Feb 272015
 

Janet Yellen’s testimony to Congress, which turned into a defense of the Fed, its action on monetary policy and need for independence, was a key focus in financial markets this past week.   Senator Warren and House Republicans, both, took aim at Ms. Yellen and the Fed with respect to their ability to regulate Wall Street banks. Dodd-Frank has only added to the Fed’s oversight responsibilities, thus it’s unlikely this is the last we’ve heard about this issue.

Regulators continue to expand their reach broadly speaking in at attempt to enhance financial market stability, but there can unintended consequences, something the CFP and The Clearing House will explore at their May 11th conference in Washington, DC.  Visit the CFP’s website for the latest information on this and all CFP events.

 

Major Firms Are Saying The Stage Is Set For Another Crisis In The Bond Market

ECB Faces Struggle in Sourcing Enough Bonds for QE

Fed Flags Concerns About Mutual Funds, Exchange-Traded Funds

House Panel Wants Treasury Subjected to SEC Securities Regulations

House Republicans Intensify Attacks on Federal Reserve

Biggest Global Banks Shrink Under Pressure From Regulators

Banks Not Doing Enough To Overhaul Forex Markets

SEC mulls creation of venture exchanges

Congress urged to act on Fannie, Freddie reform as profit falls

A Boom in Private Equity’s Secondary Market

U.S. Regulators Revive Work on Incentive-Pay Rules

New Rules Spur a Humbling Overhaul of Wall St. Banks

Banks not doing enough to overhaul forex business, says watchdog

 

Note: Graduate student, Jinyu Huang, contributed to the compilation of this post.

 

Feb 262015
 
Bill Longbrake

Bill Longbrake

It would seem that everything is coming up roses, at least in the U.S.  Is this a goldilocks world?  In this month’s letter Bill Longbrake discusses global mega trends, secular stagnation and global monetary policies, the long-run implications of which appear to be at odds with the short-term goldilocks scenario. Bill concludes that it’s hard to say where all this leads but it probably won’t be what the consensus expects.

Read the full letter.

Feb 242015
 

Swagel-Phillip-HRCFP Special Advisor Phillip Swagel’s op-ed from The Hill:

A familiar complaint about other countries’ supposed currency manipulation has arisen in tandem with Congressional efforts to grant President Obama Trade Promotion Authority to finalize trade deals with our economic and national security partners in Asia and Europe. The current and previous CEO’s of Ford Motor Company have called Japan a currency manipulator that hurts U.S. competitiveness—even while Ford’s fourth quarter earnings beat estimates with a “benign impact” from currency issues. Such critics of trade expansion want to require that the U.S. penalize currency manipulators as part of the agreements. These efforts are misguided.

An inaccurate accusation of currency manipulation is too readily made and can easily rebound on ourselves. The complaint against Japan is an example. The Japanese yen is weaker by 15 percent against the U.S. dollar over the past year, but labeling this as currency manipulation confuses the effect with the cause. The Bank of Japan last October increased its quantitative easing program to head off deflation and boost the faltering Japanese economy. This approach was recommended by academics and policymakers – notably including former Federal Reserve Chair Ben Bernanke – as a way to break Japan out of 15 years of stagnation.

Read the full article here.

Feb 132015
 

Financial firms in and of themselves may not be systemic, but they can become systemic when they participate in a “complex chain of transactions” according to the New York Fed. Fed Governor Daniel Tarullo told a conference of regulators that the agency was working to corral financial activities that fall outside of the regulated perimeter by firms that aren’t regulated like banks. The problem, however, is that the Fed doesn’t have sufficient authority to regulate these so called shadow banks, even under Dodd-Frank, as the WSJ notes.

The CFP and Clearing House will be examining the role of non-banks in the financial system at our upcoming conference on May 11, 2015 (The Intended and Unintended Consequences of Financial Reform).  Please visit our website for the latest information on this and our other upcoming events.

 

Regulation of Shadow Banking Takes a Dark Turn

SEC Raises Heat on FINRA Risk Data Plan

Study by CFTC official questions legality of HFT practice

Feb 062015
 

Financial markets remain volatile given the number of conflicting forces and signals at play.   The dollar is strong, oil prices are low, and the job market continue to improve — yet this strength is still not filtering through to consumer spending leading many to question whether the Fed will still raise rates in June.

President Obama sent his preliminary budget proposal to Congress, which included record funding requests for regulators and a series of business tax reforms including a tax that would affect financial firms with over $50 billion in assets. The Administration’s rational being that this fee would create greater financial stability, but Smith Finance Professor Mike Faulkender notes that higher capital requirements would be a more efficient method to enhance the financial stability of the banks.

 

2015 CFP Events

May 1 — Second annual conference on financial market regulation with the SEC and CFA Institute

May 11 — Conference on the intended and unintended consequences of financial reform

Visit the CFP’s website for the latest information on these events.

 

Obama proposes tax on large financial firms

FSOC adopts reforms to improve transparency over operations

Banks See Swamped Bond Market, Higher Costs on FSB Rule

U.S. housing regulator proposes new rules for nonbank mortgage firms

Small Banks Score Gains in Lifting Regulation

Regulators Formalize Changes in Applying ‘Systemic’ Label to Non-Banks

The death knell of active portfolio management has been rung too soon