#Sherman – Federal Financial Analytics

29 02, 2024

DAILY022924

Eliza Allen2024-02-29T16:41:41-05:00February 29th, 2024|2- Daily Briefing|

FSB Says Swiss Standards, Not Its Own, Led to CS Chaos

The FSB today released the review of Swiss GSIB regulation announced after Credit Suisse’s failure.

Basel Tackles Private Credit, GSIB Window-Dressing

The Basel Committee today again pressed nations – clearly here focusing on the U.S. – to finalize the end-game rules as quickly as possible.

FinCEN Releases New AML/CFT Hit List

FinCEN today emphasized that the new FATF report has revised countries where strategic AML and CFT measures are deficient, warning U.S. banks to take this into account – i.e., to ensure appropriate de-risking.

CFPB Targets Bank Comparison-Shopping Posts

The CFPB today loosed another attack on bank marketing practices, arguing that key facts are omitted from credit-card and financial-product descriptions obscuring back-end fees.

Bipartisan HFSC Votes to Repeal SAB 121

At today’s abbreviated markup, HFSC took up H.J. Res. 109, which would repeal the SEC’s Staff Accounting Bulletin 121 requiring banks to keep custody cryptoassets on balance sheet (see FSM Report CUSTODY5).

HFSC Approves Secret Service Cybercrime Bill

As HFSC’s markup continued today, the committee turned to Rep. Fitzgerald’s (R-WI) bipartisan H.R. 7156 expanding Secret Service investigative authorities over cybercrime.

FSB Head Ratchets Up Stablecoin Systemic Worries

In remarks today, FSB Chair Klaas Knot discussed market developments in cryptoassets, suggesting that renewed market interest in stablecoins by bigtechs and financial institutions could have systemic implications.

Daily022924.pdf…

31 01, 2024

DAILY013124

Eliza Allen2024-01-31T16:57:15-05:00January 31st, 2024|2- Daily Briefing|

Senate Banking Turns to AI’s Impact on Housing Finance

Today’s lightly-attended Senate Banking Subcommittee hearing on AI and Housing focused principally on AI governance issues including accountability, model explainability, transparency, and bias. Sen. Warnock (D-GA) called for action on S. 3692, legislation to prohibit use of algorithmic systems to coordinate – and it is believed thus inflate – rental prices or reduce supply. Although Subcommittee Chairwoman Smith (D-MN) lauded AI for its potential to boost the housing supply, she and other Democrats raised serious concerns that AI reinforces biases in lending decisions.

Democrats Remain Dubious About the Capital Proposal

Today’s Financial Institutions Subcommittee hearing on the capital rules made it still more clear that more than a few Democrats share at least some GOP concerns. Chair Barr (R-KY) reiterated points he has frequently made about the poor analytics behind the proposal; Full Committee Ranking Member Waters (D-CA) and Rep. Green (D-TX) were unequivocal in their support. Other Democrats raised concerns many had previously expressed in comment letters, with Rep. Sherman (D-CA) pointing to problems with the proposal’s impact on capital markets and its lack of credit for private mortgage insurance and Rep. Beatty (D-OH) highlighting concerns with small business credit availability.

Daily013124.pdf…

10 01, 2024

DAILY011024

Eliza Allen2024-01-10T17:00:41-05:00January 10th, 2024|2- Daily Briefing|

HFSC’s HUD Hearing to Trod Partisan Ground

HFSC’s majority staff memo on Thursday’s hearing with HUD Secretary Fudge makes it still clearer that the session will focus on affordable housing, homelessness, and public-housing agencies in cities such as New York and Washington, D.C.

HFSC GOP Slams DOL Fiduciary Rule

At today’s HFSC Capital Markets Subcommittee hearing on the DOL’s Fiduciary Rule, Subcommittee Chairwoman Wagner (R-MO) argued that the proposal should be withdrawn, calling it a partisan effort to eliminate “junk fees.”

HFSC Takes Partisan Approach to FSOC

At today’s HFSC Digital Assets Subcommittee hearing on FSOC’s systemic-designation framework (see FSM Report SYSTEMIC98), Subcommittee Chairman Hill (R-AR) questioned FSOC’s approach to addressing systemic risk, claiming that the Council’s revised guidance is vulnerable to abuse and unintended consequences.

CFPB Small-Business Reg Survives

Senate Republicans tried today to override the President’s veto of the Congressional Review Act resolution approved by both Houses of Congress to repeal the CFPB’s small-business reporting rule.

Daily011024.pdf…

16 11, 2023

GSE-111623

Eliza Allen2023-11-16T12:35:35-05:00November 16th, 2023|4- GSE Activity Report|

More for Mortgages?

As our reports on the Senate and House hearings with bank regulators made clear, our prediction that the agencies would compromise on mortgage risk-based capital requirements will prove itself in the final standards. However, it’s far from clear if the compromise the agencies think will satisfy Congress will do much beyond directly addressing concerns that the proposal adversely affects LMI loans.

GSE-111623.pdf…

20 09, 2023

DAILY092023

Eliza Allen2023-09-20T17:11:25-04:00September 20th, 2023|2- Daily Briefing|

Brown, Rounds Agree: AI Credit-Underwriting Warrants Regulatory Attention

At today’s Senate Banking hearing on AI in financial services, Chairman Brown (D-OH) argued that AI should be governed by the same rules as the rest of the financial system, with new law necessary if existing rules prove inadequate.

HFSC FinCEN Bills Draw Bipartisan Support

HFSC Chairman McHenry (R-NC) at today’s markup praised the scope of bipartisan support on today’s FinCEN, sanctions, and other national security bills.

HFSC Delays Bipartisan Sanction Bill Vote

Today’s HFSC markup also considered two bills addressing sanctions policy: H.R. 5512 from Rep. Sherman (D-CA) to require bank subsidiaries to comply with sanctions on Russia and Belarus and H.R. 760 from Rep. Barr (R-KY) imposing blocking sanctions on Chinese defense or surveillance companies and the third-party companies that supply them.

HFSC Dems Continue Strongly Opposing GOP Anti-CBDC Measure

The bipartisan spirit of today’s HFSC markup dissipated as Members fiercely debated H.R. 5403 from Majority Whip Emmer (R-MN), a bill that would bar the Fed from issuing a CBDC to individuals.

Gruenberg: New Shadow Bank Standards Would Cure a Capital Proposal Problem

FDIC Chairman Gruenberg today gave remarks arguing that FSOC along with OFR should establish a new reporting framework to assess the financial stability risks posed by nonbanks and ensure that public reporting is sufficient for market participants to understand nonbank counterparty risk.

HFSC Reports FinCEN, Sanctions, CBDC Bills

HFSC today unanimously reported H.R 760 sanctioning Chinese defense companies, H.R. 5512 requiring bank subsidiaries to comply with sanctions …

19 09, 2023

DAILY091923

Eliza Allen2023-09-19T18:11:29-04:00September 19th, 2023|2- Daily Briefing|

FSB Finally Takes Concrete CCP-Resolution Action

Following longstanding announcements that it would advance CCP resolvability, the FSB today released a consultative report recommending a toolbox approach to CCP resolution providing sufficient loss absorption and liquidity that is readily available and mitigates adverse effects on financial stability.

Treasury Advances Climate-Risk Principles, Not Mandates

Cautiously advancing the President’s climate-risk order (see FSM Report GREEN8), Treasury today released nine nonbinding principles for net-zero financing and investment encouraging financial institutions to focus on limiting scope 3 emissions by implementing robust net-zero transition plans.

CFPB Expands AI Crackdown

Expanding on last year’s adverse action guidance (see FSM Report FAIRLEND11), the CFPB today issued a circular stating that lenders – especially those using AI – cannot use CFPB sample adverse actions forms and checklists to deny consumers credit if the samples do not accurately portray the reasoning behind the denial.

HFSC Republicans Expand Attack From Capital to LTD Rules

Today’s HFSC Financial Institutions Subcommittee hearing on the economic consequences of the banking agencies’ slate of recent proposals showcased strong Republican concerns.

Daily091923.pdf…

17 07, 2023

DAILY071723

Eliza Allen2023-07-17T16:58:11-04:00July 17th, 2023|2- Daily Briefing|

HFSC to Tackle FinCen, Sanctions

The HFSC memo on the National Security Subcommittee’s Tuesday hearing makes it clear that Republicans have not wavered in their criticism of FinCEN’s beneficial-ownership standards (see FSM Report AML134). As before, the GOP’s principal concern is small-business burden, with bills to be considered including H.R. 4035 by Chair McHenry (R-NC) extending the small-business compliance deadline and a bill by Rep. Nunn (R-IA) to ensure at least a two-year compliance period.

Global Regulators Strengthen Crypto, Stablecoin Standards

The FSB today finalized its “same-activity/same-rule” standards for cryptoassets and stablecoins (see FSM Report CRYPTO34). We will soon provide clients with an in-depth analysis of the recommendations, which are effective immediately.

Gensler Sounds AI Systemic Alarm

In remarks today, SEC Chairman Gensler echoed his longstanding concern about predictive analytics and AI-related problems recently highlighted by CFPB Director Chopra and the banking agencies. He also cautions public issuers to ensure their AI-related disclosures are accurate, noting that AI-spawned market fraud is still fraud the SEC will vigorously pursue.

Daily071723.pdf…

12 07, 2023

DAILY071223

Eliza Allen2023-07-12T17:05:21-04:00July 12th, 2023|2- Daily Briefing|

SEC Concedes, Drops MMF Swing Pricing

In a startling bow to industry comments, the SEC today finalized MMF rules for institutional prime and tax-exempt funds that dispense with the proposal’s swing pricing (see FSM Report MMF19).

HFSC Bickers Over ESG, SEC Authority, Investor Rights

Today’s ESG hearing was the partisan show-down we anticipated – indeed, Rep. Sherman (D-CA) denounced the GOP for “waging war” against capitalism like Leon Trotsky.

Fed Nominations Advance

As anticipated, Senate Banking today approved the nominations of all three Federal Reserve Board nominees for the full Senate.

Warren Heightens Anti-Merger Campaign

Republicans were absent today from Senate Banking’s Economic Policy bank-merger hearing. Chair Warren (D-MA) reiterated her strong opposition to virtually all mergers, indicating her plans to reintroduce anti-merger legislation from prior Congresses (see FSM Report MERGER8).

Daily071223.pdf…

24 05, 2023

DAILY052423

Eliza Allen2023-05-24T17:16:58-04:00May 24th, 2023|2- Daily Briefing|

New Fed Paper Shows Link Between Twitter, Market Sentiment, Run Risk

A new FRB staff paper uses natural-language models and social-media data to craft a “twitter sentiment index” (TSI) that is then compared to actual market conditions.

Democrats Press Clawback, Regulatory Fixes as HFSC Considers Transparency Measures

Today’s HFSC mark-up so far has focused on one of Rep. Barr’s (R-KY) three regulatory transparency bills, with Democrats proposing a series of amendments without any deciding votes.

House Oversight Panel Focuses On Supervisory Accountability, Reform

At today’s hearing of the Financial Services Subcommittee of House Oversight on bank failures and supervision at the San Francisco Fed, Subcommittee Chairwoman McClain (R-MI) opened with a series of sharply-worded questions on who oversaw the bank, what factors might have distracted them from traditional supervision, why glaring risk factors were not more forcefully addressed, whether regulators were unduly complacent, whether the Fed and FDIC used all of their regulatory tools, and if the agencies have been objective and transparent in their bank failure post-mortems as well as their accounts of the systemic risk exception.

Markup Votes Postponed for Transparency, LLPA Bills

Since our last alert, Democrats continued to submit amendments for Rep Barr’s (R-KY) transparency bill at today’s HFSC markup and party lines cemented over Rep. Davidson’s (R-OH) LLPA bill.

Daily052423.pdf…

17 05, 2023

REFORM225

Eliza Allen2023-05-17T16:03:47-04:00May 17th, 2023|5- Client Report|

HFSC Subcommittees Plow More Ground for Supervisory Accountability, Capital Reform, Clawbacks

A joint hearing today of HFSC’s Financial Institutions and Oversight Subcommittees expanded on themes at yesterday’s full Committee session with bank regulators (see Client Report REFORM224) and Senate Banking’s session with SVB’s and SBNY’s CEOs, with First Republic’s CEO now added to the Congressional firing line. Much in this session repeated prior themes, with Rep. Dave Scott (D-GA) going beyond prior, sharp criticism to accuse SVB’s CEO of being the worst CEO in U.S. financial history. Democrats demanded that he give up the bonus he received the day SVB failed and he went to Hawaii, receiving little satisfaction on this score and continuing demands for clawback legislation. Rep. Bill Foster (D-IL) continued to argue that contingent-capital instruments would ensure smooth resolutions, a position he said is shared by Chairman McHenry (R-NC) even though it supports a controversial Fed/FDIC proposal for regional-bank TLAC (see FSM Report RESOLVE48).

REFORM225.pdf…