Wells' borrowing boost sparks concentration fears for Home Loan banks
By Brian Collins
Wells Fargo Bank has dramatically increased its borrowings from the Federal Home Loan Bank of Des Moines, more than doubling the San Francisco institution's level of advances and accounting for the majority share of borrowings at the government-sponsored enterprise…. "It is a problem when a FHLB is dependent on one member institution," said Basil Petrou, co-managing director of Federal Financial Analytics. "What happens if Wells Fargo decides to move its business to another FHLB?" Other Home Loan banks with large concentrations of advances with one member have ended up burned in the past. The Seattle Home Loan bank merged with the Des Moines institution in part because its largest member, Washington Mutual, failed in 2008. "Seattle was dependent on Wamu and now Des Moines is dependent on Wells Fargo," Petrou said. "And you never think anything bad is going to happen until it does."
How Trump and Brexit Could Change Global Bank Rules
by Silla Brush and Alexander Weber
This is how a race to the bottom can start. In Washington, President Donald Trump has vowed to roll back the financial regulations passed after the 2008 crisis. In London, Prime Minister Theresa May, facing a possible exodus of bankers as Britain quits the European Union, has said she might fight any “punitive” trade measures from the EU with tax cuts or policy changes to attract investors and companies…. n a few instances some regulators have conceded there’s room to tweak the U.S. regulations. Daniel Tarullo, who spearheaded many of the most important restrictions at the Federal Reserve before he stepped down in April, said some requirements could be softened for smaller banks. But Trump has been pushing for even bigger changes. On April 21, the president ordered Secretary of the Treasury Steven Mnuchin to review regulations meant to help authorities wind down a failing bank, as well as rules for designating some nonbank financial institutions as systemically important and therefore subject to additional restrictions. That worries policymakers outside the U.S. “The big question on which the Europeans are awaiting clarity is whether the U.S. really goes its own way on questions as pivotal as orderly resolution” of failing firms, says Karen Shaw Petrou, managing partner at Federal Financial Analytics Inc. in Washington.
Courts are new weapon of choice for banks looking to shift policy
By Rob Blackwell and Joe Adler
Financial services companies and groups are increasingly willing to take the regulatory regime to court in an effort to fight back against enforcement orders and new initiatives — and so far, they appear to be succeeding. ...The proliferation of major cases is a sea change from the way the banking industry has behaved in the past. Generally speaking, banks don’t sue their regulators. “Bankers are reluctant to stick their heads up,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics. “They feel — with good reason — that they live or die with the goodwill of regulators.” But that is changing, in part because of victories by PHH Corp. and MetLife. “Success breeds courage,” Petrou said.
Trump team muddies deregulation message with Glass-Steagall chatter
by Joseph Lawler
As President Trump promises a major rollback of the post-financial-crisis rules on banks, his administration is muddying his deregulation message by pushing a new Glass-Steagall, a recession-era policy more commonly associated with Sens. Bernie Sanders and Elizabeth Warren than with Republicans. ... In fact, Glass-Steagall legislation isn't likely, even though a bipartisan group of lawmakers, including Sens. Elizabeth Warren, D-Mass., and John McCain, R-Ariz., cited Cohn in introducing a bill that would create an even more aggressive form of the law in April. But there simply aren't enough Republican lawmakers who would sign on. Administrative action would be more likely. And the administration could do "a huge amount" with the powers it has now to impose a form of Glass-Steagall, according to Karen Petrou, managing partner for Federal Financial Analytics, which advises banks on regulatory affairs.