Apr 172015
 

Both politicians and regulators have been on the tapes with their views on where regulation should go next, in particular how to regulate and oversee the nonbank, or shadow banking, system. The CFP and Clearing House will be discussing the systemic importance of non-banks at our conference on May 11, 2015 on the Intended and Unintended Consequences of Financial Reform. Please visit the CFP’s website for more information and to register.

 

Fed Divided on June Rate Increase, but Soft Data May Prove Deciding Factor

Fed’s Fischer Floats Ideas for Regulating Shadow Banks

SEC Official: ‘Not Clear’ Bank Regulation Has Made Economy Safer

Judge Allows SEC Insider-Trading Suit to Proceed

U.S. Agencies Block Technology Exports for Supercomputer in China

Blackrock to Shift Funds to Comply With New Rules

Regulators Call for Short-Term Loan Changes to Handle ‘Too-Big-to-Fail’

OFR’s Berner stresses importance of LEI adoption

Elizabeth Warren’s New Agenda for Democrats on Financial Reform

SEC tightens reigns on retail investor products

FSOC has process for rescinding SIFI status

Apr 032015
 

After years of pushing banks to boost their capital cushions, regulators have now turned to corporate governance and the role of directors to ensure banks have the right culture and controls to prevent excessive risk taking. The Federal Reserve and other bank regulators are holding frequent meetings with individual directors at the nation’s biggest banks, demanding detailed minutes and other documentation of board meetings. The markets had a volatile week leading up to this week’s non-farm payroll report.  The worse than expected result caused the dollar to slump and bonds to surge as the market pushed out the timing of the Fed’s expected interest rate hike.

 

Hedge funds urge CFTC to allow anonymous swaps trades

SEC Pushes Extractive Disclosure Rule Decision to 2016

Regulators intensify scrutiny of bank boards

Startups can raise $50 million in mini-IPO

Pinning New Jobs to 2012 IPO Legislation Proves a Challenge

Battle lines drawn over “systemically important” label

Mar 312015
 

CFP Special Advisor and former Assistant Secretary for Economic Policy at the Treasury Department, Professor Phillip Swagel, has written a new paper on the Legal, Political and Institutional Constraints on the Financial Crisis Policy Response.  Read the full paper.

The paper is part of a symposium on the financial crisis that will appear in upcoming edition of the Journal of Economic Perspectives. 

Executive Summary

The story of the financial crisis response can be told through the lens of evolving legal and political constraints. In late 2007 and early 2008, while policymakers recognized weaknesses in the system, they believed that conventional monetary and fiscal responses such as Fed lending and a modest fiscal stimulus would suffice to buoy the US economy while the imbalances that had built up during the housing bubble were resolved. By the time of the Bear Stearns bailout in March 2008, the usual methods were clearly perceived to be inadequate, and the Fed was making discretionary choices to invoke authority reserved for “unusual and exigent” circumstances to respond to the potential collapse of a nonbank financial firm. In September 2008, the Fed’s ability to use this discretionary authority had reached its limits, and the imminent risk of financial crisis led to the Troubled Asset Relief Program.  The advent of the TARP capital injections facilitated a program of guarantees by the Federal Deposit Insurance Corporation to support bank funding, undertaken with existing legal authority but in an extraordinary way. Together, these actions reassured market participants that the US financial sector would not collapse and marked the beginning of the stabilization from the crisis.

Mar 272015
 

Financial markets drifted lower this week on the back of disappointing economic data and potential worries over first quarter earnings given the continued strength of the US dollar. Volatility is expected to continue into next week as earnings season officially kicks off and the latest non-farm payroll data is released.

On the regulatory front, there were a number of stories out on systemically important institutions, a topic that will be covered at the CFP’s upcoming conference with The Clearing House, and how to regulate the shadow banking system. Last week, the Fed dropped its pledge to be “patient” in raising rates, though there continues to be quiet rumblings among investors regarding fixed income market stability once they do embark on that path.

 

Fed’s Lockhart says US should step up shadow banking monitoring

FSB’s Carney voices concerns about bond market liquidity

Bond bubble worries professional investors

Chamber Chief: End the Dodd-Frank ‘shouting match’

Treasury Secretary tells how to lose the systemically important label

SEC’s White says closely monitoring proxy access efforts

S.E.C. Faces Tough Challenge to Enhanced Broker Rule

Blackrock urges stress tests in FSOC query of asset managers

SEC should work with Labor on fiduciary rule

Shadow banking system shows signs of stabilizing after collapse

Commodity traders don’t pose systemic risks

Mar 252015
 
Bill Longbrake

Bill Longbrake

Economic activity in the U.S. has been somewhat softer over the last two months. Notwithstanding this the U.S. economy is performing reasonably well. Better data reports are likely as winter turns to spring. Nonetheless, there are serious disconnects in key economic phenomena. Employment growth is very strong, GDP growth is weak and productivity is negative. In this month’s letter, Bill Longbrake discusses the reasons for these disconnects and the long-run consequences of underinvestment. Other forces are stirring – the collapse in energy prices, the strong dollar, the plunging euro, and ultra-low interest rates – which eventually may pose significant challenges for the U.S. economy.  

Read the full letter here.