#FTC

10 07, 2023

Karen Petrou: The Bankruptcy of Bank-Merger Policy

2023-07-10T14:18:07-04:00July 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 …

29 06, 2023

DAILY062923

2023-06-29T17:22:46-04:00June 29th, 2023|2- Daily Briefing|

Powell Stands by Big-Bank Reg Rewrite

In remarks today, Chair Powell echoed Vice Chair Barr’s “humble” comments yesterday about the need to anticipate additional risks despite banking-system resilience, noting that rules and supervision require review.  Building on the Fed’s internal SVB review (see Client Report REFORM218), Mr. Powell suggested that the Fed had succumbed to the “natural tendency” to fight the last war and needs now to update its standards to address new risks.

FTC Finalizes Tough New Guidance On Deceptive Reviews And Endorsements

The FTC today finalized an updated version of its Endorsement Guides, setting new standards for the advertising and endorsement behavior that may constitute unfair or deceptive practices.  These include implementation of a Consumer Review Fairness Act ban on standardized contract provisions penalizing consumers for negative reviews, a practice the CFPB last year called “gag” clauses that are banned  under this law.

Banking Agencies Encourage Banks To Go Easy On CRE Borrowers

The banking agencies and NCUA today finalized changes to troubled-loan standards in a policy statement that is substantially similar to last year’s proposal.

Daily062923.pdf

20 06, 2023

DAILY062023

2023-06-20T17:15:39-04:00June 20th, 2023|2- Daily Briefing|

ECB Targets Bank Risk to NBFIs

A speech earlier today from the ECB’s top bank supervisor makes it clear that the EU is pressing ahead with FSOC’s proposed limits on bank inter-connections with NBFIs (see FSM Report SYSTEMIC95).  Karen Petrou’s memo today also addresses this issue.

New M&A Policy Sets High Bar For Banking-Agency Approval, Increases Odds Of DOJ Rejection

Making M&A a good deal harder to pull off, Assistant Attorney General Jonathan Kanter today redefined U.S. bank-merger policy in light of comments on a recent RFI (see FSM Report MERGER10) and dramatic changes since current policy was set in 1995.  The new approach reflects Biden Administration competition policy (see Client Report MERGER6) and will make it considerably more difficult for banks of all sizes to win DOJ approval if the banking agencies approve their proposed transaction after getting a new, likely more dire competitive-factor report from the Department of Justice.

FRB-KC: Community Banks Better Capitalized than GSIBs

The Kansas City Fed today released an analysis of 2022 bank capital, finding that community banks continued to hold higher levels of capital compared to G-SIBS: ten percent to six percent, respectively.  The study also found that G-SIB supplementary leverage ratios (SLR) increased thirty basis points to 5.94 percent, the first increase since the beginning of the pandemic, excluding the impact of the Fed’s temporary capital relief.

Daily062023.pdf

30 05, 2023

Daily053023

2023-05-30T17:13:13-04:00May 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.

Daily053023.pdf

25 04, 2023

DAILY042523

2023-04-25T17:12:43-04:00April 25th, 2023|2- Daily Briefing|

Stablecoin 2.0 Is Controversial 3.0

Ahead of Thursday’s stablecoin hearing, HFSC Republicans late yesterday released a second discussion draft of legislation that received a most equivocal response at last week’s subcommittee hearing (see Client Report CRYPTO42).

Treasury Finds Profitability to Blame for De-Risking

Treasury today released its 2023 De-Risking Report, finding that profitability principally explains why financial institutions choose to de-risk.

OFR: No Single Factor To Blame For 2019 Repo Spike

A new OFR paper on the September 2019 repo rate spike concludes that while a confluence of factors – large Treasury issuances, corporate tax deadlines, and lower levels of reserves – caused the crisis, none of them individually would have been disruptive enough to trigger the spike, although limited transparency and market segmentation exacerbated it.

Federal Agencies Launch New Anti-AI Enforcement Effort

The FTC, the Civil Rights Division of the DoJ, CFPB, and EEOC today released a joint statement pledging to enforce all relevant consumer protection, anti-discrimination, and fair competition laws not only on AI, but indeed also on all “automated systems” that the agencies believe to be within their jurisdictions.

HFSC Digital Assets Hearing Set For Jurisdictional Debate

Ahead of Thursday’s hearing on the latest stablecoin discussing draft, HFSC’s staff memo today reiterates GOP opposition to the SEC’s jurisdictional arguments.

ONRRP Revised

The Federal Reserve Bank of New York today revised the terms of access to the overnight reverse-repo program, adding financial stability and bank safety-and-soundness to monetary-policy implementation as ONRRP criteria for eligible counterparties …

6 04, 2023

UDAP8

2023-04-06T16:36:20-04:00April 6th, 2023|1- Financial Services Management|

Abusive Consumer-Finance Practices

Following its usual practice of setting standards by edict, the Bureau of Consumer Financial Protection has laid out an extensive framework that brings a wide range of consumer-finance actions and inactions within the scope of enforcement sanctions governing acts or practices that are not only unfair or deceptive, but also abusive.  As a result, consumer-finance providers and the third parties on which they often rely have considerably more legal and reputational risk even as consumers may be better insulated from actions that disadvantage or even harm their financial prospects.  Much of the new policy requires providers to protect the most vulnerable of any possible consumer for all aspects of a product or service, structuring all aspects of product offerings, pricing, marketing, infrastructure, and long-term provision to a consumer’s advantage as the Bureau defines it.

UDAP8.pdf

6 04, 2023

FedFin: Extra Equitable?

2023-04-06T16:36:29-04:00April 6th, 2023|The Vault|

FHFA, Fannie, and Freddie yesterday updated the sometimes-controversial equitable-finance plans FHFA approved last year.  Notably, Fannie’s new plan no longer focuses exclusively on Black households, a feature that garnered vitriolic Wall Street Journal criticism and negative Republican reactions.  Freddie’s plan delays and may even back away from efforts to set MI and title insurance pricing.

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

22 03, 2023

DAILY032223

2023-03-22T17:37:57-04:00March 22nd, 2023|2- Daily Briefing|

FTC Builds On Treasury Cloud Concerns, Seeks Competition, AI Views

Signaling apprehension about a number of risks outlined in a recent Treasury report, the FTC today requested comment on the business practices of cloud computing providers.

Scott, Warren Reach Over Partisan, Ideological Divide to Blast the Fed

Demonstrating the confluence of populist and progressive thinking about the Fed we anticipated at the start of this year, Sens. Rick Scott (R-FL) and Warren (D-MA) have introduced legislation mandating that the Fed’s inspector general be fully independent of the chair and board of governors.

Fed Under Still More Pressure to Boost Regional-Bank Supervision

Sen. Warren (D-MA) continued her prolific letter-writing campaign, today also joining with Sens. Duckworth (D-IL), Blumenthal (D-CT), Sanders (I-VT), Reed (D-RI), Hirono (D-HI), Markey (D-MA), King (I-ME), Whitehouse (D-RI), Smith (D-MN), Van Hollen (D-MD), and Schatz (D-HI) to call upon Vice Chairman Barr quickly to heighten regulatory standards for banking organizations between $100 and $250 billion.

Powell Protests Suggestions Of Fed Supervisory Error

At his press conference today, Chairman Powell sought to defend the Fed so vigorously that some of his comments may ignite still more criticism.

Yellen Denies FDIC-Coverage Rewrite, Suggests Need for Liquidity-Rule Revisions

In her appearance today before the Senate Appropriations Subcommittee on Financial Services and General Government, Treasury Secretary Yellen refuted press reports that Treasury is considering significant deposit-insurance coverage expansion, saying only that the banking system is safe and it is too soon to consider structural reforms.

Daily032223.pdf

15 03, 2023

DAILY031523

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 …

23 12, 2022

DAILY122322

2022-12-23T12:16:11-05:00December 23rd, 2022|2- Daily Briefing|

FTC Tackles Debit-Card Networks, Access

With no let-up for the holidays, the FTC today charged that MasterCard violated both the Durbin Amendment and FRB rules (see FSM Report INTERCHANGE11) mandating that merchants be given the choice of competing debit-card networks and that no efforts be made to block them from doing so.  The order applies to the competing ecommerce network by virtue of Mastercard’s tokenizing practices, which the FTC concluded impeded merchant access in numerous improper ways.  The consent order requires MasterCard to give competing networks the customer information necessary to process the debit-card transaction and bans Mastercard from barring use of other tokens.

Daily122322.pdf

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