19 12, 2022


2022-12-19T13:00:38-05:00December 19th, 2022|5- Client Report|

FSOC Targets Usual Suspects but Also Points to Big-BHC, Nonbank Mortgage Systemic Risk

As promised, this FedFin report provides an in-depth analysis of FSOC’s 2022 annual report, focusing on findings with near-term policy implications.  As always, the report is lengthy and includes many observations and market details that provide insight into Treasury and member-agency-staff thought.  Much in it reiterates concerns about short-term funding markets, CCPs, and investment funds (with FSOC for the first time urging regulators to look not only at MMFs and OEFs, but also at collective investment vehicles).  As previously noted, the report is relatively sanguine about digital-asset systemic risk but, also reiterates findings in FSOC’s report (see Client Report CRYPTO33) demanding rapid action on a raft of reforms in this high-risk sector.  What surprised us is the discussion of large BHCs, which departs from longstanding Fed and FSOC comfort in the post-GFC regulatory regime for this sector.


16 12, 2022


2022-12-16T17:19:37-05:00December 16th, 2022|2- Daily Briefing|

GHOS Presses Speedy Bank-Crypto Capital Standards

Basel’s governing body, the Governors and Heads of Supervision, today endorsed the Committee’s planned work schedule.

Fed Finally Finalizes LIBOR Transition Regs

Narrowly ahead of its year-end statutory deadline, the Federal Reserve today issued a final version of its detailed proposal (see FSM Report LIBOR8) to implement the LIBOR Act’s provisions on replacement rates for existing contracts without fallback language (see FSM Report LIBOR7).

Regulators Highlight P2P, Crypto, NBFI Risks at FSOC Meeting

Although most of the FSOC’s discussion today of the LIBOR transition and climate risks was perfunctory, comments on the now-released 2022 Treasury annual report were not.

McHenry, Davidson Point to Forex-Clearing Systemic Risk

Picking up a recent BIS report finding at least $65 trillion at risk in off-balance sheet foreign-exchange clearing, incoming HFSC Chairman McHenry (R-NC) and the top Republican on the panel’s fintech task force, Rep. Warren Davidson (R-OH), called on Fed Chairman Powell and Secretary Yellen to investigate what they consider a looming risk to U.S. financial stability.

Chopra Presses Cloud-Service Provider, Stablecoin Systemic Designation

CFPB Chairman Chopra’s written statement for the FSOC meeting is considerably different than the oral one described in our earlier client alert.


19 10, 2022


2022-10-20T17:16:10-04:00October 19th, 2022|2- Daily Briefing|

CFPB Brings Older Adults Into Fair-Fee Focus

Following yesterday’s enforcement action and furthering its “fair-fee” policy agenda (see FSM Report CONSUMER38), the CFPB today published an Issue Brief on overdraft fees and economically-insecure older adults.

HUD Advances LIBOR Replacement As Deadline

Following its ANPR on replacing LIBOR last year, HUD today published a proposed rule to remove LIBOR as an approved index for forward ARMs and reverse mortgages, replacing it with SOFR.  For existing ARMs, HUD proposes to establish a spread-adjusted SOFR index to transition from LIBOR, with a lifetime five percent interest-rate cap for monthly adjustable rate reverse mortgages.

House Republicans Question PayPal’s Content Fine Mistake

Following revelations that PayPal had temporarily imposed a penalty fee on certain content, HFSC Ranking Member McHenry (R-NC), Energy and Commerce Ranking Member Rodgers (R-WA), and Reps. Emmer (R-MN) and Griffith (R-VA) sent a letter to PayPal CEO Dan Schulman requesting more information about PayPal mistakenly updating its Acceptable Use Policy to include a fine for sharing “objectionable” messages on the platform.

Fed Study Finds Little Evidence of Discrimination in Mortgage Lending

A new Fed study on racial bias in mortgage lending finds little evidence of discrimination, concluding instead that disparities in observable applicant risk explain most racial denial disparities.  The study uses confidential HMDA supervisory data from 2018-2019 that controls for credit scores, DTI, and LTV on top of automated underwriting systems (AUS) recommendations.


29 07, 2022


2023-01-04T13:39:09-05:00July 29th, 2022|3- This Week|

No Summer Sojourn

As noted later in this weekly, Congress is almost completely out of town this week in one sense – the House is all the way gone and most Senate committees are clearing up old business.  We expect Senate Banking’s civil-rights hearing to be ornery and the others to be mostly rhetorical, but neither this nor the other evidence of seeming somnolence means nothing much will happen in August.


28 07, 2022


2023-01-04T15:35:02-05:00July 28th, 2022|2- Daily Briefing|

End-August Deadline Set for LIBOR Comments

The Federal Register today includes the Fed’s proposal to implement the LIBOR Act.  Comments are due by August 29.  As we noted (see FSM Report LIBOR8), a smooth transition from LIBOR by its effective end date in June 2023 appears unlikely, with the Fed leaving several questions unresolved in its NPR in favor of meeting this deadline.

HFSC Votes in On Key Bills

Turning to recorded votes from yesterday’s markup, the HFSC today approved several bills including reforms to overdraft fees and credit reporting.  The overdraft bill, H. R. 4277 (Maloney, D-NY), passed 27-22.  Also voted on were H.R. 8485 (Williams, D-GA), and H.R. 8478 (Pressley, D-MA).  Both passed the Committee 28-23.

FSOC Agency Heads Report Climate-Risk Progress

At today’s FSOC open meeting, member agency heads reported their climate-risk progress following the President’s executive order.  Chairman Powell reiterated that the Fed is updating work on climate risk assessments without providing timing or details.  SEC Chairman Gensler mentioned the SEC’s proposed climate disclosure proposal, stating that hundreds of issuers already disclose climate-related information.


25 07, 2022


2023-01-04T15:53:08-05:00July 25th, 2022|1- Financial Services Management|

Legacy-Contract LIBOR-Replacement Benchmarks

Moving belatedly but now expeditiously to implement legislation governing legacy-contract benchmarks when there is no contractual fallback rate, the Fed has proposed a new framework for derivatives, consumer loans, certain GSE contracts, and any other legacy contracts without clear LIBOR-replacement provisions and a “determining person” to effectuate them.  As required by the LIBOR Act, the new approach is SOFR-based and incorporates statutory “tenor spreads” designed to reflect the differences between a rate calculated with some amount of credit risk (LIBOR) to one premised on risk-free sovereign obligations (SOFR).  The manner in which this was done was one of the most challenging aspects of finalizing the new law and reflects an uneasy compromise between the Fed and many in the industry, especially regional banks with large consumer-loan books.  Perhaps due to the late date at which the proposal was issued, many other issues are not addressed, creating areas of potential uncertainty related to affected contracts and the broader body not only of Fed rules, but also the broader regulatory framework governing nonbanks.


19 07, 2022


2023-01-06T14:46:12-05:00July 19th, 2022|2- Daily Briefing|

Fed Seeks to Bring Order Out of Looming LIBOR Chaos

Fighting the end-September deadline demanded in the new law (see FSM Report LIBOR7), the Federal Reserve Board today unanimously proposed the formulas by which benchmark-rate compliance will be judged in LIBOR-based legacy contracts without rate-fallback contractual clarity.

House Advances Sanctions, Cash-Access, Credit-Union, Mortgage Legislation to Uncertain Senate Fate

Chairwoman Waters (D-CA) today released an accounting of all the HFSC measures included in the massive National Defense Authorization Act (NDAA) approved by the House late last week.

House Judiciary Damns Bigtech, Skirts Financial Services

House Judiciary Committee Democrats today tried to reinvigorate antitrust legislation focused on bigtech companies with a report concluding that stronger antitrust and merger enforcement is needed for Google, Amazon, Facebook, and Apple.

CFPB Presses SPCs

The CFPB today issued a staff statement reiterating key points in February’s inter-agency statement encouraging special-purpose credit (SPC) programs.  The new CFPB release reiterates the criteria for SPCs that comply with the Equal Credit Opportunity Act, noting also the benefits such programs may afford to racial equity.

OFR Details Commercial Real Estate Recovery, Emerging Risks

OFR today released a study detailing how the commercial real estate (CRE) market weathered the 2020 recession, also describing CRE’s future risks.


19 07, 2022


2023-01-06T14:48:05-05:00July 19th, 2022|4- GSE Activity Report|

Bedtime for a Benchmark

As noted earlier today, the Fed has finally brought forth its LIBOR-transition proposal specifying permissible benchmarks for legacy contracts without contractual fallback rates. We will shortly provide clients with an in-depth assessment of the Fed’s proposal, but in very short, it tracks the law’s tenor spreads related to SOFR based on contract maturity and then crafts additional requirements for non-derivative obligations.


15 07, 2022


2023-01-06T14:59:56-05:00July 15th, 2022|3- This Week|

Home in the OK Corral

On Wednesday, FHFA Director Thompson will come before HFSC for what will be an important discussion of housing policy under the newly-confirmed director if Members of Congress allow policy substance to supersede political battles over who is responsible for inflation for which dastardly reason.  In hopes of substance, we’ll monitor the hearing and provide you quickly with an in-depth analysis.


23 06, 2022


2023-01-25T15:50:03-05:00June 23rd, 2022|5- Client Report|

Powell Takes Another Pounding

At today’s HFSC hearing, Chairman Powell encountered the same political headwinds evident at yesterday’s Senate Banking session (see Client Report FEDERALRESERVE70), reinforcing and even heightening his commitment to fighting inflation in concert with hopes that a soft landing may still be possible.  Chairwoman Waters (D-CA) followed Chairman Brown’s (D-OH) cautious tone, urging the central bank to be mindful of maximum employment as it pursues price stability and blaming much recent inflation on undue corporate power.  Ranking Member McHenry (R-NC) was merciless in his inflation attack, largely directing it to Democrats even as he and other Republicans pressed for faster Fed intervention and reconsideration of the Taylor Rule.


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