7 12, 2021

Daily120721

2021-12-07T22:17:26+00:00December 7th, 2021|2- Daily Briefing|

FBO Sanctions Update
Sens. Cotton (R-AR), Rubio (R-Fl) and eleven GOP colleagues have introduced S. 3318, legislation pressing the U.S. to deny foreign financial institutions access to the U.S. financial system if they provide “Palestinian martyr” payments.

Chopra Slams “Banking Cartel” as CFPB Sets LIBOR Standards
The CFPB today issued its final LIBOR-transition rule, with Director Chopra’s accompanying statement emphasizing that this rule will now prevent the “banking cartel” from again illegally setting disadvantageous consumer interest rates.

CFPB Accepting Additional Bigtech Inquiry Comments
The CFPB today reopened the comment period on its bigtech inquiry, now accepting comment until December 21. As we noted when the comment period opened, the Bureau then provided a very short comment window because Director Chopra said that the Bureau must move quickly due to the initiative’s importance.

Warren Readies Anti-Powell Attack
Sen. Warren (D-MA) today released a letter making it clear that she will strongly oppose Chairman Powell when his confirmation comes before the Senate Banking Committee.

FSB: Persistent Gaps Challenge Resolution Regimes
The FSB today updated progress on implementing its key attributes of effective resolution regimes, reporting significant advances at GSIBs despite gaps at smaller banks, insurance companies, and CCPs.

HFSC Dems: Investment Firms Must Increase Diversity
Ahead of a hearing Thursday sure to be critical of large financial companies, a new HFSC majority staff report on diversity and inclusion looks at large investment firms (including those owned by banks) and finds little progress.

Daily120721.pdf

7 12, 2021

COVEREDFUNDS3

2021-12-07T19:13:15+00:00December 7th, 2021|1- Financial Services Management|

Venture-Capital Investment Restriction

The OCC is “clarifying,”  but  also in many respects rescinding one aspect of controversial 2020 rules expanding the “covered funds” under which banks may make equity investments as provided by the Volcker Rule.  Although the bulletin doing so is very brief, it is also decisive:  regardless of the extent to which a venture-capital (VC) investment is permitted under the covered-fund rule, it is barred for national banks and other entities under OCC jurisdiction unless it fits into other, narrower authorizing standards.

COVEREDFUNDS3.pdf

6 12, 2021

M120621

2021-12-06T20:51:01+00:00December 6th, 2021|6- Client Memo|

Why Pro-Competition Consumer Finance May Not be Pro-Consumer Consumer Finance

Under Rohit Chopra, consumer protection has taken an important, widely-overlooked turn with potent consequences for all retail financial-product providers.  Media coverage of the CFPB’s bigtech order, mortgage-discrimination action, and last week’s anti-overdraft campaign highlighted traditional issues such as fair lending and predatory pricing. These are indeed in the CFPB’s sights, but so also is a much bigger target: the extent to which a few large companies are said to be able to set consumer interest rates and otherwise dictate the shape of U.S. retail finance. This might cut big banks down to the puny size their critics seek, but it’s more likely to accelerate the transformation of retail finance into a wild west of unregulated providers outside the reach of safety-and-soundness standards and, in many cases, even of the CFPB. If this pro-competition campaign is mis-calibrated, the CFPB will put consumers at still greater risk.

M120621.pdf

 …

6 12, 2021

GSE-120621

2021-12-06T19:56:02+00:00December 6th, 2021|4- GSE Activity Report|

Another Post-Conservatorship Damoclean Sword

As we noted on Friday, Senate Banking Ranking Member Toomey asked SEC Chairman Gary Gensler a trick question about GSE obligations at the very end of a lengthy letter focused principally on cryptography.  Gensler replied that, once Fannie and Freddie leave conservatorship, their status as federal instrumentalities might well end.  Were the SEC to think so at the time, trillions in agency investments would be quickly liquidated to conform to regulatory, market, or sovereign investment restrictions.

GSE-120621.pdf

6 12, 2021

Karen Petrou: Why Pro-Competition Consumer Finance May Not be Pro-Consumer Consumer Finance

2021-12-06T14:35:29+00:00December 6th, 2021|The Vault|

Under Rohit Chopra, consumer protection has taken an important, widely-overlooked turn with potent consequences for all retail financial-product providers.  Media coverage of the CFPB’s bigtech order, mortgage-discrimination action, and last week’s anti-overdraft campaign highlighted traditional issues such as fair lending and predatory pricing. These are indeed in the CFPB’s sights, but so also is a much bigger target: the extent to which a few large companies are said to be able to set consumer interest rates and otherwise dictate the shape of U.S. retail finance. This might cut big banks down to the puny size their critics seek, but it’s more likely to accelerate the transformation of retail finance into a wild west of unregulated providers outside the reach of safety-and-soundness standards and, in many cases, even of the CFPB. If this pro-competition campaign is mis-calibrated, the CFPB will put consumers at still greater risk.

Mr. Chopra’s interest in market competition doubtless derives from his stint as a lone, strong voice at the Federal Trade Commission who lost pretty much every battle he waged against giant corporate combos.  It surely stems also from President Biden’s executive order demanding that federal agencies take express pro-competitive action. And, indeed, there’s a lot to do in sectors such as tech-platform companies that already seem to have skipped over just being monopolies to become potent oligopolies with powerful impact over each aspect of everyday life, not to mention pricing and economic inequality.

However, neither traditional nor neo-Brandeisian antitrust theory applies well …

6 12, 2021

Daily120621

2021-12-07T14:21:45+00:00December 6th, 2021|2- Daily Briefing|

BIS Tackles NBFI-Reform Specifics
Building on the FSB’s NBFI priority focus, BIS Managing Director Agustín Carstens today reiterated his call for both entity-and activity-based standards for systemic-scale nonbanks.

White House Emphasizes Anti-Corruption Commitments
In connection with the President’s democracy summit, the White House today issued a fact sheet laying out a reinvigorated version of the President’s prior anti-corruption commitment.

OCC Outlines Climate-Risk Agenda
The OCC’s semi-annual risk report today includes a new section on the agency’s climate-risk plans. As anticipated, the OCC in the near-term will build out large-bank risk-management standards based on Basel’s new principles (See FSM Report CLIMATE12), but these will be only the agency’s “first step.”

Daily120621.pdf

3 12, 2021

AL120621

2021-12-03T21:50:22+00:00December 3rd, 2021|3- This Week|

CRYPTO CRASH-COURSE

After a series of seven crypto-focused hearings, HFSC will hold a high-profile session Wednesday covering essentially any issue in the digital asset arena Members target.  We thus expect a wide-ranging session that will guide our assessment as to whether any legislation in 2022 is planned on the House side.  As previously noted, Senate Banking Chairman Brown (D-OH) has also launched an inquiry into stablecoin trading-platform stability and conflicts.  Chairwoman Waters’ (D-CA) focus is more likely aimed at consumer protection and CFPB’s planned initiative in this area.  We expect Democrats also to advance recommendations in the PWG’s recent stablecoin report (see Client Report CRYPTO21), while Republicans will push back on grounds also cited by FRB Gov. Waller and former Gov. Quarles.  We also expect Republicans to refute the SEC’s view that cryptoassets are securities (see Client Report INVESTOR19).

AL120621.pdf

3 12, 2021

Daily120321

2021-12-03T21:47:42+00:00December 3rd, 2021|2- Daily Briefing|

OCC Presages Additional Climate-Risk Guidance
Although it intends to issue climate-risk guidance for big banks by year-end, the OCC today also solicited academic papers and policy research on climate risk in banking and finance for a June 2022 meeting. The scope of the inquiry suggests that the agency is exploring an array of matters well beyond its near-term guidance that may well cover all federal charters, but timing also suggests that these more sweeping requirements will be considered in the second half of 2022. Submissions are specifically requested on physical and transition risks, climate’s impact on different communities, climate risk modeling and stress testing, and ESG ratings and regulatory reliance; these are due March 11.

Gensler Expands on Crypto Risk, GSE Status
Although Senate Banking Ranking Member Toomey (R-PA) thought his answers inadequate, SEC Chairman Gensler’s response to a series of questions sheds light on the SEC’s continuing plans to cast a wide regulatory and enforcement net over cryptography.

Daily120321.pdf

2 12, 2021

Daily120221

2021-12-02T21:48:53+00:00December 2nd, 2021|2- Daily Briefing|

Fed Staff Assess Big-Bank Correlated Risk, Systemic Hazard
A new research note from the Federal Reserve looks at a critical question: how correlated have bank exposures become in the wake of stress testing and other rules many analysts, ourselves included, anticipated. To the extent exposures are correlated, systemic risk is likely to increase, especially if correlations are tightest at the biggest banks and/or correlated exposures are risky.

Quarles Defines Boundaries of Fed Emergency, Regulatory, Supervisory Policy and Politics
In parting remarks today, FRB Gov. Quarles not only defended his record, but also took a very different stand on future emergency facilities than another departing Fed official, Vice Chair Clarida. Unlike Mr. Clarida’s stout defense of 2008 and 2020 actions, Mr. Quarles argues that the credit facilities established in concert with those for emergency liquidity are problematic both in terms of central-bank mission and facility execution.

Daily12021.pdf

2 12, 2021

FedFin: Going Down?

2021-12-02T16:51:42+00:00December 2nd, 2021|The Vault|

Two recent studies add fuel to the fire we first spotted late last year: demands for ARMs that only go down.  Director Thompson’s latest scorecard combines with her equitable-finance mission to make this option a top political priority even if its market feasibility remains at best uncertain.

The full report is available to subscription clients. To find out how you can sign up for the service, click here.…

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