#Liang – Federal Financial Analytics

1 03, 2023

DAILY030123

Eliza Allen2023-03-01T16:38:23-05:00March 1st, 2023|2- Daily Briefing|

What’s Next For McHenry Privacy Bill

As we anticipated yesterday, HFSC reported H.R. 1165, Chairman McHenry’s privacy bill, on a party-line vote of 26-21. Discussions this morning lead us to conclude that Mr. McHenry plans to consider additional changes that could be made via a manager’s amendment when bringing the bill to the House floor given that its fate there is uncertain given the GOP’s slim majority.

CFPB Targets Public-Benefits Finance

The CFPB today published a “spotlight” examining numerous fees it says “erode” public benefit programs delivered through various financial products. Focusing in particular on prepaid cards, the spotlight states that the Bureau will monitor and may take action against entities violating consumer protection laws in the delivery of cash assistance. This comes following a major enforcement action in this area against Bank of America and reports of others pending against large banks.

Treasury Sets Out Steps Seemingly Towards A U.S. CBDC

Following up the President’s executive order on digital assets (see Client Report CRYPTO26) and Treasury’s subsequent report (see Client Report CBDC14), Under-Secretary Nellie Liang today outlined next steps leading to the Administration’s decision about CBDC benefits that will strongly guide the Fed’s CBDC final call. Ms. Liang details how CBDC and FedNow each have benefits, describing how CBDCs generally work and could function in the U.S.

Daily030123.pdf…

21 09, 2022

DAILY092122

Eliza Allen2022-09-27T16:31:10-04:00September 21st, 2022|2- Daily Briefing|

Liang Emphasizes Fed CBDC Views vs. Treasury Report

In remarks last night, Treasury Under-Secretary Liang took a decidedly more cautious stand on CBDC than Treasury’s recent report, emphasizing its caveats rather than over-arching conclusions. Differing from the report (see Client Report CBDC14), she reiterated Fed concerns that CBDC might undermine financial intermediation even as the report argues that it might well not do so if nonbanks were given access to it and to instant payments.

Senate Democrats Lambast More Big Banks

Ahead of their hearing with big-bank CEOs tomorrow, Senate Banking Democrats today released additional “snapshots” similar to those published earlier this week, this time highlighting Wells Fargo and JP Morgan Chase. These “megabank” snapshots follow the same format as those for the large regional banks, providing a list of headlines highlighting not only alleged instances of consumer discrimination and abuse, but also Wells Fargo’s fake accounts scandal and JP Morgan’s oil lending practices.

Daily092122.pdf…

9 09, 2022

DAILY090922

Eliza Allen2022-10-24T12:01:09-04:00September 9th, 2022|2- Daily Briefing|

White House Reaffirms Anti-Algo Stand

The White House late yesterday announced core bigtech policy principles. These are extremely general and do not go as far in areas such as antitrust that progressives sought.

U.S. Announces Start of Work on Basel “End Game”

Ahead of what might otherwise have been a fractious Basel Committee meeting, the Fed, OCC, and FDIC today reaffirmed the U.S. commitment to finalize what FRB Vice Chair Barr Wednesday called the Basel III “end-game.”

Basel Chair Announces Preliminary AI Priorities

Pablo Hernández de Cos, Chair of the Basel Committee, announced today the work that regulators plan on AI and algorithmic decision-making.

OFR Details Climate Data-Sharing Efforts

Acting OFR Director James Martin today addressed the need for integrated climate-related financial data and challenges to forecasting and modeling climate risk.

Liang Stresses Climate-Resiliency

Treasury Under Secretary Liang today reiterated an array of agency and Administration climate-risk priorities, emphasizing ongoing Treasury and FSOC climate resiliency efforts and underscoring Treasury’s commitment to a net-zero economy.

Treasury To Issue Price-Cap Sanction Guidance

Deputy Treasury Secretary Wally Adeyemo today made it clear that enforcement of the anti-Russia oil-price caps will depend not only on restricting shipping insurance, but also doing so for financial and payment services.

Daily090922.pdf…

5 07, 2022

DAILY070522

Eliza Allen2023-01-24T15:42:23-05:00July 5th, 2022|2- Daily Briefing|

Fed Develops a Measure of Operational-Risk Exposures

In a research note late last week, Federal Reserve staff proposed a new approach to quantifying a bank’s operational-risk exposure, a timely contribution to the debate sure to rage when the U.S. advances Basel’s proposed rewrite of operational-risk-based capital requirements (see FSM Report OPSRISK18).

FHLB Banks Said to Pose Grave Risks, Require Reform

A new paper from Fed staff and former Gov. Dan Tarullo argues that the Federal Home Loan Banks pose structural problems to federal bank regulation and systemic stability by virtue of their hybrid status and the absence of clear purpose under contemporary market circumstances.

FRB-New York: Digital Currencies Could Strengthen the USD

Contrary to Congressional fears (see Client Report CBDC13), a new blog post from the Federal Reserve Bank of New York projects that digital currencies might bode well for the continued international dominance of the dollar.

Liang Calls for New-Age CCyBs, Open-End Fund Reform, Digital-Asset Macropru

In remarks today, Treasury Under-Secretary Liang concludes that post-2008 macroprudential standards strengthened the financial system as evidenced by its ability to support the real economy in 2020.

Global Regulators Find Risky Connectivity Between Banks, BigTech

The BIS Financial Stability Institute today released a report investigating what it calls the regulatory blind spot of bigtech inter-dependency, recommending that regulators develop an entity-based regulatory framework for bigtech operations in the financial sector and, while they work on this longstanding goal, use an new, indirect approach.

Daily070522.pdf…

6 05, 2022

Al050922

William Cross2023-03-01T13:27:23-05:00May 6th, 2022|3- This Week|

Socking It to FSOC

As the schedule below notes, this week will again bring FSOC’s record and agenda before Senate Banking and the House Financial Services Committee. Much of the session will, as usual, wander into areas outside FSOC’s ambit – inflation and sanctions are sure-fire examples of non-FSOC issues on which Treasury alone exercises considerable sway and about which Congress is intensely curious. However, there’s a lot to talk about when it comes to high-priority financial policy and, even in Washington, talk often leads to action.

Al050922.pdf…

22 03, 2022

DAILY032222

Eliza Allen2023-04-03T13:01:29-04:00March 22nd, 2022|2- Daily Briefing|

BIS Advances Cross-Border CBDC Settlement

The BIS today announced significant progress accelerating the ability of CBDCs to handle cross-border payments. Working with central banks in Australia, Singapore, Malaysia, and South Africa, the BIS described two prototype platforms for multi-currency international settlement that in their view prove that central banks can transact directly with each other using a shared platform.

ECB Head Criticizes Crypto, Calls for CBDC

Although we have not been able to confirm this by official remarks, press reports today indicate that ECB head Christine Lagarde has concluded that crypto-assets and -currency are significant factors in Russian-sanctions evasion.

CFPB Attaches UDAAP Label to Product-Review Practices

Building on FTC action, the CFPB today issued guidance stipulating that contractual-gag orders and certain other practices (e.g., employee or paid reviews) affecting the integrity of consumer reviews are illegal in credit-card, mortgage, or other consumer-finance marketing. The law on which this view is premised is a provision in the CFPB’s authorizing statute providing enforcement power for unfair, deceptive, or abusive acts or practices (UDAAP).

Treasury Lays out Digital-Asset Work Plan

In remarks today, Treasury Under-Secretary Liang laid out her agency’s plans to execute President Biden’s digital-asset order (see Client Report CRYPTO26). Treasury’s report on money and the payment system will address current weaknesses (e.g., high fees for low-balance accounts, slow and costly remittances), recognize the strength of FDIC insurance and other safeguards, build on FedNow, and establish a way for stablecoins to access the payment system.

Daily032222.pdf…

7 03, 2022

DAILY030722

Eliza Allen2023-04-04T12:23:58-04:00March 7th, 2022|2- Daily Briefing|

Liang Reiterates Climate, Digital Worries

Treasury Under-Secretary Liang’s comments to international bankers today addressed the U.S. financial-reform agenda after noting market turbulence and reiterating the importance and effectiveness of current Russian sanctions.

Mandatory Disclosures for Mandatory Arbitration?

Ahead of a hearing tomorrow, Senate Banking Chairman Brown (D-OH) released a statement on S. 3755, legislation cosponsored by senior Democrats on both the Banking and Judiciary Committees banning pre-dispute arbitration clauses and class-action waivers.

Hsu Emphasizes Sanctions Compliance, Climate, Inclusion

Acting Comptroller Hsu today told international bankers that they must ensure compliance with U.S. sanctions, heighten cybersecurity vigilance, and work together to protect continuing trust in cross-border finance.

FinCEN Sets Up Red Flags, High Alert

FinCEN today issued sanctions “red flags”, assisting compliance, but also laying out clearer markers for enforcement should its concerns about cryptocurrency and other possible evasions remain at individual institutions or exchanges. The release emphasizes SARs for immediate reporting of suspicious activities related to Russian state actors and/or oligarchs and related entities.

GOP Seeks to Widen Russian Financial Sanctions

As Congress and the White House wrestle with additional ways to sanction Russia, senior House Republicans today have advanced a package of bills which may well find at least some Democratic support. Among the most likely to advance on a bipartisan basis is H.R. 6900 from Rep. Huizenga (R-MI) expanding current sanctions on Russian sovereign debt to bar U.S. financial institutions from secondary dealings in Russian sovereign debt regardless of issuance date.

Daily030722.pdf…

15 02, 2022

FedFin: Stablecoin Legislative Consensus in Sight, But from a Distance

Arezou Rafikian2023-04-04T15:59:02-04:00February 15th, 2022|The Vault|

Despite fierce partisan fighting over pending Fed nominations, today’s Senate Banking hearing on stablecoin regulation was considerably more bipartisan that last week’s HFSC session (see Client Report CRYPTO24). Both Chairman Brown (D-OH) and Ranking Member Toomey (R-PA) are in broad agreement on a two-tier structure in which stablecoins are issued either by banks or by nonbanks subject to strict reserve-asset, AML, and related regulation.

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

15 02, 2022

CRYPTO25

Arezou Rafikian2023-04-04T15:58:50-04:00February 15th, 2022|5- Client Report|

Stablecoin Legislative Consensus in Sight, But from a Distance

Despite fierce partisan fighting over pending Fed nominations, today’s Senate Banking hearing on stablecoin regulation was considerably more bipartisan that last week’s HFSC session (see Client Report CRYPTO24). Both Chairman Brown (D-OH) and Ranking Member Toomey (R-PA) are in broad agreement on a two-tier structure in which stablecoins are issued either by banks or by nonbanks subject to strict reserve-asset, AML, and related regulation. That said, we think it may prove difficult for Democrats and Republicans to agree on key details in the construct of a U.S. private stablecoin regime, with the thorniest issue likely to prove the extent to which the federal construct preempts state regulation. Further, Sen. Brown signaled that there will be more stablecoin hearings before any action occurs, making it unlikely that time will permit resolution of outstanding differences of opinion within the Senate and then with the House before the end of this session.

CRYPTO25.pdf…

14 02, 2022

Karen Petrou: Two Regulatory Decisions That Will Define the Future of Money

Arezou Rafikian2023-04-04T16:07:43-04:00February 14th, 2022|The Vault|

Like all of you, we at FedFin spend a lot of time watching the U.S. Congress, but I’m increasingly wondering why. Sure, there’s the blood and guts. Watching Congressional deliberations is more and more like being a spectator at a hockey game for the fights or NASCAR races for the next fiery crash. Does any of this carnage really matter? Not much when it comes to vital, urgent financial policy questions such as what money has come to be in the United States. With Congress mired in a never-ending cock fight, regulators hold the fate of finance mostly in their own fierce grip. Even without deployment of the Fed’s nuclear CBDC option, two developments last week show clearly how much power regulators have to redefine U.S. digital currency.

First, there was outgoing FDIC Chair McWilliams’ offhand suggestion in her final remarks that stablecoins have all the characteristics of fiat currency deposits and thus could be eligible for FDIC insurance under current law. As soon as he took the helm, Acting FDIC Chairman Gruenberg demanded tough cryptocurrency regulation, but he didn’t rule out deposit status for at least some stablecoins if the agency was satisfied with their stability.

The impact of an FDIC decision deeming at least some stablecoins to be deposits is hard to over-estimate. As I detail in my book, what’s actually in a bank deposit isn’t what most people think they hold, i.e., a virtual pile of dollars. In fact, money in the bank is …