#FRB Boston – Federal Financial Analytics

22 01, 2024

DAILY012224

Eliza Allen2024-01-22T16:57:16-05:00January 22nd, 2024|2- Daily Briefing|

FRB Reconsiders Interchange-Fee Cuts

Bowing to critics in the banking industry and on the Board, the Federal Reserve today extended the comment period on its debit-card interchange fee proposal (see FSM report INTERCHANGE12) by a surprisingly-long ninety days to May 12. The extension is in part due to the Board’s decision to publish additional interchange fee cap data which may have persuaded the Board that the initial data analysis supporting a mandatory pricing reduction was incorrect.

OIG Finds Reserve-Bank Trades Legal, But Problematic

The Federal Reserve’s Office of the Inspector General (OIG) today released long-awaited reviews of personal trades by former Dallas and Boston Reserve Bank Presidents two years ago that raised numerous and often vociferous assertions of conflicts of interest. Indeed, Sen. Warren (D-MA) stated that she believed these epitomized a “culture of corruption” at the Fed, introducing bipartisan legislation to force considerably more transparency at the Reserve Banks.

FSB Plans Global Run-Risk Buffers

The head of the Financial Stability Board, Secretary General John Schindler, today briefed media on the global regulator’s plans to brief the G20 in October about viral-run risk and the standards needed to avert it. Mr. Schindler said little about what the FSB is likely to propose although the Basel Committee is now considering rewrites to global LCR and NSFR standards likely to be reflected in the FSB’s recommendations.

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30 05, 2023

Daily053023

Eliza Allen2023-05-30T17:13:13-04:00May 30th, 2023|2- Daily Briefing|

Fed Study Validates Bank/Shadow-Bank Interconnections, Systemic Risk

A new study by staff from the Federal Reserve Banks of Boston and New York evaluates the banking-sector impact of fire sales across multiple NBFI segments, finding numerous bank vulnerabilities to nonbanks not only through direct exposures, but also through complex, indirect channels.

McHenry Protests U.S. Outbound-Investment Constraints

HFSC Chairman McHenry (R-NC) sent a letter to Secretary Yellen late Friday demanding information about a potential executive order that would enable CFIUS to prohibit or require notification of outbound investments into China, stating that the Administration’s interest in capital controls necessitates Congressional oversight.

IMF Article Calls SVB Resolution “Riskless Capitalism”

An article in the IMF’s forthcoming Finance and Development magazine issue argues that SVB’s uninsured depositors enjoyed “riskless capitalism,” concluding that high moral hazard-risks will persist without incentives for depositor due diligence.

FTC Demands Greater Debit-Card Data Access

The FTC today finalized a consent order requiring Mastercard to provide competing card networks with the customer account information necessary to process debit payments, alleging that the company illegally withheld that information to prevent merchants from using its competitors or Mastercard-branded debit cards saved in e-wallets outside of traditional networks.

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22 12, 2022

DAILY122222

Eliza Allen2022-12-22T16:43:24-05:00December 22nd, 2022|2- Daily Briefing|

Waters Blasts ICE/BKI Merger

Although HFSC Chair Waters (D-CA) frequently opposes large-bank mergers, her stand today against the ICE/Black Knight deal is the first time we can recall her taking a public stand on a transaction before the Federal Trade Commission (outside HFSC’s jurisdiction).

Toomey Sets Agenda for GOP Fed Reform

Among his parting shots, Senate Banking Ranking Member Toomey (R-PA) yesterday introduced legislation to reform the Federal Reserve System.

Toomey Also Tries to Set Stablecoin Agenda

In another effort to set the terms of debate before he departs, Senate Banking Ranking Member Toomey (R-PA) also introduced a new version of his initial stablecoin legislation (see FSM Report CRYPTO27).

Warren Doubts Zelle’s Fraud Policy Changes

Continuing her campaign against Zelle fraud, Sen. Warren (D-MA) today sent a letter to the CEO of Zelle’s parent company demanding a briefing on pending efforts to compensate consumers for fraudulent transfers.

CFPB Cites ARM Risks, Rewards

The CFPB today issued a consumer alert describing the risks associated with various mortgage products during a period of rising interest rates.

Project Hamilton Ducks CBDC-Feasibility Decision

The Federal Reserve Bank of Boston today announced the completion of its Project Hamilton work with MIT on a U.S. CBDC.

Fed to Reconsider Key Bank-Control Criteria

Although the banking agencies today reiterated that their policy is not generally to require reporting of loans to potentially controlling principal-fund complexes or banks that meet passivity requirements, the Fed will now reconsider relevant rules in this sector.

Daily122222.pdf…

2 12, 2022

DAILY120222

Eliza Allen2022-12-02T16:51:39-05:00December 2nd, 2022|2- Daily Briefing|

Menendez Blasts FRB-Chicago Choice

Continuing his campaign for increased diversity and transparency at the Federal Reserve, Sen. Bob Menendez (D-NJ) issued a fiery statement criticizing the Federal Reserve Bank of Chicago’s decision to name a non-Latino president.

Fed Revises PSR to Prepare for FedNow

The FRB today finalized changes to its Policy on Payment System Risk (PSR) to expand access to collateralized intraday credit. These reduce the administrative steps associated with requesting collateralized capacity, action the Fed says would improve intraday liquidity management and payment flows while also assisting the Reserve Banks managing intraday credit risk.

GOP Expands CBDC Attack to Project Hamilton

Readying an inquiry intended to block CBDC when the GOP takes over the house next year, Ranking Member McHenry (R-NC) and six other HFSC Republicans sent a letter to FRB Boston President Susan Collins demanding answers to allegations that private companies are abusing their work on Project Hamilton to position themselves for product sales to financial companies once a CBDC begins.

Fed Finally Outs Climate-Risk Principles

As long anticipated and likely late on Friday in hopes of avoiding critical GOP scrutiny, the Federal Reserve Board today released proposed climate-risk principles. These are “high-level” as is also the case for global edicts in this contentious arena (see FSM Report CLIMATE14), also tracking the OCC’s longstanding like-kind proposal (see FSM Report GREEN12).

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14 07, 2022

DAILY071422

Eliza Allen2023-01-06T15:12:22-05:00July 14th, 2022|2- Daily Briefing|

FSB Climate-Risk Progress Report Underscores Disclosure Standards, Improved Data

The FSB today released a climate-risk progress report that also details near-term actions. These include not only the statement to the G20 in October noted in yesterday’s G20 report, but also a status report in September from the Task Force on Climate-Related Financial Disclosures (TCFD) on industry progress toward adopting its climate disclosure recommendations.

CFPB, OCC Slam BofA for UI-Fraud Lapses

The OCC and CFPB today issued a $225 million enforcement order against Bank of America related to unemployment-insurance and public-benefit fraud that led the bank to improperly withhold prepaid-card payments to legitimate recipients.

BIS Builds “Central Bank Liquidity Bridges”

Continuing its work to promote better cross-border payments, the BIS today floated the idea of “central-bank liquidity bridges” to overcome current frictions in the bank-dominated sector.

Clarida and Powell Cleared, but OIG Still Reviewing Fed Ethics

The Office of the Inspector General at the Fed today cleared former Vice Chair Clarida and Chairman Powell of ethics violations that have dogged them as recently as a letter yesterday from Senate Democrats.

Daily071422.pdf…

3 02, 2022

Daily020322

Arezou Rafikian2023-04-05T14:01:47-04:00February 3rd, 2022|2- Daily Briefing|

Fed Study Presages House Two-Tier Stablecoin Standards
A new Federal Reserve staff note recommends a different approach to stablecoin innovation than that proposed by the President’s Working Group on Financial Markets (see Client Report CRYPTO21).

Fed’s Project Hamilton: CBDC Advances Payment Functionality, Outdoes DLT
The Boston Fed and MIT today published findings from Phase 1 of their CBDC research initiative “Project Hamilton,” which has now successfully created a core processing engine for a hypothetical CBDC. Results also demonstrate an array of other CBDC capabilities, a finding sure to factor into the Fed’s thinking about the pace of CBDC implementation once it makes more progress on the basic “what-if” questions in its discussion draft (see FSM Report CBDC10).

McWilliams Outlines How FDIC Insurance Could Cover Stablecoins
Although Jay Powell delivered his all-important annual address atop a virtual Wyoming mountain, the Federal Reserve is nonetheless mired in the Big Muddy.

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10 01, 2022

m011022

Arezou Rafikian2023-04-25T14:04:38-04:00January 10th, 2022|6- Client Memo|

Senate Banking’s CBDC Questionnaire

It’s certain that Jay Powell’s confirmation hearing will put him through the wringer on inflation, equality, “insider” trading, and the rules he’ll foster under the new vice chair for supervision. This is enough to try even the most patient of souls, but there’s another issue senators should be sure to raise: what’s taking the Fed so, so long to start its CBDC deliberations, let alone conclude them? After initially dismissing the need for a U.S. central bank digital currency, Chairman Powell announced last May that the Board would seek public comment sometime that summer. At about the same time, Gov. Brainard spoke about a possible CBDC construct and the Boston Fed announced a technical build-out project along with the Massachusetts Institute of Technology. The Federal Reserve Bank of New York’s Innovation Hub also has CBDC ambitions. Although Fed officials were quick to point out that none of these nor any of the subsequent high-profile papers commits the Fed to anything, work seemed well under way to join the dozens of other central banks convinced that CBDC is essential in the quick-digitization payment future clearly emerging outside the reach of central bankers.

m011022.pdf…

10 01, 2022

Karen Petrou: Senate Banking’s CBDC Questionnaire

Arezou Rafikian2023-04-25T14:04:57-04:00January 10th, 2022|The Vault|

It’s certain that Jay Powell’s confirmation hearing will put him through the wringer on inflation, equality, “insider” trading, and the rules he’ll foster under the new vice chair for supervision. This is enough to try even the most patient of souls, but there’s another issue senators should be sure to raise: what’s taking the Fed so, so long to start its CBDC deliberations, let alone conclude them?

After initially dismissing the need for a U.S. central bank digital currency, Chairman Powell announced last May that the Board would seek public comment sometime that summer. At about the same time, Gov. Brainard spoke about a possible CBDC construct and the Boston Fed announced a technical build-out project along with the Massachusetts Institute of Technology. The Federal Reserve Bank of New York’s Innovation Hub also has CBDC ambitions. Although Fed officials were quick to point out that none of these nor any of the subsequent high-profile papers commits the Fed to anything, work seemed well under way to join the dozens of other central banks convinced that CBDC is essential in the quick-digitization payment future clearly emerging outside the reach of central bankers.

What’s happened since the summer CBDC storm? Not much.

Mr. Powell and other Fed officials at one point promised that the CBDC paper would come in September, but autumn came and went. The Fed’s certainly been busy tidying up after its “transitory” inflation goof and ongoing macroeconomic challenges, but it neglects CBDC at its and our peril.

First, whether …

13 10, 2021

Daily101321

Arezou Rafikian2023-06-15T15:03:35-04:00October 13th, 2021|2- Daily Briefing|

Quarles Quandary Not Key to Fed Reg, M&A Action
Late yesterday, the Federal Reserve Board announced that Randy Quarles will cease his duties as supervision vice chair starting today. Mr. Quarles’ term as a governor continues until 2032 but the vice chairmanship is a position appointed by the President and confirmed by the Senate.

FSB Sets Ambitious Course for Cross-Border Payment Redesign
The FSB today published both a progress report on its cross-border payment roadmap (see FSM Report PAYMENT21) and a final set of forward-looking plans. Work on the roadmap has advanced well, with the FSB now expressly incorporating CBDC into its forward-looking work.

Senate GOP Heightens Pressure on Reserve-Bank Appointments
Countering an array of Democratic demands for diversity, Senate Banking Republicans today urged the boards of the Boston and Dallas Reserve Banks to ensure an apolitical appointment process.

AI Task Force Considers Algo Privacy, Transparency, Bias
As anticipated, today’s HFSC AI Task Force hearing on ethical AI kicked off Congressional work on this hot topic, making it clear that Democrats may advance consumer-data privacy, algorithm transparency, and anti-bias standards.

Brown Fires Fusillade at Fed Regulatory Policy
Making it more than clear that he takes at best a guarded approach to Jay Powell’s renomination, Senate Banking Chairman Brown (D-OH) today sent Mr. Powell a letter demanding a “new direction” in bank regulation regardless of who succeeds Vice Chairman Quarles and chairs the Fed.

Daily101321.pdf…

30 09, 2021

REFORM209

Arezou Rafikian2023-07-31T15:42:27-04:00September 30th, 2021|5- Client Report|

HFSC Dems Mum on Powell Renomination

In very sharp contrast to the Senate Banking session on Tuesday with Chairman Powell and Secretary Yellen (see Client Report REFORM208), today’s HFSC session was largely devoted to partisan wrangling over monetary policy, the debt ceiling, and the Biden Administration’s overall fiscal policy. Likely complicating Democratic support for Mr. Powell, Ranking Member McHenry (R-NC) strongly endorsed renomination. Significantly, no Democrat spoke on this issue nor did any raise the trading scandal at the Reserve Banks or the Fed’s regulation of very large banks in this or, indeed, any other context.

REFORM209.pdf

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