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When Sandra Thompson earlier this year enunciated a new equitable-finance mission, we forecast that Fannie and Freddie would undertake an array of new activities that significantly expand their footprint along with their equity and equality impact.  As anticipated, the plans announced yesterday by Fannie and Freddie go beyond FHFA’s reiterated mission statement earlier this week, mirroring in some ways the banking agencies’ broad view of CRA as a community-development and racial-equity instrument as well as the boost to LMI housing on which attention long focused.  But, for all the public-good creds these plans engender, several will doubtless promote market angst as the GSEs launch pilots that tread heavily on MI, title-insurer, and servicer toes.

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Last Wednesday, the American Banker quoted me on the politics behind President Biden’s contradictory campaign to demand inflation-stifling policies while at the same time championing Fed independence.  The article quoted me accurately, but as I read it, the brevity of my comments made them seem unduly pointed.  As in Renaissance Florence, modern-day Washington is awash with nuance.  To understand what President Biden meant, one has to watch for the equivalent of a carefully-arched eyebrow or a seemingly-offhand remark.  Those I see and hear say that the White House will not hesitate to turn the Fed into the fall guy for inflation and then defenestrate it in political self-defense.

This isn’t to say that President Biden wants to sacrifice the central bank on the midterm’s altar.  Despite entreaties of his more bloody-minded political aides, the President has so far heeded Secretary Yellen and given Jay Powell the equivalent of a royal pass.  Still, the carefully calibrated comments last week show that this pass is increasingly conditional.

It’s not hard to understand why those frightened of a return to what Martin Wolf last week called a U.S. autocracy are willing to push the Fed in front of the firing line. I am less and less alone in thinking that Democrats in 2016 lost it all because they trusted conventional economic thinking far too much.   Still, the Biden Administration has so far made the same mistake.

Starting in 2015, the Fed said that the American economy was a “good place.”  President Obama took …

Continuing its use of novel rulings that preclude public notice and comment, the CFPB has issued a landmark ruling on artificial intelligence (AI) and other forms of algorithmic underwriting stipulating lender responsibility for sending out the adverse action notices required under the Equal Credit Opportunity Act (ECOA).  The CFPB recently added a broader range of credit decisions on outstanding loans (e.g., granting or reducing lines), to these notice requirements, making the reach of this new policy still broader.  Lenders are responsible for adherence to these requirements even if their underwriting models are provided by third parties or credit decisions are made by third parties such as fintechs or auto dealers.  However, when these nonbanks are the lender, they are then subject to CFPB enforcement even if the Bureau does not have formal supervisory power over them under another recent CFPB ruling…

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As detailed in our new in-depth report, the CFPB has issued another sweeping rule by way of a seemingly innocuous circular not subject to public notice and comment.  Under it, lenders that use third-party underwriting are responsible for ensuring that borrowers receive thorough adverse action notices even if the lender has no authority over the AI or other complex models determining credit outcome.

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