FHFA Sets Comment Deadline for Freddie Closed-End Loan Product
The Federal Register includes the FHFA’s comment request on a new Freddie Mac product that would
give borrowers access to their locked-up equity without a new first lien at a higher rate or a traditional homeequity second riding piggyback atop the first lien.
Fed Systemic-Risk Assessment: Some Worries, No Troubles
The latest Federal Reserve financial-stability assessment continues the Fed’s practice of detailing vulnerabilities without drawing bottom-line conclusions; the Board once did so, but ceased this practice after opining that the financial system’s risk was “moderate” shortly before the 2020 crash. The Board’s report now also says that it assesses vulnerabilities, not the likelihood of near-term shock. Survey respondents do make this assessment, with this report showing a striking increase in concerns about policy uncertainty in light of continuing inflation and the higher-for-longer rate outlook. The Fed continues to fear vulnerabilities due to historic levels of hedge-fund leverage, life-insurance illiquidity, and MMF redemption risk. The Fed seems to be less concerned about these risks than the IMF’s recent financial-stability assessment, although new big-bank stress tests now include an exploratory scenario related to hedge funds (see Client Report STRESS32). The report does not voice the concerns about private credit laid out in recent Fed research or by the IMF.
One could go on – indeed many do – about whether inflation is showing enough signs of a slow-down to warrant lower interest rates. I’ve said before that lower rates won’t have the housing-affordability benefits advocates expect, but this doesn’t address the underlying issue of just how hot inflation may be running. I’m not sure if anyone – including the Fed – really knows, but battles on my neighborhood listserv validated by growing data make clear that federal data overlook one hidden price hike driving more and more Americans flat-out crazy: credit-card surcharges that are nothing but shadow price hikes of as much as four percent.
In fact, card surcharges are the epitome of the “junk” fees the CFPB has vowed to quash. The credit-card late fees the Bureau lambasts are due to consumer sins of omission or commission – i.e., consumers have the ability – I would say obligation – to keep their card debt within amounts they can honor as well as the choice to pay on time. How much should be charged for paying late is obviously a point of discussion, but that consumers have a duty to pay on time is indisputable.
In sharp contrast, card surcharges are often unavoidable and ill-disclosed. The neighborhood listserv is something of a group rant, but it does include interesting illustrations of hidden credit-card surcharges that are often – think car-repair shops – meaningful and material add-on prices discovered only after the fix, quite literally, is in.
D.C. is an …
Credit-Card Surcharges: One Inflationary Culprit the CFPB Could Catch
One could go on – indeed many do – about whether inflation is showing enough signs of a slow-down to warrant lower interest rates. I’ve said before that lower rates won’t have the housing-affordability benefits advocates expect, but this doesn’t address the underlying issue of just how hot inflation may be running. I’m not sure if anyone – including the Fed – really knows, but battles on my neighborhood listserv validated by growing data make clear that federal data overlook one hidden price hike driving more and more Americans flat-out crazy: credit-card surcharges that are nothing but shadow price hikes of as much as four percent.
The Run to Liquidity Regulation
There were early-warning tremors last week signaling that new liquidity rules are coming, with the Wall Street Journal on Friday forecasting an inter-agency proposal in what we expect to be early May. But, while a liquidity rewrite has been obvious since at least Acting Comptroller Hsu’s preview in January, what the proposal will detail is far from clear. Although Mr. Hsu and Vice Chair Barr are signaling structural change to the current liquidity construct, FRB Gov. Bowman insists that supervisory – not regulatory – standards should ensure that banks are resilient in the face of liquidity stress. The only area where she appears to agree with Messrs. Hsu and Barr pertains to discount-window lending. All of the agencies appear lined up to take last year’s inter-agency guidance on discount-window readiness and turn it into a rule that mandates actual preparation by all IDIs – and possibly – but far from certainly – including prepositioning collateral assets. The proposal is likely also to address collateral integrity to limit the risk to the Federal Reserve and, indeed, a troubled bank if assets are pledged to Home Loan Banks but urgently needed for the discount window. No word if the Fed also plans to address the FedWire closing times that made Signature’s collateral problem even worse (see Client Report REFORM222), but don’t wait up.
GAO Gives CFPB Clear Bill of Financial Health
The GAO today released the report initially scheduled for the Financial Institutions Subcommittee hearing earlier this week convened to discuss CFPB financial management.
Deadline Set for Comment on Controversial FDIC Merger Proposal
The Federal Register today sets the comment deadline on the FDIC’s request for comment on its bank merger policy (see FSM Report MERGER15).
House Bill Revises Exam Appeal Process
HFSC Vice Chair Hill (R-AR) and Rep. Scott (D-GA) yesterday introduced H.R. 8071, a bill to create an FFIEC independent review officer for banks seeking review of supervisory judgements and require supervisors to respond more quickly to bank queries.
FDIC’s Paperwork Request Illuminates Proposed Merger Policy
In conjunction with today’s publication of the FDIC’s proposed merger-policy rewrite (see FSM Report MERGER15) comes a proposed change in the filings that would need to accompany any merger application submitted to the FDIC.
Housing Takes on Immediate Political Impact, Will Action Follow?
Although there was no need for further evidence that campaign season has begun, today’s Senate Banking housing hearing surely confirmed it. Chair Brown (D-OH) used his opening statement and virtually all of his questioning to focus on Ohio-specific issues; GOP senators argued forcefully that Biden Administration policies reduce housing supply and hike unaffordability. Sen. Brown talked about the need for legislation in several instances, but it remains to be seen if he plans near-term action on a specific proposal. Perhaps hoping for this, Sen. Cortez-Masto (D-NV) questioned FHFA Director Thompson about Home Loan Bank mission compliance, pressing colleagues to support a bill she introduced in the last Congress to double the System’s affordable-housing obligation and alter other aspects of their operations. Sandra Thompson announced that FHFA this year will issue proposals to address the Banks’ mission and “streamline” AHP activities – she did not say how – as well as sharply constrain insurance-company members with a new, ongoing requirement for mortgage-finance activities.
The FDIC Plan to End Too-Big-to-Fail Brings Promise of More Bailouts
In 2013, the FDIC issued a short, unilluminating paper purporting to show how the agency would implement one aspect of the orderly-liquidation authority (OLA) Congress granted in 2010 to prevent the profligate bailouts that blighted the great financial crisis. I was unconvinced by the 2013 paper and even more perplexed when years passed and the utterance on single-point-of-entry (SPOE) resolutions was all the FDIC deigned to pronounce. After all, if big banks and systemic nonbanks can’t be closed without bailouts, then moral hazard triumphs and crashes become still more frequent and pernicious. Last week, mountains moved and Chair Gruenberg said that anything big will not be bailed out. Would this were true, but it’s not
In 2013, the FDIC issued a short, unilluminating paper purporting to show how the agency would implement one aspect of the orderly-liquidation authority (OLA) Congress granted in 2010 to prevent the profligate bailouts that blighted the great financial crisis. I was unconvinced by the 2013 paper and even more perplexed when years passed and the utterance on single-point-of-entry (SPOE) resolutions was all the FDIC deigned to pronounce. After all, if big banks and systemic nonbanks can’t be closed without bailouts, then moral hazard triumphs and crashes become still more frequent and pernicious. Last week, mountains moved and Chair Gruenberg said that anything big will not be bailed out. Would this were true, but it’s not.
Despite the agency’s failure last year to find a solution other than a bailout for high-risk regional banks and an Inspector-General report finding the FDIC most OLA-unready, the FDIC now is confident that it can handle even the biggest blow-out at U.S. global systemically-important banks. This derives from untested faith in SPOE, the FRB’s TLAC rule, GSIB living wills, and what it calls legal certainty pertaining to qualified financial contracts (QFCs).
Maybe so re GSIBs, but this sangfroid is still more puzzling when one reads on and finds that the FDIC thinks so well of its GSIB OLA capabilities that it says that it’s also ready to deploy them for foreign-GSIB operations in the U.S., any regional bank that hits a systemic bump, and even nonbank SIFIs. Nothing is said about the fact that …
Bipartisan Bill Seeks Barriers to Financial-Infrastructure Ransom Payments
Ahead of next week’s HFSC hearing, Chair McHenry (R-NC) and Rep. Pettersen (D-CO) introduced the Ransomware and Financial Stability Act, a bill to require FMUs, large securities exchanges, and certain technology-service providers to notify Treasury before paying a ransom and come under numerous restrictions should they do so.
Waters Plans FHLB-Reform Legislation
Sharply criticizing FHLB backstops for troubled banks, HFSC Ranking Member Waters (D-CA) stated that she is drafting legislation to implement a number of the Congressional recommendations outlined in FHFA’s recent FHLB-reform report, including readying a bill to double the FHLB system’s required contributions to affordable housing and prevent the banks from making good as banks go bad.