#McHenry

16 12, 2024

FedFin on: A Half-Empty Privatization Glass

Arezou Rafikian2024-12-17T17:52:59-05:00December 16th, 2024|The Vault|

Markets are getting very excited by ongoing Trump transition rhetoric about GSE privatization and a Friday CBO study refining its 2020 scenarios to conclude that release-and-recapitalization could proceed more quickly and prove less costly than four years ago suggested. That said, CBO remains cautious about what would happen if recap/release actually began, standing by its earlier, conservative view of budgetary implications and systemic impact. One little-noticed conclusion of note for those favoring privatization for free-market reasons: if privatized GSEs can’t sustain GSE volume, CBO concludes (we think rightly) that …

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8 11, 2024

FedFin Assessment: Are Crypto’s Wins the Banks’ Losses?

Arezou Rafikian2024-11-08T14:57:19-05:00November 8th, 2024|The Vault|

One of the more striking results of the election is the enormous win crypto firms got for their $135 million of Congressional-campaign spending: victories so far in every race it entered. Much of this is due not just to crypto’s lure; instead, it reflects choices based not only on a candidate’s crypto sentiments, but also on the opponent’s vulnerability. As a result, at least some of crypto’s luster could fade when Congress gets back to work. However, Donald Trump campaigned on a pro-crypto platform, endorsing legislation such as the Lummis (R-WY) bill to create a “strategic reserve” for bitcoins…

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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 …

1 05, 2023

FedFin Analysis: GAO Slams FRB, FDIC Supervision

Arezou Rafikian2023-05-03T15:37:21-04:00May 1st, 2023|The Vault|

Following our analyses of the Fed’s report on SVB (see Client Report REFORM221) and the FDIC’s on SBNY (see Client Report REFORM222), we turn now to one from the General Accountability Office sure to have at least as much impact on bipartisan consideration of what needs next to be done to govern regional banks. HFSC Chairman McHenry (R-NC) has already cited the GAO report in his rebuttal to those from the banking agencies, and it may well have tempered Senate Banking Chairman Brown’s (D-OH) support of a focus solely on new law and rule.

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10 04, 2023

Karen Petrou: Why the Fed is a Repeat Offender

Eliza Allen2023-04-10T17:29:46-04:00April 10th, 2023|The Vault|

As we noted in a recent report, a divided Congress that may not even be able to keep the U.S. Government in business is one unlikely to enact substantive financial reform. Thus, we’re in for yet another episode of political damage control, regulatory excuses, and a few heads on enforcement spikes without meaningful, measurable, and accountable supervisory reform. Been there, done that, had another financial crash, or so my dispiriting read of recent efforts to force post-crash supervisory reform makes all too clear. It’s probably too much to ask that Congress not flit off to the next election before it ensures meaningful regulatory-agency accountability for manifold supervisory lapses, but if it does what it usually does, then we are doomed to more crashes with worse consequences unless it and the White House force the Fed to do what it’s never done before: meaningfully and transparently improve supervisory rigor and enforcement might.

In my memo three weeks ago, I showed how regulators by 2001 had failed to act on the lessons of the 1980s and 1990s before the largest bank failure at the time presaged the great financial crisis hot on its heels. After the GFC, the U.S. convened the Financial Crisis Inquiry Commission (FCIC). When it issued its report in 2011, it drew scathing conclusions not only about all the “light-touch” regulation before the crash, but also supervisory unwillingness or inability to ensure that what rules there were were rules that were obeyed.

Despite this report and …

20 03, 2023

FedFin Analysis: Possible Cures for a Viral Run

Eliza Allen2023-03-20T16:12:34-04:00March 20th, 2023|The Vault|

Among the most vexing issues in the wake of SVB’s failure is the extent to which social media may have led to the first “viral run,” a run akin to the meme-stock volatility that lead the SEC and others to fear a new form of “flash-crash” risk. In this report, we assess current policy options related to deposit runs resulting from social media, an issue cited frequently by HFSC Chairman McHenry (R-NC) as a top priority as he begins work on post-SVB financial standards. We note some remedies – e.g., a ban on deposit-related communication were they permissible under various constitutional and statutory free-speech edicts.

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30 01, 2023

Karen Petrou: M&Ms, McHenry, and the Making of Financial Policy

Arezou Rafikian2023-01-30T11:28:41-05:00January 30th, 2023|The Vault|

It’s a sad commentary on American politics to observe, as I feel we must, that the experienced chairman of the House Financial Services Committee, Patrick McHenry, has followed M&M’s “spokescandies” as a target of Tucker Carlson’s bilious, yet widely-watched, wrath. The fundamental frivolity of this contrast is self-evident, but that has yet to dampen the credibility of this combustible commentator with his super conservative acolytes. That Mr. Carlson matters so much to public discourse is deeply distressing given some of his other targets – Nancy Pelosi’s husband after a brutal attack is only one that comes immediately to mind. Unlike him and many other Carlson targets, Mr. McHenry can more than take care of himself. Still, going after him means super-conservatives will blast any Member or measure that falls short of purity on their rightward-loaded scale. Since nothing these folks like can be enacted into law, all this does is reduce the hopeful odds we cast earlier this year for constructive financial-policy legislation. Too bad – the nation could use some.

The nub of the accusation lies in his chairman’s decision to leave the word “inclusive” in the name of one of his panel’s revamped subcommittees. Clearly, the concept of inclusion has become accursed because Democrats often used it in concert with what might seem an equally innocuous word: diversity. Democrats did use diversity and inclusion demands to press for racial, gender, and sexual-orientation equity in ways that rubbed many republicans raw, but the idea of inclusion is fundamental to …

8 12, 2021

FedFin: HFSC Begins Political Taxonomy of Crypto-Asset Policy

Arezou Rafikian2023-05-23T13:06:52-04:00December 8th, 2021|The Vault|

As anticipated, today’s HFSC hearing was a marathon session at which industry witnesses defended their business model, Republicans liked it fine, and Democrats worried about a wide array of policy challenges. While both sides of the aisle agreed that cryptoassets might well enhance financial inclusion, partisan battle lines formed over issues such as the extent to which stablecoins are fully reserved, covered by the securities laws, and if a single regulator for this sector is either desirable or feasible. Industry witnesses strongly rejected the PWG’s stablecoin conclusions (see Client Report CRYPTO21), suggesting for example that stablecoins are safer than bank deposits because they are fully – not fractionally – reserved.

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1 12, 2021

FedFin: HFSC Throws Partisan Brickbats without Financial-Policy Impact

Arezou Rafikian2023-05-23T14:19:51-04:00December 1st, 2021|The Vault|

Continuing the partisan and often-acrimonious tone of the Senate Banking hearing (see Client Report FEDERALRESERVE64), HFSC today heard from Chairman Powell and Secretary Yellen. Much of the session was preoccupied by differing views of whom or what is to blame for inflation, with Members also squaring off on the benefit of the BBB and infrastructure bills. Many financial-policy priorities were sidelined by these big-picture battles, with the session omitting discussion of topics such as digital currency, bank consolidation, and even fair lending and diversity.

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5 10, 2021

FedFin: Gensler: SEC Will Not Ban Crypto, Will Treat as Securities

Arezou Rafikian2023-06-28T15:31:17-04:00October 5th, 2021|The Vault|

As anticipated, today’s HFSC hearing with SEC Chair Gensler covered the full SEC agenda, although members steered clear of the SEC investigation demanded by Sen. Warren (D-MA) into recent Fed trading. Chair Gensler defended his budget request, citing for example a major increase in IPOs and saying the SEC is a “cop on the beat” ensuring investors are protected. Democrats pushed Mr. Gensler to take more action on crypto while Republicans argued crypto is not a security; Chair Gensler was consistent throughout the hearing in his belief that the law is clear on what is a security, but noted also it may be outdated in some areas and thus urged Congress to update the law if it sees appropriate. Like Fed Chair Powell (see Client Report REFORM209), Chair Gensler pledged he would not ban crypto.

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