#Warren – Federal Financial Analytics

17 04, 2024

DAILY041724

Eliza Allen2024-04-17T17:36:07-04:00April 17th, 2024|2- Daily Briefing|

Global Regulators Tackle NBFI Margining, Collateral Transformation

As it has long promised, the FSB today issued a consultation on standards designed to buttress derivatives, commodity, and securities-financing markets under stress through more stringent margining and collateral requirements.

Basel Head Says Go Slow re AI Risk, Supervisory Models

Basel’s Secretary General, Pablo Hernández de Cos, today focused on AI’s risk-reward profile in the banking sector, concluding that it raises a series of profound questions global regulators must work cooperatively to address.

Lummis, Gillibrand Begin Senate Stablecoin Debate

As long anticipated, Sens. Lummis (R-WY) and Gillibrand (D-NY) today introduced a significantly revised version of their 2022 Bill (see FSM Report CRYPTO28) laying out U.S. stablecoin standards.

FIO Subpoena Power Faces Rollback

At HFSC’s mark-up today, the committee began with Rep. Fitzgerald’s (R-WI) Insurance Data Protection Act, H.R. 5335, which would repeal the Federal Insurance Office’s authority to subpoena insurance companies for data collection.

HFSC Likely to Pass RegTech Bill

At HFSC’s extended mark-up today, the committee turned to H.R. 7437, a bipartisan bill that would require federal banking regulators to regularly review and report to Congress on their use of technology to ensure they’re equipped to address threats to the financial system.

HFSC Set to Pass AOCI Recognition, Systemic-Risk Designation Study Measures

Continuing our coverage of today’s mark-up, HFSC was generally supportive of the two bills on the agenda from Democrats, H.R. 4206 from Rep. Sherman (D-CA) requiring large banks with available for sale securities to mark to market …

16 04, 2024

DAILY041624

Eliza Allen2024-04-16T17:10:39-04:00April 16th, 2024|2- Daily Briefing|

House GOP Takes on New Merger Guidelines

The House Small Business Committee today sent a GOP letter to the FTC and Justice Department strongly protesting new merger guidelines (see FSM Report MERGER13) on grounds that they sharply curtail needed small-business capital.

House Hikes Iran Sanctions

Working through a series of sanctions bills in the wake of recent geopolitical developments, the House yesterday voted 294-105 to advance H.R. 5921, a bill introduced by Rep. Huizenga (R-MI) that prohibits Treasury from authorizing transactions by U.S. financial institutions in connection with Iranian imports or exports other than food, medicine, and other humanitarian assistance.

House Passes Bill Targeting China-Iran Petroleum Trade

Continuing its response to recent geopolitical events, the House yesterday voted by a 383-11 margin to pass H.R. 5923, a bill from Reps. Lawler (R-NY) and Gottheimer (D-NJ) that would require the President to periodically determine if any Chinese financial institutions have purchased petroleum or petroleum products from Iran, stating that U.S. financial institutions also may not open or maintain certain accounts with Chinese institutions that have done so.

Warren Again Targets OCC Merger Decisions

Continuing recent attacks on the OCC’s approach to mergers, Sens. Warren (D-MA) and Blumenthal (D-CT) yesterday sent a letter to Acting Comptroller Hsu sharply criticizing the agency’s decision first to allow NYCB to acquire Flagstar bank and then do the same shortly thereafter for Signature.

OCC Toughens LCR, NSFR via New Reporting Requirements

The OCC today sought public comment as required by law for …

9 04, 2024

Daily040924

Arezou Rafikian2024-04-10T10:52:27-04:00April 9th, 2024|2- Daily Briefing|

Senate GOP Tackles Card Fees

Joined by GOP Senators from credit-card domiciles, Senate Banking Ranking Member Scott (R-SC) yesterday led the expected Republican resolution overturning the CFPB’s credit-card late fee rule (see FSM Report CREDITCARD37). It joins like-kind resolutions from Rep. Barr (R-KY) and Ogles (R-TN), with Mr. Barr’s resolution the one likely to move to the House floor.

Warren Starts Bargaining for Crypto-AML Standards

Throwing another wrinkle into the careworn face of efforts to pass stablecoin legislation, Sen. Warren (D-MA) yesterday sent a letter to Reps. McHenry (R-NC) and Waters (D-CA) arguing that their ongoing and apparently-hopeful efforts to craft stablecoin legislation may inadvertently amplify risk.

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8 04, 2024

M040824

Shane Smith2024-04-08T13:31:04-04:00April 8th, 2024|6- Client Memo|

Why Lowering Interest Rates Now Makes Housing Even More Unaffordable

As we’ve noted, Sen. Warren and a raft of progressive Democrats are emphatically demanding that the Federal Reserve lower interest rates to promote affordable housing. However, as a new Federal Reserve Bank of Dallas note confirms, low rates don’t necessarily make it easier to buy a home because house prices generally rise as rates fall. Worse still, ultra-low real rates eviscerate not just the ability of all but the well-heeled and -housed to save for a down payment, but also for much else that ensures economic resilience and long-term security. Simply put, lower for longer makes the U.S. still more economically unequal, not exactly what progressives want.

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8 04, 2024

Karen Petrou: Why Lowering Interest Rates Now Makes Housing Even More Unaffordable

Shane Smith2024-04-08T09:30:15-04:00April 8th, 2024|The Vault|

As we’ve noted, Sen. Warren and a raft of progressive Democrats are emphatically demanding that the Federal Reserve lower interest rates to promote affordable housing. However, as a new Federal Reserve Bank of Dallas note confirms, low rates don’t necessarily make it easier to buy a home because house prices generally rise as rates fall. Worse still, ultra-low real rates eviscerate not just the ability of all but the well-heeled and -housed to save for a down payment, but also for much else that ensures economic resilience and long-term security. Simply put, lower for longer makes the U.S. still more economically unequal, not exactly what progressives want.

The assumption in Sen. Warren’s letter and a like-kind one from Chair Brown is that lower mortgage rates reduce the carrying cost of a mortgage and thus make it easier for lower-income households to qualify for a loan. However, this seemingly-obvious conclusion assumes that housing markets are static and, as any real-estate agent will tell you, they aren’t.

When rates go down, demand goes up and prices do the same. Or, as the Dallas Fed study observes, a one-percentage-point hike in short-term rates usually lowers house prices by 7.5 percent over two years. Just as intuition suggests that easy money spurs homebuying, so it is that tight money reduces demand and prices respond accordingly.

Or, they do in a normal market and there haven’t been any of these since the Fed sent interest rates below inflation-adjusted zero in 2008 and kept them …

5 04, 2024

Al040824

Shane Smith2024-04-05T16:26:55-04:00April 5th, 2024|3- This Week|

Crossing the AML Frontier

As the schedule below makes clear, Treasury Deputy Secretary Wally Adeyemo will bring his agency’s updated wish list before Senate Banking on Tuesday. The principal focus of the session is sure to be digital assets, with Treasury refining its prior plan to bring them fully within the AML/CFT enforcement scope not just to the greatest extent possible under current law, but also after key revisions. Democrats will be most receptive, with Sen. Warren (D-MA) using the session to propel her stalled bill to revise the law to bring what she calls cryptocurrency fully within it. This is a bipartisan bill, but we still expect many Republicans to complain that data does not support Treasury’s concerns in this sector. Republicans led by Ranking Member Scott (R-SC) are sure also to use the session to complain that big banks are using SARs to target January 6 protesters and others with whom they do not agree, alleging also that Treasury has pressed banks to do so for its own political purposes. Sen. Scott has sent a strongly-worded letter on this topic and it is a still more high-priority issue in the House. As always, an in-depth analysis will follow the hearing pointing to key actions and any changes to the challenging path ahead for the Warren-Marshall bill now that it was omitted from Majority Leader Schumer’s priority list.

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29 03, 2024

DAILY032924

Eliza Allen2024-03-29T12:07:52-04:00March 29th, 2024|2- Daily Briefing|

Treasury, FinCEN Pulled Into Firearm MCC Fray

Following her December letter to major payment networks, Sen. Warren (D-MA) and Rep. Dean (D-PA) lead 31 Democratic lawmakers urging Treasury, FinCEN, and the banking agencies to issue clear guidance instructing financial institutions and payment-card networks to implement the new Merchant Category Code (MCC) for firearm and ammunition retailers. Notably, they now press Treasury to use powers they seem to presume Treasury has to set a federal mandate for code use that would then preempt state prohibitions on transaction identification in this high-impact political arena. The letter also calls on FinCEN to issue an advisory about acts that may precede gun crime and firearm-purchase scenarios that should trigger SARs. Answers to questions pressing these policies are due by April 11.

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11 03, 2024

DAILY031124

Eliza Allen2024-03-11T17:15:23-04:00March 11th, 2024|2- Daily Briefing|

Hagerty Demands Signature-Asset Sale Answers ASAP

Sen. Bill Hagerty (R-TN) yesterday sent a letter to Chair Gruenberg questioning the FDIC’s adherence to requirements in its auction process during the sale of Signature Bank’s loan portfolio, accusing the FDIC of making political choices inconsistent with its least-cost mandate.

Scott Again Calls for Gruenberg Resignation

Adding to GOP pressure on FDIC Chair Gruenberg, Senate Banking Ranking Member Scott (R-SC) yesterday sent a letter reiterating his demand that Mr. Gruenberg step down.

BTFP Demise if FHLB Opportunity

As anticipated, the BTFP window closed today.

FDIC’s Hill Wants New Blockchain, Liquidity Standards

FDIC Vice Chair Hill today said there are “significant downsides” to the agency’s current approach to blockchain, describing its message and that of the inter-agency policy (see Client Report CRYPTO32) as “don’t bother trying.”

Warren Tries to Divide Powell from Other Regulators to Conquer Capital Regs

Following her grilling of Chair Powell last week regarding his decision to intervene in setting the new capital rules, Sen. Warren (D-MA) yesterday sent a letter to Vice Chair Barr, Chair Gruenberg, and Acting Comptroller Hsu asking them if pressure from big banks has “weakened your resolve.”

GAO Wants FinCEN to Move Better, Faster

Reinforcing longstanding bank complaints about the current AML regime, GAO today published a report finding that FinCEN needs to improve transparency surrounding its progress implementing the Anti-Money Laundering Act of 2020 (see FSM Report AML132).

Biden Presses for Statutory Change Boosting FHLB Affordable-Housing Contributions

President Biden’s FY25 …

7 03, 2024

DAILY030724

Eliza Allen2024-03-07T16:51:03-05:00March 7th, 2024|2- Daily Briefing|

HFSC GOP Press Discount-Window Reform, Slow-Go on Liquidity Risk

Building on questioning at a recent HFSC hearing (see Client Report LIQUIDITY34), Financial Institutions Subcommittee Chair Barr (R-KY) led all Republican members of his subcommittee in a letter to Chair Powell, Chair Gruenberg, and Acting Comptroller Hsu urging them to address stigma and operational issues associated with the discount window.

Powell Reiterates: Capital Rules Will Change

Today’s Senate Banking hearing with Chair Powell covered much of the same ground as the Chair’s appearance before HFSC (see Client Report FEDERALRESERVE75) with Democrats focusing on housing affordability and Republicans expressing their satisfaction with Mr. Powell’s statement that the Basel III proposal may have to be withdrawn and re-proposed.

House Judiciary Now Says 12 Large Banks Colluded with FinCEN

Prior to the House Judiciary’s Select Subcommittee on the Weaponization of the Federal Government hearing today on large bank “collusion,” the subcommittee yesterday published a report finding that FinCEN and the FBI engaged in backchannel discussions with large financial institutions to gather private financial data.

BCBS Proposes GSIB Window-Dressing Revisions

As anticipated, the Basel Committee on Banking Supervision today released a consultation on revisions to the GSIB assessment framework concerning window dressing.

House Republican Targets Interest on Reserves

Following up on yesterday’s HFSC hearing (see Client Report FEDERALRESERVE75), Rep. Davidson (R-OH) has introduced legislation (H.R. 7562) to prevent Federal Reserve Banks from paying interest on excess reserves.

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1 03, 2024

Al030424

Eliza Allen2024-03-01T17:07:55-05:00March 1st, 2024|3- This Week|

A Central Bank Very Much in the Middle

As always, we will provide clients with in-depth analyses after Chair Powell comes before Congress later this week to face the usual fusillade of political inquiry along with policy questions. As before (see Client Report FEDERALRESERVE74), Mr. Powell will face hard questioning from Republicans on the pending capital rules, with many now trying to pin him down on likely changes and the extent to which Mr. Powell’s promise of consensus before a final rule still holds. A lot of questions will also come from both sides of the aisle on bank mergers, with House Democrats demanding a new merger policy, Sen. Warren (D-MA) trying to get Mr. Powell to signal disapproval of the CapOne/Discover deal – he won’t, and Republicans trying to get Mr. Powell to say that deals such as this one must get done to ensure regional-bank survival – again, he won’t. We also expect a new grilling from the GOP on Fed emergency-liquidity powers, along with continuing questions on climate risk, CBDC, and the quality of bank supervision. The fate of NYCB by the time of the hearing will also be a major preoccupation on both sides of the aisle even if bad doesn’t immediately go to worse. Democrats will try to shore up CBDC but many are also troubled by emergency-liquidity powers. All sides will of course take much of the hearing’s bandwidth by pushing Mr. Powell to go one way or …