Federal Reserve: Janet Yellen stays the course
The Federal Reserve is sticking to chairwoman Janet Yellen’s playbook, said Binyamin Appelbaum in The New York Times. Testifying before Congress last week, Yellen said it is too soon to predict the economic impact of Donald Trump’s election, but stressed that the Fed’s short-term interest rate plans remain unaltered. Yellen “made clear” that the central bank will likely raise its benchmark interest rate when it meets again in mid-December, citing healthy job growth and modest increases in inflation. She also dismissed rumors that she might resign before her term ends in February 2018. “It is fully my intention to serve out my term,” Yellen said.
“Spare a thought” for Yellen, whose job is about to get a lot harder under Trump, said Daniel Gross in Slate.com. When January rolls around, the Fed chief will be the last Democrat in Washington with any kind of real authority. Not only that, but Yellen will have to figure out how to work with a president who “lambasted” her throughout his campaign, accusing her of keeping interest rates low to benefit President Obama and Hillary Clinton. In the meantime, she’ll be charged with navigating a global economy “full of potential disruptions,” including the lingering drama of Brexit, China’s economic slowdown, and the ongoing struggles of Deutsche Bank, Germany’s largest bank.
Markets: Dow tops 19,000 for the first time
The Dow Jones industrial average broke into record territory this week, said Adam Shell in USA Today. The stock market index topped 19,000 “for the first time in its 120-year history,” with investors growing bullish on President-elect Donald Trump’s promises of lower taxes, less regulation, and higher infrastructure spending. All four major U.S. stock indexes—the Dow, S&P 500, Nasdaq, and Russell 2000—closed at record highs Monday, the first time that’s happened since Dec. 31, 1999. But with Trump not yet in office, “whether the bullish hype turns out to be the right trade remains to be seen.”
Banks: JPMorgan settles international bribery charges
JPMorgan has agreed to pay $264 million to settle charges that it bribed foreign officials to win business in China, said Renae Merle in The Washington Post. U.S. officials accused the bank of hiring hundreds of unqualified friends and relatives of Chinese officials in its Hong Kong office between 2006 and 2013, in violation of the Foreign Corrupt Practices Act. Participants in the “Sons and Daughters” program were kept on if the bank’s relationship with their patron generated enough revenue. Officials said JPMorgan “acknowledged wrongdoing as part of the settlement, an unusual admission in such cases.”
Sports: DraftKings and FanDuel fantasy sites to merge
“After tussling for years” as rivals, the two biggest fantasy sports companies in the U.S. are teaming up, said Liana Baker in Reuters.com. DraftKings and FanDuel announced a merger last week that will allow them to trim their legal bills and reduce advertising costs. Financial terms haven’t been disclosed, but both companies were valued at more than $1 billion before authorities began a crackdown in 2015 on daily fantasy sports sites, which critics liken to sports betting. Both companies agreed last month to pay $6 million each to settle false advertising claims with the New York attorney general.
Autos: Volkswagen to cut 30,000 jobs in Germany
Volkswagen is embarking on a “radical shakeup,” said William Boston in The Wall Street Journal. The embattled German automaker plans to cut 30,000 jobs at its VW brand over the next five years, amounting to a one-fifth reduction in its German workforce. The move is meant to save the company $3.9 billion, allowing it to increase investments in new technologies like electric vehicles and self-driving cars and move beyond its devastating emissions-cheating scandal. So far, Volkswagen has spent nearly $20 billion to settle lawsuits and recall 11 million cars.
What the experts say
Trade college loans for mortgage debt
“A new home-loan refinance program allows borrowers to swap student loans for mortgage debt at today’s low interest rates,” said Ann Carrns in The New York Times. The program, called the Student Loan Payoff ReFi, is offered by nonbank lender SoFi and mortgage giant Fannie Mae. It allows homeowners who have student loans, or home-owning parents who cosigned student loans with their children, to refinance their mortgage and take out additional home equity as cash to pay off student debt. “The borrower is left with a new, larger mortgage, but at a lower interest rate.” However, borrowers with federal student loans will lose protections like the option to defer payments and the repayment programs that tie monthly payments to income.
Military retirement is changing
“Major changes are coming to the military retirement system starting in 2018,” said Kimberly Lankford in Kiplinger.com. Those who joined the military between 2006 and 2017 will soon be able to opt into a new “blended retirement system,” while those who join in 2018 or later will automatically be enrolled. Under the current system, service members are eligible for a pension after 20 years of service,
but receive nothing if they stay fewer than that. The new plan includes a pension after 20 years, but also allows service members to make matching contributions into a Thrift Savings Plan, which can be kept after just two years of service. The military offers matching contributions of up to 5 percent of base pay. “If you don’t plan to stay in the military for 20 years, you’ll come out ahead with the blended retirement system.”
Retiring as a couple
Teamwork is important for couples nearing retirement, said Elizabeth O’Brien in Money.com. Financial advisers say “spouses are often happiest if they retire within a couple of years of each other.” But that might not always be possible, because of either a job loss or a health situation. One consideration for people retiring before age 65: where their health insurance will come from before Medicare kicks in. Relying on one spouse’s workplace coverage “could go bad if that worker loses his or her job.” To keep income flowing, both spouses should try to delay claiming Social Security to increase payouts. “If it isn’t feasible for you to both delay claiming, the lower-earning spouse might file for benefits right away, while the higher earner waits till age 70.”