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56 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT A Recession Possible by Presidential Election? A report points out the similarities in the economy leading up to the Great Recession to today. A report by the Council of Foreign Relations projects that a recession could occur as soon as the 2020 Presidential Election. The report references the years preceding the 2008 financial crisis, which saw a rising gap in the growth in home prices and household income, and a "parallel dynamic is playing out" today. "In 2018, as in 2005, housing-price growth began falling rapidly, with significant price drops occurring in several major markets…The trend- line in existing-home sales growth has also been down since 2015, tipping into negative territory at the start of last year. Similar drops have preceded nearly every recession since 1970," the report states. Additionally, the report says that if these trends continue the economy should expect to see falls in home prices—possibly beginning by mid-2020—dragging down household spending with a falling economy. "Growth has been slowing, with Trump's tariff war hit- ting exports. Manufacturing is contracting. Retail sales, excluding autos, have stalled. Consumer confidence is falling," the report states. How can an possible reces- sion be slowed? The Council of Foreign Relations said a U.S.- China trade deal, which would boost consumer confidence, is not looking like a possibility. "But all signs are that this is unlikely, given Chinese insistence that structural reforms are now off the table," the report says. The Fed has already cut interest rates twice in 2019, with a possible third cut looming. Commentary from the Council of Foreign Relations said it would "likely take more than 175 basis points of easing to prevent it." Questions surrounding a possible recession have been a major theme throughout most of 2019, with opin- ions divided on the topic. "This is going to be a much shorter recession than the last one," predicts George Ratiu, Senior Economist with Realtor.com. "I don't think the next recession will be a repeat of 2008...The housing market is in a better position." Additionally, the majority of economists and analysts believe the recession still has at least a year be- fore it arrives. Just 2% of economists, strategists, academics, and poli- cymakers believe a recession will start this year, according to a recent survey of more than 200 members of the National Association for Business Economics. Meanwhile, 38% believe one will begin in 2020, while 25% anticipate one starting in 2021. Fourteen percent expect it won't materialize until after 2021. Industry Reacts to Volcker Rule Revisions Put in place following the Great Recession, critics have argued that it hindered their trading practices. T he Federal financial reg- ulatory agencies recently announced that they finalized revisions to simplify compliance requirements relating to the "Volcker rule." Under the revised rule, firms that do not have significant trad- ing activities will have simpli- fied and streamlined compliance requirements, while firms with significant trading activity will have more stringent compli- ance requirements. Community banks generally are exempt from the Volcker rule by statute. The revisions continue to prohibit pro- prietary trading, while providing greater clarity and certainty for activities allowed under the law. With the changes, the agencies expect that the universe of trades that are considered prohibited proprietary trading will remain generally the same as under the agencies' 2013 rule. "The Federal Reserve, FDIC, OCC, SEC, and CFTC have all appropriately simplified the Volcker Rule to reduce com- pliance burdens and provide certainty for markets," said Mike Crapo, Chairman of the U.S. Senate Committee on Banking, Housing and Urban Affairs in a statement. "I continue to encour- age the agencies to consider further revisions to the 'covered funds' definition's overly-broad application to venture capital, other long-term investments, and loan creation, which are necessary to improve market liquidity and preserve access to diverse sources of capital for businesses." Earlier this year, some banks complained that the Volcker Rule's provision, which forced banks to prove that their short-term trades were allowable under the law, was burdensome and restricted legitimate trading, and is now scrapped. The changes have been sup- ported by the banking industry, MarketWatch reports, but the rule's namesake, former Fed Chairman Paul Volcker, opposed the changes. "The new rule amplifies risk in the financial system, increases moral hazard, and erodes protec- tions against conflicts of interest that were so glaringly on display during the last crisis," Volcker wrote in a letter to Fed Chairman Jerome Powell in August. The rules will be effective on January 1, 2020, with a compliance date of January 1, 2021.