanding of the nature of financial system risks, interlinkages and interconnections.
Competition Policy

The market power of corporations is becoming more pronounced across a range of industries, with important macroeconomic effects. Margins between prices and variable costs—markups—have been rising steadily since the 1980s, and at an accelerated pace since 2010. Measures of industry concentration and profitability mirror this increase in market power. Corporate level data suggest that these trends have been driven by an increase in rents that are accruing to a relatively small, but growing, number of “superstar” firms (some of which have been created by a series of mergers and acquisitions). While there is significant heterogeneity in the causes underlying this rising market power, the evidence suggests that these developments are having important effects on macroeconomic outcomes including potentially depressing future investment and R&D spending, as well as weighing on the labor share of income.

The right policy responses to this increase in market power are complex. In cases where barriers to entry or increasing returns are driving the increase in market power, and where that power is being used to price discriminate, restrict supply or engage in predatory pricing, there is a clear role for applying antitrust policies. In other cases, network and information externalities or increasing returns to scale may justify an oligopolistic structure. However, supernormal profits or rents from such market power should be taxed fairly. Care is needed, though, in not unintentionally placing an unfair tax burden on returns that arise from up-front investments (in areas such as R&D, for example). This could be achieved, for example, by moving to a cashflow tax. In any case, public policy should certainly focus on ensuring that markets remain contestable. It may also sometimes be appropriate for the entity providing the service to be regulated. Finally, insofar as increased market power arises from greater efficiency or technological innovation, there may be a public policy role to help workers displaced by such changes in market structure, including with relocation or retraining support. Such support should be broad-based and apply to all workers that are facing a transition (whether it is a symptom of changes in trade patterns, of technology, or of shifts in market power).

WASHINGTON, DC – Fannie Mae (FNMA/OTC) today announced the winning bidders for its thirteenth non-performing loan sale. The sale includes approximately 9,800 loans totaling $1.64 billion in unpaid principal balance (UPB), divided among four pools. The winning bidder for the transaction is MTGLQ Investors, L.P. (Goldman Sachs). The transaction is expected to close on July 20, 2018.

In collaboration with Bank of America Merrill Lynch and Williams Capital Group, Fannie Mae began marketing these loans to potential bidders on May 15, 2018.

The loan pools awarded in this most recent transaction include:

Group 1 Pool: 2,372 loans with an aggregate unpaid principal balance of $358,278,749; average loan size $151,045; weighted average note rate 4.73%; weighted average delinquency 25 months; and weighted average broker’s price opinion (BPO) loan-to-value ratio of 79%.
Group 2 Pool: 3,182 loans with an aggregate unpaid principal balance of $478,667,973; average loan size $150,430; weighted average note rate 5.21%; weighted average delinquency 40 months; and weighted average BPO loan-to-value ratio of 63%.
Group 3 Pool: 1,403 loans with an aggregate unpaid principal balance of $210,828,373; average loan size $150,270; weighted average note rate 5.13%; weighted average delinquency 40 months; and weighted average BPO loan-to-value ratio of 63%.
Group 4 Pool: 2,881 loans with an aggregate unpaid principal balance of $595,183,158; average loan size $206,589; weighted average note rate 4.60%; weighted average delinquency 39 months; and weighted average BPO loan-to-value ratio of 120%.
The cover bid, which is the second highest bid, was 81.48% of UPB (53.39% of BPO) for the total of the four pools which were purchased on an all-or-none basis.

Bids are due on Fannie Mae’s thirteenth Community Impact Pools on June 19, 2018.

Potential buyers can register for ongoing announcements or training, and find more information on Fannie Mae’s sales of non-performing loans and on the Federal Housing Finance Agency’s guidelines for these sales, at http://www.fanniemae.com/portal/funding-the-market/npl/index.html.

On April 14, 2016, the Federal Housing Finance Agency announced additional enhancements to its requirements for sales of non-performing loans by Fannie Mae and Freddie Mac that build on the requirements originally announced in March 2015. The additional requirements, which apply to this Fannie Mae non-performing loan sale, encourage sustainable modifications that have the potential to provide more borrowers the opportunity for home retention by requiring evaluation of underwater borrowers for modifications that may include principal and/or arrearage forgiveness; forbidding “walking away” from vacant homes; and establishing more specific proprietary loan modification standards.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.

Bank of America Chief Executive Officer Brian Moynihan will participate in the Bernstein Strategic Decisions Conference on Wednesday, May 30 at 4 p.m. Eastern Time. A live audio webcast will be accessible through the Bank of America Investor Relations website at http://investor.bankofamerica.com. A replay will also be available.

Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,400 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 36 million active users, including 25 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

Fannie Mae (FNMA/OTC) today announced that it will not utilize its second (April 19) Benchmark Notes® announcement date this month. As announced in our 2018 Benchmark Securities Issuance Calendar, the company may forgo any scheduled Benchmark Notes issuance.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.

Bank of America announced today that Merrill Edge® will open 600 new investment centers within its expanding coast-to-coast financial center footprint, bringing its total to 2,800 by 2020. The effort is part of Bank of America’s previously mentioned plan to invest heavily in both its physical and digital presence across the United States, entering new markets and redesigning more than a third of its existing financial centers. To meet growing client demand for investment services, Merrill Edge also expects to add 300 new Financial Solutions Advisors™ for a total of 4,000 representatives by year-end.

The 600 new Merrill Edge investment centers will be added to new and existing Bank of America financial center locations. Merrill Edge investment centers will be built within new financial centers opening in Cleveland; Cincinnati; Columbus; Indianapolis; Lexington, KY; Pittsburgh; and Salt Lake City. Merrill Edge investment centers will also be added to existing financial center locations in Chicago; Houston; Kansas City, Kan.; Los Angeles; Miami; Minneapolis; New York; Philadelphia; San Francisco; and San Jose. Bank of America currently has 4,500 financial centers across the United States, including 2,200 with dedicated, on-site Merrill Edge Financial Solutions Advisors and another 770 through video conferencing.

Merrill Edge is a streamlined financial platform that offers access to online and advised investing, trading, brokerage and banking services. Clients can be self-directed; work with a Financial Solutions Advisor; or access Merrill Edge Guided Investing, an online advisory program that offers Global Wealth & Investment Management CIO-directed portfolio management strategies. Since its creation in 2010, Merrill Edge has grown steadily to $184.5 billion in assets and more than 2.4 million accounts. Merrill Edge also works with Merrill Lynch and U.S. Trust to support clients’ needs as they become more complex – giving clients access to our full wealth management offering.

“Our goal is to serve our clients in ways most convenient to them, and we have both the brick and mortar and the digital presence to do just that,” said Aron Levine, head of Merrill Edge at Bank of America. “Our clients have asked for seamless integration of their Bank of America banking and Merrill Edge investing, and appreciate being recognized and rewarded for their relationship. We continue to listen and deliver, enabling us to grow responsibly and meet our clients’ evolving needs.”

Continued tech innovations and new capabilities for clients
Merrill Edge continues to create new solutions to help clients pursue their investing goals. One example is the launch of Merrill Edge Guided Investing1 last year, an online investing service that provides access to investment strategies managed by the Merrill Lynch and U.S. Trust Chief Investment Office. Client behavior suggests that Merrill Edge Guided Investing is instrumental to retirement planning. Three-quarters of accounts that have been opened by our clients are focused on retirement goals, with most (80 percent) set for a time horizon of 10 or more years.

Most recently, Merrill Edge launched two new patent-pending experiences for the self-directed investor, helping them make more informed investing decisions. Stock Story helps clients discover critical information about companies in a new and innovative way without having to know all the investing jargon. Portfolio Story provides step-by-step guidance to key elements of their account, helping clients quickly find answers to their most critical questions.

Additional capabilities to advance the client experience and help clients meet their financial goals include:

Integrated capabilities across banking and investments

Ability to view one’s entire financial picture on a single page, including Merrill Edge investing accounts, Bank of America banking accounts and other accounts, such as 401(k)s held at other financial institutions.
Bank of America’s Preferred Rewards program recognizes and rewards clients for their relationships across deposits, investments and loans.
Trade stocks, ETFs, mutual funds and options online or with the Merrill Edge mobile app.
Transfer money in real time2 from Bank of America banking accounts with instant access to place trades.
Access to thousands of the most highly requested index and low-cost funds.
Access to fixed income portfolios, ladder bonds, treasuries and CDs designed to provide a steady income flow.
Industry-recognized research, insights and tools

Stay on top of the markets with real-time Briefing.com updates throughout the trading day, along with access to over 30 independent news providers.
Easy access to tools and research for the self-directed investor to explore ETFs, mutual funds, equities and other investments with no minimums and no maintenance fees.
Access to industry-leading BofA Merrill Lynch Global Research, CFRA and Morningstar research.
Learn more about investing with the Merrill Edge Investing Classroom, a series of courses that range from basic to more sophisticated strategies.
Understand your investing impact3 with access to environmental, social and governance scores for individual stocks and your portfolio.
Industry recognition, awards and accolades
In the last year, Merrill Edge received many industry accolades and reviews, recognizing its excellence in client experience and innovative tools and resources.

“We’re thrilled to be recognized by these prestigious organizations,” said Dean Athanasia, co-head of Consumer & Small Business at Bank of America. “These awards demonstrate our commitment and our success in helping clients pursue their financial and life goals and showcase our best-in-class approach to the industry.”

Notable awards and recognition include:

Barron’s 2018 Best Online Broker Survey 4 (March 2018) – Merrill Edge earned 4 out of 5 stars and was named one of the top online brokers.
Customer Service Institute of America 5 (March 2018) – Merrill Edge has been awarded the 2017 International Service Excellence Award in the category of customer-focused innovations.
Stockbrokers.com’s eighth annual Online Broker Review 6 (Feb. 2018) – Merrill Edge was awarded 4.5 out of 5 stars, and received a No. 1 ranking for overall client experience and a No. 1 ranking for new tool for its new stock research experience.
Corporate Insight’s 2017 e-Monitor Awards Report 7 (Jan. 2018) – Merrill Edge earned the top spot in the equity research and quotes category due to its new stock research experience. Merrill Edge also earned the most medals of any firm.
NerdWallet 8 (Jan. 2018) – Merrill Edge was named one of the “best online brokers for stock trading in 2018.”
J.D. Power 9 (Nov. 2017) – Merrill Edge’s contact centers were recognized for providing “an outstanding customer service experience” in the live phone channel for the seventh consecutive year.
Kiplinger’s Personal Finance Magazine 10 (Oct. 2017) – Merrill Edge was named the top online broker in a tie with Fidelity.
To learn more about Merrill Edge and these updates, visit www.merrilledge.com.

1 Please review the Merrill Edge® Guided Investing Program Brochure at www.merrilledge.com/guided-investing-program-brochure for important information including pricing, rebalancing, and the details of the investment advisory program.

2 Certain banking and brokerage accounts may be ineligible for real-time money movement, including but not limited to transfers to/from bank IRAs (CD, money market), 529s, SafeBalance Banking®, credit cards and transfers from IRAs, loans (HELOC, LOC, mortgage) and accounts held in the military bank. Accounts eligible for real-time transfers will be displayed online in the to/from drop-down menu on the transfer screen.

3 Impact investing and/or environmental, social and governance (ESG) investing has certain risks based on the fact that ESG criteria exclude securities of certain issuers for nonfinancial reasons and therefore, investors may forgo some market opportunities and the universe of investments available will be smaller. ESG ratings are provided by MSCI ESG Research LLC, an independent provider of research-driven insights and a Registered Investment Advisor under the Investment Advisors Act of 1940, that provides in-depth analysis on the ESG-related business practices of more than 6,000 companies.

4 Merrill Edge® was one of 19 brokers evaluated in the Barron’s 2018 Best Online Broker Survey, March 26, 2018. Barron’s evaluated firms in Trading Experience & Technology, Usability, Mobile, Range of Offerings, Research Amenities, Portfolio Analysis & Reports, Customer Service, Education, Security, and Costs to rate the firms. Merrill Edge earned the top overall score of 32.7 out of a possible 40. Learn more at http://webreprints.djreprints.com/54692.html . Barron’s is a trademark of Dow Jones & Co., L.P. All rights reserved. Reprinted with permission of Barron’s. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.

5 Merrill Edge® was named the “winner” in the Customer-Focused Innovations category by the Customer Service Institute of America for 2017. The judging criteria are based on an on-site interview; the balanced scorecard methodology; and review of the organization to determine if the customer is the focus of the business and how that is supported through culture, processes, procedures, training, hiring practices, and daily actions. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.

6 Merrill Edge® was evaluated as one of 13 online brokers in the 2018 StockBrokers.com Online Broker Review published on February 20, 2018. StockBrokers.com evaluated brokers using 292 variables across 10 categories. The best-in-class rating recognizes brokers who ranked in the top five in that category. Learn more at http://www.stockbrokers.com/review/merrilledge. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.

7 Merrill Edge® earned the top spot in the equity research & quotes category of the 2017 e-Monitor’s Awards Report 2017 in part due to its stock story capability. In its analysis, e-Monitor reviewed the offerings and capabilities for the 18 firms in the e-Monitor coverage group, divided into six distinct categories: core product offerings, account information & performance reporting, equity research & quotes, planning tools, alerts, and mobile capabilities. Each category included a distinct set of attributes and criteria used to grade and rank firms. Based on this review, they awarded gold, silver or bronze medals to those firms that excel. More information on this award can be found at http://corporateinsight.com/e-monitor-reports/december-2017-2017-e-monitor-awards. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.

8 Merrill Edge® was named by NerdWallet as one of the “best online brokers for stock trading” in January 2018. To be included, approximately 20 online trading firms were extensively reviewed by NerdWallet in a range of categories including but not limited to: fees, available investments, customer support, and mobile apps. Learn more at https://www.nerdwallet.com/blog/investing/best-online-brokers-for-stock-trading. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.

9 J.D. Power 2017 Certified Contact Center ProgramSM recognition is based on successful completion of an audit and exceeding a customer satisfaction benchmark through a survey of recent servicing interactions. For more information, visit www.jdpower.com/ccc.

10 Merrill Edge® was ranked No. 1 overall (tied with Fidelity) out of seven online brokers by Kiplinger’s Personal Finance’s Best Online Brokers Survey, October 2017. To be included, firms had to offer online trading of stocks, ETFs, funds and individual bonds. The results were based on ratings in the following categories: Total Commissions Score, Breadth of Investment Choices, Tools, Research, Ease of Use, Mobile Access, and Advisory Services. Learn more at http://www.kiplinger.com/slideshow/investing/T023-S002-best-online-brokers-2017/index.html from Kiplinger’s Personal Finance, October 2017. © 2017 The Kiplinger Washington Editors. Used under License. The ranking or ratings shown here may not be representative of all client experiences because they reflect an average or sampling of the client experiences. These rankings or ratings are not indicative of any future performance or investment outcome.

Merrill Edge®
Merrill Edge® is a streamlined financial platform that offers access to online and advised investing, trading, brokerage and Bank of America banking services. Clients can be self-directed; work with a Financial Solutions Advisor™ to use managed portfolios; or access Merrill Edge Guided Investing, an online advisory program that offers Global Wealth & Investment Management Chief Investment Office-directed portfolio management strategies.

Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 47 million consumer and small business relationships with approximately 4,500 retail financial centers, approximately 16,000 ATMs, and award-winning digital banking with approximately 35 million active users, including approximately 24 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.

(New York) – JPMorgan Chase (NYSE-JPM) and New York City Mayor Bill de Blasio announced today that the company intends to pursue building a new 2.5 million square foot headquarters at its 270 Park Avenue location in New York City. The building would be the first major project under the City’s innovative Midtown East Rezoning plan, passed in 2017, that fosters modern office construction and improvements to the business district’s public realm and transportation. The project will be subject to various approvals, and the company will work closely with the New York City Council and State officials to complete the project in a manner that benefits all constituencies.

“At JPMorgan Chase, we believe that investing for the long-term is a hallmark of our success,” said Jamie Dimon, Chairman and Chief Executive Officer of the company. “With a new headquarters at 270 Park Avenue, we are recommitting ourselves to New York City while also ensuring that we operate in a highly efficient and world-class environment for the 21st century. We look forward to working constructively and collaboratively with Mayor Bill de Blasio, Governor Andrew Cuomo, Deputy Mayor Alicia Glen, the New York City Council, and other key City and State officials on this important project,” Dimon added.

“This is our plan for East Midtown in action. Good jobs, modern buildings and concrete improvements that will make East Midtown stronger for the hundreds of thousands of New Yorkers who work here. We look forward to working with JPMorgan Chase as it doubles-down on New York as its international home,” said Mayor Bill de Blasio.

New York State Governor Andrew Cuomo said: “New York State is the business capital of the globe, and our investments in workforce development and commercial enterprise have positioned us at the forefront of innovation and growth. JPMorgan Chase’s commitment to build their new, state-of-the-art corporate headquarters and support thousands of jobs here in New York is proof that our economic development strategies are successful, and I look forward to working with them to keep New York State’s momentum moving forward.”

Under the East Midtown rezoning, JPMorgan Chase will purchase development rights from landmarks in the surrounding district in order to build a larger building. Any such transactions in the new East Midtown subdistrict require the seller of the air rights to pay the City a minimum contribution of $61.49 per square foot, providing funding for improvements to the neighborhood’s public realm including shared streets, pedestrian plazas and thoroughfare upgrades.

With the new, modern facility, which is expected to create over 8,000 construction-related jobs during the building period, JPMorgan Chase would consolidate its global headquarters from a variety of locations into a fully LEED-certified, energy-efficient office tower in Midtown Manhattan. The headquarters project would build on the firm’s strong legacy of investment in local communities and the City of New York, its home since 1799.

The building’s modernized infrastructure and design, including 21st century systems and technology, would allow for improved business adjacencies, synergies and collaboration. Clients, shareholders and the surrounding community would benefit from this innovative project, which would also support the firm’s commitment to attracting and retaining best-in-class talent. The new building would house about 15,000 employees, replacing an outdated facility designed in the late 1950s for about 3,500 employees.

Once the project’s approvals are granted, redevelopment and construction are expected to begin in 2019 and take approximately five years to complete. Most employees currently located at 270 Park Avenue would be relocated nearby during the development period.

With this headquarters commitment, JPMorgan Chase expects to remain one of the largest private employers in New York City. The company also employs thousands of others in additional NYC Corporate locations and in approximately 350 bank branches. Regarding jobs related to the new project, the company intends to work closely with its Supplier Diversity team to encourage the participation of Minority and Women Owned Business Enterprises (MWBEs).

The project is not expected to have a material impact on the company’s financial results.

“It was barely six months ago that we secured the East Midtown rezoning into law, and building owners are already responding in a major way. This is a true win-win-win. The City of New York retains a major company and its employment base, the surrounding community sees improvements in its public spaces, and JPMorgan Chase will have a new headquarters that helps the firm compete for decades to come,” said Deputy Mayor for Housing and Economic Development Alicia Glen.

“This project would enhance JPMorgan Chase’s efficiency and infrastructure, strengthen the newly rezoned East Midtown business district, and will further solidify New York City’s leadership as a global financial center,” said Manhattan Borough President Gale A. Brewer. “I look forward to reviewing the details.”

Council Member Keith Powers, District 4, said, “The East Midtown rezoning was the result of years of hard work by Community Boards 5 and 6, local stakeholders, and East Side public officials to promote responsible development. Through this announcement, JPMorgan Chase is making a significant investment in East Midtown that will have a long-term impact on New York City. As Co-Chair of the East Midtown Governing Group, I look forward to working alongside stakeholders to review the project.”

About JPMorgan Chase & Co.
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.5 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of customers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

WASHINGTON, DC – Rising long-term interest rates and soaring market volatility are not enough to alter the forecast for strong 2.7 percent real GDP growth in 2018, according to the Fannie Mae Economic and Strategic Research Group’s February 2018 Economic and Housing Outlook. With long-term Treasury yields hitting multi-year highs in February and equities experiencing a sudden repricing, downside risks to the forecast are present, particularly if the recent stock market declines are sustained and prove contagious to other markets. Strength in economic fundamentals continues to underpin the current forecast, including recent momentum in domestic demand and a historically healthy labor market. Consumer spending surged in the fourth quarter due to unsustainably strong replacement demand for vehicles damaged by the hurricanes. With that demand satiated, spending growth should moderate in coming quarters but remain the primary driver of headline growth, in part due to increased disposable income from the tax cut. Meanwhile, the generous depreciation provisions of the Tax Cuts and Jobs Act should spur strong growth in capital expenditures. Given that the economy is already approaching full employment, the passage of deficit-financed stimulus in this year’s budget will likely stoke additional overheating concerns. Finally, we expect the first rate hike of the year at the March Fed meeting, a move fully priced in by the market, with continued gradual monetary policy normalization under the new leadership of Fed Chair Jerome Powell.

“Fiscal Policy and the Fed: Stimulus/Response – our 2018 theme – will be paramount in the months ahead as the economy navigates newfound turbulence and heightened inflationary concerns,” said Fannie Mae Chief Economist Doug Duncan. “While our 2018 growth forecast remains unchanged, upside and downside risks are emerging that are contingent on those policy influences. Legislatively, stimulus from tax reform and the recently passed budget could add to growth. However, if additional growth is accompanied by signs – or even fears – of inflationary pressure, it could complicate the Fed’s attempt at a ‘soft landing’ and may require more aggressive monetary action. On housing, we upped this year’s 30-year fixed mortgage rate forecast by 30 basis points to an average of 4.4 percent during the fourth quarter as a result of the unexpected spike in long-term interest rates at the start of the year. However, we don’t expect rates to play much of a role in total home sales, especially with anticipated stronger disposable household income growth. The ongoing inventory shortages should continue to constrain sales despite otherwise ripe home buying conditions.”

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.

WASHINGTON, DC – The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 2.0 points in December to 85.8, reversing last month’s rise. The decrease can be attributed to decreases in four of the six HPSI components. The net share of respondents who said now is a good time to buy a home decreased 5 percentage points compared to November and is down 8 percentage points compared to the same period last year. Meanwhile, the net share who reported that now is a good time to sell a home remained flat and is up 21 percentage points year-over-year. The net share who said home prices will go up in the next 12 months decreased 2 percentage points in December, while Americans also expressed a weakened sense of job security, with the net share who say they are not concerned about losing their job decreasing 6 percentage points. Finally, the net share of consumers who said mortgage rates will go down over the next 12 months fell 1 percentage point in December, while the net share reporting that their income is significantly higher than it was 12 months ago rose 2 percentage points.

“Consumers remained cautious in their housing outlook at the end of 2017, as tax reform discussions continued. In December, mirroring the other major consumer sentiment benchmarks, the HPSI reflected this caution and declined slightly,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Entering 2018, housing affordability remains a persistent challenge, particularly in rental markets, where consumer expectations for price increases over the next 12 months reached a new survey high.”

HOME PURCHASE SENTIMENT INDEX – COMPONENT HIGHLIGHTS

Fannie Mae’s 2017 Home Purchase Sentiment Index (HPSI) decreased in December by 2.0 points to 85.8. The HPSI is up 5.1 points compared with the same time last year.

The net share of Americans who say it is a good time to buy a home fell 5 percentage points to 24%, erasing much of last month’s rise.
The net percentage of those who say it is a good time to sell remained unchanged at 34%.
The net share of Americans who say home prices will go up fell 2 percentage points to 44% in December.
The net share of those who say mortgage rates will go down over the next 12 months fell 1 percentage point to -52%.
The net share of Americans who say they are not concerned about losing their job fell by 6 percentage points to 68%.
The net share of Americans who say their household income is significantly higher than it was 12 months ago rose 2 percentage points to 16%.
ABOUT FANNIE MAE’S HOME PURCHASE SENTIMENT INDEX
The Home Purchase Sentiment Index (HPSI) distills information about consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey® (NHS) into a single number. The HPSI reflects consumers’ current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

ABOUT FANNIE MAE’S NATIONAL HOUSING SURVEY
The most detailed consumer attitudinal survey of its kind, Fannie Mae’s National Housing Survey (NHS) polled approximately 1,000 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010). As cell phones have become common and many households no longer have landline phones, the NHS contacts 60 percent of respondents via their cell phones (as of October 2014). For more information, please see the Technical Notes. Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future. The December 2017 National Housing Survey was conducted between December 1, 2017 and December 18, 2017. Most of the data collection occurred during the first two weeks of this period. Interviews were conducted by PSB, in coordination with Fannie Mae.

DETAILED HPSI & NHS FINDINGS
For detailed findings from the December 2017 Home Purchase Sentiment Index and National Housing Survey, as well as a brief HPSI overview and detailed white paper, technical notes on the NHS methodology, and questions asked of respondents associated with each monthly indicator, please visit the Surveys page on fanniemae.com. Also available on the site are in-depth special topic studies, which provide a detailed assessment of combined data results from three monthly studies of NHS results.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.

WASHINGTON, DC – The 2017 economic growth forecast increased one-tenth from the prior forecast to 2.5 percent due to the government’s upgraded third quarter GDP growth estimate and an expected solid fourth quarter finish, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s December 2017 Economic and Housing Outlook. Consumer demand and investment spending growth are expected to pick up in the current quarter, offset partly by slowing inventory investment and the first drag from trade in a year. Business equipment investment, in particular, grew at its fastest pace in three years during the third quarter, hastened in part by a flurry of deregulation activity, a declining dollar, and strengthening economic growth abroad. With tax legislation potentially passing by year end, the ESR Group sees upside risk to growth but will need to review the final bill before assessing the impact. Absent tax reform, 2018 GDP growth is expected to decelerate to 2.1 percent. Consumer demand is expected to continue to sustain near-term growth as a strong labor market and surging stock and house prices helped push household net worth to a 70-plus-year high. On the heels of the Federal Open Market Committee’s recent decision to raise interest rates for the third time in 2017, the ESR Group predicts two additional hikes in 2018, with further tightening possible based on the potential impact of tax reform on the labor market and inflation.

“The economy appears poised to finish 2017 on a cheerful note as fundamentals increasingly align with strong business and consumer sentiment. Domestic demand is building momentum, job growth is solid and broad-based, and consumer spending looks likely to strengthen,” said Fannie Mae Chief Economist Doug Duncan. “If enacted, tax reform should be a net positive for GDP growth next year, which we currently have pegged at a modest 2.1 percent in the absence of tax law changes. As expected, the Fed raised rates once more last week and, barring inflationary pressure, is expected to tighten two more times in 2018. Finally, the housing market continues its upward grind, as it struggles to balance strong demand and house price appreciation with inventory shortages and affordability concerns.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full December 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.

WASHINGTON, DC – Fannie Mae (FNMA/OTC) today announced the launch of DUS Disclose™, a new MBS disclosure website that will enhance the transparency and increase the data available for Multifamily securities in alignment with the industry.

“We have worked closely with industry partners over the past six months in preparation of the site’s deployment and have received positive feedback,” said Dan Dresser, Vice President for Multifamily Capital Markets, Trading, and Credit Pricing. “The new DUS Disclosure system ensures that our investors have the data they need to better analyze our multifamily securities.”

The new DUS Disclose website replaces the Multifamily Securities Locator Service (MFSLS) and provides a user-friendly interface with more comprehensive data, enhanced disclosures, and the ability to download expanded security, loan, and property level information.

Additional details on the transition from MFSLS to DUS Disclose can be found in the announcement on the Mortgage-Backed Securities web page.

For questions about DUS Disclose, please email the Fannie Mae Investor Help Line or call 1-800-232-6643.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.

WASHINGTON, DC – Fannie Mae (FNMA/OTC) announced the winning bidders for its ninth and tenth Community Impact Pools of non-performing loans. The transaction is expected to close on January 12, 2018, and includes approximately 690 loans totaling $124.12 million in unpaid principal balance (UPB), divided between two pools; the loans in pool 1 are in a larger geographically dispersed area and the loans in pool 2 are in New York City. The winning bidders for the transaction were the Community Loan Fund of New Jersey Inc. (NJCC) for Pool 1 and Preserving City Neighborhoods Housing Development Fund Cooperation for Pool 2. Both firms are non-profit entities.

In collaboration with Bank of America Merrill Lynch and First Financial Network, Inc., Fannie Mae began marketing these loans to potential bidders on October 11, 2017.

The loan pools awarded in this most recent transaction include:

Pool 1: 635 loans with an aggregate unpaid principal balance of $110,265,681; average loan size of $173,647; weighted average note rate of 5.64%; weighted average delinquency of 43 months; and weighted average broker’s price opinion loan-to-value ratio of 82%.
Pool 2: 55 loans with an aggregate unpaid principal balance of $13,860,506; average loan size of $252,009; weighted average note rate of 6.62%; weighted average delinquency of 68 months; and weighted average broker’s price opinion loan-to-value ratio of 65%.
The cover bids, which are the second highest bids, for the Community Impact Pools are 85.02% of UPB (55.26% of broker’s price opinion) for Pool 1 and 89.87% of UPB (43.66% of broker’s price opinion) for Pool 2.

On September 27, 2017, the Federal Housing Finance Agency announced additional enhancements to its requirements for sales of non-performing loans by Fannie Mae and Freddie Mac that build on requirements originally announced in March 2015 and apply to this Fannie Mae non-performing loan sale. These added enhancements encourage sustainable modifications that have the potential to give more borrowers the opportunity for home retention by requiring evaluation of underwater borrowers for modifications that may include principal and/or arrearage forgiveness; forbidding “walking away” from vacant homes; and establishing more specific proprietary loan modification standards..

Potential buyers can register for ongoing announcements or training, and find more information on Fannie Mae’s sales of non-performing loans and on the Federal Housing Finance Agency’s guidelines for these sales, at http://www.fanniemae.com/portal/funding-the-market/npl/index.html.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/FannieMae.

Nearly six in every 10 American workers are stressed about their current financial situation[1]—and Prudential is calling on all U.S. employers to do something about that stress.

In a pre-Thanksgiving “Open Letter to Employers in America,” that debuted November 21 in print editions of major publications across the country, including The Wall Street Journal and The New York Times, Prudential is advocating on behalf of tens of millions of American workers who lack 401(k) plans and other workplace benefit protections.

“The prosperity we celebrate each Thanksgiving cannot be taken for granted; it is the legacy of generations who came before us, pursuing the promise that hard work can create a better life,” the letter reads. “But how do we keep that promise within reach, when innovation and structural shifts are transforming work faster than the nation’s policies and safety nets can keep pace?”

The letter was crafted as part of Prudential’s holistic approach to Financial Wellness, including its $5 million commitment to partnership with the Aspen Institute, a non-partisan forum for values-based policy leadership. The partnership was created to boost financial security for all American workers, and the letter outlines the company’s belief in the need to build new paths to prosperity for them.

“Our relationship with Aspen is part of our efforts to help broaden the national conversation about reconnecting work and wealth,” says Lata Reddy, senior vice president, Diversity, Inclusion & Impact. “Aspen is a convener of thinkers representing a cross-section of American society. Together, we’re bringing the issue to the forefront to develop solutions to the financial challenges faced by American workers.”

To keep the conversation about the importance of workplace benefits top of mind this holiday season, Prudential will publish an updated version of the letter in print editions of major publications on December 6.

WASHINGTON, DC – The full-year 2017 economic growth forecast increased two-tenths to 2.4 percent following a stronger-than-expected estimate of third quarter real GDP growth and an improvement to the fourth quarter outlook, according to the Fannie Mae Economic & Strategic Research (ESR) Group’s November 2017 Economic and Housing Outlook. Consumer spending ended last quarter on a firm note and is expected to post a solid gain in the fourth quarter due in part to robust post-hurricane durable goods replacement demand. Business fixed investment should also add to growth, thanks to ongoing regulatory easing, energy prices amenable to machinery orders and exploration activity, and a declining dollar through most of this year. Housing, however, remains a soft spot and is expected to subtract from GDP growth for the third consecutive quarter. Lean housing inventory continues to provide a tailwind to home prices at the expense of affordability. As expected, Jerome Powell was nominated to replace current Fed Chairwoman Janet Yellen. If he is confirmed, gradual monetary policy normalization will likely continue, supporting our expectation that the Fed will announce its third rate hike of the year at next month’s Federal Open Market Committee meeting, followed by two rate increases in 2018.

“The first print of third quarter economic growth showed surprising resiliency. The expected economic hit from the recent natural disasters either failed to materialize or was drowned out by business optimism,” said Fannie Mae Chief Economist Doug Duncan. “Recent data showed a stronger pickup in domestic demand than anticipated, leading us to increase our growth forecast for the final quarter of this year and coming quarters. We also revised higher our 2018 growth forecast to 2.0 percent. Tax cuts, if enacted, present upside risk to our growth forecast for next year but could also lead to more aggressive Fed action. Housing still remains a drag on the economy, as shortages of labor and available lots, coupled with rising building material prices, further complicate existing inventory, affordability, and sales challenges.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full November 2017 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic & Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR Group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.

Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.