In a blog post titled "The Fifth Year of the Frankendodd Life Sentence," University of Houston finance professor Craig Pirrong discussed certain limitations of the Dodd-Frank Act. Mr. Pirrong stated that "the systemic risk effects of the mandate are at best a push," and that, at their worst, the effects are negative. He also pointed out that the source of systemic risk derives from the huge liquidity strain that clearing creates when the market is stressed. Mr. Pirrong asserted that while the Dodd-Frank Act was intended to reduce concentration and interconnectedness in the financial system

The House Financial Services Subcommittee on Monetary Policy and Trade reviewed legislative proposals that were intended to bring "greater accountability and transparency to the Federal Reserve." Witnesses asserted that: (i) history shows that when the Federal Reserve System (the "Fed") follows a rules-based approach to monetary policy, the economy performs better; (ii) requiring the Fed to explain the differences between a reference rule and its chosen monetary policy instead of constraining the Fed's policy choices would increase transparency; (iii) the Federal Reserve has continued to

The Senate Banking Subcommittee on Securities, Insurance and Investment held a hearing to discuss oversight of the FSOC process for designating firms as systemically significant. According to the Delta Strategy summary linked below, FSOC Deputy Assistant Secretary Patrick Pinschmidt said that (i) FSOC is still considering entity and activity-based designations for asset management firms and (ii) insurance company designations are based on a firm's size and interconnectedness, and on operations that are not considered "plain vanilla" insurance activities. Lofchie Comment: FSOC continues to

FDIC Vice President Thomas Hoenig cautioned lawmakers about the risks involved in not requiring firms to post collateral in trades with their own affiliates. In a letter to the Chair and Ranking Committee Member of the House Appropriations Committee, the FDIC Vice President stressed that requiring the inter-affiliate margin (i) minimizes the amount of risk that can be brought into the taxpayer-funded safety net, (ii) reduces excess leverage at the largest banks, (iii) ensures that liquidity will continue to be available to farmers and ranchers in periods of economic stress and (iv) makes the

The FDIC announced a civil money penalty of $140 million against two U.S. banks for violations of the Bank Secrecy Act ("BSA") and anti-money laundering laws and regulations. The institutions' violations included failures to retain a qualified BSA officer and staff, provide sufficient BSA training, and conduct effective independent testing. See: FDIC Press Release.