The Vault

As noted in our in-depth analysis of Acting FHFA Director Thompson’s confirmation hearing, it’s clear that Democrats and Republicans are thinking hard about resurrecting statutory changes to the GSEs’ charters.  They are, though, about as far apart as usual on the constructs they prefer, ….

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

At today’s confirmation hearing, Gov. Brainard took a lot of the heat on inflation Republicans only mildly mentioned during Mr. Powell’s Tuesday confirmation hearing (see Client Report FEDERALRESERVE67). As we anticipated (see Client Report FEDERALRESERVE66) this reflects the fact that the GOP is united in opposition to her appointment as Fed vice chair; should she hold Sen. Manchin (D-WV) she will be confirmed; if not, perhaps not. Ranking Member Toomey (R-PA) also used the occasion to signal – again unsurprisingly – GOP opposition should Sarah Bloom Raskin be nominated….

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

As promised, FedFin begins our 2022 forecasts with this in-depth report on bank regulation. In general, we conclude that the context of decisions in 2022 and beyond will shift from a focus on tailoring efficiencies and burden relief to one emphasizing risk mitigation, fairness, equity, and — for the very biggest banks — a smaller systemic footprint. This report looks at the impact of pending personnel decisions as well as the outlook for climate-risk, new capital rules, FBO standards, and other key issues….

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

As promised yesterday (see Client Report FEDERALRESERVE66), we listened closely today to gauge the extent to which Chairman Powell faces a serious challenge to reconfirmation. At least as far as Senate Banking Members are concerned, he doesn’t. Although Sen. Warren (D-MA) and other Democrats lambasted Mr. Powell over insider-trading allegations and what they called the Fed’s unresponsiveness, all still were cordial and seemed generally to blame the problem on institutional failures, not the chairman. Sen. Menendez (D-NJ) called the Fed’s diversity policy “outrageous,” but also does not seem inclined….

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

It’s certain that Jay Powell’s confirmation hearing will put him through the wringer on inflation, equality, “insider” trading, and the rules he’ll foster under the new vice chair for supervision.  This is enough to try even the most patient of souls, but there’s another issue senators should be sure to raise:  what’s taking the Fed so, so long to start its CBDC deliberations, let alone conclude them?

After initially dismissing the need for a U.S. central bank digital currency, Chairman Powell announced last May that the Board would seek public comment sometime that summer.  At about the same time, Gov. Brainard spoke about a possible CBDC construct and the Boston Fed announced a technical build-out project along with the Massachusetts Institute of Technology.  The Federal Reserve Bank of New York’s Innovation Hub also has CBDC ambitions.  Although Fed officials were quick to point out that none of these nor any of the subsequent high-profile papers commits the Fed to anything, work seemed well under way to join the dozens of other central banks convinced that CBDC is essential in the quick-digitization payment future clearly emerging outside the reach of central bankers.

What’s happened since the summer CBDC storm?  Not much.

Mr. Powell and other Fed officials at one point promised that the CBDC paper would come in September, but autumn came and went.  The Fed’s certainly been busy tidying up after its “transitory” inflation goof and ongoing macroeconomic challenges, but it neglects CBDC at its and our peril.

First, whether the U.S. stands aloof from CBDC is a vital strategic question for all U.S. financial institutions.  The CBDC construct quite literally determines life or death for the current U.S. banking business model and systemic risk will surely ensue if banks do not have adequate time to shape their future in their […]

As the banking industry has long hoped and Congress last year directed,1 FinCEN is beginning to develop a new policy framework prioritizing ways to make anti-money laundering (AML) and countering the financing of terrorism (CFT) regulation more risk-based. FinCEN is taking the opportunity of its request for information (RFI) also to seek views on ways to modernize AML/CFT standards, make them more efficient, ensure adherence to global protocols, and toughen rules where necessary to protect national security. Last year’s law required Treasury to enhance law enforcement and submit a report on AML/CFT….

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