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16 05, 2023

DAILY051623

2023-05-16T17:44:43-04:00May 16th, 2023|2- Daily Briefing|

Hsu Presses Reg Harmonization, Resolution Reform, Merger-Policy Rewrite

We now add our assessment of Acting Comptroller’s Hsu’s testimony to our analyses of those from Messrs. Barr and Gruenberg ahead of HFSC’s hearing later this morning.

Yellen Says White House Supports Community-Bank Exemptions

Speaking today to the ICBA, Secretary Yellen today joined the parade of policy-makers affirming the national importance of community banks.

JEC GOP Counter FRB on SVB Causality

JEC Republican staff today released a memo finding that tailored liquidity rules did not contribute to SVB’s failure, a contrast to the FRB’s SVB report (see Client Report REFORM221).

LLPAs Set for GOP Frying Pan

The majority-staff memo for tomorrow’s Housing Subcommittee hearing makes it clear that, as anticipated, the sole topic will be FHFA’s controversial LLPAs and related GSE pricing.

Senate Banking: Tough Grilling For Failed-Bank CEOs, Growing Consensus For Clawback Bill/Tough Rules

As predicted, today’s Senate Banking hearing with the CEOs of SVB and SBNY was a feisty session in which Democrats built their case for executive clawback legislation and the failed bank executives defended management while repeatedly placing blame on what they called an “unprecedented series of events.”

Daily051623.pdf

14 03, 2023

DAILY031423

2023-03-14T16:55:33-04:00March 14th, 2023|2- Daily Briefing|

JEC Chairman Heaps SVB Blame on Trump-Era Rollbacks

Echoing Democratic statements made earlier in the day, JEC Chairman-Designate Heinrich (D-NM) released a statement late yesterday blaming the Trump Administration’s 2018 regulatory “rollbacks” for SVB’s failure, noting that the committee warned in 2018 that the rollbacks would result in SVB being subject to “nearly none” of Dodd-Frank’s enhanced regulations.

Warren Lambasts Powell on SVB Inquiry

Expanding her attack against FRB Chairman Powell, Sen. Warren (D-MA) today demanded that he recuse himself from the SVB investigation announced just yesterday.  She states that Mr. Powell’s actions allowed “big banks” like SVB to “load up” on risky assets, saying that Vice Chairman Barr needs complete independence.

Treasury Official Announces Coming DeFi Risk Report

In remarks yesterday, Assistant Secretary for Treasury’s Office of Terrorist Financing and Financial Crimes Elizabeth Rosenberg announced that her team will shortly be releasing a risk assessment on DeFi.  She notes interest in any legitimate DeFi use cases, also saying that DeFi may nonetheless facilitate illicit finance.

FDIC Warns Bridge-Bank Counterparties

Reflecting the unusual nature of the two bridge banks the FDIC has established for SVB and Signature, the agency was compelled today to issue a warning that financial institutions are required to comply with their obligations to these FDIC-owned institutions to the extent previously required of the failed banks.

Daily031423.pdf

19 12, 2022

DAILY121922

2022-12-19T16:49:50-05:00December 19th, 2022|2- Daily Briefing|

JEC Report Calls for Crypto Regulation

The Joint Economic Committee (JEC) released a report late Friday arguing that recent contraction in the digital-asset market demonstrates the need for more regulation.  While it does not outline specific policy changes, the report asserts that new regulations must strive to keep digital assets separate from the broader economy to prevent contagion, as well as ensure that investors are properly informed on digital asset’s individual risks.

KC Fed Discounts SLR Relief as Solution to ONRRP Growth

A Friday brief from the Kansas City Fed concludes that limited money-market investment opportunities, policy uncertainty, and ONRRP changes such as easier eligibility better explain the sharp increase in ONRRP than bank-capital shortages as deposits flowed to MMFs.  As a result, the paper concludes that reinstating SLR exemptions for central-bank deposits and Treasury obligations would not materially affect bank use of the ONRRP and thus facilitate Fed balance-sheet reduction.

McHenry Tees Up Fintech Action for New Congress

Incoming Chairman McHenry (R-NC) today reintroduced legislation designed to facilitate financial innovation, kicking off his chairmanship’s focus on fintech, crypto, and other financial technology related matters.  The bill does not address priority policy questions in this contentious arena, instead creating a pathway for financial innovators to request information on whether they are eligible for exemptions from relevant regulations from the banking agencies and CFPB.

Daily121922.pdf

23 08, 2022

DAILY082322

2023-01-04T10:40:24-05:00August 23rd, 2022|2- Daily Briefing|

Life Insurers Depend on FHLB Advances for Stress Liquidity, Long-Term Funding

Reflecting longstanding fears about life-insurance run-risk (see Client Report SYSTEMIC92), a new research note from the Federal Reserve finds that life insurers were quick to establish liquidity buffers when Covid hit in 2020, largely doing so via FHLB advances and interest-rate derivative margins.

JEC Financial Inclusion Report Calls for Postal Banking, Crypto Regulation

The Joint Economic Committee yesterday afternoon released a report on the barriers that people of color and low-income communities face accessing financial services, concluding that traditional banks discriminate, new nonbank offerings may prove predatory, and policy solutions are essential.

OFR: Lower-Risk Hedge Funds Lead to Higher Treasury-Market Stress

A new OFR working paper finds that changes in aggregate hedge fund exposures are related to Treasury yield changes in economically and statistically significant ways, with managed futures and multi-strategy funds having the highest impact on Treasury prices.

FHFA Advances Equity Campaign with New Committee

Building on its equitable housing campaign, FHFA today announced an advisory committee on affordable, equitable, and sustainable housing.  It will provide analysis focused on Fannie, Freddie, and the FHLBs in areas such as the barriers to and need for regulatory or policy changes to expand affordable, equitable, and sustainable housing.

Daily082322.pdf

17 11, 2021

Daily111721

2023-05-26T10:39:14-04:00November 17th, 2021|2- Daily Briefing|

Williams Emphasizes Treasury-Market Failures
FRB-NY President John Williams today reinforced the principles laid out in the recent Inter-Agency Working Group on Treasury Market Surveillance report (see Client Report TMARKET2) – i.e., the “imperative of resilience.”

OFR: U.S. Financial Stability at Mid-Range, Too Soon to Judge Climate Risk
OFR today released its 2021 annual report, concluding that overall risks to U.S. financial stability remain in the medium range. Notably, the report generally downplays risks resulting from climate change, arguing these are difficult to quantify and thus deferring conclusion until more data are available.

Waller Breaks with PWG on Limiting Stablecoins to Banks
Although FRB Chair Powell has not yet decided on the need for CBDC, Fed Gov. Waller today opposed it on grounds that private innovation suffices to ensure U.S. payments innovation. This sets up a conflict should Mr. Powell’s endorse CBDC after pending discussion the draft or if Gov. Brainard takes over the chair.

JEC Reviews Crypto Construct
At today’s Joint Economic Committee hearing on cryptoassets, Chairman Beyer (D-VA) urged Congress to update the crypto regulatory framework to better protect consumers, prevent insider trading, and ensure economic stability in part by preventing runs on cryptoassets.

Daily111721.pdf

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