#credit availability

15 11, 2023

REFORM230

2023-11-15T15:58:45-05:00November 15th, 2023|5- Client Report|

Bipartisan Capital Bashing Continues in the House

Following yesterday’s Senate Banking hearing (see Client Report REFORM229), today’s HFSC session with top bank regulators again highlighted growing bipartisan consternation over the unintended consequences of the agencies’ capital proposal (see FSM Report CAPITAL230).  Although Ranking Member Waters (D-CA) echoed Chairman Brown’s defense, Democratic criticism today went beyond concerns about mortgages and green bonds also to address credit availability, new trading and derivatives standards, capital recognition of securities losses, and insufficient review of the proposal’s quantitative impacts.  Republicans continued to bash the proposal for what they said is insufficient economic analysis.  Unlike yesterday, attention to the FDIC’s harassment scandal most notably came from Democrats’ side of the aisle, with Ranking Member Waters using all of her questioning time to criticize the FDIC and request a report from each agency describing how they will review sexual-harassment.  Reiterating concerns he and Subcommittee on Financial Institutions Chairman Barr (R-KY) recently raised regarding regulators’ interactions with international standard-setters, Chairman McHenry grilled Vice Chair Barr and Acting Comptroller Hsu about staff compensation and agency documentation practices at international events.  Mr. Barr emphasized that all Board and staff member compensation comes from the Fed, while Mr. Hsu only said that his agency tracks participation in these bodies to ensure mission alignment.   We continue to expect GOP pressure on the international-agency front but no action until GAO completes its report.  Chair Gruenberg noted broad alignment with a new incentive-compensation proposal, but revised the initial timeline …

24 08, 2023

DAILY082423

2023-08-24T16:11:54-04:00August 24th, 2023|2- Daily Briefing|

Pressley Presses for Audit of Racial Equity Pledges

Rep. Pressley (D-MA) late yesterday sent letters to the five largest US banks requesting a comprehensive financial audit of the racial equity pledges made after the George Floyd murder.  She requests detailed updates on how the commitments have been met along with any changes to the bank’s offerings.  The letter also criticizes banks for continuing to entrench racial-wealth disparities by diminishing Black-owned businesses access to credit, “modern day redlining,” and increasing the amount of unbanked and underbanked households by closing physical bank branches in majority Black neighborhoods.  Responses are requested by October 23.

Daily082423.pdf

3 07, 2023

M070323

2023-07-03T12:09:08-04:00July 3rd, 2023|6- Client Memo|

The Unintended Consequence Of Capital Hikes Isn’t Less Credit, It’s More Risk

As was evident throughout Chairman Powell’s most recent appearances before HFSC and Senate Banking, conflict between capital and credit availability characterizes what is to come of the “end-game” capital rules set for imminent release.  The trade-off is said to be between safer banks and a sound economy, but this is far too simple.  As we’ve seen over and over again as capital rules rise, credit availability stays the same or even increases.  What changes is who makes the loans and what happens to borrowers and the broader macro framework, which in the past has been irrevocably altered.  The real trade-off is thus between lending from banks and the stable financial intermediation this generally ensures and lending from nonbanks and the risks this raises not just to financial stability, but also to economic equality.

M070323.pdf

3 07, 2023

Karen Petrou: The Unintended Consequence Of Capital Hikes Isn’t Less Credit, It’s More Risk

2023-07-03T12:08:54-04:00July 3rd, 2023|The Vault|

As was evident throughout Chairman Powell’s most recent appearances before HFSC and Senate Banking, conflict between capital and credit availability characterizes what is to come of the “end-game” capital rules set for imminent release.  The trade-off is said to be between safer banks and a sound economy, but this is far too simple.  As we’ve seen over and over again as capital rules rise, credit availability stays the same or even increases.  What changes is who makes the loans and what happens to borrowers and the broader macro framework, which in the past has been irrevocably altered.  The real trade-off is thus between lending from banks and the stable financial intermediation this generally ensures and lending from nonbanks and the risks this raises not just to financial stability, but also to economic equality.

As post-2008 history makes clear, banks do not stop lending when capital requirements go up; they stop taking certain balance-sheet risks based on how the sum total of often-conflicting risk-based, leverage, and stress-test rules drives their numbers.  That all these rules push and pull banks in often-different directions is at long last known to the Fed based on Vice Chair Barr’s call for a “holistic review”.  Whether it plans to do anything about them and their adverse impact on the future of regulated financial intermediation remains to be seen.  Until something is done, banks will look across the spectrum of capital rules, spot the highest requirement, and then figure out how best to remain profitable …

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