#Gruenberg – Page 3 – Federal Financial Analytics

20 11, 2023

M112023

Eliza Allen2023-11-20T12:15:04-05:00November 20th, 2023|6- Client Memo|

The Fate of the End-Game Rules Does not Lie in the FDIC’s Hands

It’s a hard fact of life that nothing good comes to federal agencies caught up in scandal even when scandal is misplaced. So the real question for the FDIC is whether the bad already all too evident at the divided banking agency will grow still worse, threatening the FDIC’s ability to participate in pending rulemakings or, even worse, resolutions. It likely will be no accident if the FDIC comes unglued and the capital and other proposals fall apart. I think new rules will proceed, but the FDIC’s threat is far from out of the blue.

M112023.pdf…

20 11, 2023

Karen Petrou: The Fate of the End-Game Rules Does not Lie in the FDIC’s Hands

Eliza Allen2023-11-20T12:16:01-05:00November 20th, 2023|The Vault|

It’s a hard fact of life that nothing good comes to federal agencies caught up in scandal even when scandal is misplaced. So the real question for the FDIC is whether the bad already all too evident at the divided banking agency will grow still worse, threatening the FDIC’s ability to participate in pending rulemakings or, even worse, resolutions. It likely will be no accident if the FDIC comes unglued and the capital and other proposals fall apart. I think new rules will proceed, but the FDIC’s threat is far from out of the blue.

Is this cynical? I prefer to think of it as an observation born of experience, but this is a city about which Harry S. Truman famously said, “If you want a friend in Washington, get a dog.”

FedFin reports last week tracked Marty Gruenberg’s travails before Senate Banking and then again at House Financial Services, with Ranking Member Waters surprisingly aligning herself with her usual GOP enemies when it came to castigating Mr. Gruenberg over sexual-harassment problems at the agency reported by the Wall Street Journal as the week of hearings broke two days before.

And, as the hearing went on, Mr. Gruenberg found himself in even more of a pickle. In another uncoincidental moment, Chairman McHenry got wind of 2008 allegations against the chair, allegations Mr. Gruenberg belatedly recalled when prompted by yet another poke from the Journal. Now, Mr. McHenry has opened a formal investigation even as a statement from GOP members of …

17 11, 2023

Al112023

Eliza Allen2023-11-17T16:34:27-05:00November 17th, 2023|3- This Week|

That’s Different

As we noted in our in-depth reports last week, Congressional hearings with top bank supervisors are always eventful, but rarely game-changers. This proved to be the case when FRB Vice Chair Barr, Acting Comptroller Hsu, and FDIC Chair Gruenberg came before Senate Banking (see Client Report REFORM229) and HFSC (see Client Report REFORM230). One surprising takeaway affects policy and the other is political, but each has the potential to change the end-game landscape as well as that of the Biden Administration’s financial rulemaking for the rest of the President’s term.

Al112023.pdf…

17 11, 2023

DAILY111723

Eliza Allen2023-11-17T16:32:11-05:00November 17th, 2023|2- Daily Briefing|

FDIC Special Assessment to Cost Still More

After abruptly cancelling its open meeting, the FDIC late yesterday released its final special-assessment rule.

GOP Tries to Force Gruenberg Out

Following HFSC Chairman McHenry’s (R-NC) decision yesterday to begin a formal investigation of FDIC Chair Gruenberg are not only a raft of Senate Republicans putting pressure on the increasingly-beleaguered long-time FDIC official, but also top Democrats.

Senate Dems, HFSC Intensify FDIC Scrutiny

Building on earlier comments, bipartisan scrutiny of the FDIC and Chairman Gruenberg grew this afternoon with two new letters from Democratic and Republican leaders in both chambers of Congress.

Chopra Wants DIF Redesign

Although the most contentious issue on the agenda for yesterday’s cancelled FDIC meeting was the special assessment, the board was also to consider the Deposit Insurance Fund’s status and progress on its designated reserve ratio (DRR).

Daily111723.pdf…

16 11, 2023

DAILY111623

Eliza Allen2023-11-16T16:40:39-05:00November 16th, 2023|2- Daily Briefing|

Global Supervisors Press Direct, Indirect CSP Oversight

Global financial supervisors today highlighted cloud-service provider systemic risk, pointing to an issue also of longstanding FSOC concern.

Barr Takes Surprising AOCI Turn

In remarks today focused on Treasury-market risk, FRB Vice Chair Barr also surprisingly said that “most banks” do not need to report unrealized securities gains and losses in capital although supervisors are stepping up surveillance in this area.

McHenry Escalates FDIC Revelations to Official Probe

Following bipartisan outrage regarding the FDIC’s harassment scandal at Senate Banking and HFSC hearings this week, HFSC Chairman McHenry (R-NC) today announced that his Committee will investigate the FDIC as well as Chairman Gruenberg for alleged misconduct.

Global Regulators Set Crypto Custody Standards

IOSCO today issued final standards for cryptoassets in securities markets, codifying its prior stand that protections such as those against conflicts of interest and embedded vertical-integration risks should be managed for cryptoassets in the same manner regulators and supervisors address them in fiat-asset transactions.

Daily111623.pdf…

15 11, 2023

REFORM230

Eliza Allen2023-11-15T15:58:45-05:00November 15th, 2023|5- Client Report|

Bipartisan Capital Bashing Continues in the House

Following yesterday’s Senate Banking hearing (see Client Report REFORM229), today’s HFSC session with top bank regulators again highlighted growing bipartisan consternation over the unintended consequences of the agencies’ capital proposal (see FSM Report CAPITAL230). Although Ranking Member Waters (D-CA) echoed Chairman Brown’s defense, Democratic criticism today went beyond concerns about mortgages and green bonds also to address credit availability, new trading and derivatives standards, capital recognition of securities losses, and insufficient review of the proposal’s quantitative impacts. Republicans continued to bash the proposal for what they said is insufficient economic analysis. Unlike yesterday, attention to the FDIC’s harassment scandal most notably came from Democrats’ side of the aisle, with Ranking Member Waters using all of her questioning time to criticize the FDIC and request a report from each agency describing how they will review sexual-harassment. Reiterating concerns he and Subcommittee on Financial Institutions Chairman Barr (R-KY) recently raised regarding regulators’ interactions with international standard-setters, Chairman McHenry grilled Vice Chair Barr and Acting Comptroller Hsu about staff compensation and agency documentation practices at international events. Mr. Barr emphasized that all Board and staff member compensation comes from the Fed, while Mr. Hsu only said that his agency tracks participation in these bodies to ensure mission alignment. We continue to expect GOP pressure on the international-agency front but no action until GAO completes its report. Chair Gruenberg noted broad alignment with a new incentive-compensation proposal, but revised the initial timeline …

14 11, 2023

REFORM229

Eliza Allen2023-11-14T15:57:18-05:00November 14th, 2023|5- Client Report|

Capital Proposal Gets Bipartisan Bashing in Senate Banking

Today’s Senate Banking hearing with top bank regulators showcased broad bipartisan concern over the interagency capital proposal (see FSM Report CAPITAL230). Although Chairman Brown (D-OH), Sen. Warren (D-MA), and Sen. John Fetterman (D-PA) staunchly defended the proposal on countercyclicality grounds, other senators on both sides of the aisle sounded the alarm over its impact on credit availability, small-business lending, and shadow-bank migration. FRB Vice Chair Barr repeatedly defended his agency’s analysis while emphasizing openness to comment, also highlighting that the proposal relates primarily to non-credit activity and would apply to only 37 banks. Some Republicans also raised concerns over other recent rulemakings, with Sen. Britt (R-AL) asking Vice Chair Barr if the agencies would consider a comment deadline extension for the LTD proposal (see FSM Report TLAC9). Although Mr. Barr stated that the rule is far simpler than the capital proposal, he also said the agencies would consider a similar extension. FDIC Chairman Gruenberg drew bipartisan ire over reports of FDIC widespread harassment, with Republicans seizing the occasion to criticize Mr. Gruenberg’s leadership. Grilled by Sen. Tillis (R-NC) about reports of a Fed leak of confidential supervisory information, Mr. Barr only said that he is deeply concerned. Separately, Chairman Brown emphasized unfinished work on bank executive accountability and urged Congress to pass the RECOUP Act (see FSM Report COMPENSATION37), which passed the Committee nearly unanimously in July.

REFORM229.pdf…

13 11, 2023

DAILY111323

Eliza Allen2023-11-13T17:07:02-05:00November 13th, 2023|2- Daily Briefing|

Senate Banking GOP Demand End-Game Withdrawal, Holistic Review Release

Making still clearer their line of attack at tomorrow’s hearing, all GOP Members of the Senate Banking Committee today sent Chairs Powell, Gruenberg and Acting Comptroller Hsu another letter demanding the withdrawal of the capital proposals.

FRB-PHL: Fintech Spots Credit Risk Better than Banks

A new study from the Federal Reserve Bank of Philadelphia finds not only that fintech loan-risk scoring performed well during the pandemic, but also that the proprietary loan rating systems of large fintech companies better predict default likelihood in the personal loan market compared to traditional measures of credit risk.

Barr Stands By His Proposals

Vice chairman Barr’s testimony for forthcoming hearings emphasizes that the banking system is resilient and sound, eschewing the caveats included in Friday’s supervisory report about pockets of weakness.

Gruenberg Defends DIF Rewrites

While echoing comments from Messrs. Barr and Hsu about the sound banking system, FDIC Chair Gruenberg’s testimony pointed to what he called significant downside risk from higher rates, geopolitical tension, unrealized losses, and other factors.

Hsu Differentiates OCC Supervision, Defends Regs

Acting Comptroller Hsu’s testimony reiterates Mr. Barr’s comment about a sound banking system, pointedly noting that all of the recent failures were state-chartered.

Daily111323.pdf…

8 11, 2023

DAILY110823

Eliza Allen2023-11-08T16:56:25-05:00November 8th, 2023|2- Daily Briefing|

BIS: No Stablecoin Peg Has Held

Ahead of HFSC Chairman McHenry’s push for new stablecoin legislation, the BIS today issued a report looking at 68 stablecoins and found that not a single stablecoin tied to fiat-currency or similarly-robust assets sustained parity with its peg at all times, regardless of size or type of backing. The paper also suggests that there is no guarantee that issuers of stablecoins would be able to redeem stablecoins on demand or in full and identifies younger coins and unbacked coins as more price volatile.

Gruenberg, Barr Say Agencies Must Work With Banks to Implement CRA Standards

Commenting today on CRA, FDIC Chairman Gruenberg indicated that he is looking forward to working with banks to “figure out” how to make the rule work in critical areas such as the retail-lending and community-development lending tests. Vice Chair Barr and Acting Comptroller Hsu also highlighted implementation challenges, but all strongly supported the rule as a major advance sure to support community development and modernize banking requirements.

Daily110823.pdf…

3 11, 2023

DAILY110323

Eliza Allen2023-11-03T17:39:35-04:00November 3rd, 2023|2- Daily Briefing|

FSOC Advances Designation Framework, Ready to Deploy

The FSOC today voted unanimously to finalize the Council’s analytic framework for financial stability risk identification (see FSM Report SYSTEMIC95) and guidance on nonbank financial company systemic designations (see FSM Report SIFI35). FedFin will soon provide clients with in-depth reports on each item. In addition to minor clarifications to the analytic framework, the Council importantly decided not to add cost-benefit analysis. Further, the final nonbank designation guidance is unchanged from the proposal, meaning that designation standards will not require a determination of imminent threat to financial stability.

Daily110323.pdf…