STATE GOVERNMENT RELATIONS
Gov. Holcomb Vetoes Agency Oversight Bill
Gov. Eric Holcomb vetoed HB 1211 on Wednesday, citing concerns about its effect on broadband projects and state agency emergency rules. In his veto letter, Holcomb wrote that the “entirely new and unvetted” broadband language in HB 1211 could jeopardize $154 million of projects across 28 counties.
FEDERAL GOVERNMENT RELATIONS
FOMC: Federal Reserve Announces First Interest Rate Hike Since 2018
According to the latest Federal Open Market Committee statement, the Federal Reserve will raise the interest rates by a quarter of a percentage point to a target range of 0.25% to 0.5%. The committee also indicated that it would begin reducing its holdings of Treasury securities, debt and agency mortgage-backed securities at a coming meeting.
“With appropriate firming in the stance of monetary policy, the committee expects inflation to return to its 2% objective and the labor market to remain strong,” the committee said. It added that indicators of economic activity and employment have continued to strengthen and that job gains have been strong in recent months, with the unemployment rate declining substantially.
In a press conference after the release of the FOMC statement, Fed Chairman Jerome Powell noted that the committee feels that the economy is “very strong and well-positioned to withstand tighter monetary policy.”
The committee indicated that the implications of the invasion of Ukraine by Russia for the U.S. economy are highly uncertain, “but in the near term, the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.” Powell said that the country is seeing some short-term upward pressure on inflation due to higher oil prices and noted that supply chain issues could emerge.
Congress Passes Bill Addressing Tough Legacy LIBOR Contracts
Both houses of Congress last week passed an omnibus spending package that included bipartisan legislation to address “tough legacy” Libor contracts. With two tenors of U.S. dollar LIBOR no longer being published and the remainder set to cease by June 30, 2023, the legislative language would direct the Federal Reserve to determine replacement rates for LIBOR-referencing contracts that lack fallback language and to provide a safe harbor from litigation over a change in rates after the cessation of LIBOR.
In addition to the Libor “tough legacy” contract fix, the omnibus appropriations package includes several banking-related provisions, including an $11 billion increase to the authorization cap for the Small Business Administration’s 504 loan program as well as $5 billion for debt refinancing.
Additionally, lawmakers authorized $295 million for community development financial institutions, including $35 million for the Treasury Department’s Bank Enterprise Award Program. The final bill reflects a total increase of $25 million for CDFIs, specifically about $10 million for the BEA program.
Raskin Withdraws Fed Nomination
Sarah Bloom Raskin, President Biden’s nominee to serve as the next vice chairwoman for supervision at the Federal Reserve, withdrew her nomination this week after failing to secure support from several key lawmakers, including Sen. Joe Manchin (D-W.Va.). According to news reports, Raskin was not expected to receive support from any GOP senators, which meant that in the evenly divided Senate, Manchin’s opposition would have prevented her confirmation.
During her confirmation hearing in the Senate Banking Committee, Raskin faced tough questions about her previous writings and speeches in which she seemed to support using the regulatory apparatus to redirect investment away from industries that, in her view, are contributing to climate change.
Banking Committee Clears Nominees for Fed Board, FHFA
The Senate Banking Committee on Wednesday approved President Biden’s Federal Reserve nominees, including sitting governors Jerome Powell, who has been nominated to serve a second term as Fed chairman, and Lael Brainard, who has been nominated to serve as vice chairwoman, as well as Lisa Cook and Philip Jefferson, who were nominated to serve as governors.
The Banking Committee also approved the nomination of Federal Housing Finance Agency Acting Director Sandra Thompson to lead the agency.
OCC Finalizes Rule Allowing Exemptions from SAR Requirements
To help banks develop more efficient and effective Bank Secrecy Act compliance programs, the Office of the Comptroller of the Currency finalized a rule that would allow the agency to issue exemptions from Suspicious Activity Report requirements in certain circumstances.
Under the proposal, national banks seeking an exemption must submit a request in writing to the OCC. In reviewing these requests, “the OCC will consider whether the exemption is consistent with the purposes of the [Bank Secrecy Act] and with safe and sound banking, and may consider any other appropriate factors,” including outstanding supervisory concerns regarding BSA/AML compliance. Institutions also need to seek an exemption separately from the Financial Crimes Enforcement Network.
The final rule will enable the OCC to facilitate changes required by the Anti-Money Laundering Act of 2020. It will also make it possible for the OCC to grant relief to national banks or federal savings associations that develop innovative solutions intended to meet Bank Secrecy Act requirements more efficiently and effectively. The rule takes effect May 1.
The FDIC and Federal Reserve have issued separate proposals regarding SAR exemptions.