#IOR

3 03, 2023

Al030623

2023-03-03T17:17:37-05:00March 3rd, 2023|3- This Week|

Gloves Off

When Chairman Powell comes before HFSC and Senate Banking this week, we’ll see if FedFin’s forecast for newly-rough going plays out, but all signs say it will.  In the lead-up to the midterm, Democrats other than Sen. Warren (D-MA) who weren’t all that sympathetic to many Fed actions held their tongues in order to protect a central bank that, for all its putative independence, seemed aligned with Biden Administration statements promoting American prosperity and the near-term chances of reduced inflation.  With the 2024 election looking even uglier than the midterm and Republicans in control of the House, Mr. Powell may find himself squeezed hard from both sides of the aisle, taking lots of heat on issues ranging from monetary policy and the debt ceiling to a panoply of Fed regulatory and payment-system decisions along with the pending nomination of a new vice chair.

Al030623.pdf

20 01, 2023

DAILY012023

2023-01-20T16:43:26-05:00January 20th, 2023|2- Daily Briefing|

Waller Throws Fuel on IOR-Recapture Fire

The American Banker today reports that FRB Gov. Christopher Waller answered a question by saying that the Fed does not need the $2 trillion or so housed in the ONRRP to conduct monetary policy. Mr. Waller also said the Fed does not need the level it now holds of central-bank deposits from banks, noting that QT should continue with very significant reductions even though the precise amount of reserves needed to ensure market liquidity is unknown.

Daily012023.pdf

12 01, 2023

DAILY011223

2023-01-12T16:51:37-05:00January 12th, 2023|2- Daily Briefing|

OCC Tightens Fair-Lending Review

Acting Comptroller Hsu took the occasion today of release of a new fair-lending manual to emphasize the OCC’s commitment to ending credit discrimination.

McHenry Chairmanship Starts With CFPB Confrontation

In his first financial-policy action since becoming HFSC Chairman, Rep. Patrick McHenry (R-NC) today blasted the Bureau and its “reckless” Director for what he described as expanding its authority beyond congressional intent.

FRB-NY Staff Renew Debate Over FBO Liquidity, Market Impact

A new post from FRB-NY staff assesses the funding strategies of FBO branches and agencies to judge their current impact setting dollar-liquidity pricing in the U.S. wholesale funding market.

OFR Cites Heightened Systemic Risk, MMF Worries

In its annual report on 2021, OFR has concluded that financial stability risks are generally elevated due to macroeconomic tightening, inflation, climate change and volatility in Treasury, crypto, and commodity markets.

DOJ Lands Unprecedented Redlining Settlement

Continuing the Administration’s racial-equity campaign, the Department of Justice today announced an historic settlement with City National Bank.

Daily011223.pdf

8 11, 2022

DAILY110822

2022-11-08T16:54:50-05:00November 8th, 2022|2- Daily Briefing|

EU Council Eases Basel End-Game Rules

Ahead of U.S. action on what is now being called the Basel “end-game,” the Council of the European Union today announced a set of compromises and delays to finalize the standard.  The output floors (see FSM Report CAPITAL220) will apply at both the parent banking group and subsidiary banks, but EU banks will have the discretion to consolidate capital at the highest parent level in each EU nation.  The Council release provides no details, indicating only “technical improvements” were made to the Basel credit-, market-, and operational- risk standards and small banks now have unspecified breaks, including with regard to disclosure.

BIS: CBDC Could Boost Deposit Rates, Small Banks

A new BIS staff paper differentiates its analysis of CBDC’s monetary-policy transmission impact by distinguishing between the extent to which large and small U.S. banks respond to different rates paid in interest on reserves (IOR).  Large banks are found to be unresponsive to IOR changes, making CBDC necessary to force them to increase rates on deposits via the competition channel rather than a traditional monetary-policy tool.  To the extent this reasoning takes hold, it could prove potent with Democrats who not only often favor CBDC, but are also increasingly angry about what they see as large-bank failures to raise deposit rates in lock-step with Fed hikes.

Daily110822.pdf

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