15 03, 2022


2023-04-03T14:45:47-04:00March 15th, 2022|2- Daily Briefing|

House Readies Still Tougher Sanctions

Thursday’s HFSC mark-up will advance a series of bills ramping up sanctions designed as amendments to the omnibus legislation advancing through Congress to punish Russia and targeted allies.  We expect all these bills to pass by wide margins, with additional measures added after tomorrow’s speech from Ukraine’ president; we will provide clients with an in-depth report of the mark-up and other actions related to financial markets.

What’s Next at the Fed

As anticipated, Sarah Bloom Raskin has reportedly withdrawn her nomination following indication from Sen. Manchin (D-WV) and two moderate Republicans that they will oppose her confirmation.  Although this might clear the nominations of Chairman Powell, Gov. Brainard, Lisa Cook, and Phillip Jefferson, this will occur only if Chairman Brown (D-OH) is willing to sacrifice leverage over the next nomination for the supervision vice chair.

More on What’s Next for the Fed

President Biden’s statement today on Ms. Raskin’s withdrawal clarifies the outlook detailed in our alert earlier this afternoon.  After praising the nominee, the president urges the Senate to quickly confirm Mr. Powell, Ms. Brainard, Ms. Cook, and Mr. Jefferson.


14 03, 2022


2023-04-03T15:04:42-04:00March 14th, 2022|2- Daily Briefing|

IOSCO Adds Carbon-Market Review to Work Plan

IOSCO today released a comprehensive sustainability work plan, moving beyond the investor-focused disclosures it previously espoused set for action next week by the SEC.  Going forward, global securities regulators have now prioritized reducing greenwashing and encouraging reliable ESG-impact assessment.  IOSCO will thus review both the pending IFRS climate- and general-sustainability disclosure requirements and final standards.

Raskin Faces Still Higher Confirmation Odds

Sen. Manchin (D-WV)’s statement today that he will not support Sarah Bloom Raskin makes her path to confirmation difficult, if not impossible.  For her appointment as Fed Supervisory Vice Chair to advance, at least one Republican would need to break ranks on the Senate floor even if Ranking Member Toomey (R-PA) is unable to hold his blockade.


14 03, 2022


2023-04-03T15:12:45-04:00March 14th, 2022|3- This Week|


Spurred in part by the critical role cryptocurrency is playing in the Ukraine crisis, the Biden Administration last week finalized a long awaited “whole-of-government policy construct (see Client Report CRYPTO26) with far-reaching, immediate implications not only for the Executive-Branch agencies that must now do as they are told, but also the more-or-less independent banking agencies that will try to make the White House as happy as possible.  Touching on another key question — who has payment-system access — the Fed last week revised its 2021 proposal with a replacement request for comment (see FSM Report PAYMENT24) that now opines just a bit more on which companies will get the most scrutiny if they seek Reserve Bank master accounts and services.


7 03, 2022


2023-04-04T12:36:43-04:00March 7th, 2022|3- This Week|

The Fog of War

As we anticipated last week, the focus on the Fed usually transfixing Congressional hearings with the central bank’s chairman shifted to the grievous global geopolitical situation.  As Mr. Powell told HFSC and then Senate Banking, the Fed plays no official role in deciding whom the White House chooses to sanction and Members were too tactful to ask for a public description of the Fed’s formidable behind-the-scenes role on these critical decisions.  Even the discussion of whether the U.S. should have a CBDC was cloaked in how doing so might affect U.S. economic hegemony.  Still, Congress always has time for a political brawl and the fight that most directly involves the Fed is the one swirling around the Biden Administration’s nominees to join its Board of Governors.


3 03, 2022


2023-04-04T12:53:47-04:00March 3rd, 2022|2- Daily Briefing|

LIBOR Transition Rescue Advances

Advancing a long-delayed effort to clarify the LIBOR transition, a bipartisan group of Senate Banking Members today introduced legislation dictating replacement rates for legacy contracts.  The language is a companion to a revised version of House-introduced standards (see Client Report LIBOR5)  that among other things reflects Sen. Toomey’s (R-PA) concerns that the bill be narrowly tailored to a defined class of legacy contracts rather than, as some feared, stipulating new benchmark rates across the financial market for new contracts.  The bill is supported by virtually all financial-industry advocacy organizations and should now advance quickly to the Senate floor since the Senate Banking Committee has already held hearings on this issue.  At today’s hearing (see FedFin’s report), Chairman Powell strongly endorsed the bill and reiterated the need for rapid action.

Powell Defends Fed’s Institutional Legitimacy, Continuing Function as Nominations Stall

Today’s Senate Banking hearing with Chairman Powell featured continuing partisan wrangling over stalled Fed nominations showed no sign of resolution after Republicans essentially forced Mr. Powell to concur that his powers to act pro tem ensured continuing central-bank function.  Ranking Member Toomey (R-PA) also renewed his campaign against Reserve Banks, arguing that they are anachronistic and have strayed from core mandate concerns.


1 03, 2022


2023-04-04T13:02:03-04:00March 1st, 2022|2- Daily Briefing|

HFSC Readies for Powell Testimony

Apart from a macroeconomic overview, much of the HFSC staff memo ahead of Chairman Powell’s appearance tomorrow details recent Fed actions to enhance diversity, and Fed-official trading problems and resulting policies.

Gruenberg Worries re Risks to Come

The FDIC released its usual quarterly report on IDI conditions, showing considerable strength in the fourth quarter.  Still, Acting Chairman Gruenberg’s remarks expressed considerable caution about industry resilience under growing macroeconomic and geopolitical stress.

Reach of U.S. Sanctions

Building on our report last week on new sanctions (see FSM Report SANCTION16) and Karen Petrou’s memo, we here address a frequently-asked questions as the Ukraine conflict rages and sanctions increase: the extent to which foreign banks without a U.S. presence must adhere to U.S. sanctions.

FRB Tries Anew re Payment-System Access

Responding indirectly but importantly to the controversies swirling around Sarah Bloom Raskin (see Client Report FEDERALRESERVE69), the FRB today released a supplement to its earlier proposal about the extent to which novel entities are granted Reserve Bank master accounts (see FSM Report PAYMENT17).

Congress Poised to Tighten Russia’s Financial Noose

Signaling that the U.S. Congress will add new sanctions to pending Ukraine relief, Senate Finance Chairman Ron Wyden (D-OR) today called for an array of financial actions to circumvent Russian finance.


25 02, 2022


2023-04-04T15:00:05-04:00February 25th, 2022|3- This Week|


Given the magnitude of geopolitical developments, we expect even Congress’s acute concern about inflation to be secondary when Chairman Powell comes before HFSC and Senate Banking later this week.  To be sure, there will be a lot of talk about energy prices and the extent to which these will accelerate price increases or decelerate tightening at the next FOMC meeting. Even so, Congress has more immediate concerns, one suitable to the geopolitical situation and the other mired in Congress’s own high-priority politics.


21 02, 2022


2023-04-04T15:44:10-04:00February 21st, 2022|3- This Week|

Chicken Games

It’s no longer news that Senate Banking’s Republicans last week boycotted confirmation votes for the Administration’s full slate of Federal Reserve nominees along with that for FHFA Acting Director Thompson.  Although the tactics are striking, Republican objections aren’t — we forecast these well before the voting (see Client Report FEDERALRESERVE66) and see nothing thereafter to change our prediction that — while certainly possible — it would prove difficult for the White House to advance Ms. Raskin’s appointment as Vice Chair for Supervision.  Our updates last week also predicted that each side would dig in its heels not just on Ms. Raskin, but also on whether Democrats would split the slate so all but her appointment could advance.  What’s next?


16 02, 2022


2023-04-04T15:53:29-04:00February 16th, 2022|2- Daily Briefing|

FSB Fears Crypto, Contemplates Response
The FSB today issued an in-depth report on systemic crypto risk, concluding that this could so quickly become a real threat that it could warrant preemptive intervention.  Even so, the report provides no recommendations on how best to proceed, with global regulators confining themselves to a detailed presentation on vulnerabilities and resulting risk.

CFPB Opens Regulatory Portal to All Petitioners
Taking what it says are steps to democratize its rulemaking, the CFPB today established a process via which consumers may directly petition it to commence a rulemaking, also releasing a guide explaining the submission process.

FedFin Assessment: What’s Next for the Fed
As requested, this alert updates clients on the implications of yesterday’s GOP boycott of the confirmation votes in the Senate Banking Committee for President Biden’s FRB-leadership slate.  As anticipated (see Client Report FEDERALRESERVE66), Sarah Bloom Raskin’s nomination as supervisory vice chair is proving to be particularly problematic, leading Democrats to try to attach Chairman Powell’s far more popular confirmation to the rest of the slate in hopes of forcing it through.


14 02, 2022

Karen Petrou: Two Regulatory Decisions That Will Define the Future of Money

2023-04-04T16:07:43-04:00February 14th, 2022|The Vault|

Like all of you, we at FedFin spend a lot of time watching the U.S. Congress, but I’m increasingly wondering why.  Sure, there’s the blood and guts.  Watching Congressional deliberations is more and more like being a spectator at a hockey game for the fights or NASCAR races for the next fiery crash.  Does any of this carnage really matter?  Not much when it comes to vital, urgent financial policy questions such as what money has come to be in the United States.  With Congress mired in a never-ending cock fight, regulators hold the fate of finance mostly in their own fierce grip.  Even without deployment of the Fed’s nuclear CBDC option, two developments last week show clearly how much power regulators have to redefine U.S. digital currency.

First, there was outgoing FDIC Chair McWilliams’ offhand suggestion in her final remarks that stablecoins have all the characteristics of fiat currency deposits and thus could be eligible for FDIC insurance under current law.  As soon as he took the helm, Acting FDIC Chairman Gruenberg demanded tough cryptocurrency regulation, but he didn’t rule out deposit status for at least some stablecoins if the agency was satisfied with their stability.

The impact of an FDIC decision deeming at least some stablecoins to be deposits is hard to over-estimate.  As I detail in my book, what’s actually in a bank deposit isn’t what most people think they hold, i.e., a virtual pile of dollars.  In fact, money in the bank is …

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