#Gruenberg

2 02, 2024

DAILY020224

2024-02-02T16:21:33-05:00February 2nd, 2024|2- Daily Briefing|

Powell, Hsu Add to Pressure on SEC Crypto-Custody Standards

As we noted yesterday, Congressional Republicans are now mounting a Congressional Review Act effort to repeal the SEC’s staff accounting bulletin (see FSM Report CUSTODY5) requiring balance-sheet recognition of crypto-custody deposits at considerable cost to banking institutions.

Trump to Dump Powell

As we expected, Donald Trump today said that, if elected, he will not reappoint Jerome Powell.  This decision will not present itself to the next president until Mr. Powell’s term ends in January of 2026, but we do not think either of the candidates is likely to reappoint Mr. Powell should he seek a third term.

GOP Bill Challenges Capital Proposal

Echoing long-held concerns of other HFSC Republicans, Rep. Ogles (R-TN) along with Rep. Donalds (R-FL) have introduced legislation (H.R. 7143) forcing regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Senate Presses for Anti-Hungary Sanctions

In a statement that may lead financial institutions to review their exposures, Senate Foreign Relations Chair Cardin (D-MD) called on the Biden Administration to consider sanctions against Hungary due to its government’s refusal until late yesterday to support EU efforts for Ukraine and its broadly anti-democratic program in general and with specific regard to pressuring the U.S. and its ambassador to Hungary.

HFSC Republicans Take Another Shot at FDIC

Continuing their campaign against FDIC Chair Gruenberg, HFSC Chair McHenry (R-NC) along with Subcommittee Chairs Barr (R-KY) and Hill (R-AR) sent a letter today to the FDIC questioning …

17 01, 2024

DAILY011724

2024-01-17T16:21:16-05:00January 17th, 2024|2- Daily Briefing|

CFPB Tries to Bring Overdraft Fees Under New Benchmark

Arguing that overdraft fees are a big-bank “junk-fee harvesting machine,” CFPB Director Chopra today released a long-awaited proposal to cap fees to what the agency considers a reasonable threshold.

Bowman Expands Basel Critique, Key Dem Now Points to Problems

In remarks today, FRB Gov. Bowman did not go quite as far as her colleague Chris Waller yesterday, but she nonetheless urged that the end-game rules be re-proposed after comments are taken into account.

Senate Banking GOP Again Urges Capital Proposal Withdrawal

Senate Banking Ranking Member Scott (R-SC) along with all Committee Republicans late yesterday sent a letter to FRB Chair Powell, FDIC Chairman Gruenberg, and Acting Comptroller Hsu once again calling on the regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Biden, Brown Praise CFPB Overdraft Proposal

Following the CFPB’s announcement of its proposed rule regarding overdraft fees today, President Biden again denounced “junk fees” as “exploitation,” and included the CFPB’s proposal in his administration’s efforts to lower costs for American consumers.

FRB/FDIC Provide Limited-Time Resolution-Plan Filing Flexibility

Reflecting a problem we identified in our assessment of the resolution-plan proposal (see FSM Report LIVINGWILL22), the FRB and FDIC today extended the resolution plan submission deadline for categories II and III banks from July 1, 2024 to March 31, 2025.

Global Regulators Turn to OTC-Derivative Margin Improvement

Following yesterday’s release with the CPMI focused on CCPs and clearing members, the Basel Committee and IOSCO today …

8 01, 2024

M010824

2024-01-08T11:25:26-05:00January 8th, 2024|6- Client Memo|

Reflections on Regulatory Failure and a Better Way

Earlier today, we released our 2024 regulatory outlook, a nice summary of which may be found on Politico’s Morning Money.  As I reviewed the draft, I realized how much of what the agencies plan is doomed to do little of what has long been needed to insulate the financial system from repeated shock.  This is a most wearisome thought that then prompted the philosophical reflection also to be found in this brief.  It asks why lots more bank rules do so little for financial resilience yet are always followed by still more rules and then an even bigger bust.   I conclude that financial policy should be founded on Samuel Johnson’s observation that, “when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”  That is, redesign policy from one focused on endless, ever-more-complex rules spawning still larger bureaucracies into credible, certain, painful resolutions to concentrate each financial institution’s mind and that of a market that would no longer be assured of bailout or backstop.

m010824.pdf

8 01, 2024

Karen Petrou: Reflections on Regulatory Failure and a Better Way

2024-01-08T11:25:21-05:00January 8th, 2024|The Vault|

Earlier today, we released our 2024 regulatory outlook, a nice summary of which may be found on Politico’s Morning Money.  As I reviewed the draft, I realized how much of what the agencies plan is doomed to do little of what has long been needed to insulate the financial system from repeated shock.  This is a most wearisome thought that then prompted the philosophical reflection also to be found in this brief.  It asks why lots more bank rules do so little for financial resilience yet are always followed by still more rules and then an even bigger bust.   I conclude that financial policy should be founded on Samuel Johnson’s observation that, “when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.”  That is, redesign policy from one focused on endless, ever-more-complex rules spawning still larger bureaucracies into credible, certain, painful resolutions to concentrate each financial institution’s mind and that of a market that would no longer be assured of bailout or backstop.

We know in our everyday lives that complex rules backed by empty threats lead to very bad behavior.  For example, most parents do not get their kids to brush their teeth by issuing an edict reading something like:

It has long been demonstrated that brushing your teeth from top to bottom, tooth-by-tooth, flossing hereafter and using toothpaste meeting specifications defined herein will achieve cleaner teeth, a brighter smile, improved public acceptance of the tooth-bearer, and lower cost to …

18 12, 2023

DAILY121823

2023-12-18T17:12:20-05:00December 18th, 2023|2- Daily Briefing|

House Dems Press Tax-Equity Bond Capital Fix

Emphasizing their strong support for the capital proposals, 107 Democratic lawmakers led by Rep. Sean Casten (D-IL) have sent a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu again asking for revised treatment for clean energy tax-equity bonds.

Updated GSIB Indicator Amounts Now Effective

The Fed today published updated Aggregate Global Indicator Amounts pursuant to its GSIB surcharge rule (see Client Report GSIB5).

FSB Finds U.S. NBFI Assets Continue to Dwarf Banks

The FSB today released its 2023 Global NBFI monitoring report, finding that NBFIs continue to hold a larger percentage of financial assets than banks in the U.S.

DOJ/FTC Stand Firm on New Anti-Concentration Merger Policy

Justice and the FTC today released the final version of new merger guidelines, softening but not clearly weakening the agencies’ draft (see FSM Report MERGER12).

Warren, Allies Attack Hsu’s Preemption Policy

Making it clear that Acting Comptroller Hsu will have challenges from Democrats should the White House ever nominate him as Comptroller, seven Democrats led by Sen. Warren (D-MA) sent him a letter today accusing the agency of overstepping and abusing its preemption authority.

McHenry Asks CFPB to Change Open-Banking Secondary Data Approach

HFSC Chairman McHenry (R-NC) today sent a comment letter to CFPB Director Chopra reiterating the support expressed at a recent hearing (see Client Report CONSUMER53), for the agency’s open banking proposal (see FSM Report DATA4), but now asking for changes related to …

7 12, 2023

DAILY120723

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 …

1 12, 2023

DAILY120123

2023-12-01T16:39:15-05:00December 1st, 2023|2- Daily Briefing|

Barr Outlines Rationale for LCR, NSFR Rewrite

FRB Vice Chair Barr today reiterated his views that banks must be much better prepared to use the Fed discount-window, this time emphasizing that operational readiness entails regular testing of actual transactions at regular intervals as well as robust collateral pre-positioning.

Reed Presses Synthetic-Securitization Controls

Following his comments at recent hearings (see Client Report REFORM229), Sen. Reed (D-RI) late yesterday sent a letter to FRB Vice Chair Barr, FDIC Chair Gruenberg, and Acting Comptroller Hsu urging them to evaluate CRT transaction risk on financial stability grounds and, should they find an uptick in synthetic securitizations, request public comment on possible remedies to the risks Sen. Reed identifies.

Pending Veto, House Votes Against CFPB

As anticipated (see Client Report CONSUMER53), the House today voted 221 to 202 to authorize Congressional Review Act withdrawal of the CFPB’s small business reporting rule.

OCC Readies Research for Liquidity-Reg Rewrite

Likely readying itself for the raft of new liquidity proposals presaged in Michael Barr’s talk earlier today, the OCC today issued a call for papers on depositor behavior, bank liquidity, and run risk.

Daily120123.pdf

29 11, 2023

DAILY112923

2023-11-29T16:51:26-05:00November 29th, 2023|2- Daily Briefing|

FDIC’s OIG Presses for Non-Capital PCA Triggers, Additional Supervisory Reform

The FDIC’s OIG report on First Republic’s failure is at least as scathing as its SBNY post-mortem.

Treasury Launches Anti-Crypto Enforcement Campaign

In remarks today from Deputy Secretary Wally Adeyemo, Treasury officially launched its anti-crypto sanctions and AML campaign.

Basel Proposes Sweeping Climate-Risk Disclosure Standards

Following the FSB’s finding that most banks were failing to provide meaningful climate disclosures, the Basel Committee today issued proposed climate-risk disclosure standards.

3Q Report Highlights AOCI Risk

The FDIC’s 3Q banking-condition report includes a stunning 22.5 percent rise in the total of HTM and AFS unrealized losses, which now stand at $683.9 billion.

Senate Banking Opens Private-Credit Inquiry

Senate Banking Chair Brown (D-OH) and Sen. Reed (D-RI) today asked FRB Vice Chair Barr, Acting Comptroller Hsu, and FDIC Chair Gruenberg to look into the risks private credit poses to the banking system.

Daily112923.pdf

22 11, 2023

DAILY112223

2023-11-22T12:23:22-05:00November 22nd, 2023|2- Daily Briefing|

Fed Study: CBDC Analysis Needs Work, but Public-Welfare Benefits are Likely

A new FRB staff literature survey of CBDC analyses points to the wide variety of often-opposing findings relating to critical matters such as bank disintermediation and financial stability, attributing this in part to the different CBDC models under consideration in various nations.

Agencies Extend LTD Comment Period

As implied at a recent hearing (see Client Report REFORM229), the agencies have now delayed the comment deadline on long-term debt (see FSM Report TLAC9) until January 16 from November 30.

HFSC GOP Plans Immediate FDIC-Workplace Hearings

Clearly dissatisfied even though the FDIC’s new investigation will proceed without Chair Gruenberg’s involvement, HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Oversight Subcommittee Chair Huizenga (R-MI) wrote to Mr. Gruenberg demanding that he recuse himself from overseeing any independent investigation.

Daily112223.pdf

21 11, 2023

DAILY112023

2023-11-21T10:36:54-05:00November 21st, 2023|2- Daily Briefing|

Thompson: No Regulatory “Silos” in a Crisis

Reiterating much in FHFA’s sweeping FHLB report, FHFA Director Thompson today reinforced suggestions that FHLBs can avoid acting as lenders of last resort because there are no regulatory “silos” in a crisis.

IMF Reconsiders CBDC

On Friday, the IMF updated its CBDC work, concluding that it is prudent for most countries to consider CBDC implementation even though nations are increasingly hesitant to do so.

IMF: Nations Should Block Fintech Reg Arbitrage

A new IMF study finds that Fintechs adversely affect bank profitability, concluding that “well-designed” fintech regulations are necessary to foster a level bank-fintech playing field.

House Opens New Front vs. FDIC

Following an official HFSC investigation and a raft of letters from Democrats and Republicans, House Oversight Subcommittee on Health and Financial Services Chairwoman McClain (R-MI) along with Rep. Biggs (R-AZ) today sent a letter to Chairman Gruenberg requesting briefings, documents, and communications regarding harassment and workplace practices.

Daily112023.pdf

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