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13 01, 2023

DAILY011323

2023-01-13T16:39:53-05:00January 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

20 10, 2022

DAILY102022

2022-10-20T17:36:06-04:00October 20th, 2022|2- Daily Briefing|

Fed Staff Study: Climate Risk-Based Capital Impossible for Foreseeable Future

FRB staff released a stylized study of one critical climate-risk policy question:  the extent to which banks should hold capital against it.  Members of Congress have suggested this over recent years (see FSM Report GREEN9) and the BIS at the outset of its thinking recommended both “brown-penalty” and “green-incentive” capital charges (see Client Report GREEN).

FSB Presses for MMF, Open-End Rules; Government-Bond CCPs

Continuing its NBFI focus (see Client Report NBFI), the FSB today issued new recommendations to address government-security market illiquidity.

Gruenberg Gives No Clue as to Timing, Content of Inter-Agency Crypto Guidance

In remarks today, Acting Chairman Gruenberg reiterated the risks laid out in the FSOC digital asset report (see Client Report CRYPTO33), repeated warnings against misrepresenting FDIC deposit insurance, and announced forthcoming interagency crypto guidance without providing any details or timeline.

Bipartisan Senators Press Secondary Sanctions for Enactment

Sens. Toomey (R-PA) and Van Hollen (D-MD) released a readout of a conversation with the Ukrainian Ambassador on the upcoming G7 Russian oil price cap, positioning their oil sanctions amendment for inclusion in the National Defense Authorization Act (NDAA) in light of the Ambassador’s support for it.

Warren Calls for Stronger, More Transparent CFPB Remittance Rule

Joined by four Senate Democrats, Sen. Warren (D-MA) today sent a letter to CFPB Director Chopra asking that the agency strengthen its remittance rule to ensure greater transparency for exchange rates and fees it …

17 10, 2022

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

2022-10-17T15:39:27-04:00October 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

2022-10-17T15:38:55-04:00October 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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20 12, 2021

Daily122021

2023-05-22T15:38:40-04:00December 20th, 2021|2- Daily Briefing|

Freddie Misses on Low-Income Refis, Must Remediate

FHFA today announced that Fannie Mae met all of its 2020 single-family and multifamily housing goals, but Freddie Mac failed its single-family low-income refinance goal.  FHFA Acting Director Thompson underscored that compliance with the housing goals is not optional, stating also that FHFA will work with the GSEs to ensure they meet both statutory and Conservatorship Scorecard requirements.

Daily122021.pdf

8 12, 2021

CRYPTO23

2023-05-23T13:06:42-04:00December 8th, 2021|5- Client Report|

HFSC Begins Political Taxonomy of Crypto-Asset Policy

As anticipated, today’s HFSC hearing was a marathon session at which industry witnesses defended their business model, Republicans liked it fine, and Democrats worried about a wide array of policy challenges.  While both sides of the aisle agreed that cryptoassets might well enhance financial inclusion, partisan battle lines formed over issues such as the extent to which stablecoins are fully reserved, covered by the securities laws, and if a single regulator for this sector is either desirable or feasible.  Industry witnesses strongly rejected the PWG’s stablecoin conclusions (see Client Report CRYPTO21), suggesting for example that stablecoins are safer than bank deposits because they are fully – not fractionally – reserved.  Although Chairwoman Waters (D-CA) made it clear that this hearing is the start of committee action without indicating its direction, we expect HFSC to proceed to hearing from academics and then from regulators before deciding which legislation – if any – to bring to mark-up.

CRYPTO23.pdf

8 12, 2021

FedFin: HFSC Begins Political Taxonomy of Crypto-Asset Policy

2023-05-23T13:06:52-04:00December 8th, 2021|The Vault|

As anticipated, today’s HFSC hearing was a marathon session at which industry witnesses defended their business model, Republicans liked it fine, and Democrats worried about a wide array of policy challenges. While both sides of the aisle agreed that cryptoassets might well enhance financial inclusion, partisan battle lines formed over issues such as the extent to which stablecoins are fully reserved, covered by the securities laws, and if a single regulator for this sector is either desirable or feasible. Industry witnesses strongly rejected the PWG’s stablecoin conclusions (see Client Report CRYPTO21), suggesting for example that stablecoins are safer than bank deposits because they are fully – not fractionally – reserved.

 

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

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