Spotlight on Yellen: President Barack Obama made history on Wednesday when he nominated Janet Yellen to be the first female chairperson of the Federal Reserve. BankThink's resident Basel expert, Mayra Rodriguez Valladares, cheered this selection, arguing that the Fed's vice chairwoman knows what it takes to fix the financial system, while BankThink Deputy Editor Jeanine Skowronski noted that Yellen's long road to the nomination provides a good lesson for how to get more top-level women in banking. (Readers may recall that Yellen was almost passed over for the position in favor of former Treasury secretary and White House favorite Lawrence Summers, who withdrew from the race amid mounting Senate opposition in September.) "Yellen's nomination illustrates just how crucial and effective internal and external support can be in establishing a clear pathway to power," Skowronski wrote. "Her presumptive ascent to a position that may very well make her the most powerful woman in U.S. history should inspire us to rally around other women in the banking industry long overdue a spot in the C-suite." One reader agreed with this assessment. "I have come to believe that nothing is impossible if we put our minds and our resolve to it," he commented. "Yellen's ascension is a proof of that." But another commenter took issue with the president's pick of an inflation dove to lead the central bank. "[The] article is missing one little consideration," this person commented. "What if Yellen (despite all her experience) has exactly the wrong monetary philosophy for this country at this time? There is significant evidence that this is the case for anyone who wants to objectively investigate."
Pressures in Payments: Brett King, founder of Moven, argued that the U.S. was isolating itself from the global payments system. "There is plenty of activity within the local system, but interoperability with the rest of the world is suffering," he noted. "The U.S. is fast becoming a payments island with, in the case of checks and card standards, a system that is 10 years behind the rest of the world." Meanwhile, industry lawyer Peter Weinstock complained that recent clarification from the FDIC on its supervisory approach for banks that facilitate payment processing for higher-risk merchants still leaves them at examiners' mercy. "Banks, as well as third-party processors, have been enhancing their previously implemented controls to monitor merchants' compliance with applicable law to mitigate risks," Weinstock wrote. "They will certainly need to continue to do so in order to continue providing payment processing services to higher-risk merchants." Some commenters thought this due diligence was warranted. "I did not read anything that says that a bank has to take on a risky merchant," one reader commented. "As I have said on these pages before When you fly with the crows, you get shot with the crows.'" But others thought vetting customers was easier said than done. "Lacking binoculars, how does one tell a crow [or] a seagull ... from an eagle" another reader commented. "Only in retrospect. You really want a bank examiner to determine the winners and losers?"
Rossi Teaches Congress a Lesson: In his latest Risk Doctor column, Cliff Rossi argues that a U.S. default a distinct possibility given Congress's current impasse over the ongoing government shutdown and debt ceiling debate is the ultimate systemic risk. "A U.S. default has a reasonable likelihood of sparking a liquidity crisis on par with that of 2008, leading to recession in the U.S. and abroad," he wrote. "Although these are uncertain outcomes, even a small chance of this happening should be a sufficient deterrent against allowing the debt ceiling limit to lapse for anyone knowledgeable of the way financial markets work."
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