Fed keeps trying to calm markets; Mortgage payment pause considered
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The Fed’s next moves
“Taking a page from its 2008 financial crisis playbook,” the Federal Reserve said it would start buying commercial paper, “a key funding source used by companies to cover payroll and day-to-day operations,” the New York Times reports. The Fed also said “it would roll out a new Primary Dealers Credit Facility, which will allow banks that are key conduits between the Fed, Treasury Department and the broader financial system to get the short-term loans they need to buy and hold securities including corporate bonds.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker here and here
Despite the two moves, “the question still looming over the Fed is just how far is the central bank willing to go to keep credit flowing to consumers and businesses,” American Banker says.
In Europe, top bankers “are trying to calm fears about an incipient financial crisis after huge drops in their securities over the past two weeks, reflecting growing investor concern about the economic fallout of the coronavirus pandemic,” the Financial Times reports. Both Ana Botín, executive chairman of Spain’s Santander, and a top Deutsche Bank executive, said they expected a “v-shaped” recovery. Botín said her bank is “well-positioned to withstand even a severe stress scenario.”
But there’s not as much optimism in Italy, where “an epic misfortune is playing out,” the New York Times says. “Fears are intensifying that the economic damage could trigger a far more familiar danger — a banking crisis. If the downturn persists, many Italian companies could find themselves short of the profits needed to repay their loans. That could weaken bank balance sheets to the point of crisis.”
In the U.K., the Financial Conduct Authority “has told banks and investment managers to take a flexible approach to loan repayments, account fees and savings withdrawal penalties, to help ‘meet the challenges coronavirus could pose to customers and staff,’” the FT notes. “Measures include using the flexibility within existing rules to give customers easier access to their cash, such as waiving fees for individual savings accounts and allowing them to cash in fixed-term deposits early. Other recommendations are that lenders support borrowers who are in difficulty and “show greater flexibility to customers in persistent credit card debt.’”
Why don't you stay?
“Seven months after he assumed the position on an interim basis,” Noel Quinn was named CEO of HSBC. “His appointment removes one element of uncertainty about Europe’s largest bank as it deals with the fallout from the coronavirus pandemic,” the Journal says. “Some analysts and investors have said that Mr. Quinn’s months-long apprenticeship for the top job risked undermining his credibility and raised questions about the board’s judgment in stringing out the process while he moved to cut thousands of jobs and scale back operations in Europe and the U.S.”
“Noel has proven to be the outstanding candidate to take on a role permanently that he has performed impressively on an interim basis since August 2019,” Chairman Mark Tucker said, the FT reports.
Wall Street Journal
The Federal Deposit Insurance Corp. proposed “a clearer set of rules” for fintechs and other firms seeking to offer banking services. “The FDIC’s framework would impose new oversight on the owners of so-called industrial loan companies, which enjoy many of the same benefits as traditional banks but aren’t owned by a federally-supervised bank holding company. The proposal would require that the parent provide capital and liquidity support to an industrial bank in an emergency.”
Federal authorities “are investigating whether traders at JPMorgan Chase manipulated the market for Treasury securities and futures contracts. The investigation shows that federal prosecutors and regulators continue to expand a campaign against an illicit practice known as spoofing, which has mainly focused on wily trading in derivatives. A move to scrutinize whether similar practices have affected the $17 trillion market for Treasury securities would open a new, and potentially more complicated, front in the war on spoofing.”
New York Times
The Housing Policy Council, a group of banks and other mortgage industry participants that includes Citigroup, Wells Fargo, JPMorgan Chase and Quicken Loans, “is working on a plan to offer a temporary pause in payments on home loans,” the paper says. “Details were still being decided, but the plan would allow borrowers to stop paying for as long as the public health and economic disruptions lasted,” according to Ed DeMarco, the CEO of the group, who also said the “group wanted it in place by April 1.”
“The facility will allow primary dealers to support smooth market functioning and facilitate the availability of credit to businesses and households.” — The Federal Reserve, announcing its Primary Dealers Credit Facility