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29 11, 2022

NPR, Marketplace Morning Report: Tuesday, November 29, 2022

2022-11-29T15:11:24-05:00November 29th, 2022|Press Clips|

Your move, Federal Reserve

Host Sabri Ben-Achour

Today is the eve of Fed Chair Jerome Powell’s speech, where he’s expected to lay out the current economic landscape and offer hints as to what the Fed might do with it in a couple of weeks. For more, we talk with Karen Petrou of Federal Financial Analytics.

Listen here:

22 11, 2022

American Banker Podcast: Tuesday, November 22, 2022

2022-11-28T10:50:02-05:00November 22nd, 2022|Press Clips|

‘Democrats lost the house. I’m less convinced that Republicans won it.’
Host John Heltman Welcome to the American Banker Podcast. I’m John Heltman. As you probably heard, we had an election a few weeks ago and as you also may have heard the outcome, at least in terms of which parties control which chambers of Congress has finally been determined, Democrats have retained control of the Senate and could even pick up a seat depending on the outcome of the runoff election in Georgia next month, Republicans retook control of the House of Representatives, albeit with a much narrower margin than was widely anticipated. And coincidentally, just as the voting was taking place across the country, crypto exchange, FTX began its downward spiral towards bankruptcy, a development that has broad political implications for the next Congress and for regulators’ efforts to establish rules for the crypto verse to live by, to unpack the midterm elections and the policy trajectory going forward. I invited some of the smartest people I know to the National Press Club in Washington, DC last week: Karen Petrou, co-founder and managing director of Federal Financial Analytics; Aaron Klein, Miriam K. Carliner chair of Economic Studies and Senior Fellow of the Center on Regulation and Markets at the Brookings Institution; and Ed Mills, managing director and Washington policy analyst at Raymond James. We talked about the election, what to expect out the lame duck Congress, the long shadow of FTX and what all of this means for
14 11, 2022

American Banker, November 14, 2022

2022-11-14T13:07:14-05:00November 14th, 2022|Press Clips|

For the Fed, less bad news is good news

By Kyle Campbell

After a year of scrutiny and criticism, the Federal Reserve had a good week — or, at least, a week that was much better than it could have been. Two major developments last week bolstered the central bank’s credibility in setting monetary as well as bank regulatory policy at a time when it is facing heavy scrutiny on both fronts…”It could have been a very bad week, but the fact that there weren’t crises is a pretty faint measure of success,” said Karen Petrou, managing partner of Federal Financial Analytics. The positives of last week’s episodes also come with significant caveats.


24 10, 2022

American Banker, Monday, October 24, 2022

2022-10-24T11:19:09-04:00October 24th, 2022|Press Clips|

A reckoning could be coming over Fed’s payments to banks

By Karen Petrou

Congress will do nothing about anything until the midterm election seals each member’s fate. Thus, I expect nothing to come from Congress in 2022 responding to the Federal Reserve’s sudden turn for the financial worst. However, when Congress again comes to thinking about the Fed, it will not go unnoticed, despite all the acrimony about monetary-policy miscues, that taxpayers are in some ways now far more clearly subsidizing payments to banks, money market funds and other financial companies holding deposits with the central bank or using its standing market windows.
The last time Congress thought about interest rates on reserves (IRR), more than a few members wanted it back. Given that these payments are now at what seems direct taxpayer cost, they’ll have a lot of new friends in the next Congress unless someone quickly shows why these interest payments are an artifact of Fed confusion, not big-bank malfeasance.

21 10, 2022

The Hill, Friday, October 21, 2022

2022-10-21T12:17:14-04:00October 21st, 2022|Press Clips|

It’s left vs. Federal Reserve on interest rates hikes

By Sylvan Lane

Progressive Democrats are ripping the Federal Reserve over deepening concerns the central bank could drive the U.S. into recession amid sky-high inflation not seen in four decades. Top liberal lawmakers are urging the Fed to stop hiking interest rates and slowing the U.S. economy, insisting that it’ll do nothing to curb inflation while plunging millions into joblessness…. “The Fed now has few choices but to make everything worse,” said Karen Shaw Petrou, managing partner of research firm Federal Financial Analytics, in a Thursday interview.


18 10, 2022

American Banker, Tuesday, October 18, 2022

2022-10-18T10:46:52-04:00October 18th, 2022|Press Clips|

‘Everything’s on the table’ for Fed, FDIC as they weigh resolution reform

By Kyle Campbell

Bank regulators have sparked debate among policy specialists about what requirements should be imposed on large banks to make sure they can fail without harming the broader financial system.
Last week, the Federal Reserve and the Federal Deposit Insurance Corp. issued an advance notice of proposed rulemaking on large-bank resolution standards. In it, the agencies asked for public input on a dozen subjects relating to potential requirements ranging from long-term, loss-absorbing debt to plans for key assets to be liquidated individually……”The [Insured Depository Institutions] have gotten so big that the traditional approach the FDIC has to deal with them is, at best, creaky and more likely not viable under stress,” said Karen Petrou, founder and managing partner of Federal Financial Analytics. The resolution plan requirements currently imposed on large banks have made them more resilient than pre-Dodd-Frank, Petrou said. She also noted that bank holding companies in these categories tend to meet the standard of “clean” already, and their underlying depository institutions are all insured, so additional regulatory requirements have not been necessary. Yet, one element of the large-bank resolution that warrants revisiting is the “least-cost test,” Petrou said. A provision of the 1991 FDIC Improvement Act requires the FDIC, when overseeing the resolution of a failed bank, to liquidate the institution’s assets at the lowest cost possible to the public. Petrou said updating the least-cost standard, or at least clarifying its applicability …

18 10, 2022

Marketplace, Tuesday, October 18, 2022

2022-10-19T10:08:01-04:00October 18th, 2022|Press Clips|

Why banks are setting aside cash to cover bad loans

By Justin Ho

There’s a special feeling you get during this time of year. The air gets cooler, the leaves change color, and companies issue their latest quarterly reports. Yes, we are in the middle of earnings season. And lately, we’ve been hearing from a number of companies that are preparing for a chillier economy. Call it hoarding their acorns….Karen Petrou at Federal Financial Analytics said banks are essentially pulling out their sweaters ahead of the winter. “We might not need them, maybe the winter will be warmer than we think, but we have the sweaters, we bought the sweaters, we’re ready,” she said. And if there’s a mild recession, or no recession, Petrou said it’s no big deal to put those sweaters back.


4 10, 2022

American Banker, Wednesday, October 4, 2022

2022-10-05T11:40:58-04:00October 4th, 2022|Press Clips|

Fed, FDIC plan for living wills sparks debate about best approach

By Kyle Campbell

New guidelines are coming for how large regional banks should prepare themselves for bankruptcies, but some policy experts are already questioning if they will go far enough. The Federal Reserve and the Federal Deposit Insurance Corp. issued a joint statement Friday that they will provide guidance on resolution planning for banks that have at least $250 billion in assets but do not qualify as too-big-to-fail….Karen Petrou, co-founder of Federal Financial Analytics, said it is difficult to read too much into what the Fed and FDIC have in mind about specific changes to their resolution plan policies. She said it is likely that Category II and Category III banks will face more scrutiny than they currently do, albeit not as much as the G-SIBs, but little is clear beyond that. Overall, Petrou said she supports a resolution planning framework that is conducted in an orderly fashion for all relevant institutions, which the agencies seem to be calling for, rather than the current regime, which places greater scrutiny on merging firms. “That is an appropriate approach, it’s good governance,” Petrou said. “If you were doing it on a deal-by-deal basis, based on a policy issue that cuts across regional banks, it’s really unfair to target one or another bank. This needs to be done across the sector.”




12 09, 2022

American Banker, Monday, September 12, 2022

2022-09-14T10:00:47-04:00September 12th, 2022|Press Clips|

29 08, 2022

American Banker, Monday, August 29, 2022

2022-08-29T15:10:32-04:00August 29th, 2022|Press Clips|

As Fed goes full steam ahead on higher interest rates, banks brace for new normal

The Federal Reserve’s target federal funds rate is as high as it has been in a decade and is unlikely to go any lower in the foreseeable future, Chair Jerome Powell said Friday. But just how this new reality will affect banks individually depends in large part on what’s in their loan books. During a speech at the Federal Reserve Bank of Kansas City’s economic symposium in Jackson Hole, Wyoming, Powell said he expects the rate to be just under 4% by the end of next year…Karen Petrou, managing partner at Federal Financial Analytics, said most banks are keenly aware of this risk and have taken measures to mitigate it, chiefly by diversifying their mix of funding sources. But as rates continue to rise, further adjustments will likely become necessary, she said, noting that just what those changes look like will depend on a number of factors. As the cost of funds rises to the extent it does, the lending mix is going to change. Banks may start to move funds out of excess reserves and start to put them into the economy, and that would be very good for the economy and good for the banks, but that’s not going to happen in a recession,” Petrou said. “The lending may have a higher return, but it’s also higher risk as demand goes down. There’s so many moving parts here. …

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