3- This Week

12 04, 2024


2024-04-12T16:37:57-04:00April 12th, 2024|3- This Week|

The CFPB Stand-Off

On Tuesday, the HFSC Financial Institutions Subcommittee holds yet another hearing which Republicans hope will so embarrass the CFPB that their decades-long quest to redesign or even kill it gains traction ahead of critical litigation and the national election.  The nominal topic of the hearing is the Bureau’s financial audit, and Republicans will surely make as much of it as they can to damage Director Chopra’s leadership.  However, the real target is the Bureau’s race to finalize a series of substantive actions ahead of its own political challenges should litigation and the election go against it.  The most immediate rule on the GOP’s firing line is the credit-card late-fee standard (see FSM Report CREDITCARD37), a rule now enmeshed in court decisions and challenges of unprecedented intricacy that nonetheless appear likely leading to a near-term injunction blocking the rule as lenders devoutly desire.


5 04, 2024


2024-04-05T16:26:55-04:00April 5th, 2024|3- This Week|

Crossing the AML Frontier

As the schedule below makes clear, Treasury Deputy Secretary Wally Adeyemo will bring his agency’s updated wish list before Senate Banking on Tuesday.  The principal focus of the session is sure to be digital assets, with Treasury refining its prior plan to bring them fully within the AML/CFT enforcement scope not just to the greatest extent possible under current law, but also after key revisions.  Democrats will be most receptive, with Sen. Warren (D-MA) using the session to propel her stalled bill to revise the law to bring what she calls cryptocurrency fully within it.  This is a bipartisan bill, but we still expect many Republicans to complain that data does not support Treasury’s concerns in this sector.  Republicans led by Ranking Member Scott (R-SC) are sure also to use the session to complain that big banks are using SARs to target January 6 protesters and others with whom they do not agree, alleging also that Treasury has pressed banks to do so for its own political purposes.  Sen. Scott has sent a strongly-worded letter on this topic and it is a still more high-priority issue in the House.  As always, an in-depth analysis will follow the hearing pointing to key actions and any changes to the challenging path ahead for the Warren-Marshall bill now that it was omitted from Majority Leader Schumer’s priority list.


29 03, 2024


2024-03-29T12:07:19-04:00March 29th, 2024|3- This Week|

Weekly Analyses Returning Next Week

Federal Financial Analytics’ weekly report will be abbreviated this week due to Easter holiday. In-depth analyses of weekly developments and Karen Petrou’s memo will resume on Monday, April 8.


22 03, 2024


2024-03-22T16:35:16-04:00March 22nd, 2024|3- This Week|

One Down, Not Out

As we noted, Vice Chair Barr has bowed to the institutional might of the central bank he helps govern, agreeing Friday that the consensus which Chair Powell committed (see Client Report FEDERALRESERVE75) on the capital rules will lead to significant, material changes.  This is a major victory for banks who mustered what Mr. Powell and others said is the most omnipresent, potent regulatory-advocacy campaign they’ve ever seen.  Still, it leaves open what will change, how Acting Comptroller, and – more problematic – FDIC Chair Gruenberg and Director Chopra will join in.  We anticipated this outcome in our January forecast on the future of the capital rule, also laying out just what the concession might look like and what could happen if only the Fed or just the Fed and OCC are able to agree.  We will shortly provide clients with an updated forecast of what’s to come along with a look at a question of almost equal importance:  when changes will come and if that’s enough time to ensure finalization before the political landscape could take a decided change all its own this November.


15 03, 2024


2024-03-15T17:23:21-04:00March 15th, 2024|3- This Week|

Answered Prayers?

Banks have been asking regulators for years – decades? – to update 1995 merger guidance.  So the banking agencies are beginning to do, but not exactly as banks would have liked to see it done.  Although Sen. Warren (D-MA) thinks the OCC’s proposed merger policy is too soft, our analysis (see FSM Report MERGER14) and that of many others finds it a formidable barrier to all but the simplest, smallest transactions.  Now comes the FDIC.  As the schedule below makes clear, it plans on Thursday to issue a proposal based on its 2021 RFI (see FSM Report MERGER9).  We doubt any bank-merger policy influenced as strongly by CFPB Director Chopra will be a bank merger policy banks will like any better than the OCC’s, although some compromises may have to be made if Republican members of the FDIC board are willing to contemplate at least some of what Mr. Chopra, surely seconded by Chair Gruenberg, wants done.


8 03, 2024


2024-03-08T16:55:35-05:00March 8th, 2024|3- This Week|

Strike-Force Attack

As noted last week, the White House has announced a new “strike force” aimed at the price-gouging and “junk” fees it sees far and wide across the U.S. economy, including when it comes to financial services.  Expect to hear more of this not only on the campaign trail (where Donald Trump may side more or less with the White House) as well as in the near term from the CFTB, DOJ, FTC, and even the OCC and FDIC despite their status as independent agencies.


1 03, 2024


2024-03-01T17:07:55-05:00March 1st, 2024|3- This Week|

A Central Bank Very Much in the Middle

As always, we will provide clients with in-depth analyses after Chair Powell comes before Congress later this week to face the usual fusillade of political inquiry along with policy questions.  As before (see Client Report FEDERALRESERVE74), Mr. Powell will face hard questioning from Republicans on the pending capital rules, with many now trying to pin him down on likely changes and the extent to which Mr. Powell’s promise of consensus before a final rule still holds.  A lot of questions will also come from both sides of the aisle on bank mergers, with House Democrats demanding a new merger policy, Sen. Warren (D-MA) trying to get Mr. Powell to signal disapproval of the CapOne/Discover deal – he won’t, and Republicans trying to get Mr. Powell to say that deals such as this one must get done to ensure regional-bank survival – again, he won’t.  We also expect a new grilling from the GOP on Fed emergency-liquidity powers, along with continuing questions on climate risk, CBDC, and the quality of bank supervision.  The fate of NYCB by the time of the hearing will also be a major preoccupation on both sides of the aisle even if bad doesn’t immediately go to worse.  Democrats will try to shore up CBDC but many are also troubled by emergency-liquidity powers.  All sides will of course take much of the hearing’s bandwidth by pushing Mr. Powell to go one way or …

23 02, 2024


2024-02-23T16:40:22-05:00February 23rd, 2024|3- This Week|

Anniversary Party

March 10 is the one-year anniversary of Silicon Valley Bank’s costly failure, although one might better date the beginning of the end of regional-bank regulation as we knew it to March 8, the date Silvergate bit the digital dust.  Congress has talked much of these failures ever since, but actually done nothing but chide the banking agencies from different sides of the political spectrum based on what Members think of the massive regulatory rewrite proposed in SVB’s wake and ongoing internal work at the banking agencies to improve woefully-inadequate supervision.  We would add the value also of focusing on the FDIC’s inability to resolve troubled banks to the urgent to-do list, but Congress has yet to turn to it and so neither does the FDIC.  Still, lack of action does not mean lack of talk.  There will in fact be much, much talk about recent failures when Chair Powell comes to Congress next week and even, we expect, a bit of legislative action that just might change a little bit of banking law.


16 02, 2024


2024-02-16T15:54:42-05:00February 16th, 2024|3- This Week|

Bagehot’s Legacy

HFSC Financial Institutions Chair Barr (R-KY) last week invoked the patron saint of central banks, Walter Bagehot, reminding his hearing (see Client Report LIQUIDITY34) that central banks are to use their lender-of-last-resort powers only for solvent banks and then only at a premium.  To do other, Bagehot said and Mr. Barr repeated, is to encourage moral hazard, the sin the chair went on to attribute to the modern-day Federal Reserve.  He also floated legislation to curb the Fed’s 13(3) emergency-liquidity powers, legislation on which he will have a surprising ally, Sen. Elizabeth Warren (D-MA).  She is a long-time advocate of tougher restrictions on Fed emergency liquidity (see FSM Report FEDERALRESERVE21).  Still, we think the odds of legislation in this Congress are small, with Congress, the agencies, and banks sure instead to focus on what will be demanded of them in terms of discount-window readiness, FedWire resilience, FHLB access, and additional liquidity.  Vice Chair Barr is less enthusiastic than Acting Comptroller Hsu about new liquidity standards, but much is afoot and thus so are we.  More to come…


9 02, 2024


2024-02-09T16:40:01-05:00February 9th, 2024|3- This Week|

Are We Wasting Your Time?

We most assuredly hope not, but watching Congress last week was deeply dispiriting not only when it comes to the most critical issues of the day, but also to essential financial-policy decisions.  Our in-depth reports on Tuesday’s HFSC hearing with Secretary Yellen (see Client Report FSOC30) and Thursday’s Senate follow-up (see Client Report FSOC31) laid out key topics discussed and what was said as we always do.  But what we said about what was said was largely inconsequential because almost nothing of real note was said.  The exception came on Thursday when the Secretary intimated that near-term action may begin to deal with the systemic risk FSOC fears from nonbank mortgage companies.  But even here she was elliptical and no senator made any effort to pin her down.  Instead, they – like their House counterparts and the secretary – reiterated partisan talking points about the economy, inflation, and the debt.  But, reading between the lines in our reports and our other analyses illuminates a remarkable number of likely, meaningful Congressional actions on issues of immediate financial policy import assuming NYCB doesn’t fail and absorb the little bandwidth Congress seems to have for financial policy.


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