17 05, 2021


2021-05-17T21:24:48+00:00May 17th, 2021|2- Daily Briefing|

Fed Adopts Cautious Approach Despite PNC/BBVA Approval
Although the Federal Reserve Board late Friday announced approval of PNC’s acquisition of BBVA USA, Gov. Brainard abstained due to concerns about growing concentration in the large-regional sector and potential systemic risk.

HFSC Prioritizes True-Lender Action; Interchange, Payment Proposals Also on Radar
Ahead of HFSC’s hearing this Wednesday with FRB Vice Chair Quarles and the heads of the OCC, FDIC, and NCUA, the committee memo features consideration of a resolution to nullify the OCC’s controversial true-lender rule (see FSM Report PREEMPT35), positioning it for rapid HFSC action ahead of floor consideration and likely passage.

FHFA Stands Firm Against More CRT
FHFA today issued its annual report on GSE credit-risk transfers, providing an array of data on the market from February 2020 to February of this year.

Agencies Defer Action on AI Assessment
The banking agencies today announced that they will extend the comment period on their joint RFI on AI until July 1.

FDIC Begins Review of Digital Asset Landscape
The FDIC today issued an RFI on digital assets, laying out uses and seeking comment on IDI activities – current or contemplated – and future demand. Identification of the entities that may potentially be large drivers of such services is also requested.


17 05, 2021


2021-05-17T13:33:24+00:00May 17th, 2021|3- This Week|

As we reported last week, Congress was abuzz with an HFSC mark-up, a Senate vote revoking the true-lender rule, and the rather compelling question of American democracy’s future.  Day in, day out, U.S. housing finance continued without any untoward developments prompting policy-maker attention.  As a result, the vexing question of the future of Fannie Mae and Freddie Mac remains on both the Congressional and Administration to-do lists.


17 05, 2021

Wall Street Journal, Sunday, May 16, 2021

2021-05-17T13:31:20+00:00May 17th, 2021|Press Clips|

Inequality Would Widen if U.S. Policies Spur Sustained Inflation
By Jon Hilsenrath
Federal Reserve and Biden administration officials say economic inequality is bad and they aim their policies in part at helping to reduce it. In the short run, at least, those policies might be widening inequality, not shrinking it….A fall in inflation-adjusted wages hits low- and moderate-income households especially hard, because they dedicate a larger share of their paychecks to covering daily living costs. The numbers might be temporarily skewed, but if inflation persists and is fueled by the Fed or the Biden administration’s policies, it could raise questions about the costs and benefits of those policies for working Americans. Economists describe inflation as a regressive tax—meaning it hits low-income workers hardest. “I don’t see anything good happening from an economic inequality perspective,” said Karen Petrou, a financial analyst and author of “Engine of Inequality,” a critique of Fed policy. “Most American households are living hand to mouth.” Ms. Petrou said a decade of the Fed’s low-interest-rate policies have mostly helped the wealthy by pushing stocks higher. That effect has accelerated recently. While inflation-adjusted wages fell in April from a year earlier, the Dow Jones Industrial Average was up more than 40% over the same period. The wealthiest 10% of U.S. households own 88.5% of stocks, according to Fed data.




14 05, 2021


2021-05-14T20:33:07+00:00May 14th, 2021|2- Daily Briefing|

CGFS: NBFIs Dominate International Capital Flows, Policy Response Uncertain
The BIS Committee on the Global Financial System (CGFS) today released a paper on changes to post-2008 capital flows, ratifying and updating its 2009 report. It again finds that a relatively small number of asset managers dominates global flows and each is often larger than an EME’s market.


13 05, 2021


2021-05-13T14:54:07+00:00May 13th, 2021|1- Financial Services Management|

FDIC-Insurance Status Representations
Although federal law expressly bars misrepresentation of FDIC-insurance status, the FDIC has observed increasing instances that might at the least be described as confusing, many of which led to informal enforcement actions. As a result, it is proposing to codify its ability to govern how FDIC insurance and the FDIC are described in public representations, likely doing so to set a clear basis for formal enforcement actions that have so far been scarce.


13 05, 2021

American Banker, Thursday, May 13, 2021

2021-05-13T13:44:57+00:00May 13th, 2021|Press Clips|

What’s the fate of bank-nonbank partnerships after ‘true lender’ vote?
By Brendan Pedersen and Hannah Lang
The Senate’s rejection of a Trump-era rule making it easier for banks to sell loans to third parties spells considerable uncertainty for fintech firms, even as the Biden administration likely prepares to remake the standard. The chamber’s passage of a Congressional Review Act resolution striking down the Office of the Comptroller of the Currency’s “true lender” regulation all but guarantees the rule’s demise. The resolution now moves to the Democrat-controlled House, where it is expected to pass….The outcome was an “important reminder” that historically, banking issues haven’t always been fiercely partisan, according to Karen Petrou, managing partner at Federal Financial Analytics. She said the bipartisan vote reflects a diverse coalition of interests that opposed the rule, including consumer advocates and states’ rights supporters. “Many people mistook this as a purely Democratic initiative because of all the consumer advocacy, but this was actually a broad coalition with deep roots also in the GOP,” she said. With the OCC’s new Biden-appointed comptroller, Michael Hsu, starting this week, the agency was already expected to revisit the “true lender” rule with or without a congressional reversal. Therefore, the Senate’s vote Tuesday shouldn’t have caught the industry off guard, Petrou said.


12 05, 2021


2021-05-12T21:11:53+00:00May 12th, 2021|2- Daily Briefing|

True-Lender Rule Advances to Substantive Rewrite
The Senate last night voted 52-47 in favor of a CRA resolution overturning the OCC’s true-lender rule (see FSM Report PREEMPT35), sending the resolution now to the House for likely passage given the bipartisan nature of the Senate’s vote.

Rosengren: CBDC Work Advancing, May Complement FedNow
The Federal Register today includes the Fed’s proposed guidelines to evaluate requests for accounts and services.

Williams: SOFR First, Alternative Benchmarks to Come
Boston Fed President Rosengren today updated Fed work with MIT on CBDC, signaling significant progress even though the FRB has yet even to, as Chairman Powell might say, start thinking about thinking about creating a U.S. CBDC.

Brown, Toomey Preparing Broad China Sanctions Bill
Continuing Congress’s use of sanctions as a tool of U.S. foreign, human-rights, and economic power, Senate Banking Chair Brown (D-OH) and Ranking Member Toomey (R-PA) today agreed in principle on legislation they will offer as an amendment to a broader package on China set for near-term Senate consideration.

New House Disclosure, Fair-Lending Bills Set to Advance
Although recorded votes will take place later tonight, it seems likely that the HFSC bills on which action was incomplete earlier today will be decided on party-line votes.


12 05, 2021

Wall Street Journal, Wednesday, May 12, 2021

2021-05-12T20:05:22+00:00May 12th, 2021|Press Clips|

Housing-Market Surge Is Making the Cheapest Homes the Hottest
By Ben Eisen
The red-hot U.S. housing market is giving an extra boost to the cheapest houses, including many in historically stagnant neighborhoods that have suffered from a lack of investment. It is pushing forward efforts to revive the local economies of Detroit, Cleveland, Youngstown, Ohio, and other areas where homes can sell for as little as a few thousand dollars but typically require a lot of work to fix up and can’t be financed with a mortgage….While prices in many low-cost areas remain far below national averages, some worry that the price appreciation either won’t last or won’t reach the residents who stand to benefit most. The rising prices could also lock some families out of homeownership, especially young people and first-time buyers. It is unclear if the recent rise “is a sign of upward and sustainable wealth accumulation for low-income and minority households,” said Karen Petrou, author of “Engine of Inequality: The Fed and the Future of Wealth in America.” “I think the data is at best equivocal on that point.” Still, community advocates see signs that neighborhood revitalization is spreading from more established neighborhoods to those previously lacking signs of economic life.


12 05, 2021

FedFin: TBA or Not to Be

2021-05-12T18:41:15+00:00May 12th, 2021|The Vault|

A new Fed staff paper sharply questions an axiom of mortgage securitization:  the sanctity of the TBA market.  Using both empirical and model-derived methodologies, the paper finds that the TBA-market structure allows for adverse selection, undermining key diversification benefits fundamental to the risk-mitigation rationale of securitization.

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12 05, 2021


2021-05-12T18:39:27+00:00May 12th, 2021|4- GSE Activity Report|

TBA or Not to Be
A new Fed staff paper sharply questions an axiom of mortgage securitization:  the sanctity of the TBA market.  Using both empirical and model-derived methodologies, the paper finds that the TBA-market structure allows for adverse selection, undermining key diversification benefits fundamental to the risk-mitigation rationale of securitization.


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