#CBDC

24 02, 2025

Karen Petrou: How the White House Could Have Fun with the Fed

2025-02-24T09:11:47-05:00February 24th, 2025|The Vault|

President Trump has an awesome ability to keep even his closest allies perplexed by nonstop announcements that often break precedent, accepted norms, and even the law.  Just as opponents begin to rally against one initiative, the White House launches another, sending dissenters off in a different direction, leaving the actions they initially targeted unchanged or even forgotten. Still, several policy themes are coming through loud and clear through all these different actions that have far-reaching financial-market cumulative impact.  One is the sheer volatility all this chaos creates; another to which I turn here is the President’s sure and certain effort to make the Federal Reserve a tool of the executive branch, going beyond setting interest rates to turn it into America’s sovereign wealth fund.

As we noted, The President’s executive-order barrage includes one demanding a U.S. sovereign wealth fund (SWF).  The tricky bit here is not the lines that would quickly blur between public and private enterprise, an historic U.S. economic principle that won’t slow Mr. Trump down for a minute.  Instead, it’s where the money funding the SWF comes from given the lack of a nationalized commodities enterprise such as Norway’s and the Administration’s hell-bent campaign to reduce the federal deficit.  Solution?  The Fed.

U.S. law is seemingly an obstacle to deploying the Fed as an SWF since it allows the Fed to hold only direct obligations of the U.S. Treasury and its agencies as well as – a Fed sleight of hand in the 2008 crisis – Fannie …

13 11, 2024

FedFin Assessment: The Fate of the Federal Reserve

2024-11-14T15:45:31-05:00November 13th, 2024|The Vault|

In a recent client brief, we provided our forecast of what might happen to Federal Reserve independence, process, powers, and personnel under either a Harris or Trump presidency.  This is of course no longer an either/or matter, with this report thus reviewing and, where needed, updating our initial assessment of what Mr. Trump could do to the central bank even where Chair Powell says he can’t.  Sherrod Brown’s defeat makes the Fed particularly vulnerable in the Senate, where Elizabeth Warren (D-MA) stands a strong chance of becoming the Banking Committee’s ranking Democrat.  She and incoming chair Tim Scott (R-SC) will agree on a lot about the Fed, especially if Sen. Rick Scott – a frequent Warren ally on the Fed front – becomes Majority Leader….

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

8 03, 2023

FedFin: Red Light For Retail CBDC

2023-03-08T17:02:10-05:00March 8th, 2023|The Vault|

At today’s HFSC hearing, Chairman Powell modulated his hawkish stance just a bit, continuing as he long has done to refuse to take a stand on fiscal policy while advocating for rapid debt-limit action.  Pressed by Republicans for CBDC updates, the chairman today was the most specific of any Fed official to date, stating that a retail CBDC would require express Congressional authorization even though this may not be the case for a wholesale-focused instrument.  As yesterday (see Client Report FEDERALRESERVE72), Republicans pushed hard against the Vice Chairman’s holistic-capital review, leading Mr. Powell to say that he hopes for Board consensus on both end-game rules and broader rewrites but cannot assure this will be the case despite the Board’s consensus culture….

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

6 03, 2023

Karen Petrou: Why Way-Woke Won’t Work in 2023

2023-03-06T16:31:48-05:00March 6th, 2023|The Vault|

The fact that both the House and Senate passed a Congressional Review Act resolution overturning the Department of Labor’s ESG standards makes it clear that striking an anti-woke blow is deemed good politics by red and purple politicians. The President’s certain veto also makes it clear that a blue man sees matters quite differently, as did 204 House Democrats and 46 of their Senate colleagues. This stalemate will continue for changes to federal law, but it won’t stop Republicans from taking a lot out on financial regulators and big banks that they can’t get into the law books. Thus, anyone deemed even a bit woke-ful will get an earful.

Even if all these excoriations are only rhetorical, they will prove meaningful because even federal regulators immune from the appropriations process are susceptible to political influence – as well they should be if they are not also to be unaccountable. That anti-wokeness is already making its mark is evident in many ways, most recently in the inter- agency crypto-liquidity risk statement at great pains to refute any Republican suggestion that tough new standards amount to a blanket ban on engaging in any form of legal cryptoasset activity. In essence, the new statement says, “banks can do crypto if it’s legal, but they almost surely shouldn’t do crypto because it’s way risky and we’re watching.”

To be sure, anything crypto isn’t always toxic. Another way the agencies will handle accusations that they are conducting a stealth-woke anti-crypto campaign is to make it …

22 09, 2022

FedFin on: The Cryptoverse Has A Big Black Hole

2022-09-30T12:03:14-04:00September 22nd, 2022|The Vault|

In this report, we follow our earlier analysis of Treasury’s CBDC recommendations and housing finance  with an analysis of another Treasury report in response the President’s executive order focused on the overall construct of cryptoassets in the U.S.  Treasury here makes its views even clearer than it did when favoring a CBDC.  It simply sees no “natural use case” for…

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

21 09, 2022

FedFin on: Can You See CBDC?

2022-09-30T12:09:12-04:00September 21st, 2022|The Vault|

In this analysis, we drill down in Treasury’s high-impact reports to the President on the future of digital assets to identify key considerations and strategic implications for housing finance.  We start with an assessment of central bank digital currency (CBDC), turning in subsequent reports to other critical strategic questions surrounding the….

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

21 09, 2022

FedFin Analysis: Treasury Sees Few Crypto Benefits, Much Risk to Contain and Control

2022-09-30T12:11:23-04:00September 21st, 2022|The Vault|

We follow our prior in-depth analysis of Treasury’s CBDC and payments report (see Client Report CBDC14) with a detailed assessment of the Department’s assessment of overall cryptoasset policy.  We noted on Friday key recommendations and turn here to a more in-depth assessment of Treasury’s reasoning, recommendations, and likely action.  This section of the response to the President’s executive order (see Client Report CRYPTO26) is notably uncharitable to cryptoassets, observing that broader use cases beyond trading and lending within the crypto verse have yet to materialize and may never do so….

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

12 07, 2022

FedFin on: U.S. Digital-Asset Policy

2023-01-23T16:02:08-05:00July 12th, 2022|The Vault|

As part of its response to the President’s digital-asset executive order, the Department of the Treasury is seeking views on the broad policy questions on which it believes answers might guide the Administration’s next steps. The definition of digital assets on which comment is sought includes central-bank digital currency (CBDC) and other digital representations of value delivered via distributed ledger technology (DLT). As a result, Treasury’s inquiry is comprehensive and results could have far-reaching implications, but the nature of the questions posed are so broad as to provide little indication of how Treasury plans to frame its report to the White House and proceed thereafter.

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

10 05, 2022

FedFin: Fed is Cautiously Optimistic re U.S. Systemic Risk

2023-02-21T15:48:57-05:00May 10th, 2022|The Vault|

In this report, we assess the new Federal Reserve financial-stability report. Secretary Yellen is also testifying now about systemic risk and sure to get questions on the Fed’s conclusions. We will shortly send you an in-depth report on this hearing, but key to the Fed’s report is a more cautious, but still sanguine outlook. For example, banks are found to be resilient and well-capitalized despite growing Fed concern about indirect risk channels such as asset-market volatility, sanctions-related disruptions to payment…

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

Go to Top