#Menendez – Federal Financial Analytics

31 01, 2024

DAILY013124

Eliza Allen2024-01-31T16:57:15-05:00January 31st, 2024|2- Daily Briefing|

Senate Banking Turns to AI’s Impact on Housing Finance

Today’s lightly-attended Senate Banking Subcommittee hearing on AI and Housing focused principally on AI governance issues including accountability, model explainability, transparency, and bias. Sen. Warnock (D-GA) called for action on S. 3692, legislation to prohibit use of algorithmic systems to coordinate – and it is believed thus inflate – rental prices or reduce supply. Although Subcommittee Chairwoman Smith (D-MN) lauded AI for its potential to boost the housing supply, she and other Democrats raised serious concerns that AI reinforces biases in lending decisions.

Democrats Remain Dubious About the Capital Proposal

Today’s Financial Institutions Subcommittee hearing on the capital rules made it still more clear that more than a few Democrats share at least some GOP concerns. Chair Barr (R-KY) reiterated points he has frequently made about the poor analytics behind the proposal; Full Committee Ranking Member Waters (D-CA) and Rep. Green (D-TX) were unequivocal in their support. Other Democrats raised concerns many had previously expressed in comment letters, with Rep. Sherman (D-CA) pointing to problems with the proposal’s impact on capital markets and its lack of credit for private mortgage insurance and Rep. Beatty (D-OH) highlighting concerns with small business credit availability.

Daily013124.pdf…

14 11, 2023

REFORM229

Eliza Allen2023-11-14T15:57:18-05:00November 14th, 2023|5- Client Report|

Capital Proposal Gets Bipartisan Bashing in Senate Banking

Today’s Senate Banking hearing with top bank regulators showcased broad bipartisan concern over the interagency capital proposal (see FSM Report CAPITAL230). Although Chairman Brown (D-OH), Sen. Warren (D-MA), and Sen. John Fetterman (D-PA) staunchly defended the proposal on countercyclicality grounds, other senators on both sides of the aisle sounded the alarm over its impact on credit availability, small-business lending, and shadow-bank migration. FRB Vice Chair Barr repeatedly defended his agency’s analysis while emphasizing openness to comment, also highlighting that the proposal relates primarily to non-credit activity and would apply to only 37 banks. Some Republicans also raised concerns over other recent rulemakings, with Sen. Britt (R-AL) asking Vice Chair Barr if the agencies would consider a comment deadline extension for the LTD proposal (see FSM Report TLAC9). Although Mr. Barr stated that the rule is far simpler than the capital proposal, he also said the agencies would consider a similar extension. FDIC Chairman Gruenberg drew bipartisan ire over reports of FDIC widespread harassment, with Republicans seizing the occasion to criticize Mr. Gruenberg’s leadership. Grilled by Sen. Tillis (R-NC) about reports of a Fed leak of confidential supervisory information, Mr. Barr only said that he is deeply concerned. Separately, Chairman Brown emphasized unfinished work on bank executive accountability and urged Congress to pass the RECOUP Act (see FSM Report COMPENSATION37), which passed the Committee nearly unanimously in July.

REFORM229.pdf…

20 09, 2023

DAILY092023

Eliza Allen2023-09-20T17:11:25-04:00September 20th, 2023|2- Daily Briefing|

Brown, Rounds Agree: AI Credit-Underwriting Warrants Regulatory Attention

At today’s Senate Banking hearing on AI in financial services, Chairman Brown (D-OH) argued that AI should be governed by the same rules as the rest of the financial system, with new law necessary if existing rules prove inadequate.

HFSC FinCEN Bills Draw Bipartisan Support

HFSC Chairman McHenry (R-NC) at today’s markup praised the scope of bipartisan support on today’s FinCEN, sanctions, and other national security bills.

HFSC Delays Bipartisan Sanction Bill Vote

Today’s HFSC markup also considered two bills addressing sanctions policy: H.R. 5512 from Rep. Sherman (D-CA) to require bank subsidiaries to comply with sanctions on Russia and Belarus and H.R. 760 from Rep. Barr (R-KY) imposing blocking sanctions on Chinese defense or surveillance companies and the third-party companies that supply them.

HFSC Dems Continue Strongly Opposing GOP Anti-CBDC Measure

The bipartisan spirit of today’s HFSC markup dissipated as Members fiercely debated H.R. 5403 from Majority Whip Emmer (R-MN), a bill that would bar the Fed from issuing a CBDC to individuals.

Gruenberg: New Shadow Bank Standards Would Cure a Capital Proposal Problem

FDIC Chairman Gruenberg today gave remarks arguing that FSOC along with OFR should establish a new reporting framework to assess the financial stability risks posed by nonbanks and ensure that public reporting is sufficient for market participants to understand nonbank counterparty risk.

HFSC Reports FinCEN, Sanctions, CBDC Bills

HFSC today unanimously reported H.R 760 sanctioning Chinese defense companies, H.R. 5512 requiring bank subsidiaries to comply with sanctions …

12 09, 2023

DAILY091223

Eliza Allen2023-09-12T17:19:22-04:00September 12th, 2023|2- Daily Briefing|

GHOS Presses Basel Action on Lessons Learned

Basel’s group of Governors and Heads of Supervision (GHOS) met yesterday, listing strong bank risk management and governance arrangements, effective supervision, and the need for a robust regulatory framework as the primary lessons it learned from this year’s banking turmoil. GHOS also pressed its members to finalize their Basel III reforms, noting that most plan to implement them by the end of 2024.

Gensler Takes Swing-Pricing, AI Fire

At today’s Senate Banking hearing with SEC Chairman Gensler, Democrats largely defended the pace and scope of recent SEC work while Republicans criticized the agency for rulemakings they said were ideologically driven and inadequately analyzed. Chairman Brown (D-OH) applauded the SEC’s crypto enforcement actions and encouraged it to examine broker and investment adviser use of AI. Ranking Member Scott (R-SC) and several other Republicans sharply criticized Mr. Gensler for what they said was his lack of transparency and responsiveness to congressional inquiries.

Daily091223.pdf…

6 07, 2023

DAILY070623

Eliza Allen2023-07-06T16:55:22-04:00July 6th, 2023|2- Daily Briefing|

Basel Redesigns Global Bank-Supervision Construct

As promised at its last meeting, the Basel Committee today released a public consultation on revisions to its 2012 core supervisory principles (see FSM Report REFORM92).

Accommodative CRE Policy Goes Live

Publication in the Federal Register today makes effective a finalized policy statement issued by the banking agencies and NCUA late last week on how financial institutions are to handle troubled commercial real estate (CRE) loans.

Senate Dems Demand CFPB Voice-Cloning Action

Following his letter to large bank CEOs regarding AI fraud, Chairman Brown (D-OH) along with Sens. Menendez (D-NJ), Reed (D-RI), and Smith (D-MN) today sent a letter to Director Chopra urging action against AI-related financial scams.

FSB Turns to GSIB Resolvability

The FSB’s plenary today announced that recent events have spurred it to assess the resolvability of GSIBs and other large banks, providing neither timeline nor focus for this work.

FRB-NY Study Advances Wholesale Digital Currency

Although making clear that it sets no new policy nor endorses any CBDC action, the Federal Reserve Bank of New York’s Innovation Center published a DLT proof-of-concept finding that shared ledgers can effectively support both wholesale domestic interbank and cross-border payments.

Daily070623.pdf…

22 06, 2023

DAILY062223

Eliza Allen2023-06-22T16:52:30-04:00June 22nd, 2023|2- Daily Briefing|

Gruenberg: End-Game Almost Done, Will Be Tough

In remarks today, FDIC Chair Gruenberg erased any of the doubt Chair Powell left yesterday as to the nature of the U.S. end-game capital rewrite (see Client Report FEDERALRESERVE74).

FSB Tackles Third-Party Risk

The FSB today issued a consultation on third-party vendor management, with comments due by August 22.

Senior Democrats Reintroduce Fed Racial Equity Measure

HFSC Ranking Member Waters (D-CA) and Senate Banking member Sen. Warren (D-MA) today reintroduced legislation that would create a new racial justice mission at the Fed.

Powell Announces Internal Endgame Draft, Defends FRB-SF

At a Senate Banking hearing today covering much of the territory discussed in yesterday’s HFSC hearing (see Client Report FEDERALRESERVE74), Chairman Powell noted that an endgame draft proposal has been circulated internally, he has been briefed on it and that all governors will have ample time to review it.

Daily062223.pdf…

15 06, 2023

DAILY061523

Eliza Allen2023-06-15T16:36:26-04:00June 15th, 2023|2- Daily Briefing|

Bipartisan Cash-Acceptance Bill Reintroduced

The chairman of Senate Foreign Relations and Banking Committee member Menendez (D-NJ) yesterday reintroduced bipartisan legislation (S. 1984) along with Rep. Payne (D-NJ) (H.R. 4128) to require retail businesses to accept cash for in-person transactions.

CFPB Renews Mortgage-Servicing Rewrite

In a blog post today, CFPB Director Chopra highlighted an issue that failed to come up at hearings earlier this week (see Client Report CONSUMER51): mortgage servicing.

Senate Democrats Focus On P2P Consumer Protection

Reflecting recent CFPB concerns and a consumer warning, Senate Banking Committee Chairman Brown (D-OH) along with Sens. Reed (D-RI), Warren (D-MA), and Menendez (D-NJ) today sent letters to the CEOs of PayPal and Cash App requesting consumer-fraud and scam data as well as steps the companies are taking to protect consumers.

IMF Sees Regional-Bank Risk, Urges Fast Action

The IMF’s financial-stability report for the United States today details recent macroeconomic-, fiscal-, monetary-, and financial-policy developments, with the Fund’s executive directors (including that of the U.S.) emphasizing in response the need to prioritize inflation-fighting over fiscal tightening.

FHFA Housing Equity Session Provides Little Insight

We had intended to listen through today’s FHFA equitable finance listening session, but its opening indicated that it will not address the pending regulatory rewrite.

Daily061523.pdf…

12 05, 2023

DAILY051223

Eliza Allen2023-05-12T17:05:25-04:00May 12th, 2023|2- Daily Briefing|

Bowman Blasts Barr

In another public sign of a growing FRB divide, Gov. Bowman early this morning followed Gov. Waller in taking strong issue with what would otherwise appear to be Board policy.

Fed Nominees Face Tough Confirmation Fight

In response to President Biden’s nomination of Philip Jefferson for Fed Vice Chair and Dr. Adriana Kugler and Lisa Cook to Fed Governor seats, Democrats have voiced strong support while Republicans are biding their time on nominations sure to prove controversial.

GOP Presses Broader FDIC, FRB Backstops

Picking up on the FDIC’s report (see Client Report DEPOSITINSURANCE119), Republicans have introduced legislation to provide limited coverage for transaction accounts and address other issues raised by recent events.

FRB-NY: SVB, Signature are 1930s Redux

Following on its post yesterday regarding changing bank-funding sources, the Federal Reserve Bank of New York today argues that the concentrated, uninsured deposit bases at SVB and SBNY are directly comparable to those of small rural banks in the 1930s.

Daily051223.pdf…

3 03, 2023

Al030623

Eliza Allen2023-03-03T17:17:37-05:00March 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…

17 02, 2023

DAILY021723

Eliza Allen2023-02-17T12:16:37-05:00February 17th, 2023|2- Daily Briefing|

Senate Dems Frame FRB-Nomination Demands

In conjunction with a bill spearheaded by Sen. Jack Reed (D-RI), Banking Chairman Brown (D-OH) joined other Democrats yesterday in introducing S. 496, legislation to require that the Federal Reserve Board have a governor dedicated to worker interests much as the seat now held by Gov. Bowman is by law required to focus on community-bank considerations. The measure was also introduced in the last Congress and was then as now intended more to send a signal to the White House about the candidates Senate Banking will view with the greatest favor rather than as a serious effort to change the law.

Swiss Bank Role In SEC Crypto Action Sure To Hike Pressure On Banking Agencies

We draw to your attention the reference to a Swiss bank in the SEC’s enforcement order against Terraform Labs and its founder, Do Kwon. Although criticized today by Republicans as an example of the SEC’s prior regulatory failures, the order itself is unsurprising given that Mr. Kwon is a fugitive and the algorithmic stablecoin’s collapse shocked previously complacent crypto markets and regulators. The SEC’s order says only that $100 million was illegally transferred into a “Swiss bank,” not naming the institution.

Daily021723.pdf…