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5 07, 2024

Marketplace, Friday, July 5, 2024

2024-07-08T11:21:18-04:00July 5th, 2024|Press Clips|

Unpacking the June jobs report

The U.S. economy added 206,000 jobs in June, according to the labor department.   On the other hand, the job growth in previous months was revised down significantly. Let’s discuss with Karen Petrou, co-founder and managing partner at Federal Financial Analytics.

https://www.marketplace.org/shows/marketplace-morning-report/more-signs-of-a-cooling-labor-market/#Unpacking-the-June-jobs-report

25 06, 2024

American Banker, June 25, 2024

2024-06-27T14:51:51-04:00June 25th, 2024|Press Clips, Uncategorized|

Derivatives pose thorny problem for banks, regulators in resolution plans

By Kyle Campbell

Federal regulators want large banks to get specific about their contingency plans for their derivatives holdings. The Federal Deposit Insurance Corp. and the Federal Reserve cited four of the country’s largest banks last week for weaknesses in their resolution plans related to derivatives — a broad and varied market of financial contracts that include swaps, options and futures. The move was the latest and most direct move by the agencies to encourage banks to step up their practices around the handling of these contracts…Yet because of their complexity and the role they play in financial markets, derivatives receive different legal treatment than other assets on a bank’s balance sheet, said Karen Petrou, managing partner at Federal Financial Analytics. Deemed “qualified financial contracts” by Dodd-Frank, derivatives held by systemically large banks — known as “covered entities” — are shielded from typical default provisions in cases of failure. This means that, unlike in a traditional bankruptcy process, when these banks fail, their counterparties cannot simply close out their derivative positions. This arrangement is meant to protect banks, the FDIC and broader financial stability by mitigating losses for large failed banks and preventing counterparties from having to quickly seek out hedging alternatives.But, because these contracts are treated differently under the special resolution regime than they are under the traditional bankruptcy code, Petrou said there is ambiguity and confusion about how they should be handled.”Without clarification of the bankruptcy …

17 06, 2024

Marketplace, Monday, June 17, 2024

2024-06-21T09:56:29-04:00June 17th, 2024|Press Clips|

Why are bond prices up right now? And what difference does it make?

By Mitchel Hartman

We’re in the midst of a bond market rally. In the last eight weeks — barring Monday, when the bond market retreated a bit — bond prices have been going up, as their yields — the annual interest rate they pay — have been going down….The Fed’s got interest-rate-setting meetings in July and September. But here’s the thing: It met just last week: At that meeting, “they changed their forecast,” said Joanna Gallegos. “They said for the end of the year, we anticipate only making one rate cut versus three.” Basically, said Karen Petrou, a managing partner at Federal Financial Analytics, the bond market is saying to the Fed: “We can hear you. We’re just not listening.” “Even though [Chair] Jay Powell said, ‘We’re going to keep rates about where they are for a while. We don’t think we’ve beaten inflation yet,’ the market is essentially saying, ‘We think you have, and you’re going to be cutting rates as soon as September,’” Petrou said. Based on that belief, investors bid up bond prices, sending the interest rate on the benchmark 10-year Treasury note lower. “Traders think the Fed is overcautious, and the Fed will be able to cut rates. Indeed, it may have to cut rates because the economy will be softening,” she said. But Petrou pointed out that so far, the Fed has confounded market expectations, keeping rates higher for …

8 05, 2024

American Banker, Wednesday, May 8, 2024

2024-05-08T15:14:09-04:00May 8th, 2024|Press Clips|

Will Democrats stand by Gruenberg?

By Clair Williams

Lawmakers — mostly Republicans — let loose almost immediately after the release of an independent review of the Federal Deposit Insurance Corp.’s workplace culture, calling for the agency’s chairman, Martin Gruenberg, to resign. Those calls, while neither entirely new nor unexpected, were being made by lawmakers farther afield from the usual suspects on the House Financial Services Committee and Senate Banking Committee who are typically involved in financial policy issues….Those hearings could be critical to Gruenberg’s survival at the agency. So far, both the White House and his Democratic allies on Capitol Hill haven’t asked for his resignation, but that could change in the time between the release of the review and his testimony. Lawmakers are receiving closed-door briefings today on the results of the review, according to multiple committee sources familiar with the matter, which could affect lawmakers’ views. I think it’s going to depend on the hearings,” said Karen Petrou, managing partner at Federal Financial Analytics. “I really do.” While Republicans are unified in opposing Gruenberg’s continued time as chairman of the agency, Democrats have been more shaky, she said. They are in a tough position, Petrou said, because of Gruenberg’s importance to the Democratic banking policy agenda, “but on the other hand, if these were allegations about a Republican or a business person, they would be up in arms.”  “It’s going to be touch-and-go,” she said. “If the hearings go well and he holds his ground and …

19 04, 2024

American Banker, Friday, April 19, 2024

2024-04-19T15:16:22-04:00April 19th, 2024|Press Clips|

11 04, 2024

Marketplace, Wednesday, April 11, 2024

2024-04-12T09:22:02-04:00April 11th, 2024|Press Clips|

What do bank earnings tell us about the economy?

By Mitchell Hartman

It’s the second week of April, which means spring is in the air and daffodils, cherry trees and lilacs are blooming. Here at Marketplace, it also means earnings season is starting. Corporate profit-and-loss reports for the January-to-March quarter kicked off in earnest Wednesday with Delta Air Lines, which did quite well. Revenue rose 6% and earnings per share nearly doubled from a year ago. ..“Banks really are bellwethers of the economy,” said Karen Petrou, managing partner at Federal Financial Analytics. “Biggest issues for the larger banks: interest rates, which we — at least, I — know are going to be higher for longer. And that helps to improve bank earnings.” That’s because the banks make more money on the interest they charge borrowers. But Petrou said there’s also a downside to interest rates staying high: credit losses. As consumers keep spending, their credit card balances are rising….“We know that the low-wage earners are having difficulty. What we’re looking for now: Has it crept up the wage scale, middle-income wage earners with late payments or delinquencies?” she said.

https://www.marketplace.org/2024/04/11/what-do-bank-earnings-tell-us-about-the-economy/

5 04, 2024

Marketplace, Friday, April 5, 2024

2024-04-05T15:37:25-04:00April 5th, 2024|Press Clips|

When is strong hiring too strong?

Hiring in the month that just ended was quite a bit stronger than expected, with more than 300,000 jobs added to payrolls and the unemployment rate falling slightly to 3.8%. That’s continuing the Fed’s interest rate predicament. We’ll discuss with Karen Petrou, co-founder and managing partner at Federal Financial Analytics.

4 04, 2024

American Banker, Podcast, April 4, 2025

2024-04-04T15:04:14-04:00April 4th, 2024|Press Clips|

Buy the People: Why everyone loves to hate the Fed

By Kyle Campbell

Click the link below to listen to Kyle Campbell’s podcast on economic  populism.  It’s a terrific survey of Fed history with authoritative insiders including Federal Financial Analytics‘ managing partner Karen Petrou, and then – my bit – an assessment of why recent monetary  policy has made so many Americans so angry and how that affects the political outlook , especially this November.

https://www.americanbanker.com/podcast/buy-the-people-why-everyone-loves-to-hate-the-fed

2 04, 2024

Politico Morning Money, Tuesday, April 2, 2024

2024-04-02T10:37:12-04:00April 2nd, 2024|Press Clips|

By MICHAEL STRATFORD and ZACHARY WARMBRODT

First look: A bank merger rethink — MM has a preview of a provocative bank M&A talk that Federal Financial Analytics managing director Karen Petrou will give at a Kansas City Fed workshop today.

As banking agencies signal tougher scrutiny of proposed mergers, Petrou makes the case that regulators are failing to use tools they already have to address conflicts of interest, concentration and unfair competition ahead of M&A reviews.

“How much of this is necessary in merger review and how much could be accomplished by better prudential regulation along with vigilant supervision and meaningful enforcement?” she says in remarks prepared for her talk, which you can read here.

https://www.politico.com/newsletters/morning-money

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