#bigtech – Federal Financial Analytics

21 11, 2022

FedFin on: Treasury Plumbs the Depth of Nonbank Finance, Seeks New Merger Policy, Rules

Arezou Rafikian2022-11-22T13:19:47-05:00November 21st, 2022|The Vault|

As promised, this report provides an in-depth analysis of Treasury’s report and resulting recommendations to the President’s Competition Council on the impact of new nonbank consumer-finance entrants from a competition, consumer-protection, and financial-stability perspective. Although the report calls for reconsideration of bank-merger policy with an eye to the growing role of fintechs and bigtechs, its overall view of market power fails in our view to capture the actual landscape in which…

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

17 08, 2022

FedFin on: Data-Safeguard Legal/Reputational Risk

Arezou Rafikian2023-01-04T11:55:58-05:00August 17th, 2022|The Vault|

Using another of its tools to set policy without prior public comment, the CFPB has released a circular stating that inadequate consumer-data safeguards may constitute a breach of the unfair, deceptive, or abusive acts or practices (UDAAP) protection standards subject to Bureau enforcement action. This is the case even if no consumers have been harmed, if only one consumer is adversely affected, …

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

15 08, 2022

Karen Petrou: The Sobering Lesson of Subprime Mortgages for Digital-Asset Regulation

Arezou Rafikian2023-01-04T12:13:43-05:00August 15th, 2022|The Vault|

Last week, the American Banker had a synopsis of views filed on Treasury’s request for comments on digital-finance regulation. Its quote from the ABA’s comment letter is striking, indicating that this letter pointed to the increasingly-absurd reality of no rules for nonbanks and no digital assets for banks given all their rules. Progressive advocates pushed back, arguing that it’s right to keep banks quashed because of all the systemic hazards they pose. To my thinking, both sides are right, with recent history not just showing why, but also how urgent it is for regulators finally to act on both overarching crypto rules and those governing bank exposures in this volatile sector.

The recent history I have in mind is the chilling precedent of subprime mortgages starting in around 2003. I well remember a meeting at the OCC in which my late husband detailed both the borrower and market risks of new mortgage products such as those with “silent seconds” extended to borrowers with no demonstrable ability to repay even a first line from resources other than the ever-appreciating house prices investors somehow believed were a force of nature that always blew balmy winds their way.

The OCC official with whom we spoke was even more worried than we about emerging market trends, but she was over-ruled from on high. This was first because national banks weren’t sounding the alarm, second because no other banking agency seemed worried, and finally because anything that adversely affected national banks might have undermined …

27 04, 2022

FedFin on: Nonbank Consumer-Finance Supervision

Arezou Rafikian2023-03-01T15:07:08-05:00April 27th, 2022|The Vault|

Using what it describes as “dormant” authority, the CFPB is seeking comment on a rule setting the procedures under which it expands its authority to nonbank financial companies it believes pose consumer-protection risk. The procedural rule is just what this term implies – one that establishes procedural standards that may change upon finalization – rather than a request for views on the extent to which the CFPB has the authority it claims. Indeed, the Bureau clearly intends to use the authority stipulated in this rule for supervisory interventions even as comment on the procedures has yet to be completed…

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

26 04, 2022

FedFin on: Chopra Stands His Ground on Sweeping Agenda, Administrative Process

Arezou Rafikian2023-03-01T15:52:51-05:00April 26th, 2022|The Vault|

The Senate Banking Committee’s hearing today with CFPB Director Chopra was a sharply partisan session with little immediate impact on what Mr. Chopra plans to do to achieve his sweeping new vision. Although the debate will have little to no impact on bank-merger policy, much of the session focused on the actions Mr. Chopra took in concert with Acting Chairman Gruenberg to wrest FDIC control from former Chair McWilliams and issue an RFI suggesting significant changes to both merger analytics and bank-resolution policy…

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…

21 03, 2022

Karen Petrou: How to Set Course to a Digital Future

Arezou Rafikian2023-04-03T13:18:42-04:00March 21st, 2022|The Vault|

Last week, we laid out the macrofinancial implications of the Ukraine crisis – i.e., its impact on the global financial-and-regulatory order. Some of this analysis is founded on President Biden’s digital-asset executive order, which also has profound and immediate impact on critical macroprudential issues at the border of innovation and regulation to which we now turn. To forecast how digitalization will come upon us, the digital-asset order must be read in the Administration’s broader context in which high-impact political issues, such as racial equity, weigh at least as heavily as the complexities of CBDC or even the benefit of a future financial crises foregone.

Administration policy based on Democratic politics is set not only by the digital-asset order, but also by other White House directives that will define the boundaries of what Treasury and the agencies – the Fed included at least to a point – will do. To forecast digital-asset policy, one must thus also divine the outcome of two other executive orders.

First, there’s the President’s competition directive. Every critical consumer-protection question under the CFPB’s purview is now considered first and foremost in terms of competition, with the agency’s director making it manifestly clear that almost anything done by any big bank is a target for structural reform. Director Chopra doesn’t like fintech or biotech much better than most banks do, but his approach to digital assets is likely only to squelch big banks as much as he can and thus to drive cryptoassets further into …

6 12, 2021

Karen Petrou: Why Pro-Competition Consumer Finance May Not be Pro-Consumer Consumer Finance

Arezou Rafikian2023-05-23T13:26:47-04:00December 6th, 2021|The Vault|

Under Rohit Chopra, consumer protection has taken an important, widely-overlooked turn with potent consequences for all retail financial-product providers. Media coverage of the CFPB’s bigtech order, mortgage-discrimination action, and last week’s anti-overdraft campaign highlighted traditional issues such as fair lending and predatory pricing. These are indeed in the CFPB’s sights, but so also is a much bigger target: the extent to which a few large companies are said to be able to set consumer interest rates and otherwise dictate the shape of U.S. retail finance. This might cut big banks down to the puny size their critics seek, but it’s more likely to accelerate the transformation of retail finance into a wild west of unregulated providers outside the reach of safety-and-soundness standards and, in many cases, even of the CFPB. If this pro-competition campaign is mis-calibrated, the CFPB will put consumers at still greater risk.

Mr. Chopra’s interest in market competition doubtless derives from his stint as a lone, strong voice at the Federal Trade Commission who lost pretty much every battle he waged against giant corporate combos. It surely stems also from President Biden’s executive order demanding that federal agencies take express pro-competitive action. And, indeed, there’s a lot to do in sectors such as tech-platform companies that already seem to have skipped over just being monopolies to become potent oligopolies with powerful impact over each aspect of everyday life, not to mention pricing and economic inequality.

However, neither traditional nor neo-Brandeisian antitrust theory applies well …

18 11, 2021

FedFin on: Omarova Nomination Threatened

Arezou Rafikian2023-05-25T16:01:16-04:00November 18th, 2021|The Vault|

As expected, today’s hearing with Comptroller-nominee Saule Omarova included an unprecedented amount of fireworks for what is normally a low profile appointment. In this report, we omit analysis of the debate on Ms. Omarova’s origins and alleged Marxism, instead assessing policy issues germane should Ms. Omarova succeed in what seems an increasingly difficult confirmation. Notably, moderate Democrats such as Sens. Tester (D-MT) and Warner (D-VA) were clearly concerned with Ms. Omarova’s opposition to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), while Republicans lambasted her for previous comments about cutting off credit to the oil and gas industry and proposals they believed would nationalize U.S. banking.

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…

25 10, 2021

Karen Petrou: The Three Top Priorities for CFPB’s Bigtech Rewrite

Arezou Rafikian2023-06-05T14:00:57-04:00October 25th, 2021|The Vault|

In early 2019, FedFin issued a report highlighting an array of hazards as bigtech’s “surveillance capitalism” business model increasingly subsumed financial services. On Thursday, the Consumer Financial Protection Bureau finally took the first step – a giant step – towards the wholesale rewrite of the U.S. bigtech industry that’s only become still more urgent. Finance is structurally, systemically, and equitably different when someone who tracks what kind of underwear we like also knows how much money we have, where we spend it, and who holds it. Given this, the Bureau’s full-bore attack on bigtech may well realign the sector’s competitive construct not just in the U.S., but also around the world. This can be for the way-better if the Bureau picks its targets well and stands its ground under the ruthless barrage sure to start at hearings later this week.

That the CFPB contemplates an incoming fusillade is clear from its order. All it demands of Amazon, Apple, Facebook, Google, PayPal, and Square makes daunting reading even if one doesn’t have to fill in seventeen pages of penetrating questions and provide all the supporting documentation demanded on each one of them. Tech platforms are told to hand over memos, names, product numbers, contracts, operating manuals, and pretty much anything else anyone might think of for any aspect of recent bigtech operation that touches consumer finance. The full scope of all these data demands is stunning, but perhaps the most interesting among them focus on data harvesting, surveillance-based advertising, targeted offers, …