"FDIC Tells Congress it May Ease Leverage Ratio; Fed Asks for Legislative Help"
The FDIC may exclude bank reserves kept at the Fed and in Treasury securities from leverage ratio calculations, according to a letter Chair McWilliams sent to the Senate Banking Committee. I haven't seen any media coverage of this yet, but the link above takes you to a detailed report by Jaret Seiberg of Cowen Washington Research Group.
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Mark Miller
Chief Financial Officer/Chief Operating Officer
Community National Bank & Trust
Chanute, KS
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Original Message:
Sent: 04-30-2020 17:34
From: Barb Rehm
Subject: Weekly News Roundup
GDP shriveled and unemployment swelled, the Fed held firm, and the federal "stay-at-home" order expired Thursday while some states began reopening their economies. But the big news of the week – again – revolved around the Paycheck Protection Program. I know you're all inundated with information about this program, so I'll keep it (relatively) brief. PPP restarted Monday with an additional $310 billion. Within minutes of opening, the SBA's E-Tran system crashed, and the agency contended all the trouble was just part of its plan to "pace" the process. After smaller banks claimed the $30 billion specifically set aside for their borrowers, the SBA decided to accept applications only from banks with less than $1 billion in assets during an eight-hour window Wednesday, which of course upset larger banks. But many bankers are growing weary of the government's constant fiddling with the program's details.
Here's what else you might want to read this week.
"FDIC Tells Congress it May Ease Leverage Ratio; Fed Asks for Legislative Help"
The FDIC may exclude bank reserves kept at the Fed and in Treasury securities from leverage ratio calculations, according to a letter Chair McWilliams sent to the Senate Banking Committee. I haven't seen any media coverage of this yet, but the link above takes you to a detailed report by Jaret Seiberg of Cowen Washington Research Group.
"In Face of Coronavirus, Bankers Apply Lessons from Natural Disasters"
American Banker interviewed bankers with crisis-management experience to glean lessons for executives trying to navigate the coronavirus. One takeaway: mistakes are inevitable. "Clarity is more valuable than certainty," one banker said.
"Banks Grant Millions of Payment Deferrals During Pandemic"
Banks are deferring payments by borrowers hit by the coronavirus. The looming question is whether deferrals turn into defaults.
"How Banks Plan to Safely Reopen After Coronavirus Lockdowns Lifted"
While this story focuses on large banks, it has lessons for everyone trying to figure out how to safely bring employees back to the office.
"Fed's Powell Says More Spending Will Be Needed from Congress"
Fed Chair Powell pulled no punches at a press conference Wednesday where he pledged to keep interest rates low for as long as it takes – and that's likely longer than you think. It's clear Powell is bracing for a long, hard slog. More should and will be done to bolster the economy, both by the Fed and Congress, he said. Powell also advised against worrying about the federal debt, for now.
"The Federal Reserve Is Changing What It Means to Be a Central Bank"
Excellent and well-sourced The Wall Street Journal story on all the Fed is doing to save the economy and all the downsides those moves present. "Among risks the Fed is taking: that some programs won't work, that officials won't be able to unwind them, that politicians will grow accustomed to directing the central bank to fix problems its tools aren't designed to solve, and that public discontent about the central bank's choices will erode its authority over time."
"Fed Lending Faces a Tough Slog on Main Street"
The Fed's "Main Street Liquidity Fund" is one of the new programs that may prove problematic, former New York Fed president Bill Dudley writes for Bloomberg. This program is aimed at businesses that are too big to qualify for SBA-backed loans but not big enough to benefit from the Fed's corporate credit facility. Dudley sees two main issues: convincing businesses to borrow and banks to make the loans on the one hand balanced against the risk that these loans simply end up keeping bad businesses afloat, which makes it harder for competitors to survive.
"Federal Reserve Expands Business-Lending Program"
The Fed expanded the Main Street Lending Program on Thursday. Businesses with up to 15,000 employees and $5 billion in annual revenues are eligible for four-year loans of at least $500,000.
"Fed to Extend Loans to More Cities, Counties"
The Fed expanded another new program, saying it will now buy up to $500 billion in debt from state, city and county issuers. But the Fed is requiring these borrowers to seek credit from banks first.
"U.S. Audits of Small-Business Loans Face Daunting Challenges"
Treasury Secretary Mnuchin said the government will audit all PPP loans over $2 million and spot check smaller credits for fraud. But The Wall Street Journal story outlines how difficult it will be for the SBA to verify whether the borrower was eligible, if it used the money as intended, and whether the loan should be forgiven.
"Auto Loans Are Running on Fumes"
Car loans are performing even worse than credit card loans.
"Why Some Small Banks are Taking Their CECL Lumps Now"
Congress gave the industry a two-year reprieve from CECL, but some banks are opting to take the pain sooner vs. later.
"Trump Appointees Manipulated Agency's Payday Lending Research, Ex-Staffer Claims"
The New York Times got a memo written by a CFPB economist that outlines what he saw as efforts to dismantle a payday lending reg.
"The Untold Story of the Birth of Social Distancing"
Who knew? Social distancing became official U.S. policy way back in February 2007 as the Bush administration searched for ways to combat pandemics. Check out The New York Times piece for the interesting backstory on something we're all doing right now.
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Barb Rehm
Senior Managing Director
Promontory Interfinancial Network, LLC
Arlington VA
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