24 05, 2022

DAILY052422

2022-05-24T16:34:55-04:00May 24th, 2022|2- Daily Briefing|

BIS Committee Fears Debt Build-Up Poses Systemic Risk

The BIS Committee on the Global Financial System has concluded that sharp increases in household and corporate debt pose increasing systemic risk.

CFPB Creates New Competition Office, Plan

Reflecting its director’s continuing focus on consumer-finance competition, the CFPB today recast an office that previously encouraged “sandbox” product launches into an office focused principally on enhancing the ability of small firms and start-ups to compete with big banks, fintech, and bigtech.

FRB-Dallas Staff: TALF Worked for CMBS

The Federal Reserve Bank of Dallas has issued a new report documenting the manner in which Fed support at the pandemic’s outset supported U.S. commercial real estate.

IDIs Sound, but Worrisome Signs

The FDIC’s report on banking-sector 1Q data shows that, despite continuing strong earnings and robust credit quality, some IDIs are facing serious challenges.

HFSC Disabilities Hearing Confirms Little Appetite for New Legislation

As anticipated, HFSC’s Subcommittee on Diversity and Inclusion hearing today covered issues faced by persons with disabilities such as under-banking, unemployment and housing inaccessibility.

Brainard to Lay Out Key CBDC Considerations

The HFSC staff memo today on Thursday’s CBDC hearing confirms that it will be a consequential session.

HFSC Backs OLA, Climate Action in FY23 Budget

The House Financial Services Committee today released its views on the FY2023 budget, detailing broad support for the administration’s financial stability, climate, and housing efforts to guide its future authorizing work and that of the appropriations committees to the extent they heed HFSC’s request.…

23 05, 2022

DAILY052322

2022-05-23T16:39:23-04:00May 23rd, 2022|2- Daily Briefing|

FRB-NY Staff: Mandatory Flood Insurance Harms LMI Households

A New York Fed blog post today points to another important, unintended consequence of well-meaning regulation: the adverse impact of mandatory flood-insurance coverage on LMI households.

FRB Atlanta Staff Bolsters Proposed Cash Acceptance Mandate

blog post today from the Federal Reserve Bank of Atlanta strengthens the case for the mandate for retailer cash acceptance recently approved by the House Financial Services Committee.

Kansas City Fed Finds Persistent Commodity-Market Price Hikes, Volatility

Reflecting concerns in a recent Petrou op-ed, the Federal Reserve Bank of Kansas City today released a report differing from the FOMC’s optimistic inflation forecasts at least as far as they relate to commodities.

HFSC Tackles Disability Rights

Tomorrow’s HFSC Subcommittee on Diversity and Inclusion hearing on disability rights will focus not only on housing access, but also on the extent to which a broad range financial services are easily accessible to persons with disabilities.

Fed Survey Shows Significant LMI Investment in Payment, Investment Crypto

The Fed today released a report on household well-being in 2021, detailing an array of survey findings that generally show Americans feeling remarkably prosperous and satisfied.  The Fed cautions that this may no longer pertain, but the data do suggest what may be more than a passing rebound in economic resilience for at least some families.

Daily052322.pdf

23 05, 2022

DEPOSITINSURANCE113

2022-05-23T10:51:36-04:00May 23rd, 2022|1- Financial Services Management|

FDIC-Insurance Status Representation

Using a new approach to issuing enforcement edicts – a circular – the CFPB has made use of its controversial decision to bring nonbanks under its ambit to bolster the FDIC’s efforts to enhance consumer understanding of which funds are entrusted to FDIC-insured depositories and which may be at greater risk in other hands. Even inadvertent violations that may suggest FDIC insurance where it does not apply could result in significant legal risk under either federal or state action.

DEPOSITINSURANCE113.pdf 

23 05, 2022

M052322

2022-05-23T09:39:40-04:00May 23rd, 2022|6- Client Memo|

The Moral Obligation of Stablecoin Issuers

At the height of what proved his fleeting power, the founder of a now-evaporated stablecoin said, “I never debate the poor.”  And, perhaps he doesn’t have to – his was not among tall the fiat-currency wallets emptied in the course of this high-flying venture.  Those were mostly in the virtual pockets of young and often minority households.  Regardless, this statement is stark evidence of the difference between the social-welfare obligations demanded of banks and the get-it-while-you-can ethos embodied by this entrepreneur, Elon Musk, and all their acolytes.  We demand much of banks because they take other people’s money.  The same obligations should bind stablecoins because they also take other people’s money and thus need to be governed not just for safety and soundness, but also for equality and equity.

M052322.pdf

23 05, 2022

Karen Petrou: The Moral Obligation of Stablecoin Issuers

2022-05-23T09:38:20-04:00May 23rd, 2022|The Vault|

At the height of what proved his fleeting power, the founder of a now-evaporated stablecoin said, “I never debate the poor.”  And, perhaps he doesn’t have to – his was not among tall the fiat-currency wallets emptied in the course of this high-flying venture.  Those were mostly in the virtual pockets of young and often minority households.  Regardless, this statement is stark evidence of the difference between the social-welfare obligations demanded of banks and the get-it-while-you-can ethos embodied by this entrepreneur, Elon Musk, and all their acolytes.  We demand much of banks because they take other people’s money.  The same obligations should bind stablecoins because they also take other people’s money and thus need to be governed not just for safety and soundness, but also for equality and equity.

It might be argued that a community-service rationale isn’t warranted for crypto-currency because stablecoin issuers are not intermediaries – indeed, this was a defense against new rules laid out at a recent hearing and it’s the rationale behind the Toomey draft bill to craft a federal stablecoin construct, which eschews most prudential and any community obligations for nonbank stablecoin issuers.

Leaving aside the competitive inequity of a two-tier regulatory framework for the same business, there are three compelling public-welfare arguments for subjecting stablecoins and many other virtual currencies to critical components of bank regulation even if they don’t emulate every aspect of a full-service bank.

First, taking money from other people and promising that they can get it back …

20 05, 2022

Al052322

2022-05-20T16:59:22-04:00May 20th, 2022|3- This Week|

Seeing CBDC

When HFSC takes up digital assets later this week, its ostensible focus will be on whether the U.S. should have a CBDC.  However, given distress across the virtual-currency landscape, the focus will surely be broader.   Democrats will use the session to press hard for stablecoin standards, perhaps prompting Rep. Josh Gottheimer (D-NJ) to advance his draft before measures such as one pending from Sen. Toomey (R-PA) take precedence (see FSM Report CRYPTO27).  House Republicans will surely press the CBDC principles they reiterated last week to argue that stablecoins should be given far more of a chance than Democrats think sound.  We expect Members also to push and pull at the assumptions embedded in the Fed’s discussion draft (see FSM Report CBDC10) and at the benefits CBDC might or might not provide to financial inclusion and for cutting big banks down to the size progressives prefer.

Al052322.pdf

20 05, 2022

DAILY052022

2022-05-20T16:39:03-04:00May 20th, 2022|2- Daily Briefing|

G7 Presses for Global Crypto Action

Preoccupied though it was with Ukraine, the G7 ministerial communiqué advances and hones global work on digital assets.  Most notably, it calls on the FSB to advance and implement comprehensive cryptoasset regulation.  As recent FSB statements indicate, the Board is contemplating its options; this G7 directive may accelerate work into more concrete standards more quickly, stipulating like-kind rules for like-kind activities.  The communiqué also calls global disclosure standards on stablecoin reserve assets and “encourages” jurisdictions to explore CBDC’s “international dimensions.”

Global Regulators Press for Harmonized, DeFi Cross-Border Payments

The BIS and CPMI today issued to papers supporting their work to build out the cross-border payment system advocated by the FSB (see FSM Report PAYMENT23).  The first paper lays out an aspirational global rulebook designed to ensure that all transborder nodes are premised on common standards for finality, certainty, and the other criteria essential to sound payment-system operations.  The second paper takes the concept of legal uniformity into the new arena of decentralized finance, laying out where DeFi might be applicable to cross-border payments with a best-execution DeFi construct, an approach for inter-operability among central banks and private banks, a DeFi utilities for AML/KYC identification, and a small-payment platform.

Daily052022.pdf

20 05, 2022

CRYPTO27

2022-05-20T13:14:34-04:00May 20th, 2022|1- Financial Services Management|

Federal Stablecoin Standards

Sharp disruptions in cryptoasset markets, and especially those for stablecoins, have energized calls for rapid U.S. statutory and regulatory action along lines initially laid out by the President’s Working Group on Financial Markets (PWG).  The most comprehensive stablecoin legislative proposal so far is the Stablecoin TRUST Act, a discussion draft released by Senate Banking Ranking Member Toomey (R-PA).  Setting the parameters for what Republicans support and thus what might pass the Senate, the draft differs in many ways from the PWG’s approach.

CRYPTO27.PDF

19 05, 2022

DAILY051922

2022-05-19T17:20:04-04:00May 19th, 2022|2- Daily Briefing|

BIS Finds New Shadow Crypto Finance, Risks in Spotlight

The BIS yesterday released a paper concluding that, while bank exposures in this high-risk sector are small in aggregate, digital assets nonetheless pose systemic risks.

Commerce Asks About CBDC, Payment System

Following the direction of the President’s digital asset executive order (see Client Report CRYPTO26), the Department of Commerce today released a request for comment on enhancing US competitiveness in  this sector.

Barr Breezes By

Today’s Senate Banking confirmation hearing with Michael Barr showed the Fed vice-chair nominee in careful form likely to assure him confirmation despite strong GOP opposition.

CFPB Tells States to Flex Their Enforcement Muscles

Turning again to actions outside the direct reach of public notice-and-comment requirements, the CFPB today issued an interpretive rule essentially encouraging states to enforce federal consumer-protection standards.

Fed Finalizes FedNow Framework

The Fed today issued a final rule laying out the legal framework governing the FedNow instant payment service it is racing to roll out (see FSM Report PAYMENT20).

Daily051922.pdf

18 05, 2022

DAILY051822

2022-05-18T17:02:28-04:00May 18th, 2022|2- Daily Briefing|

ILC Restrictions Hit Speedbump

The House Financial Services Committee today attempted to markup H.R. 5912 (Garcia, D-IL), a bill that would subject ILCs and their parent companies to BHC regulation (see FSM Report ILC13).  Reflecting concerns about the bill’s grandfather provisions, Rep. Garcia introduced an amendment to the bill that would subject commercial entities looking to acquire an ILC to prior FSOC review.

Barr Highlights Crypto Rules, Equity Ahead of Hearing

Although we will provide clients tomorrow with an in-depth assessment of his confirmation hearing, Michael Barr’s testimony confirms that he will take a different approach to financial regulation than his predecessor, Randy Quarles.  His very brief statement emphasizes the need for innovation to come with regulation and for it to advance fairness.

Bill Requiring Cash Acceptance Reported to House

The House Financial Services Committee today reported H.R. 4395 (Payne, D-NJ), a bill that requires all businesses to accept cash payments for transactions under $2000, by a vote of 32-17.  The panel added an amendment from Rep. Garcia (D-TX) to clarify that only businesses with a physical location are covered.

Daily051822.pdf

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