#Signature – Page 3 – Federal Financial Analytics

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…

16 05, 2023

DAILY051623

Eliza Allen2023-05-16T17:44:43-04:00May 16th, 2023|2- Daily Briefing|

Hsu Presses Reg Harmonization, Resolution Reform, Merger-Policy Rewrite

We now add our assessment of Acting Comptroller’s Hsu’s testimony to our analyses of those from Messrs. Barr and Gruenberg ahead of HFSC’s hearing later this morning.

Yellen Says White House Supports Community-Bank Exemptions

Speaking today to the ICBA, Secretary Yellen today joined the parade of policy-makers affirming the national importance of community banks.

JEC GOP Counter FRB on SVB Causality

JEC Republican staff today released a memo finding that tailored liquidity rules did not contribute to SVB’s failure, a contrast to the FRB’s SVB report (see Client Report REFORM221).

LLPAs Set for GOP Frying Pan

The majority-staff memo for tomorrow’s Housing Subcommittee hearing makes it clear that, as anticipated, the sole topic will be FHFA’s controversial LLPAs and related GSE pricing.

Senate Banking: Tough Grilling For Failed-Bank CEOs, Growing Consensus For Clawback Bill/Tough Rules

As predicted, today’s Senate Banking hearing with the CEOs of SVB and SBNY was a feisty session in which Democrats built their case for executive clawback legislation and the failed bank executives defended management while repeatedly placing blame on what they called an “unprecedented series of events.”

Daily051623.pdf…

15 05, 2023

DAILY051523

Eliza Allen2023-05-15T17:23:44-04:00May 15th, 2023|2- Daily Briefing|

Yellen Highlights Investor – Not Uninsured-Deposit – Runs, Buoys Sector Mergers

In an interview over the weekend, Treasury Secretary Yellen struck a decidedly different tone on bank mergers than voiced in the Administration’s policy prior to recent failures.

Gensler Outlines Top Financial Stability Concerns

In remarks today, SEC Chair Gensler outlined his financial-stability priorities.

Failed-Bank CEOs Defend Themselves, Contest Need For Receivership

Ahead of testimony tomorrow before Senate Banking, the CEOs of SVB and Signature have filed statements defending their actions and those of their colleagues.

FHFA Seeks Views On New Pricing Framework

Following last week’s announcement that it would postpone its controversial decision to retain an upfront fee related to a borrower’s debt-to-income level, the FHFA today released a Request for Input on the Enterprises’ single-family pricing framework as well as the process for setting their upfront guarantee fees.

Barr Stands His Supervisory, Regulatory Ground

Vice Chairman Barr’s testimony for Congressional hearings this week has just been released along with the Board’s 2023 supervision-and-regulation report.

Gruenberg Sticks To His Guns

FDIC Chairman Gruenberg’s Congressional testimony largely recounts prior statements about the condition of the banking system, recent bank failures, the new special-assessment proposal (see FSM Report DEPOSITINSURANCE120), and the agency’s deposit-insurance reform conclusion (see Client Report DEPOSITINSURANCE119).

Daily051523.pdf…

15 05, 2023

M051523

Eliza Allen2023-05-15T11:52:42-04:00May 15th, 2023|6- Client Memo|

How An Ill-Designed Special Assessment Is Sure To Scramble The Structure Of Federal Deposit Insurance

As our forthcoming in-depth analysis will detail, the FDIC’s proposed special assessment raises a raft of policy problems not contemplated by the FDIC despite a steep price tag warranting careful thought at a time of financial instability and recessionary risk. The FedFin analysis will detail the proposal, what the FDIC thinks, and what the proposal might do to whom, but here’s my opinion: the FDIC’s decision to allocate blame for SVB and Signature’s failures to a select group of surviving larger banks is a politically-expedient violation of the principal of insurance and a terrible precedent for the future of federal deposit coverage.

M051523.pdf…

15 05, 2023

Karen Petrou: How An Ill-Designed Special Assessment Is Sure To Scramble The Structure Of Federal Deposit Insurance

Eliza Allen2023-05-15T11:52:36-04:00May 15th, 2023|The Vault|

As our forthcoming in-depth analysis will detail, the FDIC’s proposed special assessment raises a raft of policy problems not contemplated by the FDIC despite a steep price tag warranting careful thought at a time of financial instability and recessionary risk. The FedFin analysis will detail the proposal, what the FDIC thinks, and what the proposal might do to whom, but here’s my opinion: the FDIC’s decision to allocate blame for SVB and Signature’s failures to a select group of surviving larger banks is a politically-expedient violation of the principal of insurance and a terrible precedent for the future of federal deposit coverage.

First problem: the FDIC assigns blame to a large group of bigger banks even though its own analysis of the SVB and SBNY failures points to a different underlying reason for the systemic designation. In the proposal, the FDIC targets large holdings of uninsured deposits even though both its post-mortem and the Fed’s of the two systemic failures cites bad management as the most important cause of death. Both agencies do note the new risks posed by social-media runs that hastened the banks’ passing, but each also makes it clear that these new-age runs are an endemic challenge to bank resilience, not a risk unique to SVB and Signature or other banks with large amounts of uninsured deposits. The FDIC proposal contains no explanation of why uninsured-depositories are the systemic rescue’s fall guys even though these deposits aren’t the cause of the two bank failures and the risks …

12 05, 2023

Al051523

Eliza Allen2023-05-12T17:07:36-04:00May 12th, 2023|3- This Week|

Warm-Up Acts Over, Congress Readies for Rowdy Performance

We’ll be busy this week giving you in-depth analyses of all of the key hearings scheduled this week and next on what went wrong on bank failures past, present, and hopefully not future. Last week saw two opening numbers: HFSC’s Financial Institutions Subcommittee heard from bank lawyers, an investment bank CEO, and a professor and its Oversight Subcommittee reviewed GAO’s in-depth take-down (see Client Report REFORM223) of what the Fed and FDIC did at SVB and Signature and, by inference, what they said about it. As our analyses described, Republicans are firmly convinced that the banking agencies dropped very big, obvious balls; Democrats aren’t exactly stout defenders, but they are doing their best to chime in with the agencies by emphasizing how badly bank management behaved and how much of their compensation needs to be recouped as reparations.

Al051523.pdf…

12 05, 2023

DAILY051223

Eliza Allen2023-05-12T17:05:25-04:00May 12th, 2023|2- Daily Briefing|

Bowman Blasts Barr

In another public sign of a growing FRB divide, Gov. Bowman early this morning followed Gov. Waller in taking strong issue with what would otherwise appear to be Board policy.

Fed Nominees Face Tough Confirmation Fight

In response to President Biden’s nomination of Philip Jefferson for Fed Vice Chair and Dr. Adriana Kugler and Lisa Cook to Fed Governor seats, Democrats have voiced strong support while Republicans are biding their time on nominations sure to prove controversial.

GOP Presses Broader FDIC, FRB Backstops

Picking up on the FDIC’s report (see Client Report DEPOSITINSURANCE119), Republicans have introduced legislation to provide limited coverage for transaction accounts and address other issues raised by recent events.

FRB-NY: SVB, Signature are 1930s Redux

Following on its post yesterday regarding changing bank-funding sources, the Federal Reserve Bank of New York today argues that the concentrated, uninsured deposit bases at SVB and SBNY are directly comparable to those of small rural banks in the 1930s.

Daily051223.pdf…

25 04, 2023

DAILY042523

Eliza Allen2023-04-25T17:12:43-04:00April 25th, 2023|2- Daily Briefing|

Stablecoin 2.0 Is Controversial 3.0

Ahead of Thursday’s stablecoin hearing, HFSC Republicans late yesterday released a second discussion draft of legislation that received a most equivocal response at last week’s subcommittee hearing (see Client Report CRYPTO42).

Treasury Finds Profitability to Blame for De-Risking

Treasury today released its 2023 De-Risking Report, finding that profitability principally explains why financial institutions choose to de-risk.

OFR: No Single Factor To Blame For 2019 Repo Spike

A new OFR paper on the September 2019 repo rate spike concludes that while a confluence of factors – large Treasury issuances, corporate tax deadlines, and lower levels of reserves – caused the crisis, none of them individually would have been disruptive enough to trigger the spike, although limited transparency and market segmentation exacerbated it.

Federal Agencies Launch New Anti-AI Enforcement Effort

The FTC, the Civil Rights Division of the DoJ, CFPB, and EEOC today released a joint statement pledging to enforce all relevant consumer protection, anti-discrimination, and fair competition laws not only on AI, but indeed also on all “automated systems” that the agencies believe to be within their jurisdictions.

HFSC Digital Assets Hearing Set For Jurisdictional Debate

Ahead of Thursday’s hearing on the latest stablecoin discussing draft, HFSC’s staff memo today reiterates GOP opposition to the SEC’s jurisdictional arguments.

ONRRP Revised

The Federal Reserve Bank of New York today revised the terms of access to the overnight reverse-repo program, adding financial stability and bank safety-and-soundness to monetary-policy implementation as ONRRP criteria for eligible counterparties …

21 04, 2023

DAILY042123

Eliza Allen2023-04-21T17:02:12-04:00April 21st, 2023|2- Daily Briefing|

House Republicans Renew Anti-Woke Banking Battle

In the latest GOP-led action against “woke” finance, HFSC Financial Institutions Subcommittee Chairman Barr (R-KY) yesterday reintroduced the Fair Access to Banking Act (H.R. 2743), which would prevent large banks from limiting or refusing services to the fossil-fuel, digital-asset, and gun industries.

FRB Review Of CBDC Comments Leaves Open All Options

The Federal Reserve late yesterday released a summary of public comments received on its 2022 CBDC discussion draft (see FSM Report CBDC10), arraying comments in ways that make it difficult to judge who said what or where the preponderance of comments is to be found.

FSOC Advances Activity, Nonbank Systemic Designation, Regulation

As anticipated, all FSOC members today voted to advance two key proposals to redesign the U.S. systemic framework and speed action on two clear systemic designation priorities: hedge-fund interconnectedness with the banking system and nonbank mortgage companies.

Waters Praises FSOC, Presses for New Bank Standards

While commending FSOC’s action earlier today, HFSC Ranking Member Waters (D-CA) urged it to quickly go farther, pressing the Council to send the FRB and other banking agencies recommendations for post-SVB reforms.

BIS Paper: Fintech Innovation Amplifies Inequality

A new BIS working paper on fintech concludes that increased financial-technology innovation amplifies inequalities between sophisticated and unsophisticated investors and that bridging this gap will require policy focus on fintech accessibility and usability.

Daily042123.pdf…

19 04, 2023

DAILY041923

Eliza Allen2023-04-19T17:26:14-04:00April 19th, 2023|2- Daily Briefing|

Hsu Treads Carefully Into Open Banking

In remarks today, Acting Comptroller Hsu highlighted the liquidity, cybersecurity, and even structural challenges that may arise from open banking. He argues that account portability may lead to heightened retail deposit liquidity risk and increased retail outflows, noting that online and mobile banking may well have facilitated the large outflows experienced by SVB and SBNY. Banks could require new cyber-risk controls due to the increase in volume and complexity of consumer data.

Chopra Expands Anti-Discrimination Campaign

Under heavy fire today from a staff data breach, CFPB Director Chopra nonetheless emphasized the agency’s strong stand against credit discrimination. Building on a recent statement of interest in a filing related to student loan litigation, the Bureau is now not only combatting traditional forms of discrimination, but also the targeting Mr. Chopra describes as reverse redlining across the spectrum of consumer-finance products and every contact point in the credit origination, servicing, marketing, and technology process.

Daily041923.pdf…