22 01, 2024


2024-01-22T16:57:16-05:00January 22nd, 2024|2- Daily Briefing|

FRB Reconsiders Interchange-Fee Cuts

Bowing to critics in the banking industry and on the Board, the Federal Reserve today extended the comment period on its debit-card interchange fee proposal (see FSM report INTERCHANGE12) by a surprisingly-long ninety days to May 12.  The extension is in part due to the Board’s decision to publish additional interchange fee cap data which may have persuaded the Board that the initial data analysis supporting a mandatory pricing reduction was incorrect.

OIG Finds Reserve-Bank Trades Legal, But Problematic

The Federal Reserve’s Office of the Inspector General (OIG) today released long-awaited reviews of personal trades by former Dallas and Boston Reserve Bank Presidents two years ago that raised numerous and often vociferous assertions of conflicts of interest.  Indeed, Sen. Warren (D-MA) stated that she believed these epitomized a “culture of corruption” at the Fed, introducing bipartisan legislation to force considerably more transparency at the Reserve Banks.

FSB Plans Global Run-Risk Buffers

The head of the Financial Stability Board, Secretary General John Schindler, today briefed media on the global regulator’s plans to brief the G20 in October about viral-run risk and the standards needed to avert it.  Mr. Schindler said little about what the FSB is likely to propose although the Basel Committee is now considering rewrites to global LCR and NSFR standards likely to be reflected in the FSB’s recommendations.


17 05, 2023


2023-05-17T17:44:04-04:00May 17th, 2023|2- Daily Briefing|

Bipartisan Senate Consensus Demands Structural Change To Fed IG

At today’s Senate Banking Subcommittee on Economic Policy hearing on Fed accountability, Chairwoman Warren (D-MA) was unsparing in her criticism of the Fed and its current IG, Mark Bialek.  She elicited the fact that he is the Fed’s highest-paid employee and, while he may be dismissed only by two-thirds of the Board, she argued that he is essentially captive and thus cannot be relied upon to investigate ethics challenges, bank failures, and internal operations.

HFSC GOP Demands LLPA Changes No Matter FHFA’s RFI

As anticipated, Chairman Davidson (D-OH) reiterated GOP demands that the FHFA rescind the entirety of its LLPA proposal at today’s HFSC Subcommittee on Housing and Insurance hearing, despite FHFA conceding to some Republican demands and issuing an RFI on the Enterprises’ single-family pricing framework earlier this week.  Mr. Davidson also pushed back on FHFA’s assertion that LLPA pricing must be set with regard to private mortgage insurance, saying that MI does not reduce taxpayer risk or GSE capital even though it is required for risk reduction and captured in the GSE capital standards.


14 07, 2022


2023-01-06T15:12:22-05:00July 14th, 2022|2- Daily Briefing|

FSB Climate-Risk Progress Report Underscores Disclosure Standards, Improved Data

The FSB today released a climate-risk progress report that also details near-term actions.  These include not only the statement to the G20 in October noted in yesterday’s G20 report, but also a status report in September from the Task Force on Climate-Related Financial Disclosures (TCFD) on industry progress toward adopting its climate disclosure recommendations.

CFPB, OCC Slam BofA for UI-Fraud Lapses

The OCC and CFPB today issued a $225 million enforcement order against Bank of America related to unemployment-insurance and public-benefit fraud that led the bank to improperly withhold prepaid-card payments to legitimate recipients.

BIS Builds “Central Bank Liquidity Bridges”

Continuing its work to promote better cross-border payments, the BIS today floated the idea of “central-bank liquidity bridges” to overcome current frictions in the bank-dominated sector.

Clarida and Powell Cleared, but OIG Still Reviewing Fed Ethics

The Office of the Inspector General at the Fed today cleared former Vice Chair Clarida and Chairman Powell of ethics violations that have dogged them as recently as a letter yesterday from Senate Democrats.


10 01, 2022


2023-04-25T14:19:06-04:00January 10th, 2022|5- Client Report|

FedFin Assessment: Powell, Brainard Confirmations Confront Challenges

Many of you have asked us to forecast key policy implications ahead of two high-powered hearings this week considering President Biden’s top Fed nominees.  We will as usual provide clients with in-depth analyses after the Senate Banking Committee ponders Chairman Powell’s nomination for a second term on Tuesday and Gov. Brainard’s to become vice chair on Thursday.  Now, we explain why we think Mr. Powell’s confirmation chances – while still good – are not the slam-dunk many media sources suggest and why Gov. Brainard also faces a challenging outlook.  We will not consider the odds that an appointment in the next few days of Sarah Bloom Raskin as vice chair for supervision will alter the political calculus except to say that the last time the White House tried this Sen. Warren (D-MA) didn’t budge.  We don’t expect she will this time.  This report does not consider other pending nominations to join the Board of Governors because none of them are likely to affect policy debate except when it comes to demands for greater Fed diversity.




2 12, 2021


2023-05-23T13:56:33-04:00December 2nd, 2021|2- Daily Briefing|

Fed Staff Assess Big-Bank Correlated Risk, Systemic Hazard
A new research note from the Federal Reserve looks at a critical question: how correlated have bank exposures become in the wake of stress testing and other rules many analysts, ourselves included, anticipated. To the extent exposures are correlated, systemic risk is likely to increase, especially if correlations are tightest at the biggest banks and/or correlated exposures are risky.

Quarles Defines Boundaries of Fed Emergency, Regulatory, Supervisory Policy and Politics
In parting remarks today, FRB Gov. Quarles not only defended his record, but also took a very different stand on future emergency facilities than another departing Fed official, Vice Chair Clarida. Unlike Mr. Clarida’s stout defense of 2008 and 2020 actions, Mr. Quarles argues that the credit facilities established in concert with those for emergency liquidity are problematic both in terms of central-bank mission and facility execution.


30 11, 2021


2023-05-23T14:25:32-04:00November 30th, 2021|2- Daily Briefing|

FSB Revisits Cross-Border GSIB Resolution Quandary
Continuing its work to end TBTF banks, the FSB today issued good practices for the crisis management groups that would take on a troubled GSIB. It is striking that this statement does not use the more conventional “best practices” designation; one can only speculate that this is due to limited English proficiency by the final drafts people or the document fell short of what some FSB participants believed behooved best practice.

Waters, Foster Urge Rules to Combat Algo Bias
Continuing a recent hearing theme, HFSC Chairwoman Waters (D-CA) and AI Task Force Chair Foster (D-IL) late yesterday urged federal financial regulators to ensure that AI/ML is algorithmic-bias free. Responding to the regulators’ request for information on AI use (see FSM Report AI), they argue that historical data may perpetuate longstanding bias and create models that discriminate against protected classes.

Clarida Stands By Fed Emergency Market Interventions
Outgoing FRB Vice Chairman Clarida today argued that the Fed has carefully deployed its 13(3) emergency powers and thus preserved its independence.


4 10, 2021


2023-06-28T15:36:45-04:00October 4th, 2021|2- Daily Briefing|

Fed Staff Study Ratifies GSIB Scoring; We’re Not So Sure
Late last week, the Fed published a new staff note using a novel approach – high-frequency stock trading – to identify SIFIs. Looking to determine if one firm’s negative stock return creates market-wide contagion risk in a short time period, the study finds that the eight U.S. designated GSIBs demonstrate this systemic market correlation.

USPS Experiments with New Banking Services
Following an American Prospect story today, a number of news sources have confirmed that the U.S. Postal Service has launched a pilot postal-banking proof of concept.

Warren Demands Still More Retribution for Fed Trading Practices
Based in part on news today that Vice Chairman Clarida also engaged in trading some believe has the appearance of impropriety, Sen. Warren (D-MA) has expanded her campaign demanding not just a Federal Reserve inquiry, but now also an SEC investigation.

Fed Plans Single-Day Implementation for ISO 20022 in 2023
The FRB today issued notice that Reserve Banks will adopt the ISO 20022 message format for the Fedwire Funds Service.

Gensler’s Next Grilling
Ahead of its hearing with SEC Chair Gensler tomorrow, HFSC’s majority staff memo indicates that the session will cover the full SEC agenda.


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