#ESG – Federal Financial Analytics

8 07, 2024

Karen Petrou: What MAGA Republicans and Rohit Chopra Both Want

Eliza Allen2024-07-08T13:20:21-04:00July 8th, 2024|The Vault|

Following last week’s celebration of American independence, my thoughts turned to the confluence of concern from both sides of the political spectrum about an issue at the heart of the Bill of Rights: “financial censorship.” When Florida Gov. Ron DeSantis and CFPB Director Chopra agree – as they do – on a hot-button point such as freedom of thought as it may be expressed in financial transactions, a new framework is upon us no matter who wins in November. Virtuous as this ideal is, putting it into practice is fraught with consequences, more than a few unintended.

That Mr. Chopra chose to address the Federalist Society is notable in and of itself. I’ve done this more than a few times and emerged not only unscathed, but often enlightened. But that was before Democrats viewed the Society as a cabal meant to subvert rules such as those Mr. Chopra is fond of issuing. But the CFPB director knew his crowd – he and even super-MAGA conservatives fear that powerful financial companies threaten freedom of thought because giant platforms have undue control over each of our wallets. This may not be true, but at least one such company gave it a try and those taking aim at financial censorships think that once is enough, and they are right.

However, the focus on financial censorship goes beyond what payment companies allow us to express via what we purchase. The debate is over a decade old, beginning as it did when Obama Administration banking …

10 07, 2023

Karen Petrou: The Bankruptcy of Bank-Merger Policy

Eliza Allen2023-07-10T14:18:07-04:00July 10th, 2023|The Vault|

On Wednesday, a Senate Banking subcommittee will consider bank-merger policy, surely providing a platform for its chair, Sen. Warren’s pronounced views opposing all but the smallest bank mergers and maybe not even those. Many other senators are not as adamant, but even pro-business Republicans – see J.D. Vance – think bank mergers beyond the itty-bitty are at best problematic. The politics of this debate is obvious; the substance not so much. As with many other questions, bank-merger policy is best set with a keen understanding of recent, objective research and what it actually says about concentration as it occurs outside the gaze of those fearful only of still bigger big banks.

That there is undue market power in a financialized economy that brings a raft of woes is all too clear. I thus hoped that Assistant Attorney General Kanter’s remarks last month would be a meaningful update of the Department of Justice’s anachronistic 1995 policy. It helped, but only a bit because Mr. Kanter focused principally on enforcement, leaving “broader” questions solely to the banking agencies.

They in turn have long promised a transparent merger policy, but it’s still deal-by-deal, case-by-case, crisis-by-crisis. More than a few mid-sized banks will wither away as deliberations continue because the sheer uncertainty and delays of most bank mergers undermine their economic value, particularly at a time of high interest rates, slow or no growth, tough new rules, and withering competition.

Recent antitrust research does not substantiate easy, blanket assertions about the benefits or …

6 03, 2023

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

Arezou Rafikian2023-03-06T16:31:48-05:00March 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 …

30 01, 2023

Karen Petrou: M&Ms, McHenry, and the Making of Financial Policy

Arezou Rafikian2023-01-30T11:28:41-05:00January 30th, 2023|The Vault|

It’s a sad commentary on American politics to observe, as I feel we must, that the experienced chairman of the House Financial Services Committee, Patrick McHenry, has followed M&M’s “spokescandies” as a target of Tucker Carlson’s bilious, yet widely-watched, wrath. The fundamental frivolity of this contrast is self-evident, but that has yet to dampen the credibility of this combustible commentator with his super conservative acolytes. That Mr. Carlson matters so much to public discourse is deeply distressing given some of his other targets – Nancy Pelosi’s husband after a brutal attack is only one that comes immediately to mind. Unlike him and many other Carlson targets, Mr. McHenry can more than take care of himself. Still, going after him means super-conservatives will blast any Member or measure that falls short of purity on their rightward-loaded scale. Since nothing these folks like can be enacted into law, all this does is reduce the hopeful odds we cast earlier this year for constructive financial-policy legislation. Too bad – the nation could use some.

The nub of the accusation lies in his chairman’s decision to leave the word “inclusive” in the name of one of his panel’s revamped subcommittees. Clearly, the concept of inclusion has become accursed because Democrats often used it in concert with what might seem an equally innocuous word: diversity. Democrats did use diversity and inclusion demands to press for racial, gender, and sexual-orientation equity in ways that rubbed many republicans raw, but the idea of inclusion is fundamental to …

21 04, 2022

FedFin: Risk-On CRT for a Risk-Off Market?

Arezou Rafikian2023-03-02T10:38:46-05:00April 21st, 2022|The Vault|

In our last CRT analysis, we looked at transaction viability under the Basel IV rewrite set for rapid release once key Fed nominees are finally confirmed. Now, we turn to another viability consideration: the extent to which CRT can thrive in spite of these capital obstacles and accomplish a vital purpose spelled out in a recent Urban Institute report: enhance equitable finance as FHFA demands. In short, we hope so, but it won’t be easy.

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

5 10, 2021

FedFin: Gensler: SEC Will Not Ban Crypto, Will Treat as Securities

Arezou Rafikian2023-06-28T15:31:17-04:00October 5th, 2021|The Vault|

As anticipated, today’s HFSC hearing with SEC Chair Gensler covered the full SEC agenda, although members steered clear of the SEC investigation demanded by Sen. Warren (D-MA) into recent Fed trading. Chair Gensler defended his budget request, citing for example a major increase in IPOs and saying the SEC is a “cop on the beat” ensuring investors are protected. Democrats pushed Mr. Gensler to take more action on crypto while Republicans argued crypto is not a security; Chair Gensler was consistent throughout the hearing in his belief that the law is clear on what is a security, but noted also it may be outdated in some areas and thus urged Congress to update the law if it sees appropriate. Like Fed Chair Powell (see Client Report REFORM209), Chair Gensler pledged he would not ban crypto.

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