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Trump budget plan will not cut Social Security, Medicare Mnuchin

U.S. President Donald Trump's first budget proposal will spare big social welfare programs such as Social Security and Medicare from any cuts, Treasury Secretary Steven Mnuchin said in an interview broadcast on Sunday. Mnuchin said Trump would use a major policy speech to a joint session of Congress on Tuesday night to preview some elements of his sweeping plans to cut taxes for the middle class, simplify the tax system and make American companies more globally competitive with lower rates and changes to encourage U.S. manufacturing. Speaking on Fox News Channel's "Sunday Morning Futures" program, Mnuchin, who has acknowledged that tax reform is his top policy priority, said the budget plan would not seek cuts to federal benefits programs known as "entitlements.""We are not touching those now. So don't expect to see that as part of this budget, OK," Mnuchin said of the programs, according to a transcript provided by Fox. "We are very focused on other aspects and that's what's very important to us. And that's the president's priority."Mnuchin said Trump "will be touching on tax reform" as part of his speech, which is not an official "State of the Union" address.

The plan will reduce the number of tax brackets for individuals and offer a "middle income tax cut," Mnuchin said. On the business side, Trump wants to "create a level playing field for U.S. companies to be able to compete in the world."Mnuchin said Trump was looking at a "reciprocal tax" that would help create more parity with other countries. Trump administration officials have complained that many countries charge value-added taxes on imports while exempting exports from taxation. The United States mainly taxes corporate income. But Mnuchin again said he was only studying a House Republican border tax adjustment plan that would levy a 20 percent tax on imports to encourage more U.S.-based production and exports. That plan aims to raise more than $1 trillion in revenue over a decade to offset lower tax rates for businesses.

"So let me just say this is something we are studying very carefully," Mnuchin said. "There are certain aspects that the president likes about the concept of a border-adjusted tax, there are certain aspects that he's very concerned about."He added that the Trump administration would work with the House of Representatives and Senate to craft "a combined plan that takes the best of all of this when we bring it forward."In a comment suggesting that Trump's budget and tax plan may use aggressive revenue assumptions, Mnuchin said the administration "fundamentally believes in dynamic scoring," a budget calculation method that assumes that a lower tax burden boosts revenues by encouraging economic activity.

The Congressional Budget Office has previously used mainly "static" scoring methods that assume very conservative economic effects of budget and taxes."If we make business taxes more competitive, people will do more business here and we'll get more revenues," Mnuchin said. "So although there may be an absolute lower rate, that doesn't necessarily mean it's a corresponding drop in revenues."

Why wells fargos loan losses are plunging

Wells Fargo & Co's (WFC. N) loan book is performing better than many of its peers and better than even the bank expected in the middle of the last year, thanks to factors including higher house prices and tougher loan standards. In the third quarter, Wells posted its lowest quarterly loan loss rate in at least nine years. The lower losses allowed the bank to dip into funds it set aside to cover bad loans, boosting profits by about $600 million after taxes. Part of the improvement stems from a 2009 move to tighten underwriting standards for consumer loans, like more stringent requirements for verifying prospective homeowners' income. Residential real estate loans made since then "have virtually no losses," Chief Financial Officer Tim Sloan said at an investor conference in September. Another factor helping loan performance: post-crisis loans make up a larger share of Wells Fargo's portfolio overall now, driving quality higher. Nearly half the commercial loans and around 45 percent of consumer loans on the books at the end of the third quarter were made after the financial crisis. Meanwhile, home prices increased 12.4 percent nationwide in August from a year earlier, according to CoreLogic. That had a big impact on the quality of Wells Fargo's home equity loans, where losses, also called charge-offs, fell by nearly 3/4 since the third quarter of 2012. Many of these loans are hovering just below or just above the value of the home, so as home prices go up, the losses on the loans can change dramatically, a spokeswoman said. Over half of the decline in loan losses between the third quarters of 2013 and 2012 came out of Wells Fargo's home equity portfolio.

"When you put all that together," Sloan told Reuters in a recent interview, "it makes for a rapid improvement in credit quality."To be sure, Wells Fargo is not the only U.S. bank to benefit from more of its customers paying their bills. Bank of America's total loss rate declined to 0.73 percent in the third quarter, a level not seen at the bank since 2005, Chief Executive Brian Moynihan told analysts. Bank of America reduced its allowance for bad loans by $1.4 billion in the third quarter."I don't think anybody expected charge-offs a few years ago to be as low as they are now," investor Warren Buffett said in a October 16 CNBC interview, in which he highlighted the low loss rates at both Wells Fargo and Bank of America. Buffett is a major shareholder in both banks."HUGE NUMBER" OF RESERVES

Wells' overall loss rates were even better than Bank of America's at just 0.48 percent of the loan book, a steep drop from a year earlier. The numbers may be better because of its mix of business - commercial loans often perform better than credit card loans, for example. But credit performance has outperformed even the bank's expectations. Wells Fargo chief risk officer Mike Loughlin said in May 2012 he expected loss rates to be about 1.00 percent through the credit cycle. These improvements in overall credit have allowed the bank to set aside less money to cover future losses. It stashed away just $75 million to cover bad loans in the third quarter, down 95 percent from the $1.6 billion set aside a year earlier. As losses continue to decline, Wells Fargo can also dip into funds set aside previously to cover bad loans, known as "releasing reserves." The bank released $900 million of loss reserves in Q3, before taxes, or about $600 million after taxes.

But the extent to which some banks are leaning on reserve releases to boost profits has caught regulators' attention. In September, Comptroller of the Currency Thomas Curry said some banks had become hooked on re-purposing reserves in the form of earnings. Citing some signs of rising credit risk across the banking system, Curry said it seemed like a "singularly bad time for banks to be scrimping on their allowances against their loan losses."Analysts said the current rate of Wells Fargo's reserve releases might not be sustainable. Jennifer Thompson, research director at Portales Partners, said the money that Wells Fargo set aside for future losses every quarter was coming down faster than its current losses, a process that would bottom out eventually and require the bank to build reserves back up. Sloan said the bank was mindful of regulators' views, but at the same time was bound by accounting principles that dictate reserve releases. "When your loan portfolio improves as much as ours did, it's appropriate to release reserves," he said. Even with the release, the money the bank has set aside over time covers four times the losses the bank could expect to have in a year at current rates, up from 3.6 times in the second quarter."That's a huge number," Chief Executive John Stumpf told Reuters in a recent interview.; var median = (relatedItemsTotal / 2); var $relatedContentGroupOne = $(' ul'); var $relatedContentGroupTwo = $(' ul'); $.each($relatedItems, function(k,v) { if (k + 1 = median) { $relatedContentGroupOne.append($relatedItems[k]); } else { $relatedContentGroupTwo.append($relatedItems[k]); } }); } else { $('.third-article-divide').append($('div class="related-content group-one"h3 class="related-content-title"Also In Business News/h3ul/ul/div')); $('.related-content ul').append($relatedItems); } },500); } Next In Business News U.S. December auto sales on pace for record high, led by GM DETROIT U.S. sales of new cars and trucks hit a record high in 2016, automakers said on Wednesday, and investors bid up shares in the sector as strong consumer confidence and relatively low fuel prices bolstered the industry's outlook. Exclusive: Amazon, Forever 21 vying for bankrupt American Apparel - sources Online retailer Inc and teen apparel store chain Forever 21 Inc are among the companies weighing offers to acquire bankrupt American Apparel LLC, people familiar with the talks said on Wednesday. Trump's SEC pick Clayton points to capital formation, not enforcement WASHINGTON With his selection of deal-making attorney Walter "Jay" Clayton to head the U.S. Securities and Exchange Commission, President-elect Donald Trump is signaling that the agency will try to reduce regulations that critics see as burdensome or hindering corporate growth. MORE FROM REUTERS window._taboola = window._taboola || []; _taboola.push({ mode: 'organic-thumbnails-a', container: 'taboola-recirc', placement: 'Below Article Thumbnails - Organic', target_type: 'mix' }); Sponsored Content @media(max-this site) { #mod-bizdev-dianomi{ height: 320px; } } From Around the Web Promoted by Taboola window._taboola = window._taboola || []; _taboola.push( { mode: 'thumbnails-3X2', container: 'taboola-below-article-thumbnails', placement: 'Below Article Thumbnails', target_type: 'mix' } ); window._taboola = window._taboola || []; _taboola.push