STATE GOVERNMENT RELATIONS
New Indiana Tax Revenue Forecast Hits the Mark in December
The state revenue forecast issued on Dec. 15 predicting Indiana tax collections over the next 30 months is starting right on target. Data released last Friday by the State Budget Agency show that Indiana took in $1.71 billion in general fund tax revenue during December. That was $17.4 million, or just 1%, more than anticipated by the forecast.
FEDERAL GOVERNMENT RELATIONS
Yellen Urges Legislative Action as US Hits Debt Ceiling
The Treasury Department started taking “extraordinary measures” to keep paying the federal government’s bills as the U.S. hit its debt limit Thursday, Treasury Secretary Janet Yellen said.
In a letter addressed to House Speaker Kevin McCarthy, R-Calif., Yellen said the Treasury will suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund from Thursday until June 5, 2023. She warned both moves are subject to “considerable uncertainty” if Congress does not pass a bill to increase the $31.4 trillion debt ceiling.
The Treasury secretary told lawmakers last Friday that she believes the extraordinary steps could allow the government to pay its obligations until early June. Yellen last week urged Congress to “act in a timely manner to increase or suspend the debt limit,” as failing to do so could lead to a first-ever default on U.S. debt and cause economic damage around the world.
Fed's Brainard Sees Progress on Inflation Fight
Inflation has declined in recent months, but the Federal Open Market Committee will likely need to continue pursuing a restrictive policy stance to bring inflation back down to the committee's 2% goal, Federal Reserve Vice Chair Lael Brainard said Thursday.
In a speech at the University of Chicago, Brainard pointed to tentative signs that wage growth is moderating, with the increase in average hourly earnings having recently softened. She also noted that house prices and rents for new leases have recently declined. She said these, along with other economic indicators, are signs that the nation isn't experiencing a 1970s-style wage-price spiral. "It remains possible that a continued moderation in aggregate demand could facilitate continued easing in the labor market and reduction in inflation without a significant loss of employment."
Still, Brainard warned that substantial uncertainty remains, with further shocks possible from the war in Ukraine and the pandemic. "Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to ensure inflation returns to 2% on a sustained basis," she said.
CFPB Issues Warning on Auto-Renewal Subscription Services
The Consumer Financial Protection Bureau has issued a warning that subscription services that automatically re-enroll customers may violate the law if they do not clearly disclose their terms and obtain consumer consent or make it "unreasonably difficult" for consumers to cancel.
"Negative option marketing" refers to a term or condition in which a seller may interpret a person's silence or failure to cancel an agreement as continued acceptance of the offer, according to the CFPB. The agency has received complaints from consumers about being charged for products or services they did not intend to purchase or had sought to cancel, and it brought enforcement actions against companies that engage in such practices. The CFPB cited enforcement actions against credit card providers offering "add-on" products as one example.
Companies offering negative option programs risk violating the Consumer Financial Protection Act if they fail to clearly disclose the negative option terms, fail to obtain consumer consent or mislead or impede consumers wishing to cancel, the CFPB indicated. The agency added that it is partnering with the Federal Trade Commission to identify "dark pattern practices" that trick consumers into purchasing products and services they do not want, and "Both agencies will continue to monitor these practices and bring agency actions where needed."
CFPB Directs Servicers to Expand COVID-Related Relief to Non-Pandemic Situations
In the process of releasing updated mortgage servicing examination procedures, the Consumer Financial Protection Bureau indicated that the streamlined loss mitigation options created to help servicers respond to COVID-19 should continue to be extended to those not experiencing COVID-related hardships as long as the same loss mitigation options also are available to borrowers having a COVID-19-related difficulty.
"We understand these streamlined options have been very successful in keeping consumers in their homes and note that COVID-19 will continue to impact families, even beyond the national emergency," Lorelei Salas, the CFPB's assistant director for supervision policy and acting assistant director for supervision examinations, wrote in a blog post. Salas said the agency expects servicers to continue using "all the tools at their disposal," including the "streamlined deferrals and modifications that meet the conditions of the CFPB's COVID-19-related mortgage servicing rules" to keep consumers in their homes.
Other new sections of the updated exam manual direct examiners to review servicers' practices related to charging fees for making payments (also known as convenience fees), changing existing credit arrangements, canceling private mortgage insurance, providing information about homeowners' assistance programs and representations made to borrowers prior to initiating foreclosure actions.
The mortgage servicing examination procedures describe the types of information that agency examiners gather to evaluate servicers' policies and procedures, assess whether servicers comply with applicable laws and identify risks to consumers related to mortgage servicing. The document includes CFPB guidance released since the last update in 2016.
Report: SEC Crypto Enforcement Actions Set Record in 2022
The Securities and Exchange Commission's 2022 cryptocurrency-related enforcement actions increased 50% over 2021, hitting a record 30 actions, Cornerstone Research found in a recent report. Report author Simona Mola says the SEC's increased use of multiple international authorities during its crypto actions "is likely a byproduct of the number of U.S. agencies regulating the space in addition to the SEC, but also a byproduct of the increasing complexity of certain cases that often transcend the national borders."
Crypto Industry Pushes Back Against SEC Crackdown
The Securities and Exchange Commission is sending a message to the cryptocurrency industry that it will strictly enforce compliance with securities laws after charging Gemini Trust and Genesis Global Capital with selling unregistered products. The SEC's compliance push could help the regulator establish its authority over the crypto industry, but many crypto firms are resisting the move to give the SEC more oversight powers.
Fed Provides Additional Details on Climate Scenario Exercises
The Federal Reserve provided additional details on how its upcoming pilot climate scenario analysis exercise will be conducted and the information on risk management practices that will be gathered from the program. The nation's six largest banks will participate in the exercise starting this year.
The Fed will collect qualitative and quantitative information over the course of the pilot, including details on governance and risk management practices, measurement methodologies, risk metrics, data challenges and lessons learned. The exercise will include physical risk scenarios with different levels of severity affecting residential and commercial real estate portfolios in the northeastern U.S., with each bank also asked to consider the impact of additional physical risk shocks for their real estate portfolios in another region of the country. In addition, the banks will be asked to consider the effect on corporate loans and commercial real estate portfolios using a scenario based on current climate policies and one based on reaching net-zero greenhouse gas emissions by 2050.
The Fed plans to publish insights gained from the pilot at an aggregate level, reflecting what has been learned about climate risk management practices and how insights from scenario analysis will help identify potential risks and promote effective risk management practices. No firm-specific information will be released.
Hsu: Divestiture Best Solution for Banks 'Too Large to Manage'
The most effective way to successfully fix issues at a bank that is "too large to manage" is to simplify it by divesting businesses, curtailing operations and reducing complexity, Acting Comptroller of the Currency Michael Hsu said Tuesday, adding that regulators must have "credible, transparent mechanisms" to compel divestiture at large banks when necessary.
Speaking at the Brookings Institution in Washington, D.C., Hsu said banks that are too large to manage differ in several key aspects from poorly managed banks. Among them, so-called too-large-to-manage banks assume that problems arise from a few isolated bad apples within the organization rather than signifying a larger issue. Their leaders also display "hubris, contempt, and indifference" toward outside perspectives. Hsu said that typical remediation measures, such as changing senior management, will have little impact in bringing about the necessary institutional reforms. "It is the size and complexity of the bank that is the core problem that needs to be solved, not the weaknesses of its systems and processes or the unwillingness or incompetence of its senior leaders."
Hsu said that the Office of the Comptroller of the Currency uses a four-step "escalation framework" to give banks ample opportunities to address problems. The first step is to put a bank on notice and make clear the nature of the weakness requiring remediation. Failure to make the necessary changes means the agency will proceed to the second step by taking public enforcement actions, such as consent orders. If the problem persists, then the OCC will pursue a restriction on a bank's business activities or capital actions. The fourth and final step would be to break up the bank by compelling divestiture.
"Given the stakes involved with restrictions and divestitures, we need to approach such situations and actions with great care," Hsu said. "Close coordination with our interagency stakeholders is required to ensure fair, orderly, and effective outcomes. Greater clarity about the review process and standards would support due process and fairness and bolster the credibility of supervisory actions taken."