30-10 or Bust
With smaller lenders today joining MBA, NAR, and HomeBuilders’ campaign to squeeze the 30-10 spread, we take a look at the odds the White House, Fed, or Treasury will do as hoped. We think it more than possible that the PSPA could be revised with FHFA consent to allow the GSEs to hold more of their own MBS as a spread stabilizer; whether the GSEs will do so unless forced is another question given the considerable capital cost this would exert.
Key Democrat Takes On Fed Rate Hikes
Ahead of today’s FOMC meeting, Joint Economic Committee Chair Heinrich (D-NV) yesterday sent a letter to Fed Chair Powell cautioning against additional policy tightening.
Second HFSC Markup Targets Stablecoins, Regulatory Restrictions, ESG
Thursday’s HFSC has now added another day to its mark-up calendar this week, moving the stablecoin and ESG bills to Thursday doubtless in order to avoid an endurance contest before the August recess and still meet Chairman McHenry’s (R-NC) commitments.
Senate GOP Tries to Block Capital Rewrite
Just days before the banking agencies take up new capital rules, Senate Banking Ranking Member Scott (R-SC) and ten other committee Republicans sent a letter to Chairman Powell demanding greater transparency and prior consultation.
Waters Presses FHFA for FHLB Reform
Following FHFA listening sessions and in anticipation of a final report this September on the FHLB system, HFSC Ranking Member Waters (D-CA) late yesterday sent a letter to FHFA Director Thompson laying out a series of recommendations to significantly reform the system.
Ag Committees Slam SEC Custody Proposal
In a letter to SEC Chairman Gensler released today, Senate Agriculture Committee Ranking Member Boozman (R-AR) and Chairwoman Stabenow (D-MI) along with House Ag. Committee Chairman Thompson (R-PA) and Ranking Member Scott (D-GA) raised strong objections to what they called serious flaws in the SEC’s proposed custody rule (see FSM Report CUSTODY5).
Warren, Scott Renew Fed-Ethics Campaign
Continuing their bipartisan campaign against the Fed, Sens. Warren (D-MA) and Scott (R-FL) yesterday sent a letter…
HFSC ESG Efforts Tackle Insurance Risk Pricing
Today’s HFSC Subcommittee hearing on ESG’s housing and insurance market impacts focused almost entirely on insurance. Chairwoman De la Cruz (R-TX) argued that ESG regulations drive up home costs and distort insurance and homebuilding markets, while Ranking Member Cleaver (D-MO) asserted that climate risk is material to insurance costs, calling for long-term housing resiliency solutions.
HFSC Republicans Target Bank Supervisors
The HFSC memo ahead of next week’s hearing looking at the political independence of the banking agencies makes it clear that top agency supervisors will principally be grilled on climate-risk initiatives. However, bills on which the session will set a record would require prior Congressional notice prior to action on any initiative advocated by the FSOC or an executive order.
Senate GOP Targets “ESG” Lending, Ideological Bias
Sens. Vance (R-OH), Lummis (R-WY) and Marshall (R-KS) yesterday introduced legislation that would bar regulators from taking action against any regulated entity based on fears of reputational risk and establish a Treasury special IG tasked with collecting tips on regulatory misconduct with a focus on ideological bias. The IG would be responsible for investigating allegations of misconduct by the FDIC, NCUA, Fed, OCC, SEC, CFTC, FHFA, and CFPB, offering recommendations or submitting quarterly reports to Congress on the nature and number of complaints.
House Judiciary Joins GOP Asset-Manager ESG Attack
Continuing the GOP campaign against ESG, House Judiciary Chairman Jordan (R-OH) and Reps. Massie (R-KY) and Bishop (R-NC) sent letters late yesterday to the leadership of BlackRock, Vanguard, State Street Global Advisers, the Glasgow Financial Alliance for Net Zero, and the Net Zero Asset Managers initiative, claiming that what they call “collusive agreements” violate antitrust law.
FRB-KC: Farm Credit System Mergers May Influence Ag-Bank Portfolio Strategy
New research from Federal Reserve Bank of Kansas City staff concludes that, while Farm Credit System mergers over the past twenty years had relatively minor effects on agricultural-bank profitability and efficiency, they may have altered bank portfolio decisions with broader implications both for banks and the communities they serve.
CFPB, Treasury, HHS Launch Interagency Inquiry Into Medical-Payment Products
As part of the White House initiative to address medical-sector “junk fees” and consumer protection, the CFPB today was joined by HHS and Treasury in issuing an RFI on high-cost specialty financial products it says harm medical patients by driving up debt.
FHFA Joins Repeat-Offender Crackdown
Acting on the “repeat-offender” crackdown initiated by the CFPB and recently picked up by the OCC, FHFA today issued a proposed rule that would revise its Suspended Counterparty Program (SCP) regulation to authorize FHFA to immediately suspend business between the GSEs and counterparties who are found to have committed civil or criminal misconduct in connection with real property management or ownership.
UK Targets PE/Private-Credit Interconnections
Although U.S. regulators have begun to talk about inter-connections (see FSM Report SYSTEMIC95), the Bank of England’s top official for international finance today laid out new U.K. policy to address them. Specifically, Nathanaël Benjamin addressed counterparty risk with particular attention to bank private-equity and private-credit exposures. Mr. Benjamin’s concern is principally that, should the U.S. not pull off a soft landing, this sector could experience severe stress that could quickly migrate to asset management.
IOSCO Sticks With SOFR
Acting on concerns often expressed by SEC Chairman Gensler, IOSCO today published its final assessment of USD LIBOR, judging two credit-sensitive alternatives problematic and blessing limited use of certain term SOFRs. The most immediate consequences of this will be to make the Fed still less likely to permit banks to use the limited credit-sensitive exemptions provided in its final alternative-benchmark rule (see FSM Report LIBOR9), with IOSCO emphasizing its point with specific reference to this option by urging only cautious use of these rates and suggesting that regulators (presumably outside the U.S.) review their permissibility.
The Ides of IRR
In non-public remarks ahead of a presentation by FedFin managing partner Karen Petrou, Sen. Jack Reed (D-RI) laid out what he thinks banking agencies will do next, doubtless based on what they’ve told him that they’ll do next. We have predicted that new interest-rate risk (IRR) standards are high odds, but Reed’s comments suggest they are a near-term for-sure.
House Passes Bill Rescinding FHFA Pricing Changes
The House today passed HFSC Member Davidson’s (D-OH) bill overturning the FHFA’s changes to the Enterprise’s pricing framework by a vote of 230-189 mostly along party lines, with fourteen Democrats voting for the bill. The bill stands little chance of advancing in the Senate and the White House today released a statement of policy strongly opposing it. Rep. Boebert (R-CO) submitted an amendment requiring the GAO study mandated by the bill to be made publicly available online, which was agreed upon by a voice vote.
Bipartisan Cash-Acceptance Bill Reintroduced
The chairman of Senate Foreign Relations and Banking Committee member Menendez (D-NJ) yesterday reintroduced bipartisan legislation (S. 1984) along with Rep. Payne (D-NJ) (H.R. 4128) to require retail businesses to accept cash for in-person transactions.
CFPB Renews Mortgage-Servicing Rewrite
In a blog post today, CFPB Director Chopra highlighted an issue that failed to come up at hearings earlier this week (see Client Report CONSUMER51): mortgage servicing.
Senate Democrats Focus On P2P Consumer Protection
Reflecting recent CFPB concerns and a consumer warning, Senate Banking Committee Chairman Brown (D-OH) along with Sens. Reed (D-RI), Warren (D-MA), and Menendez (D-NJ) today sent letters to the CEOs of PayPal and Cash App requesting consumer-fraud and scam data as well as steps the companies are taking to protect consumers.
IMF Sees Regional-Bank Risk, Urges Fast Action
The IMF’s financial-stability report for the United States today details recent macroeconomic-, fiscal-, monetary-, and financial-policy developments, with the Fund’s executive directors (including that of the U.S.) emphasizing in response the need to prioritize inflation-fighting over fiscal tightening.
FHFA Housing Equity Session Provides Little Insight
We had intended to listen through today’s FHFA equitable finance listening session, but its opening indicated that it will not address the pending regulatory rewrite.
New Fed Paper Shows Link Between Twitter, Market Sentiment, Run Risk
A new FRB staff paper uses natural-language models and social-media data to craft a “twitter sentiment index” (TSI) that is then compared to actual market conditions.
Democrats Press Clawback, Regulatory Fixes as HFSC Considers Transparency Measures
Today’s HFSC mark-up so far has focused on one of Rep. Barr’s (R-KY) three regulatory transparency bills, with Democrats proposing a series of amendments without any deciding votes.
House Oversight Panel Focuses On Supervisory Accountability, Reform
At today’s hearing of the Financial Services Subcommittee of House Oversight on bank failures and supervision at the San Francisco Fed, Subcommittee Chairwoman McClain (R-MI) opened with a series of sharply-worded questions on who oversaw the bank, what factors might have distracted them from traditional supervision, why glaring risk factors were not more forcefully addressed, whether regulators were unduly complacent, whether the Fed and FDIC used all of their regulatory tools, and if the agencies have been objective and transparent in their bank failure post-mortems as well as their accounts of the systemic risk exception.
Markup Votes Postponed for Transparency, LLPA Bills
Since our last alert, Democrats continued to submit amendments for Rep Barr’s (R-KY) transparency bill at today’s HFSC markup and party lines cemented over Rep. Davidson’s (R-OH) LLPA bill.
House Advances Consensus Anti-China Reporting Legislation
The House yesterday voted 400-5 to approve H.R. 1156, bipartisan legislation addressing Congress’ China concerns by mandating a new study.
Gruenberg Endorses Bank On Accounts, Notes Continuing Racial Gaps
In remarks today largely devoid of policy implications, Chairman Gruenberg praised Bank On’s impact on financial inclusion, but noted that racial divides still persist as Black and Hispanic households are more likely to be unbanked than White ones at every income level.
IOSCO Aims at Ending Crypto-Market Arbitrage
Advancing global crypto standards, the International Organization of Securities Commissions today released a consultative report on the contentious question of centralized-market regulation with which a joint HFSC/AG Committee process is now wrestling (see Client Report CRYPTO43).
HFSC GOP Blasts GSE Fees, Supports FHLB System
Today’s HFSC hearing with FHFA Director Thompson was largely the LLPA battle we anticipated, with Republicans lambasting recent actions and Democrats tartly responding that Republicans did not know what they were talking about.
Hsu Echoes Gruenberg’s Bank-On Praises
Following Chairman Gruenberg’s remarks earlier today, Acting Comptroller Hsu similarly praised Bank On’s impact on financial inclusion while highlighting racial and income gaps.