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So far Arezou Rafikian has created 1503 blog entries.
1 09, 2022

FedFin on: Centenarians Get a Face Lift

2022-09-01T15:22:37-04:00September 1st, 2022|The Vault|

As seems always the case, FHFA Director Thompson is as good as her word to Congress earlier this summer, announcing yesterday a review of the extent to which the Home Loan Banks and their System meet the mission assigned to them and, regardless, if that mission still makes sense. Building on our initial assessment of FHFA’s plans, we here turn to what the System, its allies, and reformers are likely to say and what FHFA and/or Congress will then do about it.

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

30 08, 2022

FedFin on: The No-Down Low-Down

2022-09-01T15:17:08-04:00August 30th, 2022|The Vault|

BofA’s new no-down payment mortgage is another innovative product in which banks use their balance sheets to address their CRA obligations by offering down payment assistance or, as here, flat out nothing down.  The extent to which nonbanks can match these programs depends on the extent to which Fannie and Freddie are able and then willing to cross-subsidize ….

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

29 08, 2022

American Banker, Monday, August 29, 2022

2022-08-29T15:10:32-04:00August 29th, 2022|Press Clips|

As Fed goes full steam ahead on higher interest rates, banks brace for new normal

The Federal Reserve’s target federal funds rate is as high as it has been in a decade and is unlikely to go any lower in the foreseeable future, Chair Jerome Powell said Friday. But just how this new reality will affect banks individually depends in large part on what’s in their loan books. During a speech at the Federal Reserve Bank of Kansas City’s economic symposium in Jackson Hole, Wyoming, Powell said he expects the rate to be just under 4% by the end of next year…Karen Petrou, managing partner at Federal Financial Analytics, said most banks are keenly aware of this risk and have taken measures to mitigate it, chiefly by diversifying their mix of funding sources. But as rates continue to rise, further adjustments will likely become necessary, she said, noting that just what those changes look like will depend on a number of factors. As the cost of funds rises to the extent it does, the lending mix is going to change. Banks may start to move funds out of excess reserves and start to put them into the economy, and that would be very good for the economy and good for the banks, but that’s not going to happen in a recession,” Petrou said. “The lending may have a higher return, but it’s also higher risk as demand goes down. There’s so many moving parts here. …

29 08, 2022

Karen Petrou: Why Failing to Focus on Economic Equality Flummoxes Fed Policy

2022-08-29T09:45:59-04:00August 29th, 2022|The Vault|

August doldrums always seem to power up spirals of will-he or won’t-he speculation about the Fed’s Jackson Hole meeting because there usually isn’t all that much else to talk about economically-speaking. This year is different because this year has revealed the Fed as a central bank without a compass at a time of extraordinarily strong winds towards the rocks.  Still, in all the punditry over whether the Fed can somehow maneuver to Jay Powell’s “softish landing,” there’s one missing, critical factor:  inequality and what the Fed must do about it or, if it won’t, what we must do about the Fed.

The Fed is fond of blaming fiscal policy for economic inequality, but U.S. fiscal policy has been awesomely stimulative since the pandemic struck and the U.S. has still grown ever more unequal in terms of both income and wealth.  This is because ultra-accommodative monetary policy stokes inequality and, at the scale practiced by the Federal Reserve, towers over even trillions of fiscal stimulus.  As a result, the U.S. didn’t get the Fed’s promise of “robust growth” accompanied by only a bit of “transitory” inflation.  Of course, we instead got a crushing combination of high-flying inflation that will leave long-lasting scars on vulnerable households even if it meaningfully abates as some now hope.

The Fed thinks itself aloof from any inequality accountability because it cloaks itself in the mantle of “maximum employment” as armor against any inequality-effect assertions.  It was in fact this focus solely on employment …

29 08, 2022

m082922

2022-08-29T09:45:09-04:00August 29th, 2022|6- Client Memo|

Why Failing to Focus on Economic Equality Flummoxes Fed Policy

August doldrums always seem to power up spirals of will-he or won’t-he speculation about the Fed’s Jackson Hole meeting because there usually isn’t all that much else to talk about economically-speaking. This year is different because this year has revealed the Fed as a central bank without a compass at a time of extraordinarily strong winds towards the rocks.  Still, in all the punditry over whether the Fed can somehow maneuver to Jay Powell’s “softish landing,” there’s one missing, critical factor:  inequality and what the Fed must do about it or, if it won’t, what we must do about the Fed.

m082922.pdf

28 08, 2022

The Hill, Sunday, August 28, 2022

2022-08-29T17:09:10-04:00August 28th, 2022|Press Clips|

Black Americans feel disproportionate pain from high interest rates

by Cheyanne M. Daniels and Sylvan Lane

The federal government’s efforts to stanch inflation are disproportionately impacting Black Americans. The Federal Reserve has hiked interest rates in the hopes of cooling off a red-hot economy, but its actions are hitting Black Americans — who have historically been squeezed out of home ownership and affordable loans — the hardest….“The Fed through that period argued that ultra-low interest rates supported household wealth by virtue of allowing people with homes to reduce their cost of housing with refinancing and therefore improve their wealth position. But that turned out not to be anywhere near as true for low and moderate income people, particularly minorities,” said Karen Shaw Petrou, author of “Engine of Inequality: The Fed and the Future of Wealth in America.” “We’ve now had 22 years … of policies that make it harder for lower and moderate income households, especially those of color, to be homeowners.“

https://thehill.com/policy/finance/3617000-black-americans-feel-disproportionate-pain-from-high-interest-rates/

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23 08, 2022

MarketWatch, Tuesday, August 23, 2022

2022-08-24T10:27:17-04:00August 23rd, 2022|Press Clips|

Regulators worry that hedge funds could spark the next financial crisis

By Chris Matthews

In the wake of the 2008 financial crisis, regulators have kept close tabs on America’s largest banks, subjecting them to regular stress testing and imposing new rules meant to ensure their safety during periods of financial turmoil. These new rules may have made the banking system safer, experts say, but they have also fueled the growth of a shadow financial system that is providing a growing share of financing for U.S. companies and taking on new, difficult-to-measure risks in the process…Karen Petrou, co-founder of the banking advisory firm Federal Financial Analytics, Inc., said in an interview that the steady march toward greater surveillance of private funds is the inevitable outgrowth of regulations aimed at ensuring financial stability. With the major banks KBE, -0.32% facing restrictions on leverage, capital will move to less regulated areas “like water flowing down hill,” she said, though she insisted that this doesn’t mean post-2008 regulations on big banks are misguided. Nevertheless, she is skeptical that FSOC will make effective use of the data it intends to collect on private funds. “Regulators and FSOC have a very bad history of gathering data, which they do nothing until the data goes into the red zone,” she said. “At that point its usually too late.”

https://www.marketwatch.com/story/regulators-worry-that-hedge-funds-could-spark-the-next-financial-crisis-11661282398

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22 08, 2022

FedFin on: FRB Crypto-Activity Constraints

2022-08-22T16:17:18-04:00August 22nd, 2022|The Vault|

Reflecting the concerns voiced in a recent executive order from President Biden and a subsequent request for views from Treasury, the Federal Reserve has joined the OCC in demanding prior notice from banking organizations that wish to undertake cryptoasset activities.  The OCC also warned national banks already engaged in these activities to ensure that they are safe and sound, but the Fed has gone farther.  It also demands that state member banks and BHCs already engaged in this sector notify their lead supervisor and ensure that…

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

22 08, 2022

GSE-082222

2022-08-22T10:16:44-04:00August 22nd, 2022|4- GSE Activity Report|

Forbear to Forget

A new Federal Reserve Bank of Cleveland study validates forbearance as a mortgage-market buffer, reinforcing the likelihood that policymakers and servicers will turn quickly to it if current mortgage-market conditions turn ugly under the combined stress of higher rates and slow to no growth. If bank regulators also reinstate regulatory forbearance on forborne loans, the regulatory-capital cost of higher-risk loans gets a nice counter-cyclical boost, perhaps encouraging banks to tread softly back into at least some of this sector if parallel calculations under the all-powerful stress capital buffer prove propitious.

GSE-082222.pdf

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19 08, 2022

FedFin: The Social-Impact Say-So

2022-08-19T13:55:15-04:00August 19th, 2022|The Vault|

We look here at an interesting idea from three senior Fannie Mae officials: an index to measure a Single-Family MBS’s social impact.  The proposal seeks to enable socially conscious investors to support affordable housing for underserved communities while balancing the needs of mortgage borrowers, investors, and market function.  It also reflects the objectives laid out in Fannie Mae’s Equitable Housing Finance Plan such as providing social impact data and boosting low-income and minority homeownership. …

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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