All Articles Finance Modern Money While You Were Working - April 21

While You Were Working – April 21

Trump targets FSOC and OLA, Mnuchin slow plays Fannie and Freddie, Goldman feedback goes 24/7, and why Messi and Ronaldo might one day unite

4 min read

Modern Money

Former Treasury Secretary Henry Paulson

Got a question about crisis management tools? Ask this guy. - Alex Wong/Getty Images

President Trump set his sights on FSOC, OLA

The move by President Trump to sign executive orders calling for reviews of the Financial Stability Oversight Council (FSOC) and the Orderly Liquidation Authority (OLA) comes as no surprise to anyone who has been listening to the murmurs from the White House and Treasury Department.

If the ultimate goal of the reviews is to eliminate the OLA and zap the FSOC’s power to designate systemically important financial institutions (SIFIs), then now is as good a time as any to ask what might replace them.

It’s not like there has been a litany of bank failures on Wall Street since the crisis, so something about the increased oversight that accompanies a SIFI designation is working. The increased oversight also might come in handy when the next crisis hits. One of my favorite nuggets from Andrew Ross Sorkin’s Too Big to Fail is when Ruth Porat from Morgan Stanley tells regulators, who are busy frantically trying to rescue Lehman Brothers, that their real problem is AIG. The regulators are caught off guard, having had no clue what kind of a mess AIG had become. It seems the increased oversight that accompanies a SIFI designation might prevent regulators from being so blind-sided during future crises.

When it comes to the Orderly Liquidation Authority, I recommend people in the Trump administration ask former Treasury Secretary Henry Paulson how he feels about that one. Paulson, a Republican with impeccable Wall Street pedigree, has lamented the fact that he didn’t have any authority to step in and wind down Lehman Brothers during the crisis.

The SIFI designation and the OLA are constructed to prevent the blindness and impotence that regulators felt during the last crisis. So if the goal is to get rid of them, then I ask again what will be used in their place? You can’t just take a pill.

Mnuchin talked about killing Treasury’s golden goose

Treasury Secretary Steven Mnuchin has a lot of reforms on his radar: Tax reform, health-care reform, Dodd-Frank reform, trade policy reform, etc. And yet, he insists the reform of Fannie Mae and Freddie Mac is also on his to-do list. In fact, he says reshaping the mortgage finance system is “very important” to him and President Trump.

However, talk is cheap. With Fannie and Freddie pushing $10 billion per quarter into a Treasury Department slush fund, just how motivated do you reckon Mnuchin is to cut off that nice little funding stream?

Goldman Sachs goes for 24/7 employee feedback

As is the growing trend, Goldman Sachs is rolling out a tool that enables employees to request feedback from managers whenever they want. And by whenever, the tool includes a mobile app, so they mean whenever. As someone who covers compliance quite a bit, the first thing that popped into my head was archiving. Is Goldman Sachs going to be archiving all the employee/manager communications conducted via the tool? I am also wondering how often the feedback can be sent from manager to employee? Is it only when the employee asks for it? Or can it also be whenever the manager thinks the employee needs it?

Messi and Ronaldo to join forces?

Disgraced former FIFA boss Sepp Blatter once mocked Cristiano Ronaldo for playing the beautiful game like a robot (Blatter stands up to imitate Ronaldo at the 1:10 mark in the video. It is worth the wait!). With El Clasico on tap this weekend, The Economist wonders if the next generation of Messis and Ronaldos will one day have to join forces to defeat a team of soccer-playing robots.

WYWW Appetizers

  • With the first round of polling in the French presidential election set for this weekend, Mohamed El-Erian calls for caution.
  • Willam D. Cohan at The New York Times weighs in on Glass-Steagall, Sen. Elizabeth Warren and Gary Cohn.
  • 4 ways NFL teams can optimize the draft.