#Powell – Federal Financial Analytics

3 04, 2024

DAILY040324

Eliza Allen2024-04-03T17:21:51-04:00April 3rd, 2024|2- Daily Briefing|

Bowman Wants Policy Review, Fed-Operational Improvements Ahead of New Liquidity Regs

Turning from mergers to the Fed’s lender-of-last-resort role, Gov. Bowman today argues that new liquidity policies require careful review before any new rules are adopted.

Fed Treads Carefully in New Global Money-Tokenization Project

The BIS today announced a new program exploring ways in which tokenizing central-bank and bank money for wholesale transactions on programmable platforms would benefit the monetary system.

Powell Defends Independence, Mandate Limits

In remarks today on monetary policy and Fed independence, Chair Powell was at pains to emphasize that climate risk was outside the Federal Reserve’s mandate.

FHFA Treads Cautiously Towards FHLB Reform

Issuing a minor ruling regarding Puerto Rico cooperatives, FHFA today also laid out its 2024 priorities following last year’s report on the Home Loan Bank System.

Barr Stands by CRA Rule

Responding to questions about the court injunction on the CRA rule, FRB Vice Chair Barr today stated that the rules are restated expectations within the boundaries of the Act and Congress intended the agencies to update the 1977 law.

Chopra: Merger Approval Requires Affirmative, Additive Community Benefit

Building on his comments when the FDIC board voted 3-2 to issue its merger proposal (see FSM Report MERGER15), CFPB Director Chopra today doubled down on the view that bank mergers should only be approved if there is demonstrable community benefit over an extended period of time.

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25 03, 2024

M032524

Eliza Allen2024-03-25T11:45:52-04:00March 25th, 2024|6- Client Memo|

How the FDIC Fails and Why It Matters So Much

Last January, we sent a forecast of likely regulatory action and what I called a “philosophical reflection” on the contradiction between the sum total of rules premised on unstoppable taxpayer rescues and U.S. policy that no bank be too big to fail. Much in our forecast is now coming into public view due to Chair Powell and Vice Chair Barr; more on that to come, but these rules like the proposals are still premised on big-bank blow-outs. I thus turn here from the philosophical to the pragmatic when it comes to bank resolution, picking up on a stunning admission in the FDIC’s proposed merger policy to ponder what’s really next for U.S. banks regardless of what any of the agencies say will result from all the new rules.

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25 03, 2024

Karen Petrou: How the FDIC Fails and Why It Matters So Much

Eliza Allen2024-03-25T11:45:45-04:00March 25th, 2024|The Vault|

Last January, we sent a forecast of likely regulatory action and what I called a “philosophical reflection” on the contradiction between the sum total of rules premised on unstoppable taxpayer rescues and U.S. policy that no bank be too big to fail. Much in our forecast is now coming into public view due to Chair Powell and Vice Chair Barr; more on that to come, but these rules like the proposals are still premised on big-bank blow-outs. I thus turn here from the philosophical to the pragmatic when it comes to bank resolution, picking up on a stunning admission in the FDIC’s proposed merger policy to ponder what’s really next for U.S. banks regardless of what any of the agencies say will result from all the new rules.

Let me quote at some length from the FDIC’s proposed merger policy:

“In particular, the failure of a large IDI could present greater challenges to the FDIC’s resolution and receivership functions, and could present a broader financial stability threat. For various reasons, including their size, sources of funding, and other organizational complexities, the resolution of large IDIs can present significant risk to the Deposit Insurance Fund (DIF), as well as material operational risk for the FDIC. In addition, as a practical matter, the size of an IDI may limit the resolution options available to the FDIC in the event of failure.”

In short, the FDIC wants to block most big-bank mergers because it can’t ensure orderly resolution of a large insured depository …

20 03, 2024

DAILY032024

Eliza Allen2024-03-20T16:23:55-04:00March 20th, 2024|2- Daily Briefing|

Gottheimer Confirms Bipartisan Basel Worries

Rep. Josh Gottheimer (D-NJ) today told the ABA summit that there is bipartisan concern over the impact the Basel III endgame proposal could have on American competitiveness, calling the requirements “overly-burdensome.”

FHFA Advancing FHLB Troubled-Bank Funding Limits

Speaking today at the ABA summit, the Deputy Director of the FHFA’s Division of Banking Regulation Joshua Stallings indicated that the agency is following up on the FHLB100 report by working with the FRB to set cut-off points between acceptable FHLB funding and the discount window.

Tester Slams Fed Interchange Proposal, Durbin-Marshall Bill

Sen. Tester (D-MT) today told the ABA Summit that the Fed’s debit interchange fee proposal (see FSM Report INTERCHANGE12) is a “mistake,” creating uncertainty and adversely affecting community banks and rural America.

Powell: Retail CBDC A Long Way from Anywhere

Reiterating comments made to Sens. Cramer (R-ND) and Lummis (R-WY) in his last appearance on Capitol Hill, Chair Powell today said the Fed is a long way from making any decision about offering a retail CBDC.

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7 03, 2024

DAILY030724

Eliza Allen2024-03-07T16:51:03-05:00March 7th, 2024|2- Daily Briefing|

HFSC GOP Press Discount-Window Reform, Slow-Go on Liquidity Risk

Building on questioning at a recent HFSC hearing (see Client Report LIQUIDITY34), Financial Institutions Subcommittee Chair Barr (R-KY) led all Republican members of his subcommittee in a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu urging them to address stigma and operational issues associated with the discount window.

Powell Reiterates: Capital Rules Will Change

Today’s Senate Banking hearing with Chair Powell covered much of the same ground as the Chair’s appearance before HFSC (see Client Report FEDERALRESERVE75) with Democrats focusing on housing affordability and Republicans expressing their satisfaction with Mr. Powell’s statement that the Basel III proposal may have to be withdrawn and re-proposed.

House Judiciary Now Says 12 Large Banks Colluded with FinCEN

Prior to the House Judiciary’s Select Subcommittee on the Weaponization of the Federal Government hearing today on large bank “collusion,” the subcommittee yesterday published a report finding that FinCEN and the FBI engaged in backchannel discussions with large financial institutions to gather private financial data.

BCBS Proposes GSIB Window-Dressing Revisions

As anticipated, the Basel Committee on Banking Supervision today released a consultation on revisions to the GSIB assessment framework concerning window dressing.

House Republican Targets Interest on Reserves

Following up on yesterday’s HFSC hearing (see Client Report FEDERALRESERVE75), Rep. Davidson (R-OH) has introduced legislation (H.R. 7562) to prevent Federal Reserve Banks from paying interest on excess reserves.

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6 03, 2024

FEDERALRESERVE75

Shane Smith2024-03-06T16:07:02-05:00March 6th, 2024|5- Client Report|

Chair Powell Calls Basel III Re-Proposal “Very Plausible”

As expected, Republicans took turns grilling Chair Powell on the Basel III endgame proposal and calling for its withdrawal, and were likely pleased with the results. When questioned by Chair McHenry (R-NC) and Financial Institutions Subcommittee Chair Barr (R-KY), Mr. Powell stated that he expects “broad and material changes” to the proposal and stated that a re-proposal would be a “very plausible option,” calling the amount of negative comments regarding the proposal “unlike anything I have seen.” Democrats made affordable housing their primary area of attack, following up on previous Democrat-led letters sent to Chair Powell calling for him to cut interest rates to reduce the burden on housing and construction costs. Mr. Powell responded to housing concerns by acknowledging the structural housing shortage in the U.S. but reiterated the Fed’s dual mandate and stated that targeting the housing market is outside their jurisdiction. In addition to monetary policy, much of the questioning also addressed fiscal policy, where Mr. Powell again attempted to stay aloof. Ahead of today’s hearing, Chair McHenry and Subchair Barr led all HFSC Republicans in sending a letter to Mr. Powell, Chair Gruenberg, and Acting Comptroller Hsu demanding the regulators withdraw the capital proposal. A bipartisan House coalition of 38 lawmakers led by Reps. Luetkemeyer (R-MO) and Williams (D-GA) also sent a letter to Mr. Powell criticizing the Fed’s proposal to reduce the debit-card interchange fee cap, warning of the proposal’s impact on LMI and underbanked communities.…

1 03, 2024

DAILY030124

Eliza Allen2024-03-01T17:10:56-05:00March 1st, 2024|2- Daily Briefing|

Fed Emergency Powers Back on Senate Docket

Just before the Senate passed the stopgap bill to avert a shutdown, Sen. Paul (R-KY) forced a vote on an amendment to prevent the Fed from buying debt from states and municipalities.

DOJ Goes After “Gate-Keepers”

In remarks late yesterday, Assistant AG Jonathan Kanter highlighted the impact of new DOJ/FTC guidelines (see FSM Report MERGER13) and enforcement efforts with regard to “gate-keepers” – i.e., “monopoly chokepoints” so powerful that they control entry and pricing in a key sector in which they also often compete.

Fed Seems a Bit Warier of Banking-System Stress

The Fed monetary-policy report submitted today ahead of Chair Powell’s testimony next week includes a financial-stability analysis largely derived from the FRB’s most recent financial-stability report (see Client Report SYSTEMIC97) and the update provided earlier this week by a key FRB-NY official.

White House Steps in to Comfort NYCB Worries

At close of business, NYCB shares had sunk to levels not seen since 1997 following the release of still more bad news on Thursday.

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1 03, 2024

Al030424

Eliza Allen2024-03-01T17:07:55-05:00March 1st, 2024|3- This Week|

A Central Bank Very Much in the Middle

As always, we will provide clients with in-depth analyses after Chair Powell comes before Congress later this week to face the usual fusillade of political inquiry along with policy questions. As before (see Client Report FEDERALRESERVE74), Mr. Powell will face hard questioning from Republicans on the pending capital rules, with many now trying to pin him down on likely changes and the extent to which Mr. Powell’s promise of consensus before a final rule still holds. A lot of questions will also come from both sides of the aisle on bank mergers, with House Democrats demanding a new merger policy, Sen. Warren (D-MA) trying to get Mr. Powell to signal disapproval of the CapOne/Discover deal – he won’t, and Republicans trying to get Mr. Powell to say that deals such as this one must get done to ensure regional-bank survival – again, he won’t. We also expect a new grilling from the GOP on Fed emergency-liquidity powers, along with continuing questions on climate risk, CBDC, and the quality of bank supervision. The fate of NYCB by the time of the hearing will also be a major preoccupation on both sides of the aisle even if bad doesn’t immediately go to worse. Democrats will try to shore up CBDC but many are also troubled by emergency-liquidity powers. All sides will of course take much of the hearing’s bandwidth by pushing Mr. Powell to go one way or …

20 02, 2024

DAILY022024

Eliza Allen2024-02-20T17:06:56-05:00February 20th, 2024|2- Daily Briefing|

Waters Fails to Muster Meaningful Democratic Capital-Proposal Protest

Late Friday, HFSC Ranking Member Waters (D-CA) released another letter from Democrats protecting the pending capital proposals.

Fed Study: CBDC Impact on Dollar Dominance, Payment System Depends on Many Decisions

A new Fed staff study finds that a U.S. CBDC would have only a marginal impact on the dollar’s role as the reserve currency and within the payment system, although this conclusion depends on a raft of decisions now being made about other CBDCs and the cross-border payment system.

Sanders Targets BlackRock’s Market Power

We will shortly provide clients with an update on Congressional reaction to the C1/Discover merger earlier today, but here draw client attention to a new letter from Sen. Bernie Sanders (I-VT), sure also to be among the credit-card consolidation’s fiercest critics.

Brown Presses Powell for Enforceable Ethics Standards

Senate Banking Chair Brown today renewed his campaign against Fed conflict-of-interest policies, sending another letter to Chair Powell arguing that the Fed’s recent internal-investment and ethics standards are unenforceable.

Initial Response to C1/Discover Merger Starts M&A Debate

With Congress in recess, political response to the Capital One/Discover merger has been muted in terms of sparse comments, but fiery when it comes to Sen. Warren (D-MA).

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2 02, 2024

DAILY020224

Eliza Allen2024-02-02T16:21:33-05:00February 2nd, 2024|2- Daily Briefing|

Powell, Hsu Add to Pressure on SEC Crypto-Custody Standards

As we noted yesterday, Congressional Republicans are now mounting a Congressional Review Act effort to repeal the SEC’s staff accounting bulletin (see FSM Report CUSTODY5) requiring balance-sheet recognition of crypto-custody deposits at considerable cost to banking institutions.

Trump to Dump Powell

As we expected, Donald Trump today said that, if elected, he will not reappoint Jerome Powell. This decision will not present itself to the next president until Mr. Powell’s term ends in January of 2026, but we do not think either of the candidates is likely to reappoint Mr. Powell should he seek a third term.

GOP Bill Challenges Capital Proposal

Echoing long-held concerns of other HFSC Republicans, Rep. Ogles (R-TN) along with Rep. Donalds (R-FL) have introduced legislation (H.R. 7143) forcing regulators to withdraw the capital proposal (see FSM Report CAPITAL230).

Senate Presses for Anti-Hungary Sanctions

In a statement that may lead financial institutions to review their exposures, Senate Foreign Relations Chair Cardin (D-MD) called on the Biden Administration to consider sanctions against Hungary due to its government’s refusal until late yesterday to support EU efforts for Ukraine and its broadly anti-democratic program in general and with specific regard to pressuring the U.S. and its ambassador to Hungary.

HFSC Republicans Take Another Shot at FDIC

Continuing their campaign against FDIC Chair Gruenberg, HFSC Chair McHenry (R-NC) along with Subcommittee Chairs Barr (R-KY) and Hill (R-AR) sent a letter today to the FDIC questioning …