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FHFA: Fannie, Freddie Could Need $78 Billion in a Potential Crisis - ABI

The mortgage giants Fannie Mae and Freddie Mac could require as much as $78 billion in bailout money in the event of a serious financial crisis, according to stress test results released on Tuesday by the Federal Housing Finance Agency, National Mortgage News reported. The government-sponsored enterprises would need to draw between $42.1 billion and $77.5 billion from the Treasury Department under the test's "severely adverse" economic scenario, depending on how the enterprises treat their deferred tax assets, the agency said in its report. Under the terms of the senior preferred stock purchase agreements, the GSEs would retain between $176.5 billion and $212 billion under their funding commitment from Treasury. The projected draw is lower than the estimate from last year, when regulators reported that the GSEs could need nearly $100 billion in a new crisis. In 2016, the agency said that they would need just under $126 billion. The Dodd-Frank Act requires federally regulated financial companies with total assets of more than $10 billion to conduct annual stress tests to assess their ability to withstand an economic crisis.


Senator Warren Points to Boston Herald Bankruptcy to Make Case for Venue Reform - ABI

A bipartisan bill co-sponsored by U.S. Sens. Elizabeth Warren (D-Mass.) and John Cornyn (R-Texas) earlier this year to require companies to file for bankruptcy in their main place of business has garnered no support among fellow lawmakers, Warren is continuing to push for the legislation, WSJ Bankruptcy Pro reported. Troubled by the overwhelming number of debt-burdened companies seeking protection from creditors in Delaware or New York courts regardless of where they are headquartered, Sen. Warren and Sen. Cornyn last January introduced the Bankruptcy Venue Reform Act. If passed, the bill would require corporations to file for bankruptcy in the district where their principal place of business is located, not simply where they are incorporated or where they operate much-smaller affiliates. No other lawmakers have signed on to the bill, according to Congress.gov, but Sen. Warren raised the topic last month in a speech to the New England Council, a regional business group, in Boston. “Why did the Boston Herald file bankruptcy in Delaware?” she asked her audience, noting that the newspaper’s retirees, suppliers and current employees are in Boston. “Last time I looked, we have a bankruptcy court in Boston — a court whose judges are excellent,” she said. The Boston Herald filed for chapter 11 last December. Citing a recent study, Sen. Warren said that, of the 159 biggest bankruptcies between 2007 and 2013, about 80 percent filed in either Delaware, where many businesses are incorporated, or Manhattan, the epicenter of the bankruptcy bar.


New FDIC Leader Joins Push to Re-Evaluate Banking Rulebook - ABI

Washington’s newest senior bank regulator is turning her agency’s agenda in the direction of policies being proposed by other Trump-appointed officials, adding momentum to a push to revisit rules adopted after the 2008 financial crisis, the Wall Street Journal reported. Federal Deposit Insurance Corp. Chairman Jelena McWilliams, in her first interview since being sworn in June 5, said she is ready to re-evaluate rules on bank capital, small-dollar loans and investments in low-income areas. Like other bank regulators, McWilliams has broad discretion to rewrite rules for the companies she oversees, using authority from the 2010 Dodd-Frank financial overhaul and other laws. The Republican-controlled Congress earlier this year passed a law calling for easing banking rules, especially for small lenders. But much of Dodd-Frank remained intact, leaving the Trump administration’s financial-regulatory overhauls to be carried out largely by bank regulators such as McWilliams. She said Friday that her top priorities are examining the regulatory burden on small banks, speeding up her agency’s review of bank-charter applications and helping banks introduce new financial products for underserved communities.


British Study Says U.S. Regulators Not Strong Enough for a Crisis - ABI

A Bank of England study said that the Financial Stability Oversight Council would probably not be able to stop another financial crisis because of its limited powers and narrow remit, Bloomberg News reported. The FSOC “has no macroprudential levers under its direct control, and not all its members have mandates to protect financial stability,” according to the study, which compared the powers of the U.S. body with the U.K.’s Financial Policy Committee. That could leave the American regulator vulnerable to political pressure and impede its ability to act. The FSOC was formed after the 2008 financial crisis to monitor threats that could lead to another crash. Since the election of President Donald Trump, the body has looked for ways to cut back outdated and overlapping rules to reduce Wall Street’s regulatory burden and compliance costs. The authors said the range of powers granted to the FPC makes it “the most muscular macroprudential regulator in the world.” The committee has the authority to restrict lending, add capital buffers, vary risk weights for lenders, advise on stress tests and to demand additional powers as part of its remit. By contrast, the FSOC has few powers under its control.


Consumer Credit in U.S. Rose Less Than Estimated in June - ABI

U.S. consumer debt rose less than estimated in June as revolving debt outstanding fell for the second time in four months, Federal Reserve figures showed yesterday, Bloomberg News reported. The drop in revolving debt, which includes credit cards, signals consumers took a breather after such borrowing in May jumped by the most in six months. Meanwhile, non-revolving debt, which includes loans for education and automobiles, remained robust, in part reflecting healthy demand for vehicles. The Fed’s consumer credit report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages. The results are consistent with second-quarter data that showed household spending rebounded to the fastest pace of growth since 2014, after a weak start to the year.


‘Too Little Too Late’: Bankruptcy Booms Among Older Americans - ABI

For a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy, the New York Times reported. The signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years. Now, new research sheds light on the scope of the problem: The rate of people 65 and older filing for bankruptcy is three times what it was in 1991, the study found, and the same group accounts for a far greater share of all filers. Driving the surge, the study suggests, is a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety net shrinks. The transfer has come in the form of, among other things, longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care. Declining incomes, whether in retirement or leading up to it, compound the challenge. As the study, from the Consumer Bankruptcy Project, explains, older people whose finances are precarious have few places to turn. “When the costs of aging are off-loaded onto a population that simply does not have access to adequate resources, something has to give,” the study says, “and older Americans turn to what little is left of the social safety net — bankruptcy court.”


Sen. Marco Rubio Says Family Leave Shouldn’t be a “Bankruptcy-Inducing Event” - ABI

Sen. Marco Rubio says that going on leave from work to care for a family member should not be a "bankruptcy-inducing event," as many workers across the country are forced to choose between taking a paycheck or spending time with their newborn children, CBSNews.com reported. Rubio, along with Rep. Ann Wagner (R-Missouri), plans to introduce the Economic Security for New Parents Act in the Senate to help parents get two months of paid leave, offset by funds from their future Social Security benefits. It would be the first new leave option for families since the Family and Medical Leave Act (FMLA) of 1993. That law ensures 12 weeks of unpaid leave for those seeking to care for a family member. Under Rubio's bill, employees would then delay taking their Social Security benefit for three to six months when they reach retirement age.


Fed Signals More Rate Hikes Coming Despite Trump’s Calls to Back Off - ABI

The Federal Reserve left its benchmark interest rate unchanged yesterday, keeping the rate in a range of 1.75 percent to 2 percent, but the central bank said the U.S. economy is “strong” and hinted that more rate hikes are coming soon, the Washington Post reported. President Trump has urged the Fed to keep rates low, but the central bank is an independent body, and Fed leaders have made it clear they intend to carry out their mandate to keep unemployment down and prices stable without political interference. Fed policymakers think the U.S. economy is on very good footing now and that the historically low rates that were put in place to aid the economy after the Great Recession are no longer necessary. “The labor market has continued to strengthen and…economic activity has been rising at a strong rate,” the Fed said in its statement yesterday, adding that it expects “further gradual increases” in interest rates.


U.S. Household Spending, Income Rose at Solid Rate in June - ABI

U.S. households’ incomes are rising in pace with robust spending, an indication that consumers have the capacity to drive gains in economic output, the Wall Street Journal reported. Personal-consumption expenditures, a measure of household spending on everything from hospital stays to groceries, increased a seasonally adjusted 0.4 percent in June from May, the Commerce Department said yesterday. Matching that gain, personal income — reflecting Americans’ pretax earnings from salaries and other sources, including investments — also rose 0.4 percent. Those increases helped propel overall economic output to a 4.1 percent annual growth rate in the second quarter, the Commerce Department said last week. It was the strongest growth since 2014.


Treasury calls for sweeping changes in Fintech, end to payday-lending rule - Politico

The Treasury Department on Tuesday released its blueprint for regulating financial technology, a sweeping document that could influence policy in the emerging industry for years to come.  The recommendations include the endorsement of so-called regulatory sandboxes, which would allow companies to experiment with new services that push the boundaries of current law.  Treasury also called for the end of the Consumer Financial Protection Bureau's small-dollar lending rule, increased control for consumers over their data, and a national data breach notification standard. And it endorsed the Fintech charter proposed by the Office of the Comptroller of the Currency. The OCC quickly followed through and offered updated guidance for its charter hours after Treasury released its report.  Some of those proposals are likely to be controversial with lawmakers, bankers and state regulators. Rescinding the payday lending rule will be especially contentious for Democrats, who have pushed for the regulation for years, saying many lenders charge exorbitant rates that entrap borrowers.