We certainly have an abundance of bad bits and bobs out there right now, don’t we? War, pestilence, chubby dictators with rockets, buff dictators without souls, miscellaneous threats to world peace. It’s everywhere. Nonetheless, my take remains (see my prior blog, Prognosticator’s Regret) that, at least for our economy, all that doesn’t matter so much (how stupid does that sound?). It’s only through the transmission mechanism of monetary change that our economy is really impacted and regrettably, we’ve got that in full right now in the form of rapid, material inflation.
Continue Reading It’s the Inflation, Stupid
Volcker Rule Amendment: Trending Towards Flexibility
After much anticipation and expectation, on June 25, 2020, the Federal Reserve Board, CFTC, FDIC, OCC, and SEC (the “agencies”) finalized an amendment to Section 13 of the Bank Holding Company Act, commonly known as the Volcker Rule, which among other things prohibits banking entities from sponsoring or acquiring ownership interests in “covered funds.” Covered funds are entities that would be investment companies but for exemptions provided under Sections 3(c)(1) or 3(c)(7) of the Investment Company Act, and generally include private equity funds and hedge funds. The final rule, which goes into effect on October 1, mostly follows what the agencies had signaled to everyone back in the mask and quarantine-free days of January when it released proposed changes that are largely adopted in the final rule.
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“I Was Just Following Orders”
My last commentary, Playing with Broken Toys in Coronavirus Land, touched on the notion that sometimes following rules can guarantee a bad outcome. I’ll leave more important musings about ethics and morality aside here (I still don’t have a clue about what Kant was nattering on about) and focus on the more mundane question of whether one should do what a contract says when the contract conflicts with the exercise of good judgment.
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The Calamity of the Weaponized Narrative
Tim Sloan resigned as the CEO of Wells Fargo a few months ago. I had briefly worked with Tim and much admired him so, on a personal level, this was sad. Now, Mr. Sloan’s resignation might have been a compelling and obvious move in any crisis consultant’s playbook, so I get that – but – oh, the vilification!
This commentary is about the ease with which we now embrace vilification and the substitution of ad hominem attacks for policy discussion about ideas and about the danger this poses to capital market participants.
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Beany & CECL
Beany & Cecil was a cartoon. The Current Expected Credit Loss accounting rules, better known as CECL, which the FASB is insisting will go into effect at the beginning of next year for publicly traded banks and lenders and a year later for all other GAAP reporting entities is not. Now, heaven forfend that I suggest that the work of the Financial Accounting Standards Board is cartoonish, but there’s a parallel in this pairing of harmless and obscured menace worth noting.
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Sticks and Stones May Break My Bones, But Words Really Matter
After an evening checking out my various high school and college yearbooks for any troublesome content, and checking Mom’s photo albums (I’m good on the yearbooks, but there were a couple cowboy and Indian pics from when I was about 7, that could be troublesome), it got me thinking hard about the power of words, images and narratives. Words will hurt you. Images will hurt you. Narratives will hurt you.
Our industry has to pay attention to the power of words, images and narratives; and particularly right now as the 2020 election cycle gets into high gear.
High school tweets, Texas bar admission applications, and college papers apparently can now ruin careers. Now some may say that’s a good thing and some may say it’s terrible, but let’s face it, it is a thing. In this world of hyper-connectivity, words and images take flight instantaneously and can spread around the market, around a polity, a community or around the globe in a heartbeat. And they never go away. Moreover, there seems to be a view in currency that forgiveness is not possible and balance is no longer relevant and that people are defined by their worst. A sort of the lowest common denominator. Well, heaven forbid that I take sides here, but think, if you will, for a moment on Winston Churchill: Gallipoli, Edward VIII, resistance to Indian independence and certainly some racism towards the people of the Indian subcontinent, but still the savior of the West. Bad outcome? Could happen today?
Continue Reading Sticks and Stones May Break My Bones, But Words Really Matter
More Fun With Risk Retention: Europe and Japan Weigh In
We’re all just back from CREFC and the mood was broadly constructive. (Don’t you love that word, “constructive”? When did “constructive” become a fancy way to say “good”?) We all went to South Beach this year wondering where the investors were, wondering whether the market was okay and wondering whether December was a blip or a coda. If the industry chatter captured the gestalt, and the gestalt is right, then while this recently strong market will surely expire at some point, this is not that point.
Amongst the frolicking in Goldilocks Land in SoBe, there were some actual issues discussed. One of these that got some attention, at least by the wonkier members of the crowd, is the new risk retention rules out of Europe.
We’ve written about these before. It is very much a moving target. If you think the American rulemaking process is baroque, turgid and opaque, spend some time in Brussels.
Continue Reading More Fun With Risk Retention: Europe and Japan Weigh In
Proposed Rule Regarding HVCRE ADC Open for Comment
Are you ready? The proposed rule regarding HVCRE ADC has been published in the Federal Register today and is open for comment. You know the drill, comments are due in 60 days (by November 27, 2018). Give us a ring for more background on HVCRE ADC and the proposed rule. We’re always happy to discuss
Are you there FDIC, OCC and Fed Res? It’s us, Crunched Credit: Regulators Request Feedback on HVCRE ADC
On September 18, 2018, the Federal Reserve, FDIC and OCC released a Notice of Proposed Rulemaking (NPR) regarding HVCRE. The good news is that the stated intent is not to alter any of the improvements made by EGRRCPA, instead the agencies describe the proposed rulemaking as conforming the regulatory capital rule to the new
Night of the Living Dead: LIBOR Playing a Zombie in a Reality Near You!
LIBOR is going away, but that’s sort of old news at this point. However, it has been received wisdom that only after the Bank of England stops imposing an obligation upon member banks to publish LIBOR quotes as at the beginning of 2021, would LIBOR go away