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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. …

28 08, 2022

The Hill, Sunday, August 28, 2022

2022-08-29T17:09:10-04:00August 28th, 2022|Press Clips|

Black Americans feel disproportionate pain from high interest rates

by Cheyanne M. Daniels and Sylvan Lane

The federal government’s efforts to stanch inflation are disproportionately impacting Black Americans. The Federal Reserve has hiked interest rates in the hopes of cooling off a red-hot economy, but its actions are hitting Black Americans — who have historically been squeezed out of home ownership and affordable loans — the hardest….“The Fed through that period argued that ultra-low interest rates supported household wealth by virtue of allowing people with homes to reduce their cost of housing with refinancing and therefore improve their wealth position. But that turned out not to be anywhere near as true for low and moderate income people, particularly minorities,” said Karen Shaw Petrou, author of “Engine of Inequality: The Fed and the Future of Wealth in America.” “We’ve now had 22 years … of policies that make it harder for lower and moderate income households, especially those of color, to be homeowners.“


23 08, 2022

MarketWatch, Tuesday, August 23, 2022

2022-08-24T10:27:17-04:00August 23rd, 2022|Press Clips|

Regulators worry that hedge funds could spark the next financial crisis

By Chris Matthews

In the wake of the 2008 financial crisis, regulators have kept close tabs on America’s largest banks, subjecting them to regular stress testing and imposing new rules meant to ensure their safety during periods of financial turmoil. These new rules may have made the banking system safer, experts say, but they have also fueled the growth of a shadow financial system that is providing a growing share of financing for U.S. companies and taking on new, difficult-to-measure risks in the process…Karen Petrou, co-founder of the banking advisory firm Federal Financial Analytics, Inc., said in an interview that the steady march toward greater surveillance of private funds is the inevitable outgrowth of regulations aimed at ensuring financial stability. With the major banks KBE, -0.32% facing restrictions on leverage, capital will move to less regulated areas “like water flowing down hill,” she said, though she insisted that this doesn’t mean post-2008 regulations on big banks are misguided. Nevertheless, she is skeptical that FSOC will make effective use of the data it intends to collect on private funds. “Regulators and FSOC have a very bad history of gathering data, which they do nothing until the data goes into the red zone,” she said. “At that point its usually too late.”


29 07, 2022

Bloomberg Law, Friday, July 29, 2022

2022-07-29T14:57:22-04:00July 29th, 2022|Press Clips|

Bloomberg Law: Unlocking Consumer Bank Data Stokes Chopra’s ‘Underworld’ Fears

Evan Weinberger and Andrea Vittorio

Consumers who let budgeting apps or payment platforms access their banking data shouldn’t feel as “powerless” about how that information is used if a pending regulation works as planned, said the head of the Consumer Financial Protection Bureau….Making data more portable, as an open banking system would, ensures that a single firm can’t hold a monopoly over it, says the Information Technology and Innovation Foundation.“The point of data portability is making sure there’s not exclusive access to data,” agreed Daniel Castro, vice president of the foundation and director of the Center for Data Innovation. But there are significant risks that CFPB needs to guard against, said Karen Shaw Petrou, managing partner of Federal Financial Analytics. And they’ve grown more ominous since the idea of open banking was proposed as part of the post-financial crisis Dodd-Frank law.


29 07, 2022

Financial Times, Friday, July 29, 2022

2022-07-29T14:37:30-04:00July 29th, 2022|Press Clips|

Biomedical financing must not be a casualty of the current downturn

By Karen Petrou

If the funding of small companies is threatened, then vital and transformative research will stop

The writer is Managing Partner of Federal Financial Analytics Each day seems to bring more bad news about US financial-market valuations, with the only cheer to be found in stories speculating that things have got so bad that we’re at “capitulation” or rock bottom. However, there’s one market many of us don’t consider that is struggling: private financing for early-stage biomedical treatments and cures. We should be concerned about the money that’s vanished from a sector essential to easing pain, prolonging life and helping millions to better see, hear, move and even think. Quickly restoring private capital funding for early-stage biomedical research isn’t just about rescuing investors — it can and will save lives. Biomedical finance’s travails are the result of investor stampedes away from any sort of risk.

27 07, 2022

The Hill, Wednesday, July 27, 2022

2022-07-27T09:30:11-04:00July 27th, 2022|Press Clips|

‘No good answer’: Fed set for big rate hike despite recession fears

by Sylvan Lane

The Federal Reserve is on track for another steep interest rate hike Wednesday despite growing fears its fight against inflation could push the U.S. into a recession. Fed officials are expected to announce another 0.75 percentage point interest rate hike Wednesday as both job growth and price growth rose, according to federal data. The Fed has aggressively boosted interest rates since March to bring prices down after waiting in vain for months for inflation to decline. The bank has already hiked its baseline interest rate range by 1.5 percentage points this year, including a 0.75 percentage point hike in June…Karen Shaw Petrou, managing partner at Federal Financial Analytics, said the pressures facing the Fed “have only gotten” worse since the bank raised rates in June, forcing the Fed to make tough choices. “You got no meaningful curb on inflation, even with a sharp rate rise. At the same time, financial market stresses and the impact of this inflation on household spending are curbing economic growth,” Petrou said, arguing the Fed should have begun hiking much sooner. “It’s the worst of both worlds. There’s no good answer.”


26 07, 2022

American Banker, Tuesday, July 26, 2022

2022-07-27T08:51:24-04:00July 26th, 2022|Press Clips|

New study says the Fed needs to talk the talk

By  Kyle Campbell

When central banks communicate with the general public, it enhances trust and anchors inflation expectations, a recent study from the National Bureau of Economic Research finds. As the Federal Reserve attempts to tamp down inflation from a 40-year-high, these findings should serve as a wake-up call, said former Fed Vice Chair Alan Blinder, one of the co-authors of the paper….Karen Petrou, co-founder and managing partner of Federal Financial Analytics, said financial markets are already so transfixed with the Fed’s actions and move in such lockstep with them that it is difficult for the Fed to get an accurate read of the economic landscape. While she is skeptical that average citizens would ever become so focused on the Fed, Petrou said she would be concerned about the central bank gaining any more influence than it already has.“Traders are now moving on just one half wink from a regional Reserve banker and real fundamentals seem to have far less to do with markets than Federal Reserve policy, and that’s not healthy,” she said. “No institution should have that much power because it’s clearly never going to be that right.”

6 07, 2022

American Banker, Wednesday, July 6, 2022

2022-07-07T10:04:56-04:00July 6th, 2022|Press Clips|

Rethinking bank capital at a ‘pivotal moment’ for the Fed

By Kyle Campbell

Michael Barr, the Biden administration’s pick to serve as the Federal Reserve’s top regulator, said during his Senate confirmation hearing that he wants to rethink the Fed’s various capital requirements “as a whole, rather than piece by piece.” Barr, who is expected to clear a Senate floor vote this summer to become the Fed’s next vice chair for supervision, struck a chord with that sentiment, particularly with Karen Petrou, managing partner at Federal Financial Analytics. “After Michael said that, I thought this was just too important an idea at a moment that really could be pivotal,” Petrou said. “We need to bring attention to it and then try to help move it along, because if the U.S. just goes back to a rule-by-rule, piece-by-piece, bits-and-pieces capital regulation, we’ll never get a coherent system without counterproductive impact.”…

24 06, 2022

Marketplace, Thursday, June 23, 2022

2022-06-24T09:04:32-04:00June 24th, 2022|Press Clips|

Here’s why the CFPB is concerned about credit card late fees

By Justin Ho

The Consumer Financial Protection Bureau announced this week that it’s looking into the fees that credit card companies charge consumers for late payments — specifically, whether those late fees are “reasonable and proportional” to the amount people owe. The CFPB is looking at this now because credit card companies can change their late fees based on inflation, and given how high inflation has been lately, they have some concerns. The current rules governing credit card late fees date back to 2009. In the wake of the financial crisis, Congress was looking for ways to protect people from getting too deep into debt, said Karen Petrou at Federal Financial Analytics. “Credit cards became an area where consumer advocates were really focused,” she said. In 2010, the Federal Reserve put a $25 limit on late fees. But it also allowed credit card companies to adjust those fees annually, based on the consumer price index. Petrou said the thinking was that credit card companies should be able to account for inflation. “And if we fail to reflect it as a cost of doing business, then banks will not do that business. And if banks don’t do that business, consumers don’t get credit cards,” she said…

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