STATE GOVERNMENT RELATIONS
‘Reinventing High School’ Bill Advances
The House education committee has approved 8-4 a wide-ranging bill that seeks to "reinvent" Indiana high school curriculum. Bill author Rep. Chuck Goodrich, R-Noblesville, said his proposal – a priority bill for the caucus – aims to narrow the "skills gap" between Hoosiers and employers. It would allow students to meet graduation requirements through career experience and give students state-funded scholarship accounts to spend on workforce training outside their schools, among other provisions.
3 Indiana Cities Lead WSJ Affordable Housing Index
Three Indiana cities led the Wall Street Journal/Realtor.com Emerging Housing Market Index in the fourth quarter when affordable markets continued to dominate the rankings. Lafayette, a metro area of about 225,000 people, was the top-ranked emerging housing market in the quarter, followed by Fort Wayne; Elkhart; Topeka, Kansas; and Johnson City, Tennessee.
FEDERAL GOVERNMENT RELATIONS
Gallin Named FOMC Secretary; SOMA Managers Appointed
The Federal Reserve announced Thursday that Joshua Gallin has been appointed secretary of the Federal Open Market Committee, succeeding James Clouse. Gallin has been special advisor to Fed Chairman Jerome Powell since 2019.
In addition, the Federal Reserve Bank of New York announced that Roberto Perli has been named manager of the System Open Market Account and Julie Remache has been selected deputy SOMA manager, effective Feb. 21. The FOMC approved their selections during its meeting this week.
Read the New York Fed announcement
CFPB Proposes to Overturn Longstanding Credit Card Late Fee Safe Harbor
The Consumer Financial Protection Bureau and the White House have proposed to eliminate a longstanding safe harbor that banks of all sizes rely upon when setting late fees on credit card payments. Citing "excessive credit card late fees," the CFPB proposed slashing the safe harbor dollar amount for late fees from $30 to $8 and eliminating a higher safe harbor dollar amount for late fees for subsequent violations of the same type; eliminating the annual inflation adjustment for the safe harbor amount that the Federal Reserve Board provided in 2010; and capping late fee amounts at 25% of the required payment.
In a notice of proposed rulemaking, the CFPB is proposing to amend Regulation Z, which implements the Truth in Lending Act, because in its view, the current safe dollar amount for late fees in the regulation is "not reasonable or proportional" to the violation to which the fee relates. The CFPB issued an advanced notice of proposed rulemaking last year, to which business groups responded, urging caution regarding any changes to the time-tested safe harbor. At that time and in subsequent letters, the financial industry has reminded CFPB that it has failed to follow a required process for determining the impact of its rulemaking on small credit card issuers.
Business groups have previously raised concerns about the legality of the process CFPB used to arrive at the rulemaking, noting the agency is required to seek input early in the rulemaking process from small banks likely to be affected by the new regulation. Any reduction in the late fee safe harbor would significantly affect a substantial number of community banks with assets below $850 million, many of which would be forced to exit the credit card market.
FOMC Raises Rates by 25 Basis Points
The Federal Open Market Committee announced Wednesday it would raise the target range for the federal funds rate by 25 basis points to 4.5-4.75%. The decision marked the eighth consecutive increase in the rate, although the committee's recent rate hikes have ranged from 50 to 75 basis points.
The FOMC noted that inflation had eased somewhat "but remains elevated." It cautioned that committee members anticipate that further rate hikes will be needed to lower inflation to the Fed's 2% target range.
In a news conference, Fed Chairman Jerome Powell said that he does not expect the FOMC to lower rates this year. "Our focus is not on short-term moves but on sustained changes to broader financial conditions," Powell said. "And it is our judgment that we're not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate." The FOMC meets again March 21-22.
Postal Service Proposes Rule on Mailing Cash Deposits
The U.S. Postal Service has proposed a rule amending its mailing standards for business customers looking to mail cash deposits. The proposal would require that commercial cash deposits over $500 be sent using registered mail, the Postal Service's most secure mail service.
In issuing this proposed rulemaking, USPS stated its goal of meeting the mailing needs of business customers while also providing a safe and secure service. Recent concerns have arisen from mail theft, specifically from USPS drop boxes, which are unattended and more susceptible to burglary. When sent, registered mail must be presented to an employee at a local post office.
OCC Announces Loan Origination Threshold Changes
The Office of the Comptroller of the Currency issued a bulletin Wednesday to inform banks and examiners that the loan origination threshold for reporting Home Mortgage Disclosure Act data on closed-end mortgage loans has changed due to a recent court decision. The threshold for reporting is 25 closed-end mortgage loans originating in the two preceding calendar years.
Banks that originated at least 25 closed-end mortgage loans in each of the two preceding calendar years but fewer than 100 closed-end mortgage loans in either or both of the years may need to make adjustments to policies and procedures to comply with reporting obligations, the OCC indicated. The agency does not intend to assess penalties for failures to report closed-end mortgage loan data on reportable transactions conducted in 2022, 2021 or 2020 for affected banks that meet Regulation C's other coverage requirements.
Fed Issues Guide to Weighing Crypto Requests from Non-FDIC Insured Banks
Last Friday the Federal Reserve released guidelines for evaluating requests from financial institutions that are state-chartered but not insured by the Federal Deposit Insurance Corp. seeking to engage in novel activities, such as those involving crypto assets. At the same time, the agency reiterated that such activities must be conducted in "a safe and sound manner."
The policy statement came the same day the agency denied a request from the Wyoming-based digital asset firm Custodia Bank to become a member of the Federal Reserve System. Custodia is one of several crypto firms and other novel payment companies that have received non-depository state charters and sought access to Fed master accounts without the structures applied to FDIC-insured banks. The Fed noted the firm does not have federal deposit insurance and that it proposed to engage in "untested" crypto activities that "presented significant safety and soundness risks."
In a statement, the Fed indicated it seeks to promote a level playing field for all banks with a federal supervisor, regardless of deposit insurance status. Still, supervised banks "will be subject to the same limitations on activities, including novel banking activities, such as crypto-asset-related activities," according to the agency. In response to several inquiries from banks over the years about engaging in crypto assets, the statement specifies how the Fed would evaluate such requests "consistent with longstanding practice."
"Today's action would not prohibit a state member bank, or prospective applicant, from providing safekeeping services, in a custodial capacity, for crypto-assets if conducted in a safe and sound manner and in compliance with consumer, anti-money laundering and anti-terrorist financing laws," the Fed indicated.
White House Issues Crypto Regulation 'Roadmap'
The Biden administration last Friday laid out a roadmap for mitigating cryptocurrency risks, indicating that it will prioritize digital asset research and call on Congress to pass legislation protecting consumers. In a statement, the White House called 2022 "a tough year for cryptocurrencies," alluding to the implosion of the TerraUSD stablecoin in May and the later collapse of FTX. "Many everyday investors who trusted cryptocurrency companies – including young people and people of color – suffered serious losses, but, thankfully, turmoil in the cryptocurrency markets has had a little negative impact on the broader financial system to date," the White House said.
In coming months, the administration will unveil priorities for digital asset research and development, "which will help the technologies powering cryptocurrencies protect consumers by default," the White House said. It also urged Congress to expand regulators' power to prevent misuse of customers' assets and to mitigate conflicts of interest; strengthen transparency and disclosure requirements for cryptocurrency companies; strengthen penalties for violating illicit-finance rules and subject cryptocurrency intermediaries to bans against tipping off criminals; fund greater law-enforcement capacity building, including with international partners; and limit cryptocurrencies' risks to the financial system by following the steps outlined by the Financial Stability Oversight Council in a recent report.