While You Were Working - February 24 - SmartBrief

All Articles Finance While You Were Working - February 24

While You Were Working – February 24

Basel Committee makes a funny, SoFi is going global, Germany rejects hopscotching British bankers, Fannie Mae covers some risk, Pawlenty on the Fed and Trump boots the press

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Fannie Mae

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The Basel Committee showed a wee bit of humor

The Basel Committee on Banking Supervision issued FAQs on the Net Stable Funding Ratio (NSFR). Most of the questions and answers were thoughtful and informative; such as a question about margining that drew an affirmation from the BCBS that the current treatment of 85% stable funding requirement would be maintained. However, other questions were comically elementary, so it appears the Committee decided to have a bit of fun:

Question: To which category (financial or non-financial) do insurance companies and investment companies belong?

Answer: Consistent with paragraph 131(d) and (e) of the LCR standard and paragraph 16 of the NSFR standard, banks, securities firms, insurance companies, fiduciaries (defined in this context as a legal entity that is authorised to manage assets on behalf of a third party, including asset management entities such as pension funds and other collective investment vehicles), and beneficiaries (defined in this context as a legal entity that receives, or may become eligible to receive, benefits under a will, insurance policy, retirement plan, annuity, trust, or other contract) are considered as financial institutions for the application of the NSFR standard.

The Basel Committee’s answer above equates to a sarcastic, “Uhhh … Did you even bother to read the LCR and NSFR standards before you asked that question?” So let’s hope that particular “frequently asked question” wasn’t actually asked all that frequently.

SoFi raises $500 million, says it is going global

Online lender SoFi announced it had raised $500 million in a financing round led by Silver Lake Partners. Bloomberg reports that the investors, which include private firms and sovereign wealth funds from overseas, will take an equity stake in SoFi and purchase some of its loans. SoFi also says the funding will be used to expend into Canada and Australia and also develop consumer finance tools like mobile deposit capabilities. SoFi is an intersting case. It seems to have eluded some of the troubles that have ensared other online lenders. Its model of targeting individuals with excellent credit scores for its student loan, personal loan and mortgage loan offering makes perfect sense. However, with growth will come pressure from investors, who now include equity stakeholders, to lower its own borrower standards to keep the volume of loans at a brisk pace. Doesn’t that predicatment sound familiar?

Germany said “nein” to fly-by-night British bankers

Bundesbank Executive Board member Andreas Dombret says UK bankers eyeing Frankfurt as a post-Brexit destination will have to brush up on their Deutsche and spend more time in Hesse than they might be hoping. “We will not accept any empty shells or ‘letterbox companies,’ where the business effectively continues to be done out of London,” Dombret said.

Sometimes Fannie Mae actually acts like it is under conservatorship

Fannie Mae announced it will be utilizing the reinsurance market to cover the risk on $15 billion worth of single-family home loans it plans to buy. Fannie will cover the first 50 basis points of losses attached to the pool of loans, while mortgage insurers would cover the next 250 basis points. The $15 billion deal is a drop in the bucket as Fannie Mae’s total book of business at the end of last year was $3.14 trillion. Fannie Mae, which is still operating under government conservatorship, has reinsured less than 25% of its assets since 2013.

Pawlenty weighs in on Fed’s vice chair for supervision opening

I wrote yesterday how soon-to-be-allegedly-retiring US Bancorp CEO Richard Davis is reportedly being considered by the Trump administration for one of three openings on the Federal Reserve Board. Well, today Financial Services Roundtable President and CEO Tim Pawlenty penned an op-ed for CNBC on the importance of the Federal Reserve Vice Chair for Supervision position. Pawlenty is right. That position is massively important. And I reckon Pawlenty, the former governor of the state US Bancorp calls home, knows Davis very well. However, for Pawlenty to openly campaign for Davis would probably be inapproprite. Therefore, I will. The Trump administration could do a whole lot worse than Richard Davis for vice chair of the Board of Governors of the Federal Reserve system for supervision.

White House boots some press outlets

The White House excluded Politico, The New York Times, The Los Angeles Times and CNN from a press briefing this afternoon. While it remains unclear if the move will be permanent, I am immediately reminded of two facts:

  1. Woodward and Bernstein were NOT members of the White House press corps when the reported on Watergate.
  2. Being shut out of the White House briefing room presents those four outlets with an amazing opportunity. They can now pivot to be the outlets that haven’t been “captured and pampered” by the Trump adminstration. That will allow them to dedicate more resources to reporting on what the Trump adminstration is doing, rather than what it is saying. When the tide in the Trump vs the Press war turns – and rest assured it will – those outlets will be sitting pretty; but only if they seize this golden opportunity they have just been given.