#Yellen – Federal Financial Analytics

25 09, 2023

DAILY092523

Eliza Allen2023-09-25T16:05:07-04:00September 25th, 2023|2- Daily Briefing|

IMF Report: CBDC Designs Could Boost Financial Inclusion

On Friday, the IMF released a report concluding that a well-designed CBDC could foster financial inclusion and act as an entry point for the unbanked to the broader financial system. This will strengthen Democratic demands for a U.S. CBDC, but we expect GOP opposition to remain firm and the Fed’s posture to retain its current focus on wholesale CBDCs.

FRB-NY: Stablecoins, MMFs Have Same Dynamic Runs

An FRB New York study today concludes that stablecoin investors behaved similarly to MMF investors in numerous recent runs. Staff found that investors consider a stablecoin to have been effectively depegged once its price drops below $0.99 which triggers a run and mirrors the dynamics of MMFs “breaking the buck.”

Senate Dems Target SIFI Designation, Scenarios to Curb Climate Risk

Senator Warren (D-MA) along with Sens. Sanders (I-VT), Heinrich (D-NM), Markey (D-MA), Whitehouse (D-RI), and Merkley (D-OR) today released a letter dated last Wednesday to Treasury Secretary Yellen and Climate Counselor Zindler calling on the Department to significantly increase the urgency with which it targets climate-related financial risk.

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15 09, 2023

DAILY091523

Eliza Allen2023-09-15T16:55:06-04:00September 15th, 2023|2- Daily Briefing|

Warren Adds Interest-Rate Risk to Fed Concerns

Heightening her attack on Fed interest-rate hikes, Sen. Warren (D-MA) yesterday pressed Treasury Secretary Yellen for FSOC action addressing interest-rate risks. Those she highlights include unrealized bond losses, CRE hazard, and challenges in the leveraged-loan market. Citing Moody’s recent credit downgrade of 10 regional banks, Ms. Warren voiced concern that interest rate risk still poses a systemic threat in these three areas and urged FSOC to act quickly to mitigate risk without suggesting specific actions.

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14 09, 2023

DAILY091423

Eliza Allen2023-09-14T16:47:09-04:00September 14th, 2023|2- Daily Briefing|

IOSCO Proposes Leveraged Loan, CLO Best Practices

IOSCO today released a consultation report proposing best practices for leveraged loans and CLOs that address origination and refinancing, EBITDA and documentation transparency, aligning interests from loan origination to end investors, managing conflicts of interest throughout the intermediation chain, and disclosures.

Durbin, Marshall Press Credit-Card Interchange Bill

Reiterating concerns expressed last month and comments yesterday on the Senate floor, Senate Whip and Judiciary Chairman Durbin (D-IL) and Sen. Marshall (R-KS) were joined this time by Sen. Welch (D-VT) and four House Members calling on Visa and Mastercard to reverse planned fee hikes.

GAO Presses for FSOC Power to Regulate, Not Just Designate

The GAO today issued a report recommending that Congress consider legislation allowing FSOC to compel regulatory action, arguing that this would better accomplish the Council’s mission because FSOC currently has limited power to respond to systemic risk.

HFSC GOP Highlight CBDC Privacy Concerns

As anticipated, HFSC Digital Assets GOP Members continued their staunch opposition to a U.S. CBDC, with Subcommittee Chairman Hill (R-AR) and Majority Whip Emmer (R-MN) asserting that private innovation can modernize payments without the risk of government surveillance.

Brown Doubles Down on Opposition to House Crypto Bill

Making it still more clear that he is not supportive of pending House cryptoasset legislation, Senate Banking Chairman Brown (D-OH) today sent a letter to Treasury Secretary Yellen, SEC Chairman Gensler, and CFTC Chairman Benham asking for views on where new authority may be needed.

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12 07, 2023

DAILY071223

Eliza Allen2023-07-12T17:05:21-04:00July 12th, 2023|2- Daily Briefing|

SEC Concedes, Drops MMF Swing Pricing

In a startling bow to industry comments, the SEC today finalized MMF rules for institutional prime and tax-exempt funds that dispense with the proposal’s swing pricing (see FSM Report MMF19).

HFSC Bickers Over ESG, SEC Authority, Investor Rights

Today’s ESG hearing was the partisan show-down we anticipated – indeed, Rep. Sherman (D-CA) denounced the GOP for “waging war” against capitalism like Leon Trotsky.

Fed Nominations Advance

As anticipated, Senate Banking today approved the nominations of all three Federal Reserve Board nominees for the full Senate.

Warren Heightens Anti-Merger Campaign

Republicans were absent today from Senate Banking’s Economic Policy bank-merger hearing. Chair Warren (D-MA) reiterated her strong opposition to virtually all mergers, indicating her plans to reintroduce anti-merger legislation from prior Congresses (see FSM Report MERGER8).

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10 07, 2023

DAILY071023

Eliza Allen2023-07-10T16:43:24-04:00July 10th, 2023|2- Daily Briefing|

HFSC Lays Out Its ESG Priorities

The majority staff memo ahead of Wednesday’s HFSC hearing on ESG follows the outline anticipated last week and that laid out in the GOP agenda for ESG-related action (see Client Report ESG4).

OCC Concurs On Capital, Tries For The Merger Middle

Acting Comptroller Hsu today confirmed our assessment of Vice Chair Barr’s comments earlier today (see Client Report CAPITAL228) that the three banking agencies are aligned on the new capital construct to be shortly released for public comment.

Barr, Foster Demand Delay to Capital Rewrite

Anticipating Vice Chair Barr’s remarks this morning detailing near-term capital policy changes (see Client Report CAPITAL228), HFSC Financial Institutions Subcommittee Chair Barr (R-KY) and Ranking Member Foster (D-IL) sent a letter late Friday demanding that he appear before the Subcommittee to present the conclusions of his capital review and upcoming Basel III implementation plans prior to public release, asking also for details and likely outcomes for industry consolidation.

House Republicans Keep Spotlight On FRB-SF

Continuing the GOP’s attack on the San Francisco Fed’s supervision of SVB in the wake of what many believe are “woke” priorities, House Oversight Committee Chairman Comer (R-KY) was joined today by Financial Services Subcommittee Chairwoman McClain (R-MI) in sending a letter to FRB Chairman Powell taking serious issue with the Federal Reserve Bank of San Francisco and the Fed for what they describe as SVB-related transparency and communication failures.

BIS Survey: Most Central Banks Considering CBDCs

The BIS …

27 06, 2023

DAILY062723

Eliza Allen2023-06-27T16:53:41-04:00June 27th, 2023|2- Daily Briefing|

Treasury, FIO Target Insurance, Banking Interconnections

In conjunction with FIO’s new report on Insurance Supervision and Regulation of Climate-Related Risks, Treasury’s Assistant Secretary for Financial Institutions, Graham Steele, today emphasized the need for further work to understand the insurance industry’s climate-related financial stability risks, especially from housing and banking sector spillovers. In a panel discussion, FIO Director Steven Seitz also highlighted the report’s recommendations around macroprudential risks, including prioritizing the growth of the residual and surplus lines markets, “hardening” of the reinsurance market, and realizing the effects climate risk may have on state insurance guarantee funds.

Warren Gives No Merger Ground

In a letter sent today to Chair Gruenberg, Acting Comptroller Hsu, Vice Chair Barr, Assistant Attorney General Kanter, and Secretary Yellen, Sen. Warren (D-MA) demands fast action on the rewrite of bank merger guidelines pending since at least the President’s executive order in 2021 (see FSM Report MERGER10) as well as an end to large-bank M&A. Sen. Warren takes particular issue with Secretary Yellen’s recent comments suggesting the need for industry consolidation and again confronts Acting Comptroller Hsu’s “openness” to at least some transactions. It thus seems clear that her opposition to his nomination as Comptroller remains as firm as ever.

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26 06, 2023

Daily062623

Eliza Allen2023-06-26T16:49:47-04:00June 26th, 2023|2- Daily Briefing|

Waters Forum On Deposit-Insurance Reform Focuses On Flexibility

HFSC Ranking Member Waters (D-CA) Friday hosted a roundtable on deposit insurance reform with a panel of industry experts and a legal scholar.

Bowman Blasts Barr Agenda, Cautiously Open to End Game

In remarks yesterday, FRB Governor Bowman continued her campaign against new capital rules, urging regulators instead to focus on liquidity and supervision.

FRB Withdraws Reserve Bank Registry Proposal

The Federal Register today published a notice from the FRB announcing that the Board is withdrawing proposed amendments (see FSM Report PAYMENT26) to its Account Access Guidelines that would have required Reserve Banks to publish periodic lists of depository institutions with access to Reserve Bank accounts.

Waters Recruits Treasury, SEC To Block GOP Crypto Bill

Ahead of HFSC mark-ups on digital assets legislation next month (see Client Report FEDERALRESERVE74), Ranking Member Waters (D-CA) today sent letters to Treasury Secretary Yellen and SEC Chairman Gensler asking for analyses of the draft digital assets market structure bill strongly opposed by Democrats.

Daily062623.pdf…

14 06, 2023

DAILY061423

Eliza Allen2023-06-14T17:01:12-04:00June 14th, 2023|2- Daily Briefing|

OCC Lays Out Revised Risk Warnings, Admonitions

The OCC today released its semiannual risk assessment, with much of its context based on data as of September 2022 and thus of limited value forecasting near-term threats. The OCC is careful to advise that the banking systems and institutions with federal charters have been the focus of special OCC attention since the mid-March failures.

McHenry Heightens GOP Opposition to FSOC Systemic Standards

Perhaps because he was unable yesterday to quiz Secretary Yellen (see Client Report REFORM227), HFSC Chairman McHenry (R-NC) today sent Ms. Yellen a letter taking sharp issue with proposed FSOC nonbank-SIFI designation standards (see FSM Report SIFI35). Arguing that FSOC’s longstanding precedent is not to designate nonbanks although this was done after Dodd-Frank (before Trump-era de-designations), Mr. McHenry states that the new approach focuses only on size and thus ignores the extent to which activities pose risk.

Powell Says No to ONRRP Redesign

At his press conference today, Chairman Powell denied that the ONRRP has any adverse impact on deposit inflows but said it and reserve levels will gradually drop as Treasury rebuilds its cash reserves. Further, the Fed is not open now to reducing RRP rates.

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14 06, 2023

REFORM227

Max Camateros-Mann2023-06-14T15:34:59-04:00June 14th, 2023|5- Client Report|

Yellen Demurs on Resolutions, Capital Changes

Treasury Secretary Yellen was pressed at today’s HFSC hearing to comment on pending bank capital standards, the scope of FDIC coverage, and failed-bank resolutions. Although she deferred to the banking agencies, she did agree to work with Rep. Foster (D-IL) to determine if additional guidance is needed to clarify the difference between the least-cost test and systemic stability. Ms. Yellen was closely questioned about IFI policies to China and the need for U.S. sanctions, continuing to make clear that the U.S. is seeking what NSC Director Sullivan calls derisking, not decoupling. The Secretary also stood by FSOC’s positions in favor of swing pricing, stablecoin and crypto reform, and careful CBDC consideration.

REFORM227.pdf…

5 06, 2023

DAILY060523

Eliza Allen2023-06-05T16:41:32-04:00June 5th, 2023|2- Daily Briefing|

FRB-NY: Bank Discrimination Not To Blame For More Black Fintech PPP Loans

A new paper from Federal Reserve Bank of New York staff concludes that differences in PPP applications between white and Black firms entirely explains why Black PPP borrowers received a greater share of loans from fintechs rather than banks. This issue has been a longstanding point of contentiousness used by fintech advocates to argue that their business model warrants less regulation on grounds that it is also less discriminatory. However, the paper’s results suggest that any fintech-driven mitigation of racial disparities in lending outcomes is the product of higher Black-borrower applications, not higher approval rates that would demonstrate less discrimination.

GOP Leadership Presses Treasury, SEC On US/EU Climate Coordination

Senate Banking Ranking Member Scott (R-SC) was joined today by House Oversight Committee Chairman Comer (R-KY) in sending letters to Treasury Secretary Yellen and SEC Chairman Gensler taking serious issue with reports that the Department and Commission have been facilitating EU regulators’ efforts to advance international climate-related disclosure policies and ESG initiatives. Although the letter references U.S. companies, Ranking Member Scott and Chairman Comer sharply criticize EU standards they say would cause serious business and financial system harm through “onerous extra-territorial climate mandates.”

Daily060523.pdf…