Press Center

‘Triple threat’: Auto strike joins a messy season for Biden’s economy

By Sam Sutton

The strike against Detroit’s Big Three automakers is hitting the U.S. economy at a precarious time — as it’s struggling with an era of high inflation and soaring borrowing costs. Combined with other emerging headwinds — rising gas prices, tightening credit, the resumption of student loan payments and shrinking household savings — the walkout could slow growth just as President Joe Biden and Federal Reserve Chair Jerome Powell are trying to steer the U.S. away from a recession….“None of these is a shot in the temple; they’re nonfatal,” Federal Financial Analytics managing partner Karen Petrou said. “But none is good, and the American public is fragile. It doesn’t take much to throw them off.” Pillars of the economy — including the job market and consumer spending — remain strong. But a protracted auto industry strike could be a significant test for Powell, who is already under pressure from progressives to relax monetary policy as inflation levels out in key segments of the economy.

https://www.politico.com/news/2023/09/15/triple-threat-auto-strike-joins-a-messy-season-for-bidens-economy-00116088

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Spinout of banking unit could be best option for embattled Hawaiian Electric

By Author Alex Graf, Syed Muhammad Ghaznavi

Questions are swirling about American Savings Bank FSB’s future as its parent company Hawaiian Electric Industries Inc. faces mounting lawsuits. As the only bank in the country owned by a publicly traded utility company, American Savings Bank is in an unprecedented position as its parent company Hawaiian Electric comes under pressure following fires that devastated the town of Lahaina….”Without downstreamed parent-company cash in hand to protect it from the utility’s travails, the insured depository and thus the FDIC are sure to suffer,” Karen Petrou, the co-founder and managing partner at Federal Financial Analytics, wrote in a recent blog post. The bank had $8.21 billion in total deposits at June 30, and $1.75 billion of those were uninsured, according to S&P Global Market Intelligence data. In the press release, American Savings Bank touted its liquidity and capital position, and assured customers that their deposits are safe. The bank has 273% of liquidity coverage for its uninsured deposits and a common equity Tier 1 ratio of 12.23%. It also has borrowing capacity of $3.1 billion from the Federal Home Loan Bank and Federal Reserve, according to the press release. Banking regulators are also in a precarious situation because they do not have oversight of Hawaiian Electric like they do for most bank holding companies. When a parent company is a bank or savings and loan holding company, the Federal Reserve can …

Regulators must monitor more than big banks to avoid systemic failure

By Karen Petrou

Federal banking agencies are fiercely waging what some big banks consider a jihad mandating tough new rules. Some of the rules are warranted, some not. Regardless, what’s completely missing and all too essential is action on all the other manifest threats that aren’t big banks. Indeed, one looming nonbank’s systemic merger poses a clear and present danger: Intercontinental Exchange Inc. (ICE). ICE, an already-systemic global clearing and settlement powerhouse, is now poised to gain still greater control over critical portals across the even more systemic $12 trillion mortgage market through a merger with real estate software company Black Knight.  So much could go so wrong so fast if ICE is allowed to complete its acquisition of Black Knight that, should this occur, the firm as a whole must quickly be designated a systemic financial market utility and regulated as such by the Federal Reserve.

https://thehill.com/opinion/finance/4183220-regulators-must-monitor-more-than-big-banks-to-avoid-systemic-failure/#:~:text=Federal%20banking%20agencies%20are%20fiercely,rules%20are%20warranted%2C%20some%20not.…

SVB’s failure has led US regulators to see higher capital as solution to future crises

The failure of Silicon Valley Bank and a few others has led regulators to swing the pendulum too far toward more draconian capital solutions. U.S. bank regulators recently unveiled sweeping proposals to raise capital for the country’s largest banks by around 16%, or about $200 billion. The proposed capital charges stunned many in the banking industry and prompted dissent among policymakers at the U.S. Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) — something one rarely sees….The question that emerges is why such draconian capital charges are needed when regulators have long said that the U.S. banking system is resilient and well-capitalized. “The banking agencies are in the same bind parents are with their children,” said Karen Petrou, managing partner of Federal Financial Analytics, a Washington, D.C. consultancy. “They want to tell the world how clever their kids are so no one thinks the kid is at-risk or the parent is neglectful. But, at home, they demand lots more homework and far better grades. The agencies’ rhetorical dance results from their desire to reassure financial markets yet chastise banks.”

https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/svbs-failure-future-crises/

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White House uses the term ‘Bidenomics’ to help sell the president’s economic agenda

By Asma Khalid

President Biden has low approval ratings on the economy even though voters like some key policies. The White House wants to narrow this gap with its “Bidenomics” slogan, but there are risks….But some experts say this strategy also means the president is owning the economy – all of it. He’s literally putting his name on it. Karen Petrou is a financial analyst who’s worried that this strategy could actually help former President Donald Trump, the current Republican front-runner. Karen Petrou: I don’t mind the term Bidenomics. What I mind is that the president is putting his name on economic success, which most Americans aren’t experiencing. And I fear that that will be very damaging to his electoral prospects.

https://www.npr.org/2023/07/26/1190327638/white-house-uses-the-term-bidenomics-to-help-sell-the-presidents-economic-agenda…

Why the messaging around “Bidenomics” might not be working

https://www.marketplace.org/2023/07/24/why-the-messaging-around-bidenomics-might-not-be-working/…

End court’s homeless meddling, the ‘Bidenomics’ delusion and other commentary

Editorial Board

The US Court of Appeals for the 9th Circuit isn’t “the only reason why cities across the West Coast have been overrun with plague-infected homeless camps,” but it’s “a big part of the problem,” grumbles the Washington Examiner editorial board. In Martin v. Boise, the 9th Circuit used the Eighth Amendment to prohibit cities “from enforcing their anti-camping statutes unless they could prove that the city had enough shelter beds available to house every homeless person” there. “Denying cities the ability to clear out public spaces and disincentivize public camping” makes homelessness harder to deal with. A year ago, the “Supreme Court wisely took abortion regulation out of federal courts and returned it to democratically elected leaders”; it’s time it “did the same thing for homelessness policy.”…While President Biden touts “his achievements for the US middle class” based on new job numbers, “American wealth inequality is at one of its highest levels since the Fed began calculating it in 1989,” observes Karen Petrou at The Hill. The bottom 50% of US households “would need to earn $5,000 more just to buy the same things it could the year before the pandemic.” Indeed, “two out of three voters disapprove of his economic performance and no wonder — roughly two-thirds of American households are living paycheck to paycheck and/or skipping purchases they can no longer afford.” The prez hopes to “persuade voters that happy times are here again,” yet that’s …

Bidenomics is an insult to millions of voters living paycheck to paycheck

By Karen Petrou

Bidenomics is gaining no voter traction. To understand why, step back from all the technical economic indicators and look at economic life for key voters — the majority is falling farther and farther behind, faster and faster than ever. On June 28, President Biden stood in front of Bidenomics banners to tout his achievements for the U.S. middle class. And, as he has done with any glimmer of good economic data, he followed that up on July 7 with what was effectively a self fist bump, touting new jobs numbers….

https://thehill.com/opinion/finance/4093277-bidenomics-is-an-insult-to-millions-of-voters-living-paycheck-to-paycheck/…

Inflation eases but Fed can’t conquer housing prices

As the Biden administration cheers signs that price rises across the economy have started to cool, homeownership remains out of reach for many first-time buyers.

By Kathy O’Donnel and Sam Sutton

Consumer price inflation is easing, sparking hope that the U.S. may be turning the corner on the worst price spikes in decades. Yet the single biggest component of the Consumer Price Index — housing costs — continues to be the main driver of inflation, rising twice as fast as everything else…“For younger voters, who are seeking to move out of rentals or to find an affordable first home close to work, that can be close to impossible minus a down payment from a wealthier parent,” said Karen Petrou, co-founder and managing partner of Washington-based consulting firm Federal Financial Analytics. “This is one of the really classic aspects of American economic inequality,” she said. “People are squeezed.”

https://www.politico.com/news/2023/07/12/housin-inflation-fed-00105757

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