#Senate Banking – Federal Financial Analytics

20 03, 2023

DAILY032023

Eliza Allen2023-03-20T17:07:20-04:00March 20th, 2023|2- Daily Briefing|

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.”

Daily032023.pdf…

20 03, 2023

Karen Petrou: Three Fast, Urgent Fixes to U.S. Bank Supervision and One Major Change to End Bailouts

Eliza Allen2023-03-20T11:35:24-04:00March 20th, 2023|The Vault|

In the wake of recent bank failures, much has rightly been said about how supervisors failed to act even though warning claxons blared. Nothing that happened to Silvergate, SVB, or Signature is due to forces beyond supervisory control, but there are deep, structural weaknesses in how banks have long been supervised. How long? I went back to my 2001 Senate Banking testimony about what was then the largest-ever failure to find that many of the lessons that should have been learned never sunk in.

Given that this hearing was in 2001, a good deal of what I said about bank capital requirements was about Basel I and is thus long out of date. However, one key point isn’t: the capital triggers used to spark prompt corrective action (PCA) were and are an unduly-simplistic way to identify the need for rapid supervisory intervention.

Silvergate, SVB, and Signature were all “well” capitalized right up to the brink of collapse because each of the banks in its own way arbitraged the capital rules to enormous – and obvious – advantage. Nothing in law or rule bars bank supervisors from stepping in well before PCA ratios sink but nothing seems to stir supervisors to do so. 1991’s PCA requirements were an important advance at the time, but it was outdated only a decade later. Now, it’s a dangerous supervisory distraction.

What else noted in 2001 remains an urgent fix? Over two decades ago, I urged the FDIC to reinstate the high-growth early-warning system it …

20 03, 2023

M032023

Eliza Allen2023-03-20T11:35:13-04:00March 20th, 2023|6- Client Memo|

Three Fast, Urgent Fixes to U.S. Bank Supervision and One Major Change to End Bailouts

In the wake of recent bank failures, much has rightly been said about how supervisors failed to act even though warning claxons blared. Nothing that happened to Silvergate, SVB, or Signature is due to forces beyond supervisory control, but there are deep, structural weaknesses in how banks have long been supervised. How long? I went back to my 2001 Senate Banking testimony about what was then the largest-ever failure to find that many of the lessons that should have been learned never sunk in.

m032023.pdf…

17 03, 2023

DAILY031723

Eliza Allen2023-03-17T16:53:13-04:00March 17th, 2023|2- Daily Briefing|

Biden Positions White House On Side Of SVB/SBNY Enforcement Actions

Reflecting growing political heat as SVB/SBNY revelations continue, President Biden today called on Congress to toughen enforcement penalties for senior management at failed banks. As noted on the fact sheet accompanying the formal request to Congress, the White House believes current law makes it unduly difficult for regulators to claw back executive compensation following a receivership and/or to bar individuals from further banking-industry employment.

HUD Reinstates Tough Disparate-Impact Standard

HUD today announced a final rule rescinding a 2020 rule governing Fair Housing Act disparate impact claims (see FSM Report FAIRLEND8) and restoring a 2013 discriminatory effects rule (see FSM Report FAIRLEND4). The fact sheet accompanying the announcement claimed that the complications added in 2020 rule would have made it “virtually impossible” for HUD and private plaintiffs to prove discrimination.

Waters Pledges Bill on Failed-Bank Execs, Pushes Incentive-Comp Regs

Shortly after the President called on Congress to toughen penalties for failed bank executives, HFSC Ranking Member Waters (D-CA) sent a letter today to Fed, FDIC, and SEC leadership announcing she is crafting legislation to do so. The letter also reiterated Democratic calls for the agencies to hold SVB and SBNY executives accountable and urged them to finalize longstanding compensation rules (see FSM Report COMPENSATION30), which Ms. Waters demanded include strong clawback provisions.

Daily031723.pdf…

16 03, 2023

DAILY031623

Eliza Allen2023-03-16T17:11:59-04:00March 16th, 2023|2- Daily Briefing|

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 …

15 03, 2023

DAILY031523

Eliza Allen2023-03-15T16:58:30-04:00March 15th, 2023|2- Daily Briefing|

Waters Reiterates ICE/BKI Opposition

HFSC Ranking Member Waters (D-CA) released a statement today applauding the FTC’s move to block Intercontinental Exchange from acquiring the mortgage software company Black Knight.

Progressives Press For Tailoring Redo

Cementing prior denouncements of 2018 Dodd-Frank “rollbacks” into legislative action, 17 Democratic senators and 31 House Members today took direct aim at Trump-era banking policy by introducing legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act.

Bowman Presses Small-Bank Mergers, Climate Caution, Third-Party Guardrails

In remarks today, FRB Governor Bowman noted that delays in merger reviews cause significant operational and reputational risks and suggested considering all competitors when evaluating a small bank merger’s competitive effect to reduce delays.

New CFPB RFI Brings Data Brokers Under Scrutiny

Ahead of a planned rulemaking, the CFPB today released an RFI seeking comments on the business practices of data brokers, focusing on new business models to determine if certain practices fall under the scope of FCRA.

Warren, Blumenthal Call on DOJ, SEC to Investigate SVB

Although media reports indicate that an investigation is already under way, Sens. Warren (D-MA) and Blumenthal (D-CT) sent a letter today to Attorney General Garland and SEC Chairman Gensler urging them to investigate senior SVB officials if they are not already doing so.

FHFA Delays New DTI-Based Upfront Fee

Following an announcement this January that FHFA would implement changes to Fannie and Freddie’s single-family pricing framework, Director Thompson today announced that the Agency will delay the effective …

13 03, 2023

DAILY031323

Eliza Allen2023-03-13T17:25:04-04:00March 13th, 2023|2- Daily Briefing|

Biden Promises Regulatory Revamp

In an effort to restore confidence in the banking system, President Biden announced that he will ask Congress and the banking regulators to strengthen regulations that were rolled back by the Trump administration.

Political Battle Lines Take Shape

In the wake of yesterday’s decision to protect all SVB depositors, Members of Congress are now positioning themselves for future action.

Biden Presses Stability in Wake of SVB, Signature Rescues

Reflecting ongoing uncertainties and political fallout, President Biden later this morning reiterated comments from earlier today noted in our prior alert.

Comment Deadline Set for GSE Capital Proposal

The Federal Register today includes the FHFA’s proposal to refine Fannie and Freddie’s capital construct.

Fed Tries to Get Ahead of SVB Storm

Even as Sen. Hagerty (R-TN) led calls to review Fed supervision, the Fed today announced that Vice Chair Barr will lead a review of SVB’s supervision and regulation.

Daily031323.pdf…

13 03, 2023

RESOLVE49

Eliza Allen2023-03-13T16:56:53-04:00March 13th, 2023|5- Client Report|

FedFin First Take: Failure Fall-out

As we noted last night, the President concurred with Treasury, the Fed, and FDIC in deciding that SVB’s Friday failure and imminent runs on Signature Bank and, most likely, others posed a systemic risk. This determination permits the FDIC to override all the efforts to end the moral hazard feared when uninsured depositors are fully protected in bank resolutions and came with a new Fed facility making it still easier for banks to obtain liquidity from the Federal Reserve. As we also observed, much effort is being made to assert that none of these backstops is a bailout, a conclusion sure to draw considerable discussion and dissent even from those who concur that the scale of potential run risk Monday morning could not otherwise have been averted. With this risk hopefully now resolved, much policy and political debate will begin about the Administration’s decision; why Silicon Valley Bank was so vulnerable; whether rules or enforcement are to blame for its failure, that of Signature Bank, and systemic fragility; and – even if rules are generally robust – which revisions to them are needed. The overall construct of reactions to this emergency and then the likelihood of substantive response beyond the Congressional statements and President’s commitment to new rules this morning will emerge in more specific form over the next few days if market strains continue to ease. FedFin will of course continue to apprise clients of key considerations.

RESOLVE49.pdf…

13 03, 2023

FedFin First Take: Failure Fall-out

Arezou Rafikian2023-03-15T16:50:33-04:00March 13th, 2023|The Vault|

As we noted last night, the President concurred with Treasury, the Fed, and FDIC in deciding that SVB’s Friday failure and imminent runs on Signature Bank and, most likely, others posed a systemic risk. This determination permits the FDIC to override all the efforts to end the moral hazard feared when uninsured depositors are fully protected in bank resolutions and came with a new Fed facility making it still easier for banks to obtain liquidity from the Federal Reserve. As we also observed, much effort is being made to assert that none of these backstops is a bailout, a conclusion sure to draw considerable discussion and dissent even from those who concur that the scale of potential run risk Monday morning could not otherwise have been averted. With this risk hopefully now resolved, much policy and political debate will begin about the Administration’s decision; why Silicon Valley Bank was so vulnerable;…

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

9 03, 2023

GSE-030923

Eliza Allen2023-03-09T15:28:01-05:00March 9th, 2023|4- GSE Activity Report|

Now What?

As detailed in our reports earlier this week on Powell’s appearance before Senate Banking and HFSC, much was said about the pending rewrite of big-bank capital standards. As we’ve noted, this matters a lot to the comparative advantage of GSEs, nonbank mortgage players, and banks large and small. As a result, we here go in depth on what Powell said – and mostly didn’t – about what’s next on these critical standards.

GSE-030923.pdf…