#Brainard – Page 2 – Federal Financial Analytics

4 11, 2022

DAILY110422

Eliza Allen2022-11-04T17:11:14-04:00November 4th, 2022|2- Daily Briefing|

Big Banks Pressed on Sluggish, Inequitable Deposit-Rate Hikes

Advancing an initiative with political “legs,” Sen. Jack Reed (D-RI) has demanded answers from the nation’s largest banks on why small-deposit rates have barely budged even as the Fed sharply hiked interest rates now reflected in higher loan costs.

FRB-NY Official Details Wholesale CBDC Prototype

Remarks today from a senior FRB-NY official, Michelle Neal, continued the Fed’s ambivalent stand on a CBDC (see FSM Report CBDC10).

Fed Fixes Advanced-Approach Glitches

The FRB is proposing to implement three changes to Regulation Q data collection/disclosure rules governing advanced-approach capital adequacy at BHCs, SLHCs, and state member banks.

Fed to Name Master-Account Names

Reflecting ongoing concerns on Capitol Hill, the Fed is proposing to make what our analysis suggests were opaque payment-system access guidelines (see FSM Report PAYMENT24) “a bit more transparent.”

Toomey Presses for SLR Rewrite

Ranking Senate Banking Member Toomey (R-PA) today released his letter to Chairman Powell cautioning the central bank not to handle any Treasury-market liquidity events with new backstop facilities.

Waters Adds To Fed’s Political Woes

In a letter today, HFSC Chairwoman Waters (D-CA) joined Sens. Warren (D-MA), Brown (D-OH), and Hickenlooper (D-CO) in sharply criticizing the recent Fed “super-sized” rate hike.

Fed Worry Level Goes Up

The Federal Reserve likely hoped for the torpor of a Friday afternoon to quell frightened replies to the latest financial-stability report released today.

Daily110422.pdf…

14 10, 2022

DAILY101422

Eliza Allen2022-10-14T17:04:18-04:00October 14th, 2022|2- Daily Briefing|

Along with a Squeaker Merger Approval, Fed/FDIC Begin Work on Large-Bank Resolvability

As anticipated in Karen Petrou’s speech yesterday, the Fed today unanimously approved and the FDIC will shortly do the same on an advance notice of proposed rulemaking re-enforcing large-bank resolvability. That this complex rulemaking will not slow near-term merger decisions was made clear today also by the Fed and OCC decisions to clear USB’s acquisition of MSFG’s California banking organization.

Covid Comm Presses CFPB for Still More Credit-Reporting Reform

The Chairman of the Select Subcommittee on the Coronavirus Crisis, Rep. James Clyburn (D-NC) sent a letter to CFPB Director Chopra requesting that the Bureau investigate the three nationwide consumer reporting agencies (NCRAs) for failing to properly address credit reporting errors. Citing data, the Subcommittee obtained from the NCRAs, Chairman Clyburn alleges that reporting errors occurred far more often than previously thought, that the majority of disputes do not result in consumer relief, and that the NCRAs discarded “tens of millions” of submissions without investigation by claiming they came from unauthorized third-parties.

Waller Dismisses Threat To Reserve Dollar Without A CBDC

In remarks today, FRB Governor Waller reiterated his skepticism of foreign-issued CBDCs and stablecoins, arguing that the underlying reasons for dollar dominance are non-technological and CBDCs will not affect them. He dismisses concerns that foreign CBDCs would undermine dollar dominance because they could neither reduce payment frictions nor prevent illicit finance.

Daily101422.pdf…

8 09, 2022

DAILY090822

Eliza Allen2022-11-09T13:00:10-05:00September 8th, 2022|2- Daily Briefing|

Gensler Stands Crypto Ground

In remarks today, SEC Chairman Gensler stood firm: almost all crypto tokens are securities because they are investment contracts under the “Howey Test.” Further guidance is unnecessary, he said, because the Commission has been clear and crypto companies request it only because they do not like this conclusion, not because they fail to understand it.

GOP Demands Answers On CBDC Authorization, Construct

Ranking Member McHenry (R-NC) and all of the HFSC’s Republicans today sent a letter to Vice Chair Brainard demanding that she clarify several issues germane to U.S. CBDC issuance. These most notably include the extent to which the “support” from the Administration and Congress she said was needed (see Client Report CBDC13) means express statutory change and Administration order.

Toomey Demands Greater CRA Transparency, Updated Regulations

Ranking Member Toomey (R-PA) today sent a letter to Vice Chair Brainard, Acting Comptroller Hsu, and Director Gruenberg sharply criticizing what he calls a lack of transparency of CRA-derived community benefit plans (CBPs). Describing these as an “egregious” circumvention of congressional intent, he demands that the banking regulators update regulations implementing GLBA’s CRA sunshine provision, specifically urging them to establish a public database containing all CRA-related agreements in full.

Daily090822.pdf…

7 09, 2022

DAILY090722

Eliza Allen2022-11-09T16:08:53-05:00September 7th, 2022|2- Daily Briefing|

Hsu Expands on Crypto, Climate, Merger, Systemic Actions

Acting Comptroller Hsu today made it clear that – contrary to assertions from Sen. Warren (D-MA) and others – his decision not to rescind prior OCC crypto charters and related rulings does not mean the agency is taking anything other than a cautious approach to cryptoassets. He also indicated that the slow-down in interagency action is warranted as it gives officials time to understand recent shocks to this sector.

New Brainard Position Suggests Fed CBDC Thinking Advances

In addition to hawkish anti-inflation remarks, Fed Vice Chair Brainard today appeared to back away from her prior comments espousing an expansive view of how a U.S. CBDC might work (see Client Report CBDC13). Now calling CBDC a “neutral settlement layer” affording additional stability and opposing a consumer-facing model.

Barr Takes Stage With Bold Plans For Capital, Resolution, Mergers

In his maiden speech today, Fed supervisory Vice Chair Michael Barr made several significant announcements. Reiterating the support for holistic capital regulation noted during his confirmation, Mr. Barr confirmed that the Fed will undertake a sweeping review of standards to address unintended consequences without reducing capital requirements. The Board will also begin action on the Basel “end-game” later this fall.

Daily090722.pdf…

29 08, 2022

DAILY082922

Eliza Allen2023-01-04T10:17:26-05:00August 29th, 2022|2- Daily Briefing|

FedNow Set for Soon

Vice Chair Brainard today announced that the Fed’s instant-payment “FedNow” system will achieve its hoped-for opening in mid-2023 (see FSM Report PAYMENT20). Although this announcement covers only an expansion of the Fed’s pilot program rather than a complete launch, Ms. Brainard cautioned that, while the system is ready thanks to early adoption by some financial institutions, it remains to be seen if enough banks, core processors, software-developers, and other entities are willing to make the investments necessary to create the ubiquitous, equitable service sought by the central bank. However, it is unclear if slow adoption is due to preference for the U.S.’s longstanding, private real-time system, continuing challenges to inter-operability, the fact that FedNow will be a pilot even when officially launched, or if simple lag time accounts for the delay of concern to the Fed.

Daily082922.pdf…

8 07, 2022

DAILY070822

Eliza Allen2023-01-24T15:19:51-05:00July 8th, 2022|2- Daily Briefing|

Treasury Opens Digital-Asset Framework to Public Comment

Following yesterday’s international crypto framework, Treasury today advanced its work pursuant to the President’s executive order with a request for comment on how best to ensure digital-asset responsible development. We will shortly provide clients with an in-depth analysis of the consultation, which seems more designed to check the public-comment box than to seek views on specific policy options.

Fed’s Brainard Affirms CBDC Views, Details Crypto Regulatory Priorities

In remarks today, Fed Vice Chair Brainard reiterated her tentative support for CBDC outlined at a recent Congressional hearing (see Client Report CBDC13). She did so on grounds that even well-regulated private stablecoins might either fragment the payment system or unduly concentrate power. She also detailed concerns about bank interconnections with crypto assets, stating that regulatory standards for the crypto financial system are needed before digital assets pose systemic risk.

GOP demands FHFA Action to Stem New GSE Ventures

Housing Subcommittee Ranking Member French Hill (R-AR) and nine other HFSC Republicans today sent a letter to FHFA Director Thompson demanding tougher treatment and transparency for new GSE ventures. As we noted, Fannie and Freddie’s equitable-housing plans include an array of pilots for new mortgage products and ancillary services.

Daily070822.pdf…

13 06, 2022

DAILY061322

Eliza Allen2023-01-27T15:25:57-05:00June 13th, 2022|2- Daily Briefing|

Agency Heads Advance CRA Reform

Vice Chair Brainard, Acting FDIC Chairman Gruenberg, and Acting Comptroller Hsu today largely reiterated remarks of a previous CRA conference, describing the pending proposal (see FSM Report CRA32) and laying out the benefits they see in a modernized, inter-agency standard. Mr. Hsu and Ms. Brainard responded to questions at a “fireside chat” with the head of a leading community advocacy group; Mr. Gruenberg gave more detailed remarks.

Daily061322.pdf…

3 06, 2022

DAILY060322

Eliza Allen2023-02-10T16:02:13-05:00June 3rd, 2022|2- Daily Briefing|

Agency Heads Stress Need for CRA Reform

Acting Comptroller Hsu, Fed Vice Chair Brainard, and Acting FDIC Chairman Gruenberg today took questions on the controversial, far-reaching inter-agency CRA regulatory rewrite (see FSM Report CRA32).

FRB-Cleveland Study: Small-Business Lending Continues Race/Ethnic Disparities

A new paper published by the Federal Reserve Bank of Cleveland finds evidence that race-based lending disparities persisted through the pandemic, concluding that Black business owners in particular struggled to receive loans compared to whites, fintechs have not overcome credit disparities, and minority-owned businesses were less likely to receive the PPP amounts for which they applied.

Waller Seeks Balance in Crypto Rules

FRB Gov. Waller today described the advantages of innovative, unregulated markets such as that created by cryptography at its outset.

FinCEN Takes Baby Step to No-Action Letters

Reflecting demands from Congress in recent AML law (see FSM Report AML133), FinCEN today issued an advance notice of proposed rulemaking outlining how a no-action letter process might work.

Daily060322.pdf…

27 05, 2022

Daily052722

Eliza Allen2023-02-21T13:31:35-05:00May 27th, 2022|2- Daily Briefing|

KC Fed: Advanced Nations Struggling to Find a CBDC Rationale

In concert with Vice Chair Brainard’s testimony yesterday (see Client Report CBDC13), the Kansas City Fed released a brief assessing the reason advanced economies have so far been considerably more hesitant than emerging ones to craft retail focused CBDCs. By laying out how many advanced economies are at best lukewarm to CBDC, the brief’s review illuminates reasons why the FRB is hesitant without directly addressing the U.S. The post looks at numerous CBDC rationales (e.g., financial inclusion, Payment-system speed) and differentiates them by major nations.

FRB-Cleveland: Post-1994 Bank Restructuring Improved LMI Inclusion

A new study from the Federal Reserve Bank of Cleveland offers perhaps the first literature survey of financial inclusion. It largely summarizes outstanding work, but notes that interstate banking following the Riegle-Neal Act of 1994 correlates with increased bank-branch density correlated in turn with a four percent increase in LMI household financial inclusion. This conclusion is interesting in light of the significant increase following the Act also in bank consolidation in light of continuing concern about “banking deserts” said to be due to M&A (see FSM Report MERGER9).

Daily052722.pdf…

26 05, 2022

CBDC13

Arezou Rafikian2023-02-21T13:40:03-05:00May 26th, 2022|5- Client Report|

Brainard Seeks Go-Soon CBDC Sure to Hit Powell, Political Speedbumps

Newly in place as Fed Vice Chair, Lael Brainard today made it clear at an HFSC full committee hearing that her prior statements laying out CBDC benefits are still her thinking despite the considerably more ambivalent approach outlined in the Fed’s discussion draft (see FSM Report CBDC10). This is not to say that Ms. Brainard endorsed a CBDC nor that she has solutions for the problems laid out in the discussion draft and those posed by members on both sides of the aisle. She also made it clear that bringing forth a CBDC would be a multi-year process that should sustain the role of banks as financial intermediators and support private stablecoins under proper regulation. Still, she outlined numerous benefits and ways to overcome problems, making it clear that she thinks a CBDC may well be warranted.

CBDC13.pdf…