Powell calls for CRA expansion; Richard Cordray returns

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All’s fair

Federal Reserve Chair Jerome Powell said the Community Reinvestment Act “should be extended to cover all firms providing consumer credit, not just banks,” The Wall Street Journal reported.

“Like activities should have like regulation,” he told the National Community Reinvestment Coalition, a fair-lending advocacy group. “The remarks signaled Mr. Powell’s support for efforts to overhaul the more-than-40-year-old law to encompass non-banks that increasingly provide the bulk of credit to individual borrowers, particularly in the $11 trillion mortgage market. Such firms aren’t currently required to adhere to CRA rules.”

“While banking regulators can’t expand the scope of CRA without authorization from lawmakers, Powell said Congress may want to consider an expansion of the law as lending continues to move outside of the regulated banking sector,” American Banker reported.

Powell also said the Fed “has a role to play with both its economic tools and in its bank supervision and community development work” to narrow “longstanding disparities” between racial groups, The New York Times reported.

“Those who have historically been left behind stand the best chance of prospering in a strong economy with plentiful job opportunities,” he said. “We see our robust supervisory approach as critical to addressing racial discrimination, which can limit consumers’ ability to improve their economic circumstances.”

Wall Street Journal

Acting role

Treasury Secretary Janet Yellen plans to appoint Michael Hsu, “one of the Federal Reserve’s top big-bank supervisors, to become the acting comptroller of the currency, overseeing the country’s largest financial firms. Ms. Yellen is expected to make the announcement in the coming weeks. Blake Paulson, the current acting comptroller, will remain at the agency as a deputy comptroller and chief operating officer.”

Hsu is currently “associate director of the Fed’s bank supervision and regulation division,” where he “helps lead the Fed’s supervision of the largest financial institutions, including firms such as Goldman Sachs, Morgan Stanley and Wells Fargo. He has also played a role in the response to the implosion of Archegos Capital Management.”

“After joining the OCC, Hsu will be assigned the title of first deputy comptroller, effectively putting him in charge of the national bank regulator until a formal nominee for comptroller of the currency can be confirmed by the Senate — a process that routinely stretches months,” American Banker said. “To date, the Biden administration has not announced a nominee to lead the OCC.”

Financial Times

IPO postponed

Trustly, one of Europe’s most valuable fintechs, “has postponed its proposed $9 billion stock market flotation after Swedish regulators raised concerns about the payment company’s lack of due diligence on its end customers. The planned initial public offering was due to be one of the biggest by a fintech company in Europe this year and was set to take place this quarter but has now been postponed indefinitely.”

“Trustly has pitched itself as an alternative to buy-now, pay-later companies such as Klarna, valued at $31 billion, that rely on the card networks of Visa and Mastercard for payments. Trustly offers payments directly from the bank accounts of customers to those of merchants. It claims its fees are lower than fintech companies that use card networks because it cuts out the middlemen. As well as ecommerce, Trustly is also known in the payments industry for having a large presence in the higher-risk betting sector. Rivals have questioned the company’s activities outside of online retail.”

Park it somewhere else

Large U.S. banks including JPMorgan Chase and Citigroup have “taken the unusual step of advising corporate clients to move money out of deposits” and instead “put it into money market funds. The discussions followed a Federal Reserve decision in March to end looser capital rules for banks that were put in place early in the pandemic. Usually, deposit growth is a welcome indicator of a healthy economy and allows banks to lend more. But extra deposits can be costly for banks, requiring more capital.”

Favorite son

New York’s “close-knit corporate deal-making community is backing the long-shot bet” of former Citigroup executive Ray McGuire to become mayor.

New York Times

He’s b-a-a-a-ck

Richard Cordray, “a close ally of Senator Elizabeth Warren who served as the first director of the federal Consumer Financial Protection Bureau during the Obama years, has been selected as the new head of federal student aid in the Biden administration. With his new position within the Education Department, the primary lender for higher education, Mr. Cordray might be able to cancel student debt administratively.”

President Biden “has endorsed canceling up to $10,000 per borrower through legislation, but has been pressured by some Democrats to forgive” as much as $50,000 per borrower, “and to sign an executive order making it happen if Congress fails to act.” Cordray would be in a position to do that.