Arezou

Markets are ablaze with expectations that Trump II will bring back Fannie/Freddie 1.0.  Could it be?  Maybe, but markets were ablaze with like-kind expectations in November 2016, and it still took the White House until January of 2021 on its way out the door to lay out a privatization plan the Biden team promptly filed in the bin.  A lot better will need to happen a lot faster for anything different to happen this time around.  Given the complexities both financial and political, this seems unlikely absent statutory reform by a Congress perennially unable to bring itself to do so.

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FedFin will continue our practice of providing in-depth analyses in this tumultuous election once key races are decided.  However, clients have asked for an interim report on the outlook if election uncertainty persists and, worse, if it is accompanied by civil unrest.  As detailed in this report, we see no near-term implications for what might be considered course-of-business financial policy decisions even though many of these are, like the capital rules, drivers of significant strategic import.  Of more immediate concern are …

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The CFPB has finalized in largely unchanged form its very controversial proposal requiring banks, fintechs, and certain other parties holding retail-customer personal data to share that data with third parties such as data aggregators following a consumer’s request.  The new rule will make it easier for consumers to obtain personal financial data from incumbent providers to assess alternative products and new providers or value-added services such as financial planning or other, higher-risk offerings (e.g., debt “reduction”).  The rule may well also standardize APIs accessing bank data and essentially outlaw screen-scraping, simplifying data access and heightening both privacy and security if the Bureau’s intended constraints function as anticipated in these still largely-unregulated markets. The rule seeks to accomplish its objectives not only by these requirements, but also by….

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In the new and often just fervor to increase competition, trust-busters such as CFPB Director Chopra sometimes forget that too much competition can lead to the Hunger Games, not to the “fair” and “inclusive” sectors they seek.  Defending the new open-banking rule, Mr. Chopra said that he was willing to accept even a good deal more fraud risk for consumers because his rule humbles incumbent financial-services companies.  This is like saying that one is fine with a few more dangerous drugs since that’s what it takes to loosen Big Pharma’s strangle-hold.  Yes, the U.S. drug market is rife with abuses in how pharmaceuticals are priced and distributed and the FDA is problematic, but it seems irrefutable that drugs must be demonstrably safe and effective before we take them.  Do you want to fly on any airline a group of speculators concocts even if it opens up pricing at your congested hub?  Of course not, but that’s what antitrust zealots propose to do to banking even though we’ve learned the hard, hard way that footloose companies taking other people’s money often don’t give it back.

One of the humorless ironies of this election is the alignment between radical populists and progressives that squeezes out moderate, temperate, and – yes – imperfect policies that do the best they can for the most they can with the fewest possible side-effects.  Populists want “free” markets and progressives such as Mr. Chopra want tightly-regulated ones, but the goal in each case is to cut powerful …

In this report, we build on our initial assessment of the ground-breaking AML enforcement action finalized last Thursday with TD Bank by the OCC, FRB, and FinCEN.  While the banking agencies did not use their nuclear option – requiring TD to close its U.S. operations – the scope of the violations persuaded the agencies along with FinCEN and the Department of Justice to impose huge fines and so sharply constrain U.S. activities as likely to cause both the bank and others to question the viability of continuing U.S. operations for at least the near term.  New branches, products, and services appear barred without a non-objection for the foreseeable future and considerable management turn-over, especially in the U.S., is also likely.  The OCC’s decision to impose the asset-growth cap discussed below implements the Acting Comptroller’s plan to ….

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