31 01, 2024


2024-01-31T16:57:15-05:00January 31st, 2024|2- Daily Briefing|

Senate Banking Turns to AI’s Impact on Housing Finance


Today’s lightly-attended Senate Banking Subcommittee hearing on AI and Housing focused principally on AI governance issues including accountability, model explainability, transparency, and bias.  Sen. Warnock (D-GA) called for action on S. 3692, legislation to prohibit use of algorithmic systems to coordinate – and it is believed thus inflate – rental prices or reduce supply.  Although Subcommittee Chairwoman Smith (D-MN) lauded AI for its potential to boost the housing supply, she and other Democrats raised serious concerns that AI reinforces biases in lending decisions.

Democrats Remain Dubious About the Capital Proposal

Today’s Financial Institutions Subcommittee hearing on the capital rules made it still more clear that more than a few Democrats share at least some GOP concerns.  Chair Barr (R-KY) reiterated points he has frequently made about the poor analytics behind the proposal; Full Committee Ranking Member Waters (D-CA) and Rep. Green (D-TX) were unequivocal in their support.  Other Democrats raised concerns many had previously expressed in comment letters, with Rep. Sherman (D-CA) pointing to problems with the proposal’s impact on capital markets and its lack of credit for private mortgage insurance and Rep. Beatty (D-OH) highlighting concerns with small business credit availability.


7 12, 2023


2023-12-07T16:42:01-05:00December 7th, 2023|2- Daily Briefing|

BIS: CCP Collateral Holdings Pose Systemic Risk

A new BIS study looks at the risk that the transformation of OTC markets to centrally-cleared ones has in turn transformed markets based in part on know-your-counterparty into those dependent principally on collateral backing margin positions – an inherently more fragile market structure.

White House Presses FHLB Affordable-Housing Action

In remarks today, National Economic Advisor Lael Brainard not only highlighted the Biden Administration’s actions to address housing affordability, but also mentioned plans for new financing programs.

Ambitious CFPB Regulatory Plans Come Into View

The CFPB’s fall 2023 regulatory agenda provides status updates for several significant rulemaking items.

Basel to Set IRR, Window-Dressing, Crypto Standards

The Basel Committee’s year-end meeting advanced plans to address interest-rate risk (IRR) with a concrete agreement to issue a new consultation later this month updating current global IRR standards (see FSM Report IRR7).

BIS Points to MMF Risk When Rates Rise

Another new BIS paper concludes that the record size of MMFs poses significant threat to dollar-funding market stability.

OCC Warns Banks of AI Risk, Possible Supervisory Action

Reflecting growing Congressional, regulatory, and industry concerns over AI, today’s OCC semiannual risk assessment for federal banks states that national banks should be mindful of AI risks as these fall under current supervisory procedures.

Senate GOP Goes for Gruenberg’s Jugular

Despite efforts by the FDIC to reassure critics about its independent investigation, Senate Banking Republicans today fired off a ferocious letter demanding that FDIC Chair Gruenberg immediately resign …

11 07, 2023


2023-07-11T16:38:06-04:00July 11th, 2023|2- Daily Briefing|

FRB-NY Staff: Climate Tradition Risk Meaningful, Manageable

new blog post from Federal Reserve Bank of New York staff concludes that climate-transition risk in bank loan portfolios is meaningful, but also manageable.  The paper uses general-equilibrium models to focus on forward-looking climate risk in scenarios based on current policy as well as orderly and disorderly transitions, an approach it believes differ from much retrospective analysis of carbon emissions as a measure of transition risk.

CFPB, OCC Team Up To Sanction BofA Transaction, Card Account Practices

The CFPB and OCC today took action against Bank of America in ways that renew questions about potential overlaps between the CFPB’s jurisdiction and that of the banking agencies.  The costlier of the two actions from the CFPB ordered the bank to pay over $170 million in civil monetary penalties and restitution for a range of practices the Bureau regards as abusive and deceptive (see FSM Report CONSUMER39).

GOP Urges Supreme Court to Uphold Fifth Circuit CFPB Decision

Continuing the GOP’s longstanding campaign to redesign the CFPB, HFSC Chairman McHenry (R-NC), Senate Banking Ranking Member Scott (R-SC), and 130 Members of Congress filed an amicus brief today urging the Supreme Court to uphold the Fifth Circuit’s decision declaring the CFPB’s funding mechanism unconstitutional.


5 04, 2023


2023-04-05T16:55:56-04:00April 5th, 2023|2- Daily Briefing|

FDIC Joins CFPB Targeting UDAP

The FDIC today published Consumer Compliance Supervisory Highlights showing that UDAP violations related to NSF representment constituted the second highest number of total citations and were by far the largest number of serious citations in 2022.  The FDIC reiterates August guidance that third-party arrangements related to re-presented items may present numerous risks.  We note that the FDIC’s UDAP focus is new under Chairman Gruenberg and comes at a time when the CFPB is expanding the reach of its own UDAAP enforcement powers with a focus in part on overdrafts and NSF practices.

IMF Staff Highlight New Systemic Risk: Geopolitical Stress

At a panel event today, IMF staff reported that their model-based study in the IMF’s global financial stability report found that geopolitical risks and global fragmentation gravely threaten financial stability by weakening interconnectivity between geopolitical blocs.  Their model found that increased fragmentation results in reduced cross-border banking between blocs, higher lending costs, substantial diversification losses among G7 countries, and reduced bank profitability.  Staff also drew a link between the war in Ukraine and the recent banking crisis, arguing that the war’s inflationary pressures led to an aggressive monetary policy reaction, revealing bank vulnerability to interest rate risk.


15 03, 2023


2023-03-15T16:58:30-04:00March 15th, 2023|2- Daily Briefing|

Waters Reiterates ICE/BKI Opposition

HFSC Ranking Member Waters (D-CA) released a statement today applauding the FTC’s move to block Intercontinental Exchange from acquiring the mortgage software company Black Knight.

Progressives Press For Tailoring Redo

Cementing prior denouncements of 2018 Dodd-Frank “rollbacks” into legislative action, 17 Democratic senators and 31 House Members today took direct aim at Trump-era banking policy by introducing legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Bowman Presses Small-Bank Mergers, Climate Caution, Third-Party Guardrails

In remarks today, FRB Governor Bowman noted that delays in merger reviews cause significant operational and reputational risks and suggested considering all competitors when evaluating a small bank merger’s competitive effect to reduce delays.

New CFPB RFI Brings Data Brokers Under Scrutiny

Ahead of a planned rulemaking, the CFPB today released an RFI seeking comments on the business practices of data brokers, focusing on new business models to determine if certain practices fall under the scope of FCRA.

Warren, Blumenthal Call on DOJ, SEC to Investigate SVB

Although media reports indicate that an investigation is already under way, Sens. Warren (D-MA) and Blumenthal (D-CT) sent a letter today to Attorney General Garland and SEC Chairman Gensler urging them to investigate senior SVB officials if they are not already doing so.

FHFA Delays New DTI-Based Upfront Fee

Following an announcement this January that FHFA would implement changes to Fannie and Freddie’s single-family pricing framework, Director Thompson today announced that the Agency will delay the effective …

10 11, 2022


2022-11-10T17:35:13-05:00November 10th, 2022|2- Daily Briefing|

Inter-Agency Treasury-Market Rewrite Progresses

Treasury’s Inter-Agency Working Group on Treasury Market Surveillance (IAWG) today released a progress report on its efforts to guide action to stabilize the Treasury marketplace.

Fed Reg Report Highlights Future Priorities

The Fed today released its semiannual Supervision and Regulation Report, reiterating that banks entered 2022 in historically sound financial shape and outlined its priorities based on the potential risks of changing market conditions.

FSB NBFI Report Highlights Liquidity, Systemic Risk

The FSB today released a progress report on improving the resilience of non-bank financial intermediation (NBFI), recommending a number of enhancements to the current policy toolkit to better mitigate liquidity and financial stability risk.

CFPB Spotlights Cryptoasset Complaints

The CFPB today published a bulletin analyzing cryptoasset complaints the Bureau has received since 2018, observing a large spike in these complaints over the past two years and concluding that fraud, theft, hacks, and scams are widespread problems affecting participants in crypto markets.

CFPB Continues Furnisher Accountability Campaign

The CFPB today continued its campaign for furnisher accountability by issuing a circular upholding the Bureau’s belief that consumer credit reporting agencies and furnishers must conduct a reasonable investigation of non-frivolous consumer disputes and that failure to do so may subject them to CFPB enforcement under the FCRA.

CFPB Modifies Nonbank Financial-Company Standards

The CFPB today acted again by fiat to amend what it calls its procedural rule (see FSM Report CONSUMER41) revising its “dormant” authority and, as we noted in our analysis, creating a sweeping …

28 06, 2022


2023-01-24T16:10:38-05:00June 28th, 2022|2- Daily Briefing|

HFSC Campaign vs. Chopra May Clear Hsu

Continuing their campaign against CFPB Director Chopra, HFSC Ranking Member McHenry (R-NC) and Consumer Protection and Financial Institutions Subcommittee Ranking Member Luetkemeyer (R-MO) sent him a letter late yesterday accusing him of falsehoods related to legal opinions germane to the battle at the FDIC earlier this year on bank-merger policy (see FSM Report MERGER9).

FinCEN, Commerce Urge Strong Sanction Vigilance from Trade-Financing Banks

FinCEN and the Commerce Department Bureau of Industry and Security released a joint alert today urging increased financial-institution vigilance regarding Russian and Belarusian attempts to evade import sanctions.

CFPB Sets States Free to Interpret the FCRA

Using one of its new administrative procedures – an interpretive rule, the CFPB today expanded on its prior effort to encourage states to undertake vigorous consumer protection by establishing the principle that states may preempt federal standards pursuant to the Fair Credit Reporting Act except where federal preemption is clearly enunciated in the Act.

FRB Study: LMI Households Pay More for Transaction Accounts, Discrimination Not the Cause

A new FRB study finds that banks in LMI and majority-minority communities charge higher maintenance fees and require higher minimum account balances compared to other census tracts, with fee differences compounded for communities that are both LMI and majority-minority.


17 06, 2022


2023-01-26T11:48:59-05:00June 17th, 2022|2- Daily Briefing|

Powell Ponders the Dollar
In remarks today at a conference on the dollar’s reserve-currency status, Chairman Powell highlighted Fed actions to ensure that the dollar is not only an essential global payment instrument, but also a stable one.

Republicans Prepare to Investigate SEC over Climate-Risk Disclosures
In a letter to SEC Chairman Gensler, Senate Banking Republicans upped their campaign against the SEC’s proposed climate disclosure rule, asking the Chairman to provide all written communication related to it.

Chopra Redoubles Plans for Innovative Standard-Setting, Tough New Rules
In a sweeping statement today, CFPB Director Chopra strongly defended his agency’s unusual approach to recent guidance and rulemakings as well as detailed ongoing priorities.

BIS Announces New Crypto, Cybersecurity, and Green Finance Projects
The BIS Innovation Hub today updated its 2022 work program with several new projects on cryptocurrency, cybersecurity, green finance, and CBDC.


8 06, 2022


2023-02-10T15:47:09-05:00June 8th, 2022|2- Daily Briefing|

CFTC Contemplates Broad Climate-Risk Action Plan

Acting on the President’s executive order (see FSM Report GREEN8) , the CFTC is seeking comments on how climate risk affects the derivatives market, underlying commodities markets, the entities it regulates, and financial institutions that might be directly affected by climate risk in this sector.  Supporting FSOC’s work, the Commission also seeks comments on systemic risk implications as well as near-term initiatives.

CFPB Plans Fit-for-Purpose Data-Privacy Regime

When we yesterday predicted that Sen. Brown’s comments about data privacy would spark CFPB action, we didn’t expect that it would come today.  However, Director Chopra used his opening comments and those throughout an advisory-committee meeting to argue, as had the Senate Banking chairman, that personal data are now being used for purposes adverse to fair markets and consumer protection.

Board Soon to Get Barr

The Senate Banking Committee today voted 17-7 to advance Michael Barr’s nomination for Vice Chairman for Supervision at the Federal Reserve to a full Senate vote.  Given Sen. Toomey (R-PA)’s support for Mr. Barr, rapid confirmation is almost certain.  Those voting against Mr. Barr were Sens. Shelby (R-AL), Crapo (R-ID), Tillis (R-NC), Kennedy (R-LA), Hagerty (R-TN), Cramer (R-ND), and Daines (R-MT).


9 03, 2022


2023-04-04T12:16:52-04:00March 9th, 2022|2- Daily Briefing|

President Presses Crypto, CBDC Buttons
We will shortly provide clients with an in-depth analysis of President Biden’s executive order setting the stage for substantive U.S. action across the digital-asset sector.  We note at the outset that, according to the fact sheet, the order comes as close to demanding a CBDC as the President’s authority over the Fed and Secretary Yellen’s reservations doubtless allowed.  The Fed is told to “place urgency” on its research, a demand likely to motivate the Fed to accelerate the very leisurely pace towards some sort of CBDC decision described in last month’s discussion draft (see FSM Report CBDC10).

Long-Awaited LIBOR-Certainty Bill Set for Enactment
Sen. John Tester (D-MN) today to ABA indicated that the Senate version of House-passed LIBOR-transition legislation is in the omnibus spending bill set to pass by the end of this week in order to keep the government open.

CFPB Targets Employer Financial Products, Data
The CFPB today detailed its agenda following meetings on the extent to which U.S. workers are placed at financial risk by their employers.


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