#Waters

13 11, 2024

FedFin Assessment: The Fate of the Federal Reserve

Arezou Rafikian2024-11-14T15:45:31-05:00November 13th, 2024|The Vault|

In a recent client brief, we provided our forecast of what might happen to Federal Reserve independence, process, powers, and personnel under either a Harris or Trump presidency. This is of course no longer an either/or matter, with this report thus reviewing and, where needed, updating our initial assessment of what Mr. Trump could do to the central bank even where Chair Powell says he can’t. Sherrod Brown’s defeat makes the Fed particularly vulnerable in the Senate, where Elizabeth Warren (D-MA) stands a strong chance of becoming the Banking Committee’s ranking Democrat. She and incoming chair Tim Scott (R-SC) will agree on a lot about the Fed, especially if Sen. Rick Scott – a frequent Warren ally on the Fed front – becomes Majority Leader….

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

8 11, 2024

FedFin Assessment: Are Crypto’s Wins the Banks’ Losses?

Arezou Rafikian2024-11-08T14:57:19-05:00November 8th, 2024|The Vault|

One of the more striking results of the election is the enormous win crypto firms got for their $135 million of Congressional-campaign spending: victories so far in every race it entered. Much of this is due not just to crypto’s lure; instead, it reflects choices based not only on a candidate’s crypto sentiments, but also on the opponent’s vulnerability. As a result, at least some of crypto’s luster could fade when Congress gets back to work. However, Donald Trump campaigned on a pro-crypto platform, endorsing legislation such as the Lummis (R-WY) bill to create a “strategic reserve” for bitcoins…

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

20 11, 2023

Karen Petrou: The Fate of the End-Game Rules Does not Lie in the FDIC’s Hands

Eliza Allen2023-11-20T12:16:01-05:00November 20th, 2023|The Vault|

It’s a hard fact of life that nothing good comes to federal agencies caught up in scandal even when scandal is misplaced. So the real question for the FDIC is whether the bad already all too evident at the divided banking agency will grow still worse, threatening the FDIC’s ability to participate in pending rulemakings or, even worse, resolutions. It likely will be no accident if the FDIC comes unglued and the capital and other proposals fall apart. I think new rules will proceed, but the FDIC’s threat is far from out of the blue.

Is this cynical? I prefer to think of it as an observation born of experience, but this is a city about which Harry S. Truman famously said, “If you want a friend in Washington, get a dog.”

FedFin reports last week tracked Marty Gruenberg’s travails before Senate Banking and then again at House Financial Services, with Ranking Member Waters surprisingly aligning herself with her usual GOP enemies when it came to castigating Mr. Gruenberg over sexual-harassment problems at the agency reported by the Wall Street Journal as the week of hearings broke two days before.

And, as the hearing went on, Mr. Gruenberg found himself in even more of a pickle. In another uncoincidental moment, Chairman McHenry got wind of 2008 allegations against the chair, allegations Mr. Gruenberg belatedly recalled when prompted by yet another poke from the Journal. Now, Mr. McHenry has opened a formal investigation even as a statement from GOP members of …

15 03, 2023

FedFin Assessment: Post-SVB Deposit Insurance Reform

Arezou Rafikian2023-03-15T16:58:47-04:00March 15th, 2023|The Vault|

Cementing prior denouncements of 2018 Dodd-Frank “rollbacks” into legislative action, 17 Democratic senators and 31 House Members today took direct aim at Trump-era banking policy by introducing legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act. But, while this initiative is gaining considerable attention, its legislative prospects are dim – indeed, even Senate Banking Committee Chairman Brown (D-OH) suggested as much…

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

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8 02, 2022

FedFin: Partisan Impasse Suggests Small Chance for Stablecoin Statutory Change

Arezou Rafikian2023-04-05T12:06:36-04:00February 8th, 2022|The Vault|

Today’s HFSC hearing on stablecoins makes it clear that the bipartisan legislation Chairwoman Waters (D-CA) prefers is at best a long way off. Democrats generally agreed with the President’s Working Group stablecoin report (see Client Report CRYPTO21), with Under-Secretary Liang today not only describing its findings but reinforcing the need for rapid regulatory intervention in concert with substantive statutory change.

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

8 12, 2021

FedFin: HFSC Begins Political Taxonomy of Crypto-Asset Policy

Arezou Rafikian2023-05-23T13:06:52-04:00December 8th, 2021|The Vault|

As anticipated, today’s HFSC hearing was a marathon session at which industry witnesses defended their business model, Republicans liked it fine, and Democrats worried about a wide array of policy challenges. While both sides of the aisle agreed that cryptoassets might well enhance financial inclusion, partisan battle lines formed over issues such as the extent to which stablecoins are fully reserved, covered by the securities laws, and if a single regulator for this sector is either desirable or feasible. Industry witnesses strongly rejected the PWG’s stablecoin conclusions (see Client Report CRYPTO21), suggesting for example that stablecoins are safer than bank deposits because they are fully – not fractionally – reserved.

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

1 12, 2021

FedFin: HFSC Throws Partisan Brickbats without Financial-Policy Impact

Arezou Rafikian2023-05-23T14:19:51-04:00December 1st, 2021|The Vault|

Continuing the partisan and often-acrimonious tone of the Senate Banking hearing (see Client Report FEDERALRESERVE64), HFSC today heard from Chairman Powell and Secretary Yellen. Much of the session was preoccupied by differing views of whom or what is to blame for inflation, with Members also squaring off on the benefit of the BBB and infrastructure bills. Many financial-policy priorities were sidelined by these big-picture battles, with the session omitting discussion of topics such as digital currency, bank consolidation, and even fair lending and diversity.

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

5 10, 2021

FedFin: Gensler: SEC Will Not Ban Crypto, Will Treat as Securities

Arezou Rafikian2023-06-28T15:31:17-04:00October 5th, 2021|The Vault|

As anticipated, today’s HFSC hearing with SEC Chair Gensler covered the full SEC agenda, although members steered clear of the SEC investigation demanded by Sen. Warren (D-MA) into recent Fed trading. Chair Gensler defended his budget request, citing for example a major increase in IPOs and saying the SEC is a “cop on the beat” ensuring investors are protected. Democrats pushed Mr. Gensler to take more action on crypto while Republicans argued crypto is not a security; Chair Gensler was consistent throughout the hearing in his belief that the law is clear on what is a security, but noted also it may be outdated in some areas and thus urged Congress to update the law if it sees appropriate. Like Fed Chair Powell (see Client Report REFORM209), Chair Gensler pledged he would not ban crypto.

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

4 10, 2021

Karen Petrou: How to Ensure Equitable Fed Intervention in the Crisis Next Time

Arezou Rafikian2023-07-05T15:57:30-04:00October 4th, 2021|The Vault|

With her unerring instinct for the jugular on which media thrive, Sen. Warren on Tuesday called Jay Powell a “dangerous man.” This promptly sent many into still more feverish speculation about the Fed’s next chairman, blotting out coverage of an even more consequential development in the House: Democratic plans to rewrite the Fed’s powers in the next financial crisis. Last week, I pointed to the political price for Mr. Powell’s renomination: the Omarova appointment. A structural one with even more lasting impact is the rewrite of the Fed’s emergency-liquidity powers to, as Democrats demand, end backstops for “Wall Street” in favor of Fed facilities for everyone else.

Although little noticed, HFSC Chairwoman Waters on Thursday said for the second time in as many weeks that “Our committee is committed to ideas to ensure that facilities like these [the Fed’s in 2020] can more directly support workers and small businesses as well as state and local governments the next time there is a crisis.” Holding fire on Mr. Powell, Senate Banking Chairman Brown also targeted Fed support for Wall Street in his opening statement on Tuesday. This follows an inconclusive HFSC hearing a week or so ago on just what these new facilities might look like but make it clear that an array of reforms is under active consideration.

Importantly, these demands for people-focused facilities aren’t an isolated case of progressive pique. After the 2008 crisis, there was much bipartisan ire over whom the Fed helped how. This led to a …

20 09, 2021

Karen Petrou: Choosing Between Evisceration, Amputation, or Decapitation to Punish Big Banks

Arezou Rafikian2023-08-03T14:36:09-04:00September 20th, 2021|The Vault|

One can pretty much count on senior Democrats to demand summary execution when Wells Fargo stumbles on its troubled path to exoneration from the Fed’s scorching 2018 enforcement order. So, when the OCC last week embarrassed the bank with renewed sanctions, Sen. Warren didn’t miss a beat; as we noted, she promptly sent Jay Powell a letter demanding that the bank be disemboweled. However, if Sen. Warren really wants to ensure that accident-prone banks mend their ways, she would do better by pressing remedies that might really work for the consumers she wants to protect.

Disembowelment via Sen. Warren would come via regulatory resurrection of the Glass-Steagall Act along her preferred lines. As she explains this in her letter, the Fed would use the authority she believes it has to revoke Wells Fargo’s charter as a financial holding company (FHC), thereby ending the holding company’s ability to engage in both consumer banking and securities activities.

Sen. Warren considers the mix of consumer and capital-markets activities fraught with contagion for vulnerable consumers, but none of the violations that sparked enforcement orders has anything to do with wholesale finance and could well have occurred in the most consumer-pristine of retail banks. For example, the OCC’s latest order punishes what are said to be severe lapses in mortgage servicing. IPO offerings, brokerage services, and even junk-bond sales have diddly to do with mortgage servicing or the cross-selling scandal that brought all this down on the bank in the first place. Thus, divesting capital-markets …