Would a Trump Victory Set the GSEs Free?
Common-stock investors clearly think so, but they’re a notably speculative lot and more than likely wrong. In this report, we lay out why we think the limbo in which the GSEs have languished since 2008 is now a permanent quasi-vegetative state.
Senate Banking GOP Demand End-Game Withdrawal, Holistic Review Release
Making still clearer their line of attack at tomorrow’s hearing, all GOP Members of the Senate Banking Committee today sent Chairs Powell, Gruenberg and Acting Comptroller Hsu another letter demanding the withdrawal of the capital proposals.
FRB-PHL: Fintech Spots Credit Risk Better than Banks
A new study from the Federal Reserve Bank of Philadelphia finds not only that fintech loan-risk scoring performed well during the pandemic, but also that the proprietary loan rating systems of large fintech companies better predict default likelihood in the personal loan market compared to traditional measures of credit risk.
Barr Stands By His Proposals
Vice chairman Barr’s testimony for forthcoming hearings emphasizes that the banking system is resilient and sound, eschewing the caveats included in Friday’s supervisory report about pockets of weakness.
Gruenberg Defends DIF Rewrites
While echoing comments from Messrs. Barr and Hsu about the sound banking system, FDIC Chair Gruenberg’s testimony pointed to what he called significant downside risk from higher rates, geopolitical tension, unrealized losses, and other factors.
Hsu Differentiates OCC Supervision, Defends Regs
Acting Comptroller Hsu’s testimony reiterates Mr. Barr’s comment about a sound banking system, pointedly noting that all of the recent failures were state-chartered.
GOP Blasts Basel End-Game Regs, Dems Seek a Few Changes
With HFSC Chairman McHenry (R-NC) leading the way, GOP Members of the panel’s Financial Institutions Subcommittee today blasted the banking agencies’ end-game proposal (see Client Report CAPITAL234). Republicans were unanimous in joining leadership’s attack on the proposal’s process and substance, pointing to what they called incomplete impact analyses, an inexplicably short comment period, and adverse macroeconomic and regional-bank implications. Democrats led by Ranking Member Waters (D-CA) were more restrained and in some cases supported the proposal, but concerns were also noted with specific provisions (e.g., re the treatment of certain mortgage and securitization assets) and the interface with the pending CRA final rule. We continue to expect the banking agencies to hold firm to the proposal in broad terms and make minimal, if any, changes to the comment deadline. However, pressure from Republicans and the industry could well force renewed and what many would consider improved impact analyses designed not only to allay political opposition, but also the courts if litigation challenges the final rule.
BofA’s new no-down payment mortgage is another innovative product in which banks use their balance sheets to address their CRA obligations by offering down payment assistance or, as here, flat out nothing down. The extent to which nonbanks can match these programs depends on the extent to which Fannie and Freddie are able and then willing to cross-subsidize ….
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Two Things
We yesterday provided a complete assessment of Sandra Thompson’s sojourn on HFSC’s griddle, noting the lack of any insights into essential issues such as conservatorship’s end or the full scope of CRT’s new beginning. More interesting to us are new battlelines on new products, including signs of renewed skirmishing over GSE self-insurance in lieu of MI. Unlike FHFA under Calabria, Fannie and Freddie appear to have a friend in one critical high places for new ventures, especially those said to be good for equitable finance.
Fed Seeks to Bring Order Out of Looming LIBOR Chaos
Fighting the end-September deadline demanded in the new law (see FSM Report LIBOR7), the Federal Reserve Board today unanimously proposed the formulas by which benchmark-rate compliance will be judged in LIBOR-based legacy contracts without rate-fallback contractual clarity.
House Advances Sanctions, Cash-Access, Credit-Union, Mortgage Legislation to Uncertain Senate Fate
Chairwoman Waters (D-CA) today released an accounting of all the HFSC measures included in the massive National Defense Authorization Act (NDAA) approved by the House late last week.
House Judiciary Damns Bigtech, Skirts Financial Services
House Judiciary Committee Democrats today tried to reinvigorate antitrust legislation focused on bigtech companies with a report concluding that stronger antitrust and merger enforcement is needed for Google, Amazon, Facebook, and Apple.
CFPB Presses SPCs
The CFPB today issued a staff statement reiterating key points in February’s inter-agency statement encouraging special-purpose credit (SPC) programs. The new CFPB release reiterates the criteria for SPCs that comply with the Equal Credit Opportunity Act, noting also the benefits such programs may afford to racial equity.
OFR Details Commercial Real Estate Recovery, Emerging Risks
OFR today released a study detailing how the commercial real estate (CRE) market weathered the 2020 recession, also describing CRE’s future risks.
Home in the OK Corral
On Wednesday, FHFA Director Thompson will come before HFSC for what will be an important discussion of housing policy under the newly-confirmed director if Members of Congress allow policy substance to supersede political battles over who is responsible for inflation for which dastardly reason. In hopes of substance, we’ll monitor the hearing and provide you quickly with an in-depth analysis.
When Sandra Thompson earlier this year enunciated a new equitable-finance mission, we forecast that Fannie and Freddie would undertake an array of new activities that significantly expand their footprint along with their equity and equality impact. As anticipated, the plans announced yesterday by Fannie and Freddie go beyond FHFA’s reiterated mission statement earlier this week, mirroring in some ways the banking agencies’ broad view of CRA as a community-development and racial-equity instrument as well as the boost to LMI housing on which attention long focused. But, for all the public-good creds these plans engender, several will doubtless promote market angst as the GSEs launch pilots that tread heavily on MI, title-insurer, and servicer toes.
The full report is available to subscription clients. To find out how you can sign up for the service, click here.…
Equitable Endeavors
When Sandra Thompson earlier this year enunciated a new equitable-finance mission, we forecast that Fannie and Freddie would undertake an array of new activities that significantly expand their footprint along with their equity and equality impact. As anticipated, the plans announced yesterday by Fannie and Freddie go beyond FHFA’s reiterated mission statement earlier this week, mirroring in some ways the banking agencies’ broad view of CRA as a community-development and racial-equity instrument as well as the boost to LMI housing on which attention long focused. But, for all the public-good creds these plans engender, several will doubtless promote market angst as the GSEs launch pilots that tread heavily on MI, title-insurer, and servicer toes.
Risk-On CRT for a Risk-Off Market?
In our last CRT analysis, we looked at transaction viability under the Basel IV rewrite set for rapid release once key Fed nominees are finally confirmed. Now, we turn to another viability consideration: the extent to which CRT can thrive in spite of these capital obstacles and accomplish a vital purpose spelled out in a recent Urban Institute report: enhance equitable finance as FHFA demands. In short, we hope so, but it won’t be easy.