#Senate Banking

11 01, 2022

FedFin Assessment: Powell Sidesteps Many Challenges, Promises Much

Arezou Rafikian2023-04-24T15:54:45-04:00January 11th, 2022|The Vault|

As promised yesterday (see Client Report FEDERALRESERVE66), we listened closely today to gauge the extent to which Chairman Powell faces a serious challenge to reconfirmation. At least as far as Senate Banking Members are concerned, he doesn’t. Although Sen. Warren (D-MA) and other Democrats lambasted Mr. Powell over insider-trading allegations and what they called the Fed’s unresponsiveness, all still were cordial and seemed generally to blame the problem on institutional failures, not the chairman. Sen. Menendez (D-NJ) called the Fed’s diversity policy “outrageous,” but also does not seem inclined….

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

13 12, 2021

Karen Petrou: Why Pro-Competition Consumer Finance May Not be Pro-Consumer Consumer Finance

Arezou Rafikian2023-05-23T12:35:00-04:00December 13th, 2021|The Vault|

On Wednesday, several major crypto companies told Congress that the best way to govern them – should this be needed at all – is to create a new federal regulator that knows its way around the blockchain. One trusts this proposal is a sincere effort at constructive engagement, but anyone who has run the financial-regulatory traps longer than a DLT minute knows that proposing a single regulator is the most effective way to look earnest and yet still roam free outside the regulatory perimeter. There is simply no way Congress will pull itself together to enact a single crypto regulator. And, even if Congress could do so, it shouldn’t.

Congressional obdurace about regulatory-agency rationalization isn’t because the financial-regulatory construct makes sense or even that Congress somehow thinks it does. Congress knew that the multiplicity of banking agencies created undue opportunities for arbitrage and captivity at least as early as the 1971 Hunt Commission report arguing for what the then head of the Senate Banking Committee, William Proxmire, called the “Federal Banking Commission” when he tried to create one throughout the 1970s and early 1980s. As banking blurred into financial services in the 1990s, the regulatory perimeter became even fuzzier and Congress tried to rationalize it in the 1999 Gramm-Leach-Bliley Act, ultimately having only minimal impact on the alphabet soup.

A new regulator – the Office of Federal Housing Enterprise Oversight – was created in 1992 for Fannie, Freddie, and the Home Loan Banks, but that was because the S&L crisis …

18 11, 2021

FedFin on: Omarova Nomination Threatened

Arezou Rafikian2023-05-25T16:01:16-04:00November 18th, 2021|The Vault|

As expected, today’s hearing with Comptroller-nominee Saule Omarova included an unprecedented amount of fireworks for what is normally a low profile appointment. In this report, we omit analysis of the debate on Ms. Omarova’s origins and alleged Marxism, instead assessing policy issues germane should Ms. Omarova succeed in what seems an increasingly difficult confirmation. Notably, moderate Democrats such as Sens. Tester (D-MT) and Warner (D-VA) were clearly concerned with Ms. Omarova’s opposition to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), while Republicans lambasted her for previous comments about cutting off credit to the oil and gas industry and proposals they believed would nationalize U.S. banking.

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

15 11, 2021

Karen Petrou: The Real Problem in the Omarova Hearing

Arezou Rafikian2023-06-01T13:46:35-04:00November 15th, 2021|The Vault|

Later this week, the Senate Banking Committee will hold Saule Omarova’s confirmation hearing for Comptroller of the Currency. Many expect this to be a knock-down, drag-out between the progressive bank-reform agenda and the banking industry’s antipathy thereto. This it surely will be, but to watch only these fireworks is to miss the longer-burning fire below: renewed questions about whether banks are public utilities or private companies with unique privileges fully reimbursed by virtue of unduly-burdensome regulation. It is by this choice — not Ms. Omarova’s most-uncertain confirmation — that the future of U.S. finance will be decided.

Although Ms. Omarova has surely moved on from the Marxist views of which she is accused based on an early academic paper, she clearly sides with those who think that banking is for public purpose, not private profit. Indeed, according to at least some of her work, banking can’t be trusted to banks and thus should be seconded to the federal government or outside experts presumed to be not just objective, but also disinterested in all but the public good.

This is not a new view. After the S&L crisis of the 1980s and the subsequent banking debacle in the early part of the next decade, much was made of the subsidy banks were said to enjoy from unique access to FDIC insurance and the Fed’s discount window. Bankers strongly disputed any subsidy, but I said then and believe now that banks then indeed enjoyed special-purpose charters that warranted not just tough safety-and-soundness …

19 10, 2021

FedFin on: Banking Dems, GOP Demand More, Tougher Sanctions

Arezou Rafikian2023-06-07T15:42:15-04:00October 19th, 2021|The Vault|

Today’s Senate Banking hearing with Treasury Deputy Secretary Wally Adeyemo showed bipartisan concern that the Administration is failing to implement sanctions required by law, especially when it comes to China, North Korea, and Russia. Senators also stated that they will not tolerate what they call continued defiance of Congressional mandates without making clear what they intend to do to enforce their will should Treasury fail to act.

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

27 09, 2021

Karen Petrou: The Powell Political Calculus

Arezou Rafikian2023-08-03T10:18:53-04:00September 27th, 2021|The Vault|

Although the quadrennial kerfuffle over appointment of the Federal Reserve chair gets a good deal of public attention, I cannot recall a time when anyone outside banking’s inner circles cared much about who might be the next Comptroller or Vice Chair of Supervision. And, although they’ve garnered more attention of late in the diversity context, Federal Reserve presidencies were of even less public interest. Not only are all of these appointments now proving remarkably consequential, but they also pose a particularly thorny political equation for President Biden.

While all of these finance appointments are significant, that for Jay Powell as Fed chairman is of course the most important of them all. Although key lips are publicly zipped, Treasury Secretary Yellen would like to see Mr. Powell’s reappointment as would a host of other high-impact Democratic influencers. The plethora of coverage suggesting global financial markets will collapse if Mr. Powell is deposed peddle patent nonsense, but nonetheless signify the stakes some assign to his cause.

Despite this formidable support, the Powell reappointment was still proving difficult even before the Reserve Bank stock-trading disclosures. As I noted at the time, it’s a lot easier to understand individual financial bets than monetary-policy complexities. It’s thus unsurprising that Mr. Powell’s latest concessions are proving far from satisfactory to an array of high-impact Democratic influencers very emphatically not to be found on Wall Street. One of Mr. Powell’s strengths in the renomination battle has been divisions among Democratic progressives, making this resonant scandal particularly …