#FRB KC – Page 2 – Federal Financial Analytics

25 08, 2022

DAILY082522

Eliza Allen2023-01-04T10:34:26-05:00August 25th, 2022|2- Daily Briefing|

KC-Fed: Data Aggregation Requires Rules Before Mass Adoption

The Kansas City Fed yesterday released a briefing on data aggregators concluding that they can improve the efficiency and quality of consumer financial services if proper regulation protecting data security and privacy is enacted.

SEC Prioritizes Enforcement, Disclosure, Working-Families and Systemic Risk

The SEC’s new strategic plan through 2026 speaks to Chairman Gensler’s focus on fairness, economic opportunity, and enforcement. Specifics are sparse, but the plan puts the agency’s enforcement policy in the context of protecting “working families” especially when it comes to enforcement in areas such as cryptoassets.

FSI Report: Bigtech, Third Party Vendors Pose Operational Risk

The BIS Financial Stability Institute today released a study examining operational resiliency through a macroprudential lens, offering recommendations on how to address systemic risks presented by critical third-party service providers and bigtech.

Daily082522.pdf…

29 06, 2022

DAILY062922

Eliza Allen2023-01-24T16:00:53-05:00June 29th, 2022|2- Daily Briefing|

FRB-Cleveland Study: Small-Business Finance Availability Shows Continuing Disparate Impact

The Federal Reserve Bank of Cleveland today published the results of the Small Business Credit Survey, finding that small businesses owned by people of color were far less likely to have recovered to pre-pandemic levels than their white counterparts, due in part to continuing gaps in financial access.

GOP Renews Demand for Reserve Bank Reform

Picking up on the GOP’s serious concern about Federal Reserve Bank governance expressed when Chairman Powell came before them last week (see Client Report FEDERALRESERVE70), Senate Banking Republicans today sharply criticized the head of the Kansas City Fed for what they call her unresponsiveness and even untruthfulness related to how Reserve Trust achieved payment-system access.

CFPB Report: Credit Line Reductions Harm Vulnerable Borrowers

Continuing the CFPB’s assessment of credit-card finance, Bureau staff today issued a report about the adverse impact that credit line reductions or withdrawals have on consumers, especially those under stress.

HFSC Homeownership Session Fans Partisan Flames

Today’s HFSC hearing on homeownership and inequality was a largely partisan session where each side repeated policy and macroeconomic arguments along party lines about the best ways to govern the nation’s housing market.

IMF Calls for Improvements to Capital Market Regulation

The IMF issued a report today on capital-markets regulation calling for new market liquidity backstops, strengthened CCP risk management, and greater attention to emerging risks to strengthen the regulatory perimeter focus.

Waters Renews Demands to Break Up Big Bad Banks

Following the hearing …

2 06, 2022

DAILY060222

Eliza Allen2023-02-10T16:10:34-05:00June 2nd, 2022|2- Daily Briefing|

Fed Study Outlines Fixes to Make Retail CBDC Functional

A new Federal Reserve paper assesses the interplay between a U.S. retail CBDC and monetary policy transmission if whatever the Fed comes to offer is widely adopted for both payment and investment purposes.

Black Crypto Investments Reflect Wealth Gap Born of Financial System Distrust

A new article by the Kansas City Fed investigates the popularity of cryptoassets among Black investors and explains what may attract them and how this is a symptom of the racial wealth gap. The study found that Black investors are both more likely than whites to own crypto instead of safer assets such as stocks and mutual funds and more likely to expect high returns (i.e., 27 percent for Blacks versus 15 for whites) from crypto.

Fed Study Finds Enforcement Actions Increase Minority Lending

A study today released by the Fed found that, since 1997, banks subject to an enforcement action increased their mortgage lending to minorities and decreased minority denial likelihood, even if the action was not issued for violation of the fair-lending laws.

FIO Prioritizes Biden Climate-Risk Goals

The meeting today of FIO’s Federal Advisory Committee on Insurance focused on FIO’s work to meet the goals set out for it in the President’s climate-risk executive order (see FSM Report GREEN8).

Daily060222.pdf…

27 05, 2022

Daily052722

Eliza Allen2023-02-21T13:31:35-05:00May 27th, 2022|2- Daily Briefing|

KC Fed: Advanced Nations Struggling to Find a CBDC Rationale

In concert with Vice Chair Brainard’s testimony yesterday (see Client Report CBDC13), the Kansas City Fed released a brief assessing the reason advanced economies have so far been considerably more hesitant than emerging ones to craft retail focused CBDCs. By laying out how many advanced economies are at best lukewarm to CBDC, the brief’s review illuminates reasons why the FRB is hesitant without directly addressing the U.S. The post looks at numerous CBDC rationales (e.g., financial inclusion, Payment-system speed) and differentiates them by major nations.

FRB-Cleveland: Post-1994 Bank Restructuring Improved LMI Inclusion

A new study from the Federal Reserve Bank of Cleveland offers perhaps the first literature survey of financial inclusion. It largely summarizes outstanding work, but notes that interstate banking following the Riegle-Neal Act of 1994 correlates with increased bank-branch density correlated in turn with a four percent increase in LMI household financial inclusion. This conclusion is interesting in light of the significant increase following the Act also in bank consolidation in light of continuing concern about “banking deserts” said to be due to M&A (see FSM Report MERGER9).

Daily052722.pdf…

23 05, 2022

DAILY052322

Eliza Allen2023-02-21T13:53:43-05:00May 23rd, 2022|2- Daily Briefing|

FRB-NY Staff: Mandatory Flood Insurance Harms LMI Households

A New York Fed blog post today points to another important, unintended consequence of well-meaning regulation: the adverse impact of mandatory flood-insurance coverage on LMI households.

FRB Atlanta Staff Bolsters Proposed Cash Acceptance Mandate

A blog post today from the Federal Reserve Bank of Atlanta strengthens the case for the mandate for retailer cash acceptance recently approved by the House Financial Services Committee.

Kansas City Fed Finds Persistent Commodity-Market Price Hikes, Volatility

Reflecting concerns in a recent Petrou op-ed, the Federal Reserve Bank of Kansas City today released a report differing from the FOMC’s optimistic inflation forecasts at least as far as they relate to commodities.

HFSC Tackles Disability Rights

Tomorrow’s HFSC Subcommittee on Diversity and Inclusion hearing on disability rights will focus not only on housing access, but also on the extent to which a broad range financial services are easily accessible to persons with disabilities.

Fed Survey Shows Significant LMI Investment in Payment, Investment Crypto

The Fed today released a report on household well-being in 2021, detailing an array of survey findings that generally show Americans feeling remarkably prosperous and satisfied. The Fed cautions that this may no longer pertain, but the data do suggest what may be more than a passing rebound in economic resilience for at least some families.

Daily052322.pdf…

14 02, 2022

Karen Petrou: Two Regulatory Decisions That Will Define the Future of Money

Arezou Rafikian2023-04-04T16:07:43-04:00February 14th, 2022|The Vault|

Like all of you, we at FedFin spend a lot of time watching the U.S. Congress, but I’m increasingly wondering why. Sure, there’s the blood and guts. Watching Congressional deliberations is more and more like being a spectator at a hockey game for the fights or NASCAR races for the next fiery crash. Does any of this carnage really matter? Not much when it comes to vital, urgent financial policy questions such as what money has come to be in the United States. With Congress mired in a never-ending cock fight, regulators hold the fate of finance mostly in their own fierce grip. Even without deployment of the Fed’s nuclear CBDC option, two developments last week show clearly how much power regulators have to redefine U.S. digital currency.

First, there was outgoing FDIC Chair McWilliams’ offhand suggestion in her final remarks that stablecoins have all the characteristics of fiat currency deposits and thus could be eligible for FDIC insurance under current law. As soon as he took the helm, Acting FDIC Chairman Gruenberg demanded tough cryptocurrency regulation, but he didn’t rule out deposit status for at least some stablecoins if the agency was satisfied with their stability.

The impact of an FDIC decision deeming at least some stablecoins to be deposits is hard to over-estimate. As I detail in my book, what’s actually in a bank deposit isn’t what most people think they hold, i.e., a virtual pile of dollars. In fact, money in the bank is …

14 02, 2022

m021422

Arezou Rafikian2023-04-04T16:07:21-04:00February 14th, 2022|6- Client Memo|

Two Regulatory Decisions That Will Define the Future of Money

Like all of you, we at FedFin spend a lot of time watching the U.S. Congress, but I’m increasingly wondering why. Sure, there’s the blood and guts. Watching Congressional deliberations is more and more like being a spectator at a hockey game for the fights or NASCAR races for the next fiery crash. Does any of this carnage really matter? Not much when it comes to vital, urgent financial policy questions such as what money has come to be in the United States. With Congress mired in a never-ending cock fight, regulators hold the fate of finance mostly in their own fierce grip. Even without deployment of the Fed’s nuclear CBDC option, two developments last week show clearly how much power regulators have to redefine U.S. digital currency.

m021422.pdf…

14 02, 2022

Karen Petrou: Two Regulatory Decisions That Will Define the Future of Money

Arezou Rafikian2023-04-04T16:07:34-04:00February 14th, 2022|The Vault|

Like all of you, we at FedFin spend a lot of time watching the U.S. Congress, but I’m increasingly wondering why. Sure, there’s the blood and guts. Watching Congressional deliberations is more and more like being a spectator at a hockey game for the fights or NASCAR races for the next fiery crash. Does any of this carnage really matter? Not much when it comes to vital, urgent financial policy questions such as what money has come to be in the United States. With Congress mired in a never-ending cock fight, regulators hold the fate of finance mostly in their own fierce grip. Even without deployment of the Fed’s nuclear CBDC option, two developments last week show clearly how much power regulators have to redefine U.S. digital currency.

First, there was outgoing FDIC Chair McWilliams’ offhand suggestion in her final remarks that stablecoins have all the characteristics of fiat currency deposits and thus could be eligible for FDIC insurance under current law. As soon as he took the helm, Acting FDIC Chairman Gruenberg demanded tough cryptocurrency regulation, but he didn’t rule out deposit status for at least some stablecoins if the agency was satisfied with their stability.

The impact of an FDIC decision deeming at least some stablecoins to be deposits is hard to over-estimate. As I detail in my book, what’s actually in a bank deposit isn’t what most people think they hold, i.e., a virtual pile of dollars. In fact, money in the bank is …

10 02, 2022

DAILY021022

Eliza Allen2023-04-05T09:57:51-04:00February 10th, 2022|2- Daily Briefing|

KC Fed: 2020 Capital-Distribution Constraints Worked
Touching on a subject of considerable sensitivity as well as a policy issue subject to change under a new Fed, the Kansas City Federal Reserve Bank has released a study arguing that 2020’s limits on capital distributions contributed to greater systemic resilience. The paper tracks both share buy-backs and dividends over recent years, noting that GSIBs often distributed more than their income. Repurchases succeeded dividends as the principal capital-distribution medium since the great financial crisis, a shift found to give banks more flexibility to adjust distribution levels without significant investor backlash.

FHFA Leads Way on U.S. AI/ML Standards
FHFA today issued the first U.S. financial-agency supervisory guidance on AI/ML use by Fannie Mae, Freddie Mac and Common Securitization Solutions (not also the FHLBs). This goes well beyond the 2020 RFI released so far by the banking agencies (see FSM Report AI), with the standards also reflecting FHFA’s new equity focus in supervisory guidance specific to inclusive considerations.

Toomey Takes on the Entire Reserve-Bank System
In remarks today, Senate Banking Ranking Member Toomey (R-PA) heightened his critique of the Federal Reserve’s regional banks, suggesting that the System needs a sweeping overhaul.

CFPB Assesses Overdraft-Fee Marketplace
Reflecting the CFPB’s continuing critique of overdraft fees (see FSM Report CONSUMER38), the Bureau today posted a chart of overdraft and NSF fees at the largest banks, calling recent changes “encouraging.” However, the release does not retract recent allegations about their anti-consumer or -competition impact, …

7 02, 2022

DAILY020722

Eliza Allen2023-04-05T13:35:42-04:00February 7th, 2022|2- Daily Briefing|

FDIC Takes New, Unsurprising Direction
Upon taking office over the weekend, Acting FDIC Chairman Gruenberg released a new set of agency priorities.

Fed Lawyers Press for Regulated Crypto Prior to Payment-System Access
In sharp contrast to the economic and often then even theoretical focus of many Fed research papers, Fed lawyers last week released a note assessing the legal underpinnings of U.S. money and the issues they present for rapid evolution in tandem with increasing digitalization.

Toomey Heightens Raskin Opposition
Following up last week’s contentious hearing (see Client Report FEDERALRESERVE69), Senate Banking Ranking Member Toomey (R-PA) today sent Vice Chair-nominee Raskin a formal request for information on her relationship to a fintech company that unusually obtained a Fed master account.

Fed Reiterates Anti-DLT Construct for CBDC
As we noted last week, the FRB’s CBDC technology team known as Project Hamilton has determined an array of significant CBDC benefits but also found that DLT is not its preferred system infrastructure.

HFSC to Debate Stablecoins, Not Start Action on Them
Today’s HFSC staff memo makes it clear that tomorrow’s hearing will be a platform for both Congressional — or at least Democratic — support for the PWG’s stablecoin report (see Client Report CRYPTO21).

Daily020722.pdf…