The Vault

On Tuesday, HUD and the CFPB opened the door to special-purpose mortgage finance.  Now, we expect FHFA to use this safe harbor to mandate express GSE equitable-finance programs and for banks to take much of what’s left in all their commitments after George Floyd’s murder and turn it into mortgage and other community-finance products.

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

On Tuesday, HUD and the CFPB opened the door to special-purpose mortgage finance.  Now, we expect FHFA to use this safe harbor to mandate express GSE equitable-finance programs and for banks to take much of what’s left in all their commitments after George Floyd’s murder and turn it into mortgage and other community-finance products.

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

As anticipated, today’s HFSC hearing was a marathon session at which industry witnesses defended their business model, Republicans liked it fine, and Democrats worried about a wide array of policy challenges. While both sides of the aisle agreed that cryptoassets might well enhance financial inclusion, partisan battle lines formed over issues such as the extent to which stablecoins are fully reserved, covered by the securities laws, and if a single regulator for this sector is either desirable or feasible. Industry witnesses strongly rejected the PWG’s stablecoin conclusions (see Client Report CRYPTO21), suggesting for example that stablecoins are safer than bank deposits because they are fully – not fractionally – reserved.

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

Under Rohit Chopra, consumer protection has taken an important, widely-overlooked turn with potent consequences for all retail financial-product providers.  Media coverage of the CFPB’s bigtech order, mortgage-discrimination action, and last week’s anti-overdraft campaign highlighted traditional issues such as fair lending and predatory pricing. These are indeed in the CFPB’s sights, but so also is a much bigger target: the extent to which a few large companies are said to be able to set consumer interest rates and otherwise dictate the shape of U.S. retail finance. This might cut big banks down to the puny size their critics seek, but it’s more likely to accelerate the transformation of retail finance into a wild west of unregulated providers outside the reach of safety-and-soundness standards and, in many cases, even of the CFPB. If this pro-competition campaign is mis-calibrated, the CFPB will put consumers at still greater risk.

Mr. Chopra’s interest in market competition doubtless derives from his stint as a lone, strong voice at the Federal Trade Commission who lost pretty much every battle he waged against giant corporate combos.  It surely stems also from President Biden’s executive order demanding that federal agencies take express pro-competitive action. And, indeed, there’s a lot to do in sectors such as tech-platform companies that already seem to have skipped over just being monopolies to become potent oligopolies with powerful impact over each aspect of everyday life, not to mention pricing and economic inequality.

However, neither traditional nor neo-Brandeisian antitrust theory applies well …

Two recent studies add fuel to the fire we first spotted late last year: demands for ARMs that only go down.  Director Thompson’s latest scorecard combines with her equitable-finance mission to make this option a top political priority even if its market feasibility remains at best uncertain.

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Continuing the partisan and often-acrimonious tone of the Senate Banking hearing (see Client Report FEDERALRESERVE64), HFSC today heard from Chairman Powell and Secretary Yellen.  Much of the session was preoccupied by differing views of whom or what is to blame for inflation, with Members also squaring off on the benefit of the BBB and infrastructure bills.  Many financial-policy priorities were sidelined by these big-picture battles, with the session omitting discussion of topics such as digital currency, bank consolidation, and even fair lending and diversity.

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

Although the OCC joined other agencies issuing a non-committal “roadmap” for future cryptography actions, the agency at the same time and far more decisively stated that crypto activities are permissible only if they are also safe and sound.  As a result, national banks and federal savings associations (FSAs) may no longer simply undertake approved crypto activities and now instead must receive prior OCC consent to do so.  This may prove challenging to banks now using or seeking to use national charters for their own businesses, for partnerships with state-chartered entities, or via their own fintech ventures.

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

Unsurprisingly, FHFA today raised the GSEs’ conforming loan limit to about $647,000 and the high-cost limit to nearly $1 million.  More surprisingly, FHFA Director Thompson accompanied this politically-sensitive announcement with a statement that her agency is “actively evaluating the limit and its relationship to affordable housing across the U.S.”

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

Following the UN’s COP26 climate-risk summit, the Basel Committee has proposed high-level principles guiding risk management and supervision related to both physical and transition climate risk.

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

According to the American Farm Bureau Federation, the cost of Thanksgiving dinner this year is up fourteen percent, not counting the sixty percent hike it costs to buy the gas to get to grandma’s.  This of course only compounds the political challenge facing the Biden Administration when it tries to confirm its choices for the next iteration of the Federal Reserve Board.  However, while inflation is indeed a lightning rod, the macroeconomic building below it is also strung with perilous wiring.   This is because the Fed – not Congress – is now a fiscal powerhouse, exacerbating inequality and the slow growth that goes with it no matter the trillions Democrats hope to throw around.

The Fed would have it that there is a pure monetary-policy realm premised on independent macroeconomic thinking while the fiscal hurly-burly is responsible for anything macroeconomic that the Fed does not or cannot achieve.  The purity derives, or so the Fed likes to say, from its ascetic “dual” mandate, which allows the Fed only to seek “maximum” employment and price “stability.”  But, as both my book and a new paper detail, the black-letter law of the Fed’s express mandate in fact includes a third injunction:  “moderate long-term interest rates.”

Further, The Federal Reserve Act is not the only provision of federal law stipulating the Federal Reserve’s goals.  The Fed is also covered by the overall statutory injunction to all federal agencies under the Full Employment Act to advance the “general welfare” in concert with an …