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A Cooling in Recession Talk, Heat Up in Housing, Facebook To Offer Loans?

By Vy Phan

September 22, 2019


This week the housing market heated up, recession fears cooled down, and Libra was put on the hot seat once again.

The 3% growth rate that President Trump set as his goal in the beginning of the year is seeming out of reach, as economists expect a rate around 1.7% by the beginning of 2020. This comes despite tax reform, the lower growth in population and productivity.

In other macro news, the fed has once again cut rates by a quarter point. The range of views on the committee is wide – one governor (Brullard) dissented arguing for deeper rate cuts, while another (Rosengren) argued lower rates are unnecessary.

Lower rates, improved credit scores, and tighter housing inventory are improving the outlook for housing. Housing market achieved an 18-month high in housing starts and a record high in FICO scores.

The Citigroup Economic Surprise Index – a measure of actuals vs economist’s expectations – has also registered readings above the neutral baseline suggesting slowdown fears may be exaggerated.

Source: PeerIQ, CitiGroup

In financing news this week, San Francisco online transaction company Stripe pleaded headlines this week with their $35BB valuation.

“FinTechs for the Gig Economy” appears to be an emerging theme (see Salaro and Joust) for example. 

Ten years after the financial crisis, the Congressional hotseat has shifted from big banks to big tech firms. Facebook crypto project “Libra” leader David Marcus was called back in hot seat. Marcus assured Congress that:

Marcus also insisted that Facebook is not getting into banking – no bank accounts, no earned interest, no deposit taking. Libra is digital cash.

However, most relevant for our sector, Marcus indicated that Facebook could one day offer financial services products including potentially loans via partnerships with an existing bank.


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