Well, That Was Interesting!
As we anticipated, a series of hearings last week clarified what the banking agencies plan, what Congress thinks about it, and what’s soon to come. Based on the reports cited below, we draft the following conclusions from the hearings, testimony, and reaction thereto:
Bipartisan Senate Consensus Demands Structural Change To Fed IG
At today’s Senate Banking Subcommittee on Economic Policy hearing on Fed accountability, Chairwoman Warren (D-MA) was unsparing in her criticism of the Fed and its current IG, Mark Bialek. She elicited the fact that he is the Fed’s highest-paid employee and, while he may be dismissed only by two-thirds of the Board, she argued that he is essentially captive and thus cannot be relied upon to investigate ethics challenges, bank failures, and internal operations.
HFSC GOP Demands LLPA Changes No Matter FHFA’s RFI
As anticipated, Chairman Davidson (D-OH) reiterated GOP demands that the FHFA rescind the entirety of its LLPA proposal at today’s HFSC Subcommittee on Housing and Insurance hearing, despite FHFA conceding to some Republican demands and issuing an RFI on the Enterprises’ single-family pricing framework earlier this week. Mr. Davidson also pushed back on FHFA’s assertion that LLPA pricing must be set with regard to private mortgage insurance, saying that MI does not reduce taxpayer risk or GSE capital even though it is required for risk reduction and captured in the GSE capital standards.
GOP Expands Attack On Fed Supervisory Actions
In yet another letter ahead of next week’s hearings, Senate Banking Ranking Member Scott (R-SC) and all Republican Members of the committee asked Fed Chairman Powell and FRB-SF President Daly a series of questions asserting that SVB’s failure reflects significant supervisory lapses.
FSOC Breaks The Glass
Although there is no formal announcement, FSOC will hold what is clearly an emergency, closed meeting later today per a new media advisory.
Top HFSC Republicans Join SVB-Supervisory Inquest
Following a similar letter from Senate Banking Republicans earlier today, HFSC Subcommittee Chairmans Barr (R-KY) and Huizenga (R-MI) along with Rep. Kim (R-CA) sent yet another letter to Vice Chair Barr and FRB-SF President Daly also demanding detailed supervisory-related information on SVB.
Reserve Banks Promise to Bear Some Sometime Soon
Under ever-growing pressure, all of the Federal Reserve Banks today under the New York Fed’s aegis announced a common transparency policy.
HFSC GOP Targets State Bank Supervisors
Top House Republicans today brought state banking commissions into the SVB and SBNY fray, asking each for extensive details on recent actions and setting the April 6 deadline now evident in all recent GOP requests in this arena.
GOP Leaders Also Demand FSOC Answers
HFSC Subcommittee Chairman Barr (R-KY) and Huizenga (R-MI) today also sent letters to FSOC Chair Yellen and Council of Inspectors General on Financial Oversight Chair Delmar requesting detailed information on meetings surrounding the banking agencies’ March 12 decision to invoke a systemic risk exception for SVB …
FTC Builds On Treasury Cloud Concerns, Seeks Competition, AI Views
Signaling apprehension about a number of risks outlined in a recent Treasury report, the FTC today requested comment on the business practices of cloud computing providers.
Scott, Warren Reach Over Partisan, Ideological Divide to Blast the Fed
Demonstrating the confluence of populist and progressive thinking about the Fed we anticipated at the start of this year, Sens. Rick Scott (R-FL) and Warren (D-MA) have introduced legislation mandating that the Fed’s inspector general be fully independent of the chair and board of governors.
Fed Under Still More Pressure to Boost Regional-Bank Supervision
Sen. Warren (D-MA) continued her prolific letter-writing campaign, today also joining with Sens. Duckworth (D-IL), Blumenthal (D-CT), Sanders (I-VT), Reed (D-RI), Hirono (D-HI), Markey (D-MA), King (I-ME), Whitehouse (D-RI), Smith (D-MN), Van Hollen (D-MD), and Schatz (D-HI) to call upon Vice Chairman Barr quickly to heighten regulatory standards for banking organizations between $100 and $250 billion.
Powell Protests Suggestions Of Fed Supervisory Error
At his press conference today, Chairman Powell sought to defend the Fed so vigorously that some of his comments may ignite still more criticism.
Yellen Denies FDIC-Coverage Rewrite, Suggests Need for Liquidity-Rule Revisions
In her appearance today before the Senate Appropriations Subcommittee on Financial Services and General Government, Treasury Secretary Yellen refuted press reports that Treasury is considering significant deposit-insurance coverage expansion, saying only that the banking system is safe and it is too soon to consider structural reforms.
HFSC Sets Plan For Crisis Review
In what may be an effort to buy some time as the banking crisis hopefully eases and tempers cool, HFSC Chairman McHenry (R-NC) and Ranking Member Waters (D-CA) late Friday asked GAO to conduct an immediate review of recent bank failures, insider actions, and related policy actions such as the March 12 systemic rescue and new Fed facility.
Warren Piles On To Powell With New IG Study
Sen. Warren (D-MA) in a letter Saturday applied even more pressure on the banking agencies by urging the Fed’s, FDIC’s, and Treasury’s IGs to conduct independent investigations of the bank as well as “regulatory and supervisory problems” leading to failures, renewing claims that Chair Powell is especially culpable.
McHenry, Scott Take Gloves Off For Fed, FDIC Investigation
HFSC Chairman McHenry (R-NC) and Ranking Senate Banking Member Scott (R-SC) today sent letters to Chair Powell and Chair Gruenberg, making it clear that – for all Mr. McHenry’s more conciliatory statements – Republicans are launching an investigation premised on potential missteps by the Fed and/or FDIC warranting rapid remediation.
House GOP Conservatives Oppose Liberalized FDIC-Coverage Ceiling
Countering demands for an end to FDIC insurance ceilings not only from Sen. Warren (D-MA), but also from their GOP peers, the very conservative House Freedom Caucus today released a statement demanding an end to what it calls “big government bailouts.”
FedFin Assessment: One CS Consequence – LISCC Reinstatement For All Large Foreign GSIBs
In the wake of CS’s distress, we draw client attention to a 2021 exchange sure to factor heavily in the political response.
Brown Presses For In-Depth SVB, Signature Review
As anticipated (see Client Report RESOLVE49), Senate Banking Chairman Brown (D-OH) today called on all the banking agencies and Treasury quickly to undertake a review of SVB and Signatures failures.
Warren Heaps Still More Blame On Powell
In another letter today, Sen. Warren (D-MA) once again lambasted Chair Powell for what she claimed was his direct contribution to the collapse of Signature Bank and SVB as well as a “a culture of corruption” at the Fed.
Senate GOP Blames Fed, California re SVB
Senate Banking Republicans today tweeted a series of comments citing articles going back to last year identifying SVB risk and suggesting strongly that the Fed and California state supervisors are at fault for missing clear warning signs.
Bipartisan Senators Push Better Beneficial-Ownership Data Access
Senate Budget Committee Chairman Whitehouse (D-RI) was joined by Sens. Wyden (D-OR), Warren (D-MA), Grassley (R-IA), and Rubio (R-FL) late yesterday in submitting a comment letter to FinCEN taking serious issue with its proposed implementation of the Corporate Transparency Act (CTA) (see FSM Report AML135).
Senate Finance Hearing Deepens SVB Divide
At a heated Senate Finance hearing with Treasury Secretary Yellen, Members were quick to deviate from the hearing’s budget-focused agenda to address who should bear the …
HFSC Plans Broad Attack, Limited Legislation to Rewrite Administration Crypto Standards
The HFSC staff memo makes it clear that the Digital Asset Subcommittee hearing on Thursday will be a strong general GOP attack on Biden Administration crypto policy and specific campaign against the SEC’s enforcement-focused strategy.
HFSC Plans to Blast CFPB, Press Limited Change
Thursday’s HFSC Monetary Policy Subcommittee hearing on the CFPB is sure to be a raucous, partisan affair judging by the staff memo describing it. Republicans have strongly objected to the Bureau before its inception, with concerns sharply heightened by a series of recent actions under Director Chopra.
CFPB Slams Fees, Promises Mercy
Ahead of a meeting later today between senior White House officials, Director Chopra, and hundreds of state legislators concerning the President’s “junk fee” agenda, the CFPB today released Supervisory Highlights focusing on recent instances of what it deems unlawful junk fees in deposit accounts, auto loan servicing, mortgage servicing, payday lending, and student loan servicing.
GAO Doubts Fintech’s Inclusion Advantage
The GAO today released a report finding that fintech may enhance inclusion, but that this inclusion comes at risk due to the patchwork of rules governing firms offering products – e.g., wage advances – that may put vulnerable households at risk.
HFSC Republicans Scrutinize SEC Rulemaking, Fed Climate Policy
As anticipated, today’s HFSC Subcommittee Hearing with the inspectors-general for the FRB, CFPB, Treasury, and SEC focused on GOP attacks on the SEC’s IG vacancy and the CFPB’s funding mechanism.
Brown, Others Demand ABA …
GOP Revs Up Fight Vs. Big-Bank Capital Hikes
Firing a fusillade ahead of capital rewrites expected late this month, Senate Banking Republicans late Friday sent FRB Chairman Powell a letter arguing strongly against capital increases and laying out a strong view that the agencies are required by law to tailor key standards.
BIS Project Finds Retail-CBDC Cross-Border Benefits
In a project boosting retail CBDC, the BIS Innovation Hub today announced the results of Project Icebreaker, a cross-border retail CBDC pilot between Sweden, Norway, and Israel.
GOP Will Deploy IGs To Demand Fed, CFPB, SEC Reform
In addition to a hearing that morning with Chairman Powell, the full HFSC will call federal banking agencies on the carpet Wednesday for “wasteful” spending and other governance issues.
Dems Beg Gensler Not to Scrap Scope 3 Climate Disclosures
Responding to intense GOP opposition to the SEC’s climate disclosure proposal, fifty Congressional Democrats led by Sen. Warren (D-MA) sent a letter to SEC Chairman Gensler today urging him not to scale the proposal back, especially its Scope 3 provisions.
Treasury Wants Fast NBFI, OEF, Crypto Standards
Treasury International Affairs Under-Secretary Jay Shambaugh today outlined U.S. priorities, emphasizing not only the importance of containing Russia and countering new threats, but also quickly advancing numerous global initiatives.
Hsu Pushes To Start The End Game
Acting Comptroller Hsu today reiterated his determination to act as quickly as possible on Basel’s end-game rules, noting the interagency statement last year that this would soon be done without providing …
BIS Backs Away From Old CBDC, Presses New “Unified Ledger”
BIS General Manager Agustín Carstens today distanced the global central bank somewhat from its prior calls for two-tier CBDC as quickly as possible (see Client Report CBDC6).
Administration Drops FHA Premiums in Broad Housing Push
In a victory for mortgage lenders and defeat for private mortgage insurance and the GSEs, Vice President Harris announced that FHA will shortly reduce mortgage premiums by .30 percent, saving the average homeowner $800 in total premiums or $67 a month.
GOP Opens Anti-CBDC Campaign
Starting the GOP’s 2023 campaign against CBDC with a specific initiative, Rep. Tom Emmer SP (R-MN) and nine Republicans have introduced H.R. 1122.
FDIC Found Remiss re Systemic Resolution
In its assessment of challenges facing FDIC leadership, the Office of Inspector General (OIG) finds that the agency may not be ready to handle an OLA or systemic resolution, nor is it yet able to assess climate financial risk and sanctions compliance.
FHFA Looks Into FHLB-Member Community Activities
Perhaps advancing FHFA Director Thompson’s commitment to review aspects of the FHLB System, her agency today released a request for views on the extent to which a Home Loan Bank member supported its community to retain eligibility for long-term System advances.
FSB Climate-Risk Progress Report Underscores Disclosure Standards, Improved Data
The FSB today released a climate-risk progress report that also details near-term actions. These include not only the statement to the G20 in October noted in yesterday’s G20 report, but also a status report in September from the Task Force on Climate-Related Financial Disclosures (TCFD) on industry progress toward adopting its climate disclosure recommendations.
CFPB, OCC Slam BofA for UI-Fraud Lapses
The OCC and CFPB today issued a $225 million enforcement order against Bank of America related to unemployment-insurance and public-benefit fraud that led the bank to improperly withhold prepaid-card payments to legitimate recipients.
BIS Builds “Central Bank Liquidity Bridges”
Continuing its work to promote better cross-border payments, the BIS today floated the idea of “central-bank liquidity bridges” to overcome current frictions in the bank-dominated sector.
Clarida and Powell Cleared, but OIG Still Reviewing Fed Ethics
The Office of the Inspector General at the Fed today cleared former Vice Chair Clarida and Chairman Powell of ethics violations that have dogged them as recently as a letter yesterday from Senate Democrats.