Federal regulators yesterday announced they had approved the disaster plans for the nation's eight largest and most complex banks outlining the strategies they would deploy if they fell into bankruptcy, the Associated Press reported. The announcement by the Federal Reserve and the Federal Deposit Insurance Corp. came after the two agencies in April 2016 deemed that the plans of five of the eight banks were deficient. Congress imposed the requirement to write the plans, dubbed "living wills," in the 2010 Dodd-Frank financial overhaul legislation that sought to avoid a repeat of the 2008 financial crisis. While approving the plans of all eight banks, the regulators found in their latest review that the plans of four — Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo — had shortcomings that will need attention in the next round of review. Regulators found no shortcomings in the plans submitted by the other four — Bank of New York Mellon, Citigroup, J.P. Morgan Chase and State Street.
Lawmakers in both parties and the Trump administration are negotiating overhauls of Fannie Mae and Freddie Mac — critical to home mortgages but in government conservatorship since the financial crisis — that could keep them at the center of the U.S. mortgage market for years to come, abandoning long-stalled proposals to wind them down, the Wall Street Journal reported. Bipartisan Senate legislation set to be introduced in early 2018 marks the clearest sign of this reversal and shows how the companies, entering their 10th year under federal control, have proven too risky to attempt replacing. The housing market has seen strong demand in recent years, driven in part by steady access for many Americans to 4 percent or lower 30-year fixed-rate mortgages, thanks in part to a government backstop of the companies.
Banks and rival lenders are butting heads over the credit scores used to decide millions of mortgage requests by U.S. home buyers, the Wall Street Journal reported. Now, a federal agency is weighing whether to step into the fight, which revolves around a longtime requirement for lenders who sell mortgages to Fannie Mae and Freddie Mac to gauge most borrowers using FICO scores. The Federal Housing Finance Agency’s ultimate decision could have wide-reaching ramifications for the mortgage market and home buyers across the U.S. Many nonbank lenders, which in some recent quarters have accounted for more than half of the mortgage dollars issued in the U.S., want the ability to use a credit score provided by a company owned by credit-reporting firms Equifax Inc., Experian PLC and TransUnion. These lenders argue that the alternative score would open the mortgage market to a greater number of people and lead to more mortgage approvals, helping to boost home sales and the economy.
The total net worth of U.S. households climbed further into record territory in the third quarter of 2017, reaching $96.939 trillion as stock markets and property prices boosted Americans’ wealth, the Wall Street Journal reported. The increase on the quarter was $1.742 trillion, according to the data the Federal Reserve released Thursday. That was a larger gain than the $1.276 trillion advance in the second quarter of this year. Household wealth in the stock market climbed by $1.1 trillion in the quarter, reflecting rising equity valuations last quarter amid solid business and consumer confidence and a strong labor market. The value of households’ real estate increased by about $411 billion, reflecting ongoing higher home prices. The data on household net worth include assets held by nonprofits, although nonprofits make up a relatively small proportion of household wealth.
The deputy director of the Consumer Financial Protection Bureau (CFPB) asked a federal court Wednesday night to halt a previous ruling that cleared President Trump to appoint a temporary chief in her place, The Hill reported. The move by CFPB Deputy Director Leandra English is the latest maneuver in the fight for control of the agency. English filed an injunction in the District Court for the District of Columbia to block Office of Budget and Management Director Mick Mulvaney from leading the agency. English’s complaint asks the court to impose her restraining order against Mulvaney after it dismissed her effort two weeks ago. English had sued Mulvaney, who Trump appointed to lead the CFPB until the Senate confirms a permanent replacement, and the president, claiming the Dodd-Frank Act made her the rightful acting director. The deputy director argues in the new filing that Mulvaney is ineligible to run the CFPB because of the line of succession established in Dodd-Frank. English also claims Mulvaney’s appointment violates the Federal Reserve’s independence since the CFPB was created within the Fed system and Mulvaney is a senior White House aide.
U.S. consumer borrowing rose in October, according to new data from the Federal Reserve, Dow Jones Newswires reported. Outstanding consumer credit, a measure of non-real estate debt, rose by $20.52 billion in October from the prior month, climbing at a 6.51 percent seasonally adjusted annual rate, the Fed said yesterday. Total outstanding credit increased a revised $19.21 billion in September. Revolving credit outstanding, mostly credit cards, increased at a 9.9 percent annual pace in October. Non[-]revolving credit outstanding, mainly student and auto loans, rose at a 5.3 percent annual pace. Household debt totaled $12.955 trillion in the third quarter, up 0.9 percent from the spring, the Federal Reserve Bank of New York said last month. That was the most on record, though the figure wasn't adjusted for inflation.
The Federal Reserve yesterday proposed disclosing more about its big-bank stress tests, in response to criticism from bankers who have said the exams’ results are hard to understand, the Wall Street Journal reported. The proposal, if adopted, would have the Fed publish how different loan portfolios perform under the statistical models it uses to calculate whether banks can survive a hypothetical recession. The loan data would be published each year before the tests are run. The proposal stops short of fully disclosing the Fed’s statistical models, a move that some Fed officials believe would allow banks to game the exams. The new loan disclosures show the characteristics of three sets of 200 loans: a higher-risk portfolio, a lower-risk portfolio and an average one. The Fed also disclosed the loss rates that its models calculated for those loan portfolios based on the 2016 stress-test scenario.
The Senate Banking Committee yesterday moved toward approving legislation that would ease restrictions on community banks and small financial institutions like credit unions, amid criticism from regulation advocates that the bill would be a giveaway to large banks, MorningConsult.com reported. The measure being marked up, S. 2155, boasts bipartisan support from Republicans and moderate Democrats — including many who will face tough re-election contests next year in states that President Donald Trump won in 2016. The legislation would raise the threshold — from $50 billion in assets to $250 billion — for determining whether a bank is systemically important. It would also give the Federal Reserve discretion to conduct stress tests on institutions valued between $100 billion and $250 billion on a periodic basis, in addition to loosening industry-wide rules regarding issues like home mortgages and supervision.
A high-profile plan to prevent federal watchdogs from getting too cozy with banks they are supposed to police has been scrapped by President Donald Trump’s newest Wall Street regulator, Bloomberg News reported. For years, the Office of the Comptroller of the Currency intended to remove hundreds of examiners who work inside the offices of JPMorgan Chase & Co., Citigroup Inc. and other lenders. In just his second week on the job, OCC chief Joseph Otting nixed the effort. “Upon review, it is not practical to continue the agency’s efforts to move resident examiners out of on-site locations,” said Otting, a former banker. Other reforms, such as regularly rotating supervisors from bank to bank so they don’t spend too long in a particular firm, show that the OCC has taken steps to prevent “regulatory capture,” said Otting, who ran OneWest Bank Group when Treasury Secretary Steven Mnuchin was the lender’s chairman. Factors cited as contributing to the OCC maintaining the status quo include the high cost of Manhattan real estate and the burden examiners would face in slogging back and forth between government offices and Wall Street banks.
The Trump administration’s interim director of the Consumer Financial Protection Bureau said he has frozen the agency’s collection of personal information due to cybersecurity concerns, a step in changing policies criticized by the financial industry, the Wall Street Journal reported. Mick Mulvaney, who is splitting his time as acting CFPB director and the White House’s budget chief, yesterday said that the decision is part of his effort to improve the agency’s data-security program. The longtime critic of the CFPB was appointed as its acting director by President Donald Trump on Nov. 24, succeeding Richard Cordray, an Obama appointee who left after a six-year tenure at its helm. Critics of the CFPB have long complained about the bureau’s efforts to collect consumer data on credit cards and mortgages through its disclosure rules, consumer complaint database and enforcement actions. They say such actions threaten privacy and information security. CFPB officials have in the past said such data help the agency identify discrimination and other industry misconduct, and can serve as a basis for writing rules.