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1 04, 2024

2024

2024-05-15T09:33:23-04:00April 1st, 2024|Speeches & Testimony|

The What Keeps Me Up Department:
Trump II and Global Systemic Risk
Karen Petrou
Managing Partner
Federal Financial Analytics, Inc.
Prepared for Annual ACTUS Conference
Washington, D.C.
May 15, 2024

Read remarks

 

Horizontal Bank Mergers:
Critical Industry Infrastructure in Harm’s Way
Karen Petrou
Managing Partner
Federal Financial Analytics, Inc.
Prepared for Federal Reserve Bank of Kansas City
April 2, 2024

Read remarks

25 03, 2024

Time, March 25, 2024

2024-03-27T10:31:30-04:00March 25th, 2024|Press Clips|

Why Is Trump’s Truth Social Worth Billions? Experts Have Theories

By Eric Cortellessa

On the cusp of a financial crisis, Donald Trump got help from an unlikely source: His struggling social media platform. Investors approved a plan on Friday to take Truth Social public, increasing his net worth by billions as he’s drowning in legal expenses and owes New York state half a billion dollars in a civil fraud case. The company will start trading on the ​​Nasdaq exchange on Tuesday. But the financial statements of Trump’s firm show scant evidence of a booming business worthy of the $4.7 to $5.6 billion market capitalization reported on Monday. Trump Media & Technology Group, which owns Truth Social, lost money last year, according to regulatory filings….It’s not the first time that markets have embraced social media companies at levels that appear to exceed their value, according to Karen Petrou, managing partner of Federal Financial Analytics. Other examples, she cites, include Uber and WeWork.“These kinds of valuations that seem insane are surprisingly common,” says Petrou, “They’re less common than they used to be when interest rates were low. All sorts of firms have been financed significantly, or capitalized through IPO, well above their estimated value. Some of them had no revenues for years. But the markets were chasing yield.”In other words: they were taking high risks they thought could lead to high rewards. That could also be the case with the lagging Truth Social, where shareholders are betting that a …

17 03, 2024

Barron’s, Sunday, March 17, 2024

2024-03-18T10:00:45-04:00March 17th, 2024|Press Clips|

The U.S. Economy Is Booming, But Only for a Few

“Our economy is literally the envy of the world,” President Biden declared in his recent State of the Union address. There’s some truth to this exceptionalism talk. However, the U.S. economy seems to be doing better than other advanced economies thanks also to data badly distorted by U.S. economic inequality. Here, we’re also exceptional, just in the bad way of being less equal than all other advanced democracies. Big-picture numbers show the U.S. economy beating much of the rest of the world. Gross domestic product grew 2.5% in 2023, compared to 1.9% in Japan, 0.5% in the U.K., and negative 0.3%—a mild recession—in Germany. Unemployment numbers are similar. What these apparently favorable comparisons miss, however, is how spending and investing by the few Americans who own so much of American wealth and receive so much of its income drive an economy that leaves almost everyone else farther and farther behind. Unequal economies are also unduly vulnerable to recessions and financial crises. The seeming strength of the U.S. economy is a brittle platform for growth or, as the White House hopes, political support….

https://www.barrons.com/articles/economy-inequality-bidenomics-ef5ef7ed

13 03, 2024

American Banker, Wednesday, March 13, 2024

2024-03-14T09:44:17-04:00March 13th, 2024|Press Clips|

Banks knock FDIC over growing tab for last year’s failures

By Polo Rocha

One year after Silicon Valley Bank and Signature Bank failed in the span of three days, big banks are miffed about their growing tab from last March’s wild weekend. The gripes stem from decisions made between March 10-12, 2023, when the Federal Deposit Insurance Corp. stopped deposit runs by taking over the two banks and declaring a systemic risk exception to ensure that the vast quantities of uninsured deposits at those failed banks were covered….Karen Petrou, the co-founder of the consulting firm Federal Financial Analytics, said the $4 billion difference is a “very significant mistake” that calls into question the FDIC’s credibility in gauging the costliness of bank resolutions. “When an agency gets something this wrong, it’s not unreasonable for those picking up the tab to ask,” Petrou said. The agency has been gradually getting rid of certain assets that First Citizens Bank and New York Community Bancorp did not acquire when they bought many of the remnants of the two failed banks. First Citizens bought much of SVB, and New York Community acquired parts of Signature…

https://www.americanbanker.com/news/banks-knock-fdic-over-growing-tab-for-last-years-failures

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6 03, 2024

Marketplace, Wednesday, March 6, 2024

2024-03-06T15:15:40-05:00March 6th, 2024|Press Clips|

How November’s election could shape antitrust policy

It’s the morning after Super Tuesday primaries, and for people making money decisions large and small, the election results are not a paradigm shift. We’ll discuss why with Karen Petrou, managing partner at Federal Financial Analytics.

https://www.marketplace.org/shows/marketplace-morning-report/this-elections-big-trust-issue-maybe-not-the-one-youre-thinking-of/

8 02, 2024

Politico Morning Money, Thursday, February 8, 2024

2024-02-08T12:31:26-05:00February 8th, 2024|Press Clips|

The latest on NYCB

By Zachary Warmbrodt

…. MM has a first look at the political and policy impacts to watch from Federal Financial Analytics. A few highlights:

  • The bank reported deposit inflows but what they are and how long they last is uncertain. A big factor: The government will likely be hard-pressed to do anything resembling a bailout or a systemic designation.
  • Details about NYCB’s reliance on Federal Home Loan Banks will be key. The FHFA – the agency overseeing the FHLBs — is taking a sterner view of troubled bank advances than it once did.
  • GOP lawmakers may focus on the FDIC’s decision to sell Signature Bank’s assets to NYCB, given it had yet to integrate Flagstar Bank and already had significant concentrations in New York-area commercial real estate. It could feed into Republicans’ push to force out FDIC Chair Martin Gruenberg.

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

31 01, 2024

Barron’s, Wednesday, January 31, 2024

2024-02-01T15:30:06-05:00January 31st, 2024|Press Clips|

There’s a Silver Lining for the Middle Class in High Interest Rates

By Matt Peterson

Americans are starting to feel better about the economy, but it might be a while before they release their anger at the Federal Reserve and Chairman Jay Powell. His approval rating has fallen even farther than President Joe Biden’s, according to Gallup. The Fed is seen as presiding over a period of inflationary agony. Its interest-rate increases were intended to slow price gains across the economy, but in the process they’ve made important aspects of American life more expensive. Sen. Elizabeth Warren (D., Mass.) and other Democrats urged Powell to cut rates this week, citing the high cost of mortgages, among other issues…. Banking analyst Karen Petrou’s 2021 book, Engine of Inequality: The Fed and the Future of Wealth in America, described the Fed in unflattering terms. The prolonged period of low rates helped boost stock prices but left the return on bank accounts’ savings at zero or below in real terms. The Fed didn’t want that result, and Powell has denied that the Fed is responsible for inequality. But Petrou argued that its monetary policy left the middle class “hollowed out.” Now that we’re on the other side of high rates, I asked Petrou for an update on her analysis. Banks are all but tripping over each other trying to recruit savers into high-yield accounts that offer risk-free returns above 5%. If part of the problem with low rates was …

30 01, 2024

Politico, Morning Money, Tuesday, January 30, 2024

2024-01-30T12:37:26-05:00January 30th, 2024|Press Clips|

By Zachary Warmbrodt

Karen Petrou, managing partner of Federal Financial Analytics, said the new policy will provide at least some certainty for national banks but that almost no deals of size will get done without the Federal Reserve and the Justice Department. The Fed and DOJ have been promising a new bank merger review policy but “it’s still nowhere to be seen.”

https://www.politico.com/newsletters/morning-money/2024/01/30/a-bank-merger-mirage-00138491

17 01, 2024

Politico Morning Money, Wednesday, January 17, 2024

2024-01-17T15:19:43-05:00January 17th, 2024|Press Clips|

The industry says the proposal is total overkill and needs to be both recalibrated and reduced. They, and Waller, also say that operational losses aren’t usually correlated with, say, credit risk events, so there’s not really a need to have another capital buffer for it.

“The charge for operational risk is extraordinary,” Bank Policy Institute CEO Greg Baer told reporters Tuesday. “It’s almost double the worst year of operational losses in history … and it assumes counterfactually and counterintuitively that op risk losses are perfectly correlated with market risk and credit risk losses, and therefore that you need to cover the worst case of all three simultaneously and capitalize for it.”

Karen Petrou, managing partner of Federal Financial Analytics, argues that banks’ money is better spent in other ways.

“What matters in terms of op risk in a cyber attack or a natural diaster, it’s not how much capital you have,” she told MM. “It’s whether or not you have redundant systems, backups, and appropriate controls. The amount of money you have stashed away in this punitive capital account will come in handy down the road for building new systems or paying litigation fines or handling angry customers. But the money would’ve been far better spent building resilient systems.”

Regulators’ response to these kinds of complaints about Basel is always the same: We’re listening.

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

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12 01, 2024

Financial Times, Friday, January 12, 2024

2024-01-12T09:25:29-05:00January 12th, 2024|Press Clips|

The Fed decision markets need to pay more attention to

Central bank set to make a decision on whether to extend its latest emergency liquidity facility

By Karen Petrou

The writer is managing partner of Federal Financial Analytics

One big market event for early 2024 will come when the US Federal Reserve makes a decision on whether to close its latest emergency liquidity facility on March 11 as a senior Fed official recently signalled it was likely to do so. Called the Bank Term Funding Program, the facility’s name conveys the usual blandness with which the Fed likes to brand the trillions it throws into the financial system. But the BTFP is anything but dull. Without it, all but the biggest US banks could find it even tougher to raise profitability this year; with it, they’ll find it still harder to lend into what the Fed, President Joe Biden, and pretty much everyone else hope will be a robust recovery. The BTFP is just the latest of the many rescue facilities the Fed brought forth after recent crises, marshalling the new programme as Silicon Valley Bank and Signature bank failed and dozens of other regional banks experienced sudden deposit outflows for which many were woefully unprepared….

https://www.ft.com/content/7d33ea30-26a6-42dc-a135-449ef9bf8c72

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