Connect with us

Finance

Fed’s Michael Barr clears way for gentler banking regulator

Published

on

Federal Reserve Governors Michelle Bowman and Christopher Waller pose for a photo, during a break at a conference on monetary policy at Stanford University’s Hoover Institution, in Palo Alto, California, U.S. May 6, 2022. Picture taken May 6, 2022.

Ann Saphir | Reuters

The early departure of the Federal Reserve’s top financial regulator allows for a more industry-friendly official to take his place, the latest boon for U.S. banks riding a wave of post-election optimism.

Federal Reserve Vice Chair for Supervision Michael Barr said Monday that he plans to step down from his role by next month to avoid a protracted legal battle with the Trump administration, which had weighed seeking his removal.

The announcement, a reversal from Barr’s previous comments on the matter, ends his supervisory role roughly 18 months earlier than planned. It also removes a possible impediment to Trump’s deregulatory agenda.

Banks and other financial stocks were among the big winners after the election of Donald Trump in November on speculation that softer regulation and increased deal activity, including mergers, were on the way. Weeks after his victory, Trump selected hedge fund manager Scott Bessent as his nominee for Treasury Secretary.

Trump has yet to name nominees for the three major bank regulatory agencies — the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau.

Now, with Barr’s resignation, a more precise image of incoming bank regulation is forming.

Trump is limited to picking one of two Republican Fed governors for vice chair of supervision: Michelle Bowman or Christopher Waller.

Waller declined to comment, while Bowman didn’t immediately respond to request for comment.

Bowman, whose name had already appeared on short lists for possible Trump administration roles and is considered the frontrunner, has been a critic of Barr’s attempt to force American banks to hold more capital — a proposal known as Basel III Endgame.

“The regulatory approach we took failed to consider or deliver a reasonable proposal, one aligned with the original Basel agreement yet suited to the particulars of the U.S. banking system,” Bowman said in a November speech.

Bowman, a former community banker and Kansas bank commissioner, could take on “industry-friendly reforms” around a number of sore spots for banks, according to Alexandra Steinberg Barrage, a former FDIC executive and partner at Troutman Pepper Locke.

That includes what bank executives have called an opaque Fed stress test process, long turnaround times for merger approvals and what bankers have said are sometimes unfair confidential bank exams, Barrage said.

Easier ‘Endgame’?

When it comes to the Basel Endgame, first announced in July 2023 before a toned-down proposal was released last year, it’s now more likely that its ultimate form will be far gentler for the industry, versus versions that would’ve forced large banks to withhold tens of billions of dollars in capital.

Barr led the interagency effort to draft the sweeping Basel Endgame, whose initial version would’ve boosted capital requirements for the world’s largest banks by roughly 19%. Now, Barrage and others see a final version that is far less onerous.

“Barr’s replacement could still work with the other agencies to propose a new B3 Endgame rule, but we think such a proposal would be capital-neutral industry-wide,” Stifel analyst Brian Gardner said Monday in a note. “Bowman voted against the 2023 proposal, and we expect she would lead any B3 re-write in a different direction.”

If lenders ultimately beat back efforts to force them to hold more capital, that would enable them to boost share buybacks, among other possible uses for the money.

Bank stocks traded higher Monday after Barr’s announcement, with the KBW Bank Index rising as much as 2.4% during the session. Citigroup and Morgan Stanley, which have both garnered headlines for regulatory matters last year, were among the day’s biggest gainers, each rising more than 2%.

Notably, Barr is not resigning from his role as one of seven Fed governors, which preserves the current 4-3 advantage of Democrat appointees on the Fed board, according to Klaros Group co-founder Brian Graham.

“Barr’s resignation of the vice chair role, while remaining a governor, is actually very clever,” Graham said. “It preserves the balance of power for board votes for a year or so, and it constrains the choices for his replacement to those currently serving on the board.”

Continue Reading

Finance

Stocks making the biggest moves midday: LULU, NKE, TSLA, NVDA

Published

on

Continue Reading

Finance

NKE, AAPL, F, DECK and more

Published

on

Continue Reading

Finance

How buy now, payer later apps could be crushing your credit

Published

on

Small, everyday purchases like a meal from DoorDash are now able to be financed through eat now, pay later options — a practice that some experts deem “predatory.”

“You’ve got to have enough sense to not follow the urge to finance a taco, okay? You have got to be an adult,” career coach Ken Coleman told “The Big Money Show,” Wednesday. 

“This is predatory, and it’s going to get a lot of people in deep trouble.”

RISKS OF BUY NOW, PAY LATER: ‘TICKET TO OVERSPENDING,’ EXPERT SAYS

klarna, doordash

DoorDash and Klarna are now partnering up to extend buy now, pay later options to consumers. (Reuters, Getty / Getty Images)

Financial wellness experts are continuously sounding the alarm to cash-strapped consumers, warning them of the devastating impact this financial strategy could have on their credit score as some lenders will begin reporting those loans to credit agencies.

Consumers may risk getting hit with late fees and interest rates, similar to credit cards. 

“So your sandwich might show up on your FICO score, especially if you pay for it late,” FOX Business’ Jackie DeAngelis explained.

EXPERTS WARN HIDDEN RISKS OF BUY NOW, PAY LATER

Major players like Affirm, Afterpay, and Klarna have risen to prominence at a time when Americans continue to grapple with persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic. 

“The Big Money Show” co-host Taylor Riggs offered a different perspective, suggesting that company CEOs have a “duty” to attract as many customers as they want. 

“Unfortunately for me, this always comes down to financial literacy — which I know is so much in your heart about training people to save now by later,” she told Coleman, who regularly offers financial advice to callers on “The Ramsey Show.”

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Coleman continued to come to the defense of financially “desperate” consumers, arguing that companies are targeting “immature” customers. 

“I’m for American businesses being able to do whatever they want to do under the law. That’s fine. But let’s still call it what it is: it’s predatory, and they know who their customers are,” Coleman concluded, “And I’m telling you, they’re talking about weak-minded, immature, desperate people.”

FOX Business’ Daniella Genovese contributed to this report.

Continue Reading

Trending