Press Clips

How November's election could shape antitrust policy by David Brancaccio 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/

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

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 [...]

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

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 [...]

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 [...]

“More people are carrying more debt for longer” We'll parse through some of the latest data on consumer debt and hear who's getting hit the hardest. by Nancy Marshall-Genzer Investors are looking ahead to Thursday, when we’ll get the December consumer price index. We’ll discuss what we could expect with Karen Petrou, co-founder and managing partner at Federal Financial Analytics. https://www.marketplace.org/shows/marketplace-morning-report/more-people-are-carrying-more-debt-for-longer/

Fed's rosier outlook could mean end of emergency lending facility By Kyle Campbell Recent forecasts from the Federal Reserve projecting greater stability in 2024 could spell the end for an increasingly popular funding facility at the central bank...Karen Petrou, managing partner at Federal Financial Analytics, said removing the facility could have consequences..."As with all its emergency fixes, the Fed is in a mighty pickle if it closes the BTFP," Petrou said. "Banks continue to sit on large unrealized losses and love this security blanket."  Petrou noted that the program provides cheaper funding than the Fed's official last resort lending facility, the discount window, as well as other funding sources, such as the Federal Home Loan Banks and the private repurchase agreement market. As commercial deposits continue to trend down — having fallen by $900 billion since their peak in April 2022 — Petrou said banks want as many alternative funding options as possible. But, she noted, this [...]

Operational risk emerging as linchpin of Basel capital debate By Kyle Campbell What had for months been a broad debate around the wisdom and process of the Basel III capital proposal has narrowed in recent weeks to center on a particular aspect of that proposal: capital retention for banks' operational risks...Karen Petrou, managing partner at Federal Financial Analytics, said capital is a "poor palliative" for operational risks, because it is different from other types of risks.... "Operational risk is very different from credit and market risk. It's equivalent to what you do when the lights go out, and the approach that somehow, if you have a pot of money, you will see better is nonsensical," Petrou said. "What you actually need is a generator, and that costs money." ... But Petrou notes that the rule retains the seven categories of operational risk — internal fraud, external fraud, employee practices and workplace [...]

‘The general’s at risk': FDIC controversy threatens plans to rein in Wall Street By Zachary Warmbrodt The misconduct scandal swirling at the FDIC is threatening to derail a Washington crackdown on the biggest U.S. banks ... “The proposal is showing some very significant vulnerabilities,” Federal Financial Analytics managing partner Karen Petrou said of the planned hike in bank capital. https://www.politico.com/news/2023/11/17/fdic-misconduct-wall-street-regulations-00127777