#merger – Page 2 – Federal Financial Analytics

24 03, 2023

FedFin Analysis: Whom and What the FDIC and Fed Can Save How

Arezou Rafikian2023-03-24T17:05:38-04:00March 24th, 2023|The Vault|

Recent editorials and other media have often said that the FRB and/or FDIC have powers or taken actions that is not the factual case as we understand it. Members of Congress also appear sometimes willing to make assertions about what agencies can do now even if it is unclear if there is statutory authority to do so. We have provided individual clients with key clarifications, but do so now more generally to support strategic and advocacy decision-making. Of particular importance is the authority the FDIC is said to have or lack related to uninsured deposits; as detailed below, the agency actually has significant authority to do so as well as even to back BHC debt, as long as certain stringent conditions are met. As detailed in FSM Report RESCUE65, Congress limited both the FDIC and Fed in hopes that….

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

22 03, 2023

FedFin Assessment: GSIB Rules Set For Post-CS Rewrite

Arezou Rafikian2023-03-22T16:34:58-04:00March 22nd, 2023|The Vault|

In this report, we assess the implications of recent events on two assumptions underlying current U.S. and global policy affecting GSIBs and those considered domestic SIBs: first, all are likely to be well insulated from illiquidity and/or insolvency and, when this is not the case, then orderly resolution without taxpayer bailout can be readily deployed. Credit Suisse’s failure and subsequent, subsidized acquisition is just one of the “Minsky moments” rattling regulators and other policy-makers, with the conclusions drawn from all of them surely to lead to significant reevaluation of each of these assumptions. To be sure, CS was an outlier in terms of idiosyncratic culture-and-control problems, but the Swiss regulatory and resolution system is considered reasonably robust, thus making the bank’s failure…

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

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7 02, 2022

Karen Petrou: The Junkman Cometh

Arezou Rafikian2023-04-05T13:56:03-04:00February 7th, 2022|The Vault|

In its effort to combat what it calls “junk fees”, the CFPB conflates advancing consumer protection with curtailing market power. This won’t work — that which is anti-consumer can take place in a super-competitive market (think subprime mortgages) and that conducted in a market powerhouse (innovative financial-inclusion products) may be very much to a consumer’s benefit. Thus, if the CFPB makes a muddle of its two worthy goals, it will scramble its policies. This will create a patchwork of conflicting actions that sometimes put consumers at great risk, sometimes put market integrity in peril, and sometimes do both at the same time.

Let me be clear: this critique isn’t an attack on either of the Bureau’s goals. Consumers should not be duped into seemingly low-cost financial services only to be saddled with predatory after-charges; conversely, dominant providers should not be allowed to exploit their power no matter how low direct prices may seem to fall. As we’ve learned the hard way from tech-platform firms and as the CFPB has rightly pointed out, that which is “free” can be very, very expensive. For how, see our 2019 report.

However, taking two things you don’t like and combining them doesn’t result in something that’s double-bad. Instead, one element in the mixture can counteract the other, the two elements together turn explosive, or the two together just make an ineffectual mess. For the CFPB to maximize the likelihood of getting as much as possible towards each of its worthwhile goals, …

1 02, 2022

FedFin: “Fair-Fee” Policy

Arezou Rafikian2023-04-05T14:22:57-04:00February 1st, 2022|The Vault|

Taking action to advance President Biden’s competition order, 1 the CFPB is seeking views on fees which it believes exploit consumers by virtue of unfair competition. Although many of the fees it cites are covered by statutory
disclosure regimes designed to ensure both front- and back-end fee transparency, the Bureau believes that many of these fees are unfair due to large-bank market power.

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

18 01, 2022

Karen Petrou: Inflation’s High Cost to Competition and Comity

Arezou Rafikian2023-04-24T15:18:29-04:00January 18th, 2022|The Vault|

It’s not news that the latest inflation data are disastrous. Even if they won’t last, as Mr. Powell again assured Congress, it sure is hard to see how the combination of pressures detailed in the inflation data lead to ta rate even close to the FOMC’s median projection for 2022 of 2.6 percent. This means that real rates will remain negative throughout 2022 and well into 2023. Indeed, given that the FOMC’s median projection for the near-term fed funds rate never gets above 2.1 percent, even the Fed has tacitly conceded that negative real rates may well be prolonged absent either divine intervention or another devilishly-deep recession. In June of last year, I predicted that U.S. inflation would not prove transitory and forecast the political impact finally understood at the highest levels of the Biden White House. Much is also now being written about the inequality impact I described last year, but little is said about the sum total impact of these sorry facts of life on the financial system. These may also prove anything but transitory.

The first financial-system impact of high inflation and slow growth for anything but the S&P is both political and structural. With his back increasingly pushed to the wall by inflation’s toxic equality impact, Mr. Biden defended himself against the latest CPI numbers by arguing that many of them are due to monopolistic price controls best cured by rapid antitrust initiatives such as the one already launched against the meat industry.

Other …

11 01, 2022

FedFin Assessment: Powell Sidesteps Many Challenges, Promises Much

Arezou Rafikian2023-04-24T15:54:45-04:00January 11th, 2022|The Vault|

As promised yesterday (see Client Report FEDERALRESERVE66), we listened closely today to gauge the extent to which Chairman Powell faces a serious challenge to reconfirmation. At least as far as Senate Banking Members are concerned, he doesn’t. Although Sen. Warren (D-MA) and other Democrats lambasted Mr. Powell over insider-trading allegations and what they called the Fed’s unresponsiveness, all still were cordial and seemed generally to blame the problem on institutional failures, not the chairman. Sen. Menendez (D-NJ) called the Fed’s diversity policy “outrageous,” but also does not seem inclined….

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

16 12, 2021

FedFin: Bank Merger Policy

Arezou Rafikian2023-05-22T16:11:59-04:00December 16th, 2021|The Vault|

Released in a highly-controversial fashion (see below) by two Democrats on the FDIC’s board, this RFI posits the need for a significant review of mergers involving insured depository institutions (IDIs) due to many changes in the financial industry and, so it says, the lack of substantive competitive analysis over past decades even of the largest transactions.

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

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.

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

8 10, 2021

FedFin on: Bank Merger Restrictions

Arezou Rafikian2023-06-20T15:33:46-04:00October 8th, 2021|The Vault|

Progressive Democrats in the House and Senate have introduced legislation demanding an array of new decision factors governing bank M&A transactions and new or even revised BHC activities. President Biden’s executive order demanding more competitive U.S. markets includes numerous bank-related provisions, but does so largely through requests of independent agencies such as the Federal Reserve to work with the Department of Justice to reduce bank consolidation and enhance community service. This legislation backs up these goals with binding requirements that dramatically alter the public-interest, financial, and competitive analyses on which M&A or BHC activities have long been assessed. Many more acquisitions, especially by or among large banks, would almost surely be rejected and the process might also become so public as to undermine the confidentiality essential to initial M&A agreement.

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