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21 11, 2022

DAILY112122

2022-11-21T17:37:05-05:00November 21st, 2022|2- Daily Briefing|

FRB-NY Considers Why Deposit Rates are Now So Sticky

As Karen Petrou’s talk last week noted, Democrats and the CFPB have charged that exploitation explains why bank deposit rates now lag Fed rate hikes.  Today’s post from the Federal Reserve Bank of New York finds a steady decline in bank deposit-rate matches to Fed rate hikes since 1994, but also identifies market factors that largely explain rate sluggishness.  The study estimates the “deposit beta” – i.e., the difference between FOMC hikes and all deposit rates (including non-interest paying funds) found in BHC data.

Senate Dems Demand Digital-Asset Crackdown

Following last week’s hearings with the banking agencies (see Client Report REFORM214), Chairman Brown (D-OH) and Senate Banking Democrats today sent letters urging Vice Chair Barr, Acting Chairman Gruenberg, and Acting Comptroller Hsu to review SoFi’s digital asset activities, accusing the firm of improperly expanding its crypto trading following commitments not to do so when it was granted licenses as a national bank and BHC.  Following the playbook of pressing for rules and enforcement rather than new law, Senators point to a new SoFi service they believe is not only an “expanded” digital-asset activity despite a commitment to wind down these impermissible activities, but also is dangerous to investors and unsafe and unsound.

Daily112122.pdf

15 11, 2022

REFORM214

2022-11-22T15:27:38-05:00November 15th, 2022|5- Client Report|

Crypto, Deposit Rates, Capital Top Senate Discussion

At today’s Senate Banking oversight hearing with the banking agencies, Chairman Brown (D-OH) generally applauded the work of regulators, emphasizing the need for tough standards, like-kind rules for bigtech companies, and an inquiry into why depositor interest rates lag Fed rate hikes along lines posed earlier by Sen. Reed (D-RI).  FDIC Acting Chairman Gruenberg concurred, criticizing banks for sluggish rates.  Ranking Member Toomey (R-PA) reiterated his longstanding complaints about regulators straying outside their mission in areas such as climate change.  He also called for SLR relief to reduce Treasury-market risk and opposed pending large-bank resolution guidance (see FSM Report LIVINGWILL19) on grounds that it is unnecessary.

REFORM214.pdf

14 11, 2022

DAILY111422

2022-11-14T17:00:05-05:00November 14th, 2022|2- Daily Briefing|

FSB Thinks 2020 Reg Relief Could Go, Stay – It All Depends

In conjunction with the G20 summit, the FSB has released a policy paper assessing the extent to which various pandemic-related regulatory forbearances should be continued.

FSB Reiterates Climate, Crypto, NBFI Plans

The FSB head’s letter to the G20 today reiterates all of the priorities expressed in its October letter to G20 finance ministers.

Regulatory Hearings to Address Last-Gasp 2022 Agenda, Position Panels for a Busy New Year

With GOP House and Democratic Senate control largely assured, this week’s hearings with Messrs. Barr, Gruenberg, Harper, and Hsu will illuminate not only current priorities – most notably what’s next for federal crypto law and rule – but also the very different priorities HFSC and Senate Banking will advance in the next Congress.

FRB-NY Staff: Big U.S. Banks Remain Extremely Resilient

In its latest assessment of the vulnerability of the fifty largest U.S. BHCs, Federal Reserve Bank of New York staff confirmed the overall rosy assessment of bank resilience in the Board’s latest financial-stability report (see Client Report SYSTEMIC94).

OCC Ramps Up Fair-Lending Enforcement

In remarks delivered for Acting Comptroller Hsu, Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer reiterated that ensuring fairness is a top OCC priority.

Gruenberg Finally Gets the Nod

Knowing now that he has secured Democratic Senate control into next year, President Biden today finally and formally nominated Acting FDIC Chairman Gruenberg to assume the chairmanship.

Daily111422.pdf

25 10, 2022

DAILY102522

2022-10-25T17:08:46-04:00October 25th, 2022|2- Daily Briefing|

Setting Stage for US Action, UK Regulators Target Bigtech Consumer-Finance Market Power

Focusing principally on competition, the UK’s Financial Conduct Authority (FCA) today released a discussion paper investigating bigtech’s entry into payments, deposit, consumer-credit, and insurance.

With Yellen Backing, SEC Central-Clearing NPR Advances

The Federal Register today includes the SEC’s proposal requiring that market clearinghouses submit certain secondary-market transactions for clearing along with the small percentage now already centrally-cleared.

FDIC Reports Significant Financial Inclusion Progress

Showing significant improvements in financial inclusion, the FDIC today released its biennial under- and unbanked household survey.

CFPB to Require Almost-Open Banking

At long last and as recently promised, the CFPB later this week will start a rulemaking process that would ultimately require financial institutions to share personal data with a consumer upon his or her request.

Democrats Get Ready To Blame The Fed

Continuing progressive critiques of the FOMC’s anti-inflation fight, Senate Banking Chairman Brown (D-OH) has written to FRB Chairman Powell sharply protesting current Fed policy.

Daily102522.pdf

24 10, 2022

Karen Petrou: Insider Trading, Insider Talking, and the Consequences of Outsider Wrath

2022-10-24T10:53:08-04:00October 24th, 2022|The Vault|

There’s no question that the 2008 crisis was a bit of an embarrassment to everyone in charge no matter what all their memoirs since have said.  However, the actual global financial cataclysm was nothing to U.S. voters compared to the torrent of furious protest sparked by Treasury’s maladroit decision to allow top executives at AIG to keep munificent pay raises even though many of them presided over and profited by actions that prompted well over $100 billion in taxpayer bailouts.  So it is with the Fed.  The looming battle over its billions to big finance companies is, as I detailed last week, a serious structural challenge.  But the combination of continuing official trading conflicts and new revelations about closed-door meetings is a lot easier to understand and thus a political killer with immediate consequences for Fed governance when Congress gets around to thinking about things other than itself.

Elizabeth Warren’s already on it.  Many will follow her lead not only because they often do, but also because this time she’s mostly right.  Even if she weren’t, most people will understand why she was upset by Fed “insider” trading and now by a whole lot of insider talking.

That the St. Louis Fed only says that it needs to “rethink” its policy just throws salt in this gaping political wound.  Saying also that the Bank’s president went without compensation to discuss monetary policy behind doors controlled by one of the giant companies it supervises doesn’t come close to countering …

24 10, 2022

M102422

2022-10-24T10:52:26-04:00October 24th, 2022|6- Client Memo|

 Insider Trading, Insider Talking, and the Consequences of Outsider Wrath

There’s no question that the 2008 crisis was a bit of an embarrassment to everyone in charge no matter what all their memoirs since have said.  However, the actual global financial cataclysm was nothing to U.S. voters compared to the torrent of furious protest sparked by Treasury’s maladroit decision to allow top executives at AIG to keep munificent pay raises even though many of them presided over and profited by actions that prompted well over $100 billion in taxpayer bailouts.  So it is with the Fed.  The looming battle over its billions to big finance companies is, as I detailed last week, a serious structural challenge.  But the combination of continuing official trading conflicts and new revelations about closed-door meetings is a lot easier to understand and thus a political killer with immediate consequences for Fed governance when Congress gets around to thinking about things other than itself.

M102422.pdf

22 09, 2022

REFORM213

2022-10-12T17:04:04-04:00September 22nd, 2022|5- Client Report|

Senate Republicans Tackle Woke Banking; Democrats Turn Again to Zelle, Fees

Senate Banking’s hearing with big-bank CEOs proved much more combative than HFSC’s session yesterday (see Client Report REFORM212).  From the outset, Republican Senators condemned what they characterized as serious threats of banking politicization around social and cultural issues, with Ranking Member Toomey (R-PA) predicting a Republican counter-offensive should his party regain control.  He also said that the Fed’s decision to join other central banks and supervisors in implementing climate scenario analysis is a precursor to regulatory edicts pressuring banks to divest from energy companies.  Republicans also emphasized that high regulatory-capital requirements have undue macroeconomic effects.  As predicted, Democratic focused extensively on Zelle and bank fees.

REFORM213.pdf

20 09, 2022

SANCTION19

2022-10-12T17:09:15-04:00September 20th, 2022|5- Client Report|

Senate Banking Questions Sanctions Impact

Today’s Senate Banking hearing on Russian sanctions showcased bipartisan concern that anti-Russian sanctions have yet to have meaningful impact and doubts about the extent to which oil-price caps will reverse this. Ranking Member Toomey (R-PA), joined by Sen. Van Hollen (D-MD), have thus introduced a measure to mandate secondary sanctions on financial institutions involved in a transaction with Russian oil above the price cap.

SANCTION19.pdf

15 09, 2022

INVESTOR20

2022-10-13T11:52:44-04:00September 15th, 2022|5- Client Report|

After Senate Banking Session, SEC Stays on Course

The Senate Banking hearing with Chairman Gensler today went as expected:  Democrats generally praised his work while Republicans strongly opposed it on both substantive and procedural grounds.  As a result, we expect the chairman to continue as he has in the wake of prior, comparable hearings – pretty much as he pleases and as the rest of the commission will support.  This will clearly change if Republicans gain control of both Houses of Congress after the midterm. Unless or until it does, the SEC will continue its enforcement-focused approach to cryptoasset regulation and climate disclosures.  Chairman Brown (D-OH) also confirmed our forecast:  he will defend not only his jurisdiction, but also a much more stringent approach to crypto regulation than contemplated  by the Senate Agriculture Committee’s bipartisan legislation.

INVESTOR20.pdf

9 09, 2022

INSURANCE61

2022-11-09T12:56:29-05:00September 9th, 2022|5- Client Report|

Senate Banking Considers Insurance Risk, Reach

Chairman Brown (D-OH) convened a hearing today focused on the insurance industry largely focusing on the extent to which private-equity takeovers endanger insurance solvency and threaten pensioners following risk transfers.  Republicans generally denied any concerns but joined the chairman in urging U.S. agencies to play an active role in IAIS and decline to join global standards adverse to U.S. interests.  Sen. Van Hollen (D-MD) also raised the issue of insurance-industry reliance on the Home Loan Banks, but a witness representing the NAIC and the head of the Federal Insurance Office took no stand on any concerns here.  Senators also addressed insurance discrimination, reparations, cyber risk coverage, and climate hazards, but no legislation in any of these arenas was advanced.

INSURANCE61.PDF

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