In this report, we assess today’s HFSC hearing with FRB Vice Chair Quarles, FDIC Chair McWilliams, and NCUA Chairman Hood. Comptroller Otting submitted a written statement and Chairwoman Waters (D-CA) indicated that she intends to have him testify as soon as possible. In response to questioning, Mr. Quarles said that regulators should examine SOFR’s possible procyclical effects and whether credit-sensitive overlays or an alternative rate with credit spreads is needed. He did not, however, give any sign that LIBOR transition would be delayed. In contrast to Chairman Powell and others at the Fed disputing the role of regulation in the repo crisis, Mr. Quarles also said that the FRB is reviewing internal liquidity stress tests and is willing to reconsider daylight-overdraft policies and discount-window disclosures.
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