For copies of press clips listed below, please contact Federal Financial Analytics at info@fedfin.com. Please include the date and title of the requested item(s).
Trump taps Scott Bessent for treasury secretary
Host, Sabri Ben-Achour, talks with FedFin managing partner, Karen Petrou, about the role of Treasury Secretary. (2:00min)
…
The one institution that Trump can’t afford to break
Some of Trump’s closest advisers are angling for the president-elect to choose a candidate who will shake things up at Treasury.
By Sam Sutton
Donald Trump has chosen to move fast and break things with his early picks for top Cabinet posts. He is facing stiff resistance to that strategy when it comes to the Treasury Department. The president-elect has been hung up for days over who will get the nod for Treasury secretary, the most powerful economic post in his Cabinet. It had been a two-man race between billionaire Howard Lutnick, Trump’s transition team co-chair, and Scott Bessent, a hedge fund executive, until internal squabbling created openings for other candidates, including former Federal Reserve Gov. Kevin Warsh, Sen. Bill Hagerty (R-Tenn.), and Apollo Global Management CEO Marc Rowan….A mismanaged Treasury could “add more uncertainty to the Treasury bond market, which is already in a potentially fragile condition due to liquidity shortages, deficits and a number of other challenges,” Karen Petrou, managing partner of Federal Financial Analytics, said. Rising federal deficits have also fomented concerns about the dollar’s role as a reserve currency and the U.S. government’s ability to respond to any economic crisis in the future. Markets are more likely to respond favorably if they have faith that the person running the show has a firm grasp on how policy shifts affect the broader economy….
https://www.politico.com/news/2024/11/18/trump-treasury-disruption-00190250
…
Changes coming to the Fed in a Trump presidency
By Kyle Campbell
Donald Trump’s return to power all but guarantees that changes are coming to the Federal Reserve Board of Governors, but the range of potential shake-ups varies widely. At a minimum, Trump will have the opportunity to appoint two governors to the board during the coming four years and determine the leadership of the body….Karen Petrou, managing partner of Federal Financial Analytics, said whether or not the Trump administration seeks to remove Barr or his title will depend on who runs the incoming president’s transition and what they prioritize. Because of the legal uncertainties around removability, she expects such an undertaking would be, at most, a low priority. “The external environment, whether it’s any kind of financial market stress, geopolitical risk, civil disobedience, or Trump trying to do all the things he cares about doing personally and surrounding himself with the uninhibited people willing to do it, that’s the agenda,” Petrou said. “Not Michael Barr.”…
https://www.americanbanker.com/news/changes-coming-to-the-fed-in-a-trump-presidency
…
Why the economy drove voters toward Donald Trump
Host Davis Brancaccio talks to Federal Financial Analytics‘ managing partner, Karen Petrou about how economic inequality explains a lot of votes for Donald Trump.
https://www.marketplace.org/2024/11/07/why-the-economy-drove-voters-toward-donald-trump/
…
Trump win likely to delay Basel III, imperil Biden bank regulation
By Ebrima Santos Sanneh
The incoming Trump administration is likely to lead to swift turnover at bank regulatory agencies, which would push finalization of new capital standards for large banks further down the road…. Karen Petrou, a managing partner at Federal Financial Analytics, expects the scope of the new framework to be further narrowed. Specifically, she anticipates the requirements being applied only to banks with $250 billion in assets or more and the market-based requirements being limited to the largest global systemically important banks and others with large trading books. She said some revisions could be made to cap operational risk weights and amend credit risk standards, too. Overall, Petrou said, the final version of the Basel III endgame will be the result of a “very complicated negotiation” — one that would likely escape the attention of a potential Trump administration. “Once you start bargaining over details, I can guarantee you, because I have been doing this forever, the White House will completely lose interest,” she said. “Full stop.”…
TD money-laundering scandal puts supervision back under the microscope
By Kyle Campbell
After using one of its most powerful enforcement tools to crack down on rampant money laundering at TD Bank, a Washington regulator finds its own oversight functions under the microscope. The Office of the Comptroller of the Currency implemented an asset cap on TD, prohibiting the Toronto-based bank from growing its balance sheet until its money-laundering controls are fixed…Karen Petrou, managing partner at Federal Financial Analytics, said the extensive consent order issued by the Financial Crimes Enforcement Network outlined a host of red flags that bank examiners should have detected years ago. Based on enforcement actions from Fincen, the OCC and the Federal Reserve, it is not clear if regulators picked up on the issues before last year. At that point, she said, they had few non-drastic options to choose from. “Because the banking agencies didn’t catch it early, when they could have remonstrated effectively or shut the bank down, they ended up with the 10th largest bank in the country that they were undoubtedly afraid to shut down for potential systemic risks,” she said. “They let a bank get away with AML murder by the time it was hauled before the courts, no thanks to the supervisors, from what one could tell.”… Petrou said these and other practices amounted to “red flags across the battlement” that supervisors should have been able to pick up on easily. “Absolutely blaring sirens going back 11 years,” she said.…
What can quarterly earnings tell us about the economy?
Marketplace talks with Karen Petrou
Listen here: https://www.marketplace.org/2024/10/14/what-can-quarterly-earnings-tell-us-about-the-economy/…
Until this month, the Department of Justice hadn’t finalized the adoption of new bank merger policy guidelines since 1995. Given the banking industry’s rapid evolution during the last three decades, an update was certainly overdue. It unfortunately took the bank failures of 2023 to inspire action on a much-needed bank merger policy makeover, and regulators hastily charged ahead to propose sweeping reforms. Despite soliciting feedback from industry experts and policy analysts that revealed a swath of concerns, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency locked step with the DOJ to finalize their respective rewrites of bank merger criteria largely as proposed. This is not the bank merger makeover we needed. Banking regulators realize that allowing high-risk banks to make still-bigger bets by swallowing other banks can pave a swift path toward a systemic crisis. But, as I emphasized in a study submitted to the regulators, their new policies introduce other threats to the industry’s stability. Bank merger applicants now face heightened uncertainty and delays that are sure to deter the pursuit of sound deals, leaving the door wide open for those making last-gasp efforts to avoid failure. Scrupulous, modern and aggressive antitrust policy is necessary, but those who govern banks must recognize that midsize bank mergers aren’t monopoly rent-seeking. They are critical if we are to prevent more regional bank failures and stop more
The Potential “Perverse” Consequences for Banks of New M&A Policies
Host Rob Blackwell
Karen Shaw Petrou, managing partner of Federal Financial Analytics, details how new guidelines by federal regulators to curb M&A could inadvertently increase the market power of the biggest banks and Big Tech.
Will regulators hit the gas or brakes on remaining post-Basel reforms?
By Kyle Campbell
For more than a year, a once ambitious bank regulatory reform agenda has largely been on hold as agencies deal with the fallout from last summer’s much maligned joint capital proposal. Now that the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency are in apparent agreement on a path forward for the so-called Basel III endgame, regulators are poised to work through their backlog of joint initiatives, including expanded long-term debt requirements and new liquidity standards….The Fed, the FDIC and the OCC have been eyeing a long-term debt expansion since 2022, when they issued what is known as an advanced notice of proposed rulemaking — a precursor to a formal rulemaking process — before issuing an official proposal last September. But finalizing that rule while risk-based capital changes are still pending could have significant unintended consequences, said Karen Petrou, managing partner of Federal Financial Analytics. The proposal would set long-term debt requirements at each impacted bank at the greater of 6% of total risk-weighted assets, 3.5% of average total consolidated assets or 2.5% of total leverage exposure if the bank is subject to the supplementary leverage ratio. Because the Basel III endgame proposal would realign the risk-weighting calculus, Petrou said neither banks nor regulators can know the impact of the long-term debt requirement until the capital rules are established. “The long-term debt rule can make no …