Dodd-Frank News Center

Leading economists warn about challenges facing middle class

This story appeared in Bank Digest.

To launch their new Middle Class Prosperity Project, Sen. Elizabeth Warren (D-Mass) and Rep. Elijah E. Cummings (D-Md), Ranking Member of the House Committee on Oversight and Government Reform, held the first in a series of congressional forums to hear directly from leading economists about how the nation's economic system has been rigged against the middle class over the past several decades.

The forum featured Dr. Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities; Dr. Beth Ann Bovino, U.S. Chief Economist at Standard & Poor's Rating Services; Dr. Gerald Jaynes, Professor of Economics and African American Studies at Yale University; and Dr. Joseph E. Stiglitz, University Professor at Columbia University.

Warren and Cummings launch "Middle Class Prosperity Project"

This story appeared in Bank Digest.

Senator Elizabeth Warren (D-Mass) and Rep. Elijah E. Cummings (D-Md), Ranking Member of the House Committee on Oversight and Government Reform, announced that they will launch a new "Middle Class Prosperity Project" to examine economic policies that threaten the middle class and identify new proposals that will ensure the middle class remains the engine of America's economic growth. To kick off this new project, on Feb. 24, 2015, Warren and Cummings will hold the first in a series of congressional forums to hear directly from leading economists about "how the nation's economic system has been rigged against the middle class over the past several decades." They also released an outline of their work together in a document titled: “The Warren-Cummings Partnership: Working Together to Help the Middle Class.”

Financial Services Committee considers Volcker Rule impact on job creators

This story appeared in Bank Digest.

The Committee on Financial Services has held a hearing entitled "The Impact of the Volcker Rule on Job Creators, Part I," which considered the potential impact the Volcker Rule would have on the U.S. economy and its capital markets. Among other things, the hearing examined the effect of the Volcker Rule on the ability of financial institutions to own tranches of collateralized debt obligations backed by trust preferred securities and the ways in which H.R. 3819, the Fairness for Community Job Creators Act, would modify the Volcker Rule's applicability to financial institutions that hold such ownership interests.

FOMC Continues Efforts to Support Growth

By Richard Roth, J.D., Editor, the Federal Banking Law Reporter, Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis.

The Federal Open Market Committee announced after its meeting that ended March 20, 2013, that it would continue to keep the target for the federal funds rate at a range of 0 to .25 percent. It also intends to continue its purchases of agency mortgage-backed securities and longer-term Treasury securities at a pace that will total $95 billion per month. The FOMC cited projections of continued moderate economic growth, gradually falling unemployment rates, and low inflation expectations as supporting its decisions.

Duke Sees Housing Recovery Taking Root and Expanding

By Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

Federal Reserve Board Governor Elizabeth Duke expressed optimism that the housing recovery will continue to take root and expand, supported by low mortgage rates as well as the pent-up demand of household formation in response to improving economic conditions. In a March 8, 2013,  speech to the Mortgage Bankers Association’s housing finance conference,  Duke cautioned that the strength of the momentum will be determined by credit availability to these new households, “an availability that may be much slower to return as mortgage market participants assess the regulatory, market, and economic environment.” Duke added that if such credit is not readily available, the housing recovery will still continue, but the mix of owner-occupied and rental housing, and the level of mortgage originations, “might be quite different.” 

Bernanke Says “Moving in the Right Direction” on Too-Big-to-Fail

By Richard Roth, J.D., Editor, the Federal Banking Law Reporter, Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis and Sarah Borchersen-Keto, Washington News Bureau, Contributing Author, the Federal Banking Law Reporter and Bank Digest.

Fed Chairman Ben Bernanke said the plan to end the belief that some banks are too big to fail is “moving in the right direction.” He predicted that over time there will be increased market expectations that certain large institutions can fail during questioning at a Senate Banking Committee hearing Feb. 26, 2013 (webcast), when he gave his semiannual report on monetary policy. Bernanke noted that progress had been made on the Federal Deposit Insurance Corp.'s orderly liquidation authority and on living wills. “If additional steps are needed, then Congress obviously can discuss those,” Bernanke told Sen. Elizabeth Warren, D-Mass. He added that the benefits associated with large banks are going to decline over time, meaning that “some banks are going to voluntarily begin to reduce their size because they're not getting the benefit that they used to get.”

Fed Working Paper Studies Collapse of Asset Backed Securities Market

This story appeared in Bank Digest.

A working paper released by the Federal Reserve Board entitled “From Wall Street to Main Street: The Impact of the Financial Crisis on Consumer Credit Supply” studies how the collapse of the asset backed securities (ABS) market during the financial crisis of 2007-2009 affected the supply of credit to the broader economy using a new dataset that describes unique interbank relationships within the credit union industry. Authors Rodney Ramcharan, Skander Van den Heuvel and Stephane Veranith find ABS related losses at correspondent credit unions to be associated with a large contraction in the supply of consumer credit and a hoarding of cash among downstream credit unions, suggesting that capital regulation might shape the ability of financial institutions to transmit securities price volatility onto the real economy.

FOMC Holds Steady Course

By Richard Roth, J.D., Editor, the Federal Banking Law Reporter, Bank Compliance Guide, Bank Digest; co-author, Dodd-Frank Wall Street Reform and Consumer Protection Act—Law, Explanation and Analysis 

The Federal Open Market Committee decided at its two-day meeting ending Jan. 30, 2013, to make no changes in its current economic policy, leaving all of its stimulus measures in place. Specifically, the committee left the federal funds rate target at a range of 0 to .25 percent and said that it intended to continue purchasing agency mortgage-backed securities and Treasury securities.

Bernanke Warns of Fiscal Cliff Economic Impact

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter and Bank Digest.

Federal Reserve Board Chairman Ben Bernanke urged Congress and the administration to protect the economy from the “full brunt” of a severe fiscal tightening at the beginning of next year—the so-called fiscal cliff—that would occur if a deal is not reached.

Speaking Nov. 20, 2012, at the New York Economic Club, Bernanke warned that a combination of automatic tax increases and spending cuts, absent offsetting changes, “would pose a substantial threat to the recovery.” Bernanke noted that “coming together to find fiscal solutions will not be easy, but the stakes are high.”

Stress Test Economic Scenarios Released

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter and Bank Digest.

The Federal Reserve Board released the three economic and financial market scenarios that will be used for the current stress test cycle on the largest financial institutions, as required under the Dodd-Frank Act, and in connection with capital plans due in January 2013 under the Board’s capital plan rule.

The scenarios will be used in company-run tests and tests conducted by the Fed on the 19 banks that are part of the Fed’s Comprehensive Capital Analysis and Review. The scenarios include baseline, adverse, and severely adverse scenarios, and include 26 variables such as economic activity, unemployment, exchange rates, prices, incomes and interest rates. All scenarios start in the fourth quarter of 2012 and extend to the fourth quarter of 2015. An additional 11 firms that are part of the Capital Plan Review will test themselves using the baseline and severely adverse scenarios, and will submit their results to the Fed.