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30 11, 2022

DAILY113022

2022-11-30T17:09:02-05:00November 30th, 2022|2- Daily Briefing|

Brown Again Asks Treasury for Crypto Action, Recommendations

In a letter today, Senate Banking Chairman Brown (D-OH) continued his press for regulators to do something soon about cryptoassets.  He called on Secretary Yellen to work quickly with regulators to advance the policy recommendations in recent Treasury reports (see Client Report CRYPTO32), noting in particular his concerns with vertical integration, calling for rules as well as recommendations regarding any needed statutory changes.

Confirmation Seems Assured for Full FDIC Board

At today’s confirmation hearing, Republicans raised numerous concerns with Acting Chairman Gruenberg, but appear reconciled to accepting his nomination in order to win confirmation for the two Republican nominees who would fill out the board.  Ranking Member Toomey (R-PA) blasted Mr. Gruenberg over the alleged “power grab” last year and his support for climate risk initiatives, but the bulk of questioning centered around cryptoassets.

Brown Presses CFPB to Stop Silent Second Foreclosures

Chairman Brown (D-OH) today sent a letter today to CFPB Director Chopra urging the Bureau to sanction servicers foreclosing on “zombie” second liens.  These are second liens that were often piggybacks in pre-2008 high-LTV mortgages designed to ensure that first loans could be sold to the GSEs without private mortgage insurance.

Daily113022.pdf

23 11, 2022

DAILY112322

2022-11-23T12:42:48-05:00November 23rd, 2022|2- Daily Briefing|

OFAC Updates Guidance For Price-Cap Sanction Compliance

Reflecting ongoing negotiations about the level of the oil-price cap, OFAC last night provided updated guidance to banks and insurers about when transactions may violate this latest sanction.  The new guidance identifies “covered services” for financing; this means a commitment for the provision or disbursement of debt, equity, or economic resources related to the maritime transport of Russian oil.  However, and as before, U.S. persons are authorized to provide covered services if the Russian oil is purchased at or below the price cap.

FDIC Signals Tougher GSIB Resolution Reviews

With the FDIC signaling a tough new approach to resolution plan approval, the FRB and FDIC today announced the results of the resolution plans filed by U.S. GSIBs in July, 2021.  All the banking organizations saw their plans approved except for Citigroup, which had noted shortcomings due to data quality and management concerns; the bank now has until January 31, 2023 to submit a revised plan.  FDIC Acting Chairman Gruenberg noted that, going forward, the agencies will conduct more detailed reviews of internal testing results and independent capability assessments.

Daily112322.pdf

21 11, 2022

FedFin on: Treasury Plumbs the Depth of Nonbank Finance, Seeks New Merger Policy, Rules

2022-11-22T13:19:47-05:00November 21st, 2022|The Vault|

As promised, this report provides an in-depth analysis of Treasury’s report and resulting recommendations to the President’s Competition Council on the impact of new nonbank consumer-finance entrants from a competition, consumer-protection, and financial-stability perspective.  Although the report calls for reconsideration of bank-merger policy with an eye to the growing role of fintechs and bigtechs, its overall view of market power fails in our view to capture the actual landscape in which…

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

21 11, 2022

FINTECH31

2022-11-21T12:00:14-05:00November 21st, 2022|5- Client Report|

Treasury Plumbs the Depth of Nonbank Finance, Seeks New Merger Policy, Rules

As promised, this report provides an in-depth analysis of Treasury’s report and resulting recommendations to the President’s Competition Council on the impact of new nonbank consumer-finance entrants from a competition, consumer-protection, and financial-stability perspective.  Although the report calls for reconsideration of bank-merger policy with an eye to the growing role of fintechs and bigtechs, its overall view of market power fails in our view to capture the actual landscape in which these important new entrants compete with banks.  For example, its focus on deposit-market concentration compares banks principally to neobanks, failing to consider deposit-like products such as prime MMFs and in many cases also credit-union deposits.  As a result, erroneous conclusions are drawn about market power that exists when all competitors – not just bigtechs or fintechs – are considered.

FINTECH31.pdf

16 11, 2022

DAILY111622

2022-11-16T17:14:29-05:00November 16th, 2022|2- Daily Briefing|

Treasury Calls for Tough Fintech and Bank-Partnership Protection, Prudential Standards

Treasury has completed a long-pending study of the extent to which nonbank fintechs compete with banks and how this affects financial stability and consumer protection.  We will shortly provide clients with an in-depth analysis of this report, for which Karen Petrou was extensively interviewed as now noted publicly in the appendix.  The report was ordered by the Secretary in compliance with President Biden’s competition order (see Client Report MERGER6), finding that nonbank fintechs directly compete with banks and thus may reduce current concentration levels, sure to influence the inter-agency bank-merger policy that remains to be finalized.

Williams Presses for NBFI Standards

In remarks today, FRB-NY President John Williams said that the central bank should not adjust monetary policy to address the price-stability challenges of volatile Treasury markets and that financial-stability questions have generally been well-addressed as evident in the sound U.S. banking system.  Noting recent findings in the latest staff report (see Client Report TMARKET3), Mr. Williams also called for structural changes to NBFIs along lines also laid out by the FSB (see Client Report NBFI2), arguing that MMFs and other NBFIs must be a market source of strength, not of vulnerability requiring rescue beyond the Fed’s new standing facility.

G20 Blesses FSB, Basel Work Plans

In addition to top-priority concerns such as Ukraine, the G-20 Leader’s Declaration today tackled the usual financial-policy agenda, supporting the FSB’s recent NBFI report (see Client

14 11, 2022

FedFin on: Treasury Inches Closer to All-to-All Trading

2022-11-14T16:01:03-05:00November 14th, 2022|The Vault|

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash.  Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to…

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

14 11, 2022

TMARKET3

2022-11-14T15:46:49-05:00November 14th, 2022|5- Client Report|

Treasury Inches Closer to All-to-All Trading

Building on our initial assessment, this report goes in-depth into the Treasury assessment of the market for its obligations and reforms necessary to avert another dash for cash.  Although the Federal Reserve, which participated in this study along with other agencies, indicated in 2020 it will review the supplemental leverage ratio (SLR) to enhance bond-market liquidity, it has yet to do so and no mention is made of any such reform in this report.  To be sure, this is only a Treasury report that does not necessarily reflect the views of these other agencies, but the Fed and Treasury usually work closely on matters such as this and it seems unlikely that the matter would go unmentioned if plans were under way to revise the SLR.  The 2022 report builds on the inter-agency working group’s 2021 analysis (see Client Report TMARKET2) but still does not reach firm conclusions or lay out specific recommendations suitable for near-term action.  However, work is in fact under way at the SEC, which has proposed a new central-clearing mechanism for Treasury obligations that, if finalized, would create at least some of the infrastructure necessary for the all-to-all trading this report now explores in greater detail.  Next steps for Treasury-market reform will be discussed at a conference later this week.

TMARKET3.pdf

10 11, 2022

DAILY111022

2022-11-10T17:35:13-05:00November 10th, 2022|2- Daily Briefing|

Inter-Agency Treasury-Market Rewrite Progresses

Treasury’s Inter-Agency Working Group on Treasury Market Surveillance (IAWG) today released a progress report on its efforts to guide action to stabilize the Treasury marketplace.

Fed Reg Report Highlights Future Priorities

The Fed today released its semiannual Supervision and Regulation Report, reiterating that banks entered 2022 in historically sound financial shape and outlined its priorities based on the potential risks of changing market conditions.

FSB NBFI Report Highlights Liquidity, Systemic Risk

The FSB today released a progress report on improving the resilience of non-bank financial intermediation (NBFI), recommending a number of enhancements to the current policy toolkit to better mitigate liquidity and financial stability risk.

CFPB Spotlights Cryptoasset Complaints

The CFPB today published a bulletin analyzing cryptoasset complaints the Bureau has received since 2018, observing a large spike in these complaints over the past two years and concluding that fraud, theft, hacks, and scams are widespread problems affecting participants in crypto markets.

CFPB Continues Furnisher Accountability Campaign

The CFPB today continued its campaign for furnisher accountability by issuing a circular upholding the Bureau’s belief that consumer credit reporting agencies and furnishers must conduct a reasonable investigation of non-frivolous consumer disputes and that failure to do so may subject them to CFPB enforcement under the FCRA.

CFPB Modifies Nonbank Financial-Company Standards

The CFPB today acted again by fiat to amend what it calls its procedural rule (see FSM Report CONSUMER41) revising its “dormant” authority and, as we noted in our analysis, creating a sweeping …

8 11, 2022

GSE-110822

2022-11-09T12:49:02-05:00November 8th, 2022|4- GSE Activity Report|

A Most Unpretty Picture

In its latest blast on racial equity, the Treasury Department‘s Office of Economic Policy has issued a blog post cataloguing racial disparities in residential-mortgage finance.  None of it is news – indeed, the post goes light on key questions such as refi disparities and small-balance loans.  As with most such blog posts, it’s clearly the work of industrious interns set to scrivening by higher-ups with an eye on a political prize.  Still, at a time of high-pressure lobbying to get some sort of housing-relief legislation in the lame-duck, these data will be powerfully deployed by those using racial-equity arguments to advance the left-behind housing provisions of Biden’s Build Back Better omnibus.

GSE-110822.pdf

4 11, 2022

DAILY110422

2022-11-04T17:11:14-04:00November 4th, 2022|2- Daily Briefing|

Big Banks Pressed on Sluggish, Inequitable Deposit-Rate Hikes

Advancing an initiative with political “legs,” Sen. Jack Reed (D-RI) has demanded answers from the nation’s largest banks on why small-deposit rates have barely budged even as the Fed sharply hiked interest rates now reflected in higher loan costs.

FRB-NY Official Details Wholesale CBDC Prototype

Remarks today from a senior FRB-NY official, Michelle Neal, continued the Fed’s ambivalent stand on a CBDC (see FSM Report CBDC10).

Fed Fixes Advanced-Approach Glitches

The FRB is proposing to implement three changes to Regulation Q data collection/disclosure rules governing advanced-approach capital adequacy at BHCs, SLHCs, and state member banks.

Fed to Name Master-Account Names

Reflecting ongoing concerns on Capitol Hill, the Fed is proposing to make what our analysis suggests were opaque payment-system access guidelines (see FSM Report PAYMENT24) “a bit more transparent.”

Toomey Presses for SLR Rewrite

Ranking Senate Banking Member Toomey (R-PA) today released his letter to Chairman Powell cautioning the central bank not to handle any Treasury-market liquidity events with new backstop facilities.

Waters Adds To Fed’s Political Woes

In a letter today, HFSC Chairwoman Waters (D-CA) joined Sens. Warren (D-MA), Brown (D-OH), and Hickenlooper (D-CO) in sharply criticizing the recent Fed “super-sized” rate hike.

Fed Worry Level Goes Up

The Federal Reserve likely hoped for the torpor of a Friday afternoon to quell frightened replies to the latest financial-stability report released today.

Daily110422.pdf

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