#ONRRP – Federal Financial Analytics

20 01, 2023

DAILY012023

Eliza Allen2023-01-20T16:43:26-05:00January 20th, 2023|2- Daily Briefing|

Waller Throws Fuel on IOR-Recapture Fire

The American Banker today reports that FRB Gov. Christopher Waller answered a question by saying that the Fed does not need the $2 trillion or so housed in the ONRRP to conduct monetary policy. Mr. Waller also said the Fed does not need the level it now holds of central-bank deposits from banks, noting that QT should continue with very significant reductions even though the precise amount of reserves needed to ensure market liquidity is unknown.

Daily012023.pdf…

13 01, 2023

DAILY011323

Eliza Allen2023-01-13T16:39:53-05:00January 13th, 2023|2- Daily Briefing|

Another GSE Comes Under a Regulatory-Capital Rewrite

A little-noticed GSE – Farmer Mac – has long been criticized by agricultural lenders for reducing competition in this critical sector based in part on unduly-advantageous capital rules. Now, the Farm Credit Administration – the GSE’s regulator – has issued an advance notice of proposed rulemaking to consider whether and how to align Farmer Mac’s capital more closely to the Basel banking standards.

Fed Records Expected Loss Congress Will Assess

The Fed today released its preliminary 2022 income and expense data, detailing $18.8 billion in deferred assets following its suspension of Treasury remittances. It also reports an increase in total interest expense from $5.7 billion in 2021 to $96.6 billion in 2022, $55.1 billion of which was due to depository institutions and $41.5 billion related to the ONRPP.

Daily011323.pdf…

19 12, 2022

DAILY121922

Eliza Allen2022-12-19T16:49:50-05:00December 19th, 2022|2- Daily Briefing|

JEC Report Calls for Crypto Regulation

The Joint Economic Committee (JEC) released a report late Friday arguing that recent contraction in the digital-asset market demonstrates the need for more regulation. While it does not outline specific policy changes, the report asserts that new regulations must strive to keep digital assets separate from the broader economy to prevent contagion, as well as ensure that investors are properly informed on digital asset’s individual risks.

KC Fed Discounts SLR Relief as Solution to ONRRP Growth

A Friday brief from the Kansas City Fed concludes that limited money-market investment opportunities, policy uncertainty, and ONRRP changes such as easier eligibility better explain the sharp increase in ONRRP than bank-capital shortages as deposits flowed to MMFs. As a result, the paper concludes that reinstating SLR exemptions for central-bank deposits and Treasury obligations would not materially affect bank use of the ONRRP and thus facilitate Fed balance-sheet reduction.

McHenry Tees Up Fintech Action for New Congress

Incoming Chairman McHenry (R-NC) today reintroduced legislation designed to facilitate financial innovation, kicking off his chairmanship’s focus on fintech, crypto, and other financial technology related matters. The bill does not address priority policy questions in this contentious arena, instead creating a pathway for financial innovators to request information on whether they are eligible for exemptions from relevant regulations from the banking agencies and CFPB.

Daily121922.pdf…

17 10, 2022

Karen Petrou: Fed Financial Losses and Big-Bank Political risk

Arezou Rafikian2022-10-17T15:39:27-04:00October 17th, 2022|The Vault|

Congress will do nothing about anything until the midterm election seals each Member’s fate. Thus, I expect nothing to come from Congress in 2022 responding to the Fed’s sudden turn for the financial worst. However, when Congress again comes to thinking about the Fed, it will not go unnoticed despite all the acrimony about monetary-policy miscues that taxpayers are in some ways now far more clearly subsidizing payments to banks, MMFs, and other financial companies holding deposits with the central bank or using its standing market windows. The last time Congress thought about interest rates on reserves (IRR), more than a few Members wanted it back. Given that these payments are now at what seems direct taxpayer cost, they’ll have a lot of new friends in the next Congress unless someone quickly shows why these interest payments are an artifact of Fed confusion, not big-bank malfeasance.

Yes, I know – the $2.9 billion loss the Fed reported in terms of Treasury remittances for the first week of October isn’t a direct taxpayer subsidy any more than the hundreds of billions the Fed has sent to the Treasury since 2008 are funds directly taken from taxpayers. The ups and downs of Fed remittances are the result of balance-sheet operations comprised of liabilities owed to financial companies and earnings on assets in the Fed’s portfolio. Neither is direct spending nor revenue raising. This is, though, a technicality for Members of Congress who have become used to having the Fed – and …

17 10, 2022

m101722

Arezou Rafikian2022-10-17T15:38:55-04:00October 17th, 2022|6- Client Memo|

Fed Financial Losses and Big-Bank Political risk

Congress will do nothing about anything until the midterm election seals each Member’s fate. Thus, I expect nothing to come from Congress in 2022 responding to the Fed’s sudden turn for the financial worst. However, when Congress again comes to thinking about the Fed, it will not go unnoticed despite all the acrimony about monetary-policy miscues that taxpayers are in some ways now far more clearly subsidizing payments to banks, MMFs, and other financial companies holding deposits with the central bank or using its standing market windows. The last time Congress thought about interest rates on reserves (IRR), more than a few Members wanted it back. Given that these payments are now at what seems direct taxpayer cost, they’ll have a lot of new friends in the next Congress unless someone quickly shows why these interest payments are an artifact of Fed confusion, not big-bank malfeasance.

m101722.pdf

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14 09, 2022

DAILY091422

Eliza Allen2022-10-13T11:57:25-04:00September 14th, 2022|2- Daily Briefing|

Pressure Mounts for Basel Finales

The Basel Committee’s oversight body of central bankers and top supervisors has pressed nations quickly to finalize the Basel III “end-game” rules referenced not only in FRB Vice Chairman Barr’s maiden speech, but also in a statement shortly before this meeting by all of the U.S. banking agencies.

FSB Continues Work on FMI Resolvability

The FSB today announced a survey to gather feedback on its FMI Intermediary information framework to judge how to best ensure resolvability, seeking views from FMI service providers, firms subject to resolution planning, and bank resolution authorities.

CFPB, FTC Press for Furnisher Accountability

The CFPB today joined the FTC in filing an amicus brief taking strong issue with the position that furnishers of credit information have legal discretion over their investigations of indirect credit disputes (i.e., those with debt collectors acting on the furnisher’s behalf).

SEC Proposes Treasury-Market Conversion to Central Clearing

Moving to adopt its preferred solution to Treasury-market fragility, the SEC today voted 5-0 to issue a proposal requiring that market clearinghouses – i.e., FICC, require their members (generally clearing banks) to submit certain secondary-market transactions for clearing along with the small percentage now already centrally-cleared.

Gensler Stands by Tough Crypto, MMF, Climate Policy

Ahead of testimony tomorrow before the Senate Banking Committee, SEC Chairman Gensler’s testimony reaffirmed the chairman’s strong stand on its crypto jurisdiction, reiterating that crypto markets should be subject to like-kind capital rules and that registration is necessary for most crypto tokens …