Fed issues guidelines for bank boards; The problems with the CFPB

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Thanks for the memories: Federal Reserve Chair Janet Yellen told President Trump Monday that she will resign as a member of the Fed’s board of governors as soon as her presumptive successor as Fed chair, Jerome Powell, is sworn in. Although Yellen was not reappointed as Fed chair, her term on the Fed board doesn’t expire until 2024. However, it has been customary for Fed chiefs to leave the board once their term as chair ends.

Yellen’s resignation “further broadens Donald Trump’s scope to reshape the leadership of the U.S. central bank,” the Financial Times comments. “The decision means Mr. Trump will have four vacancies on the Fed’s seven-person board to fill, one of which is the position of vice-chair, which was vacated by Stanley Fischer in October.”

Lael Brainard will be the only Fed board member not nominated by Trump, the Washington Post notes, “meaning his selections will have tremendous influence in setting the country’s future monetary policy.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker

Wall Street Journal
How to build a board: The Fed has proposed guidelines on how bank boards should operate effectively. The guidance will replace supervision letters issued by the Fed in the past and will focus on five traits that should be part of a board’s core responsibilities, including overseeing the firm’s risk profile and establishing its strategy based on that profile.

The proposed guidance is “seen by some observers as an overdue easing of the supervisor’s tight grip on the industry, but regarded as troublesome by others who fear a decline in oversight,” the paper says.

Fixing the CFPB: What went wrong with the Consumer Financial Protection Bureau? Dennis Shaul, a former aide to Barney Frank, explores the problems in an op-ed.

“I’ve learned it’s a mistake to create an unaccountable agency,” writes Shaul, now head of the Community Financial Services Association of America, which represents payday lenders, a frequent target of the CFPB. “Congress should never again create an ‘independent’ agency with a sole director, particularly one not subject to the congressional appropriations process.” Unlike other independent government agencies, the CFPB is funded by the Federal Reserve, “a move specifically designed to avoid congressional oversight,” he says.

There’s an app for that: PayPal is getting into the robo-investing business. The payments company is connecting its website and smartphone apps with Acorns Grow, an automated savings and investment service in which PayPal holds a minority interest. PayPal users will be able to make contributions to Acorns and monitor and manage their investments from the PayPal app. The rollout began Monday and will continue through early 2018.

Let’s make movies: Maria Contreras-Sweet, founder of Latino-focused ProAmerica Bank and the former head of the Small Business Administration under President Obama, has emerged as a surprise bidder for Weinstein Co. She wants to keep the disgraced Hollywood studio going, but with women at teh helm.

Financial Times
Most important banks: The Financial Stability Board released its annual list of the world’s most systematically important banks. JPMorgan Chase was the only bank in the second-highest category, meaning it has to hold additional capital of 2.5%. No bank is in the highest category.

A tale of two cities: Goldman Sachs CEO Lloyd Blankfein confirmed the bank will have two hubs in mainland Europe after the U.K. exits the European Union: Frankfurt and Paris.

Quotable
“I am gratified that the financial system is much stronger than a decade ago, better able to withstand future bouts of instability and continue supporting the economic aspirations of American families and businesses. I am also gratified by the substantial improvement in the economy since the crisis.” — Federal Reserve Chair Janet Yellen in her resignation letter to President Trump.