#credit cards

6 11, 2023

M110623

2023-11-06T15:47:06-05:00November 6th, 2023|6- Client Memo|

How Regulators Unwittingly Run Roughshod Over the Public Good

Friday’s American Banker included a Kyle Campbell article quoting me reiterating some points in my recent testimony about the need for cumulative-impact analyses of the raft of pending rules.  This led others to suggest ulterior motives, arguing that calls for cumulative-impact analyses are fig-leaves dangling over efforts to gut the rules.  While advocates do not often argue for analytical purity when obscurity suits them, the absence of analytical rigor is nonetheless an abrogation of the public good by public officials.  Setting rules based on airy assertions that it will all come right in the end since there most likely won’t be financial crises or at least new financial crises like the old financial crises ensures that this regulatory round will have at least as much wreckage as those that came before.

M110623.pdf

6 11, 2023

Karen Petrou: How Regulators Unwittingly Run Roughshod Over the Public Good

2023-11-06T15:47:01-05:00November 6th, 2023|The Vault|

Friday’s American Banker included a Kyle Campbell article quoting me reiterating some points in my recent testimony about the need for cumulative-impact analyses of the raft of pending rules.  This led others to suggest ulterior motives, arguing that calls for cumulative-impact analyses are fig-leaves dangling over efforts to gut the rules.  While advocates do not often argue for analytical purity when obscurity suits them, the absence of analytical rigor is nonetheless an abrogation of the public good by public officials.  Setting rules based on airy assertions that it will all come right in the end since there most likely won’t be financial crises or at least new financial crises like the old financial crises ensures that this regulatory round will have at least as much wreckage as those that came before.

The public good when it comes to financial policy is best measured by careful consideration of something wholly absent in all of the agencies’ thinking:  economic equality.  In its absence, the nation will suffer from still-worse political acrimony, an even worse public-health crisis, growing populations of Americans without fundamental financial security, and even higher odds for still more devastating financial crises.  How do I know this?  Look at American financial policy since at least 2000 and see what happened.

The Fed is particularly high-handed when it comes to public-good rationales not just for its rules, but also for its still more vital monetary-policy responsibilities.  The Fed cloaks itself with the “dual” mandate of “maximum employment” and “price stability” even …

19 10, 2023

DAILY101923

2023-10-19T16:30:42-04:00October 19th, 2023|2- Daily Briefing|

OIG Blasts FDIC’s Crypto-Policy Delay

Late yesterday, the FDIC’s Office of Inspector General (OIG) issued a report critical of the FDIC’s supervisory crypto policy.

Fed May Signal Possible Compromise as GOP Barr Demands Capital Answers

Amid press reports that Chair Powell has implicitly promised capital-rule compromise, HFSC Financial Institutions Chair Barr (R-KY) released a letter today pressing Vice Chair Barr still harder on the cost-benefit analytical (CBA) and cumulative-impact issues raised at the September hearing at which Karen Petrou testified.

Fed Data Show Increases in Household Financial Resilience, Profound Home-Affordability Gap

The Federal Reserve yesterday released its triennial Survey of Consumer Finances (SCF).  As always, we here highlight data with financial-policy implications; Petrou blogs and other releases will update economic-equality indicators.

BIS Head Calls for Review of Large Bank Supervision

BIS General Manager Agustin Carstens today said that the mid-March failures show the need for nations to review how they supervise larger banks, specifically highlighting liquidity risk and setting frameworks for emergency liquidity assistance.

OCC Analysis Shows Broad IRR Resilience With Startling Risk Pockets

Showing some pockets of severe risk but overall resilience, the OCC today released a statistical analysis of interest rate risk based on projected changes in twelve-month net interest income as well as the economic value of equity in parallel interest rate shock scenarios ranging from -200 basis points to +400 bps.

CFPB Thinks Big on Open Banking

As anticipated, the CFPB today advanced from a review of consumer data rights (see FSM Report

18 09, 2023

DAILY091823

2023-09-18T16:46:46-04:00September 18th, 2023|2- Daily Briefing|

Dems Slam Fed Climate Scenarios

Sens. Markey (D-MA), Warren (D-MA), Sanders (I-VT) and eight additional Democratic Senators and House Members sent a letter to Chair Powell today demanding that the Fed ensures that the financial institutions it oversees properly address the threat of climate change.  Claiming that the Fed’s climate pilot scenarios are not sufficiently rigorous, the letter demands that the Fed require banks to submit and execute plans to align their activities with climate targets, such as reducing financed emissions.

Top Treasury Official Sounds Big-Tech Payments Alarm

Treasury Assistant Secretary for Financial Institutions Graham Steele Friday warned that Big-Tech firms’ entry into financial services could result in increased market concentration and predatory pricing, highlighting their ability to leverage existing commercial relationships as well as network effects.  Mr. Steele also named consumer-data rights and junk fees as top priorities, praising the CFPB’s actions on personal data (see FSM Report DATA3) and credit-card late fees (see FSM Report CREDITCARD36).

Daily091823.pdf

14 09, 2023

DAILY091423

2023-09-14T16:47:09-04:00September 14th, 2023|2- Daily Briefing|

IOSCO Proposes Leveraged Loan, CLO Best Practices

IOSCO today released a consultation report proposing best practices for leveraged loans and CLOs that address origination and refinancing, EBITDA and documentation transparency, aligning interests from loan origination to end investors, managing conflicts of interest throughout the intermediation chain, and disclosures.

Durbin, Marshall Press Credit-Card Interchange Bill

Reiterating concerns expressed last month and comments yesterday on the Senate floor, Senate Whip and Judiciary Chairman Durbin (D-IL) and Sen. Marshall (R-KS) were joined this time by Sen. Welch (D-VT) and four House Members calling on Visa and Mastercard to reverse planned fee hikes.

GAO Presses for FSOC Power to Regulate, Not Just Designate

The GAO today issued a report recommending that Congress consider legislation allowing FSOC to compel regulatory action, arguing that this would better accomplish the Council’s mission because FSOC currently has limited power to respond to systemic risk.

HFSC GOP Highlight CBDC Privacy Concerns

As anticipated, HFSC Digital Assets GOP Members continued their staunch opposition to a U.S. CBDC, with Subcommittee Chairman Hill (R-AR) and Majority Whip Emmer (R-MN) asserting that private innovation can modernize payments without the risk of government surveillance.

Brown Doubles Down on Opposition to House Crypto Bill

Making it still more clear that he is not supportive of pending House cryptoasset legislation, Senate Banking Chairman Brown (D-OH) today sent a letter to Treasury Secretary Yellen, SEC Chairman Gensler, and CFTC Chairman Benham asking for views on where new authority may be needed.

Daily091423.pdf

1 09, 2023

DAILY090123

2023-09-01T12:18:22-04:00September 1st, 2023|2- Daily Briefing|

Durbin, Marshall Reinforce Demand for Card-Fee Cuts

Pressing their bill to limit credit-card interchange fees (see FSM Report INTERCHANGE10), Senate Whip and Judiciary Chairman Durbin (D-IL) and Sen. Marshall (R-KS) this week called on Visa and Mastercard to reverse planned fee hikes.  Sen. Durbin is pressing hard to attach the bill to a must-pass vehicle later this month; as noted, it would extend routing-system requirements to credit cards and could lead to significant reductions in card-fee income for banks.

GSIB Surcharge Revisions in Register

The Federal Register today includes the Federal Reserve’s proposal to revise how systemic risk scores that lead to GSIB designation are calculated.  As noted (see FSM Report GSIB22), while the Board estimates that the overall impacts of the changes to the surcharge are small, our analysis concludes that the scoring changes could result in higher capital requirements for large regional banks and certain IHCs.

Daily090123.pdf

8 08, 2023

FedFin on: Equity and Securitization Capital Standards

2023-08-08T13:44:33-04:00August 8th, 2023|The Vault|

Based on our analysis of the inter-agency capital proposal’s framework and its credit-risk provisions, FedFin turns now to the proposed approach to equities as well as to that for securitization exposures (i.e., those that are tranched rather than simple secondary-market issuances of packages of loans or other assets backed as needed by a single credit enhancement). The proposal in some cases liberalizes the current, “general” standardized approach (SA), but more often toughens it to account for elimination of the advanced approach…

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8 08, 2023

CAPITAL232

2023-08-08T10:52:38-04:00August 8th, 2023|1- Financial Services Management|

Equity and Securitization Capital Standards

Based on our analysis of the inter-agency capital proposal’s framework and its credit-risk provisions, FedFin turns now to the proposed approach to equities as well as to that for securitization exposures (i.e., those that are tranched rather than simple secondary-market issuances of packages of loans or other assets backed as needed by a single credit enhancement).  The proposal in some cases liberalizes the current, “general” standardized approach (SA), but more often toughens it to account for elimination of the advanced approach.  This will have particular bearing on significant aspects of category III and IV bank activities (e.g., credit-card securitizations, MMF funding), but all covered banking organizations will see significant capital increases as many activities now permitted within the banking book would need to move to the trading book under the new market-risk rules.  Securitization-related capital standards are generally brought closer to those for underlying assets in simple securitizations, giving banks more balance-sheet flexibility and credit-risk mitigation opportunities if investors accept these structures.  The treatment of equity exposures is generally tightened, sometimes so much as to effectively prohibit certain activities – e.g., non-traditional equity investments in covered funds and BHC subsidiaries.  The new treatment of investment funds will also have significant implications for banks that fund themselves through prime MMFs or sponsor investment funds through equity positions.

CAPITAL232.pdf

26 07, 2023

DAILY072623

2023-07-26T16:37:20-04:00July 26th, 2023|2- Daily Briefing|

Senate Democrats Stand Firm On “Junk Fee” Campaign

Today’s lightly-attended Senate Banking Financial Institutions Subcommittee hearing on banking and consumer fees showcased broad Democratic alignment with the Administration’s “junk fees” campaign and persistent Republican aversion to this effort as well as to the CFPB.

CFPB Flags UDAAP, Other Problematic Practices for Enforcement

The CFPB’s latest supervisory report not only details recent actions and priorities, but also expressly stipulates that certain activities identified in the course of supervision that have yet to be addressed by formal agency action are UDAAP.

SEC Targets AI Advice

Acting as anticipated following Gary Gensler’s fiery talk last week about AI risk, the SEC today voted 3-2 to propose new rules curtailing what it believes to be broker dealer and investment-adviser conflicts of interest due to predictive analytics.

Crypto-Jurisdiction Bill to Advance; Stablecoin Measure Likely to do so Tomorrow

Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) announced at today’s HFSC markup that bipartisan negotiations on the committee’s stablecoin bill continue and despite the absence of any breakthrough.

DOJ Officials Seeks Merger Answers

In remarks today, Policy Director David Lawrence of DOJ’s Antitrust Division went beyond new, draft DOJ/FTC merger guidelines (see FSM Report MERGER12) to lay out questions on which the agencies particularly seek answers.

Powell Stresses Bank Discount Window Readiness

FRB Chairman Powell’s press conference today focused almost entirely on monetary policy, but the chair agreed that the discount window performed badly during the recent crisis and that banks need to …

14 07, 2023

Al071723

2023-07-14T16:19:20-04:00July 14th, 2023|3- This Week|

All Roads Lead To Chokepoint

As we noted last week, HFSC’s anti-ESG agenda includes a strong poke at banks and their regulators, going beyond the climate-risk concerns that lie at the center of these sessions also to resurrect efforts during the Trump Administration to sanction any bank that decides on reputational or other grounds not to lend to a creditworthy, legal business (see FSM Report ESG3).  Much is said in this context about “Operation Chokepoint,” a decade-plus old effort by the FDIC and OCC to block bank exposures to payday lenders, firearms firms, or others the agencies believed posed so much reputational risk as to make the loans unsafe or unsound.

Al071723.pdf

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