LEST WE FORGET THE LOOTERS

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SBC CARES Act Oversight Hearing

Senate Committee on Banking, Housing, and Urban Affairs

CARES Act Oversight of Treasury and the Federal Reserve

Tuesday, November 30, 2021

Testimony

Janet L. Yellen, Secretary, U.S. Department of the Treasury

In her testimony, Yellen said December has the potential to be very consequential based on two decisions facing Congress – the debt limit and Build Back Better legislation.

She said if we do not address the debt limit, we will eviscerate our current recovery, and Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts.

https://www.sifma.org/resources/general ... t-hearing/

REUTERS

"Yellen reaffirms strength of US banking system in meeting with bank CEOs - Treasury"

By Pete Schroeder and Costas Pitas

May 18, 2023

WASHINGTON, May 18 (Reuters) - U.S. Treasury Secretary Janet Yellen reaffirmed the strength and soundness of the country's banking system in a meeting with bank CEOs on Thursday, a Treasury Department statement said.

During the meeting with more than two dozen CEOs and executives convened by the Bank Policy Institute, Yellen also discussed the "urgent need" for Congress to address the debt limit, the statement said.

Yellen's meeting with bank executives came as part of BPI's annual CEO meeting in Washington, which has seen top banking officials also meet with other government officials.

A BPI spokesperson declined to comment on the meeting.

While the meeting with Yellen was scheduled months in advance, according to a source familiar with the matter, it came amid a tumultuous time for banks and financial markets.

The banking sector is endeavoring to shake off several weeks of turmoil spurred by the sudden failure of Silicon Valley Bank, which led to regulators seizing two more failing institutions and backing uninsured depositors in an effort to tamp down fears of broader contagion.

The meeting also comes as government officials are looking for an agreement to raise the nation's borrowing cap.

Yellen and other officials have warned that a failure to do so could unleash chaos on financial markets, as the U.S. government would not be able to meet its obligations as early as June 1.

"She outlined how a failure to raise or suspend the debt limit would be catastrophic for the financial system, as well as American families and businesses, and underscored the Administration’s belief that the debt limit should be addressed without delay," the Treasury said in its statement.

President Joe Biden and top U.S. congressional Republican Kevin McCarthy have been negotiating over a potential deal to raise the borrowing cap.

Reporting by Costas Pitas; Writing by Katharine Jackson; Editing by Eric Beech

https://www.reuters.com/business/financ ... 023-05-18/

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REUTERS

"US bank deposits and credit slip in latest week, Fed data shows"

By Reuters Staff

MAY 19, 2023

(Reuters) - Deposits at all U.S. commercial banks slipped last week and overall credit provided by banks edged lower as well, Federal Reserve data released on Friday showed.

Deposits in the week ending May 10 totaled $17.10 trillion on a nonseasonally adjusted basis, down from $17.16 trillion a week earlier, the Fed’s weekly snapshot of the banking system’s assets and liabilities showed.

Deposits, which had dropped substantially after the collapse in March of Silicon Valley Bank, were down at large banks and little changed at smaller ones.

Meanwhile, credit provided by banks dropped to $17.32 trillion from $17.37 trillion a week earlier, led by a decline in securities holdings.

Loans and leases saw modest declines.

Reporting by Dan Burns; editing by Jonathan Oatis

https://www.reuters.com/article/usa-fed ... SS0N35N028

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REUTERS

"US regional bank stocks fall after Yellen says more bank mergers necessary"

By Chibuike Oguh

May 19, 2023

NEW YORK, May 19 (Reuters) - Shares of U.S. regional lenders fell on Friday after CNN reported that U.S. Treasury Secretary Janet Yellen told bank chief executives that more mergers may be necessary following a series of bank failures.

Yellen also reaffirmed the strength and soundness of the country's banking system at the meeting with bank CEOs on Thursday in the aftermath of the collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank.

The KBW Regional Banking Index fell 2.2%, with shares of PacWest Bancorp and Western Alliance among the biggest losers as they shed 1.9% and 2.4, respectively.

Comerica Inc declined 1.2%, Zions Bancorp. fell nearly 1.7%, and Valley National Bancorp dropped 5.5%.

The regional bank crisis has been partly blamed by some on aggressive interest rates by the U.S. Federal Reserve, which forced some lenders to seek new capital to make up for a fall in the value of assets linked to interest rates.

Fed Chairman Jerome Powell said on Friday the after-effect of recent banking sector troubles is expected to take some pressure off the U.S. central bank's interest rake hiking cycle.

Tighter credit conditions meant that "our policy rate may not need to rise as much as it would have otherwise to achieve our goals," Powell told a central bank conference in Washington.

But Tom Plumb, portfolio manager at Plumb Balanced Fund, said he doesn't expect the Fed to start lowering interest rates anytime soon as the U.S. economy is still showing signs of strength and inflation is not abating as quickly as expected.

"People thought that inflation was going to come down faster and that the pressure on these regional banks and those failures were leading to this narrative that the Fed was going to lower interest rates by the end of this year."

"I don't think that's the case," Plumb said.

An agreement on raising the U.S. debt ceiling is still possible if both Republicans and Democrats negotiate in good faith and recognize they won't get everything they want, a White House official said on Friday shortly after an impasse in talks was reported.

The debt ceiling dispute has weighed on market sentiment, including for regional bank stocks.

"Unfortunately, the way our government works they are going to take you to the brink and they're going to cause a significant last wave of panic."

"And then they will come up with some type of resolution," Plumb added.

Reporting by Chibuike Oguh in New York; editing by Deepa Babington

https://www.reuters.com/business/financ ... 023-05-19/

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REUTERS

"U.S. banks sink on concerns about office real estate loans"

By Sinéad Carew

MAY 31, 2023

(Reuters) - Shares of U.S. banks, both major and mid-sized, sharply underperformed the broader market on Wednesday with the S&P 500 Banks Index down 2.0% while the benchmark S&P 500’s fell 0.5% with worries about commercial real estate loans in focus among bank investors.

Investors worried about potential losses among banks from office real estate loans after comments from executives, including Wells Fargo & Co’s Chief Executive Officer Charlie Scharf and Blackstone President Jonathan Gray at a Sanford C Bernstein investor conference.

Wells Fargo’s Scharf said on Wednesday that there will be losses in the office loan space and that the bank was proactively managing its portfolio while he looked to reassure investors that the company is not “overly concentrated” in that space.

Meanwhile, Blackstone’s Gray talked about “unprecedented weakness” in older office buildings while noting that this segment currently makes up less than 2% of company’s equity portfolio in real estate.

“Vacancy is 20-plus percent, rents are declining, companies now are obviously thinking about their space needs in light of remote work and the economic climate that’s ahead."

"Lenders are reluctant to have exposure to office buildings."

"Buyers are reluctant."

"Valuations are going down,” Gray said, according to a transcript from the Bernstein conference.

Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey said “continued concern over loans made to the office market,” was hurting bank stocks broadly on Wednesday, citing the Wells Fargo comments.

“The implication is that there are those that will suffer even if Wells Fargo is diversified enough,” Meckler said.

Citigroup, JPMorgan Chase & Co, Morgan Stanley, Goldman Sachs down more than 1% while Bank of America was down more than 2% and Wells Fargo dropped more than 3%.

Regional lenders Citizens Financial, Western Alliance Bancorp, PacWest Bancorp, Comerica, KeyCorp, PNC Financial Services, Fifth Third Bancorp and Zions were falling more than bigger lenders.

KeyCorp, down 5.5%, was the biggest decliner in the S&P bank index, and Zions was next, down 4.9%.

Also on Wednesday, the Federal Deposit Insurance Corporation announced that U.S. banks saw total deposits decline by a record 2.5% in the first quarter of 2023.

Sending the broader market down also was an upcoming vote by lawmakers on a deal to raise the nation’s debt ceiling.

Also unexpectedly strong labor market data reinforced bets for more Federal Reserve interest rate hikes.

Reporting by Sinéad Carew in New York, Mehnaz Yasmin in Bengaluru; Editing by Nick Zieminski

https://www.reuters.com/article/usa-sto ... SL1N37S2SI

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REUTERS

"Fed, SEC probing Goldman Sachs' role in Silicon Valley Bank's final days - WSJ"

Reuters

June 15, 2023

June 15 (Reuters) - The U.S. Federal Reserve and the Securities and Exchange Commission are investigating Goldman Sachs Group's role in two deals with Silicon Valley Bank that preceded the latter's collapse, the Wall Street Journal reported on Thursday citing people familiar with the matter.

Silicon Valley Bank had booked a $1.8 billion loss on the sale of a bond portfolio to Goldman.

The Wall Street giant was also an underwriter for a failed share sale by the bank that eventually paved the way for its meltdown.

The Fed and the SEC are seeking documents related to Goldman's role as both buyer of the securities portfolio and adviser on the capital raise, the report said.

They are looking to see if Goldman's investment banking side and its trading division were improperly communicating about the portfolio sale, the report added.

Goldman had disclosed last month it was cooperating with government probes into its dealings with Silicon Valley Bank.

"SVB engaged Goldman Sachs to assist with a proposed capital raise and sold the firm a portfolio of securities."

"Prior to that sale, Goldman Sachs informed SVB in writing that we would not act as their advisor on the sale, and that SVB should not rely on any advice from the bank in this regard, but instead hire a third-party financial advisor," a spokesperson for Goldman said.

Goldman's shares closed up 0.4% at $339.12, after having risen as much as 1.6% earlier in the day.

In March, Reuters reported U.S. prosecutors were investigating the collapse of Silicon Valley Bank.

The probe by the Fed and the SEC were part of the broader probes, the WSJ report added.

An SEC spokesperson said in an emailed statement the agency "does not comment on the existence or nonexistence of a possible investigation".

A spokesperson for the Fed declined to comment.

Silicon Valley Bank's demise sent shockwaves through the industry and brought on the worst crisis for the sector in 15 years.

Reporting by Niket Nishant in Bengaluru, Additional reporting by Saeed Azhar and Chris Prentice in New York; Editing by Krishna Chandra Eluri and Maju Samuel

https://www.reuters.com/business/financ ... 023-06-15/

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REUTERS

"Fed lending to banks shrinks modestly in latest week"

By Reuters Staff

JUNE 22, 2023

NEW YORK, June 22 (Reuters) - Federal Reserve lending to banks contracted in the latest week, central bank data released on Thursday showed.

The Fed lent banks $3.2 billion via its discount window as of Wednesday, from $3.6 billion on June 14.

It lent $102.7 billion from its Bank Term Funding Program as of Wednesday, mostly flat from $102 billion on June 14.

Fed “other credit” tied to the government wind down of failed banks stood at $172.3 billion, from $180.5 billion on June 14.

Altogether, lending via the three programs stood at $278.2 billion from $286.1 billion the week before.

(Reporting by Michael S. Derby; Editing by Chris Reese)

https://www.reuters.com/article/usa-fed ... SS0N37F03G

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REUTERS

"US regulators ask lenders to work with stressed commercial real estate firms"

By Reuters Staff

JUNE 29, 2023

(Reuters) - U.S. banking regulators are asking lenders to work with credit-worthy borrowers that are facing stress in the commercial real estate market.

Financial institutions should work “prudently and constructively” with good borrowers during times of financial stress, the agencies said in a statement.

The statement from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp, the National Credit Union Administration and the Office of the Comptroller of the Currency updates and supersedes the previous guidance on commercial real estate loan workouts issued in 2009.

Office loans have posed concerns for some U.S. lenders as property values decline and more borrowers default on their loans.

Federal Reserve Chair Jerome Powell earlier in the month said that U.S. commercial real estate lending remains under pressure but appears unlikely to threaten the broader financial system.

The new guidance contains short-term loan accommodations that includes an agreement to defer one or more payments, make a partial payment, or provide other assistance or relief to a borrower.

Banks represent 54% of the overall $5.7 trillion commercial real estate market, with small lenders holding 70% of the loans in that market, according to Citigroup analysts.

More than $1.4 trillion in U.S. commercial real estate loans will mature by 2027, with some $270 billion coming due this year, according to real estate data provider Trepp.

Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Maju Samuel

https://www.reuters.com/article/usa-reg ... SL4N38L3NQ

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REUTERS

"US bank credit rose last week, while commercial and industrial loans fell - Fed data"

By Reuters Staff

JULY 7, 2023

(Reuters) - Bank credit for U.S. commercial banks expanded slightly in the last week of June, even as commercial and industrial lending ticked down, Federal Reserve data released on Friday showed.

Bank credit rose to $17.31 trillion in the week ending June 28, from $17.29 trillion a week earlier, on a non-seasonally adjusted basis.

On a seasonally adjusted basis credit contracted slightly, but in both data series bank credit ended the month up compared with the first week of June.

Commercial and industrial lending, an indication of activity among small and medium-sized businesses, cooled to $2.77 trillion, from $2.78 trillion.

Trends in bank loans are a gauge of economic momentum, and year-over-year growth has slowed sharply since last year as the Fed raised interest rates and credit has tightened.

Reporting by Ann Saphir and Dan Burns; Editing by Chris Reese

https://www.reuters.com/article/usa-fed ... SS0N37G00I

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REUTERS

"US banks report tighter credit, weaker loan demand - Fed survey"

By Ann Saphir

July 31, 2023

July 31 (Reuters) - U.S. banks reported tighter credit standards and weaker loan demand from both businesses and consumers during the second quarter, Federal Reserve survey data released on Monday showed, evidence that the central bank's interest-rate hike campaign is slowing the nation's financial gears as intended.

The Fed's quarterly Senior Loan Officer Opinion Survey, or SLOOS, also showed that banks expect to further tighten standards over the rest of 2023.

"The most cited reasons for expecting to tighten lending standards were a less favorable or more uncertain economic outlook, an expected deterioration in collateral values, and an expected deterioration in credit quality of CRE (commercial real estate) and other loans," the Fed said.

The Fed has raised interest rates by 5.25 percentage points since March 2022, and its surveys and hard data have shown banks have been slowing their lending in response.

Monday's SLOOS report - which Fed policymakers had in hand last week when they decided to deliver an 11th interest-rate hike after skipping one at their June meeting - suggests credit tightening is ongoing.

"You've got lending conditions tight and getting a little tighter, you've got weak demand, and ... it gives a picture of a pretty tight credit conditions in the economy," Fed Chair Jerome Powell said last week when asked about the survey results.

But it does not point to a rush to tighten of the kind that some Fed policymakers had worried would occur after the banking turmoil in March and that might have made them skittish about further policy tightening ahead.

Still, it could threaten the Fed's "soft-landing" scenario.

"The degree of tightening in recent quarters looks pretty significant by broad historic standards," wrote JPMorgan economist Daniel Silver, noting that in the past such tightening has generally been associated with recessions.

The data "are not a guarantee of a recession to come, but the tightening evident as of late suggests that the economy should slow."

TIGHTER TERMS

The survey showed a net 50.8% of banks tightened terms of credit last quarter for commercial and industrial (C&I) loans to medium and large businesses, up from 46% in the prior survey.

For small firms, a net 49.2% of banks said credit terms were stiffer, versus 46.7% in the last survey.

Both measures fell short of the 70%-plus levels reached at the height of the pandemic in 2020; excluding that period, they were the largest increases since the Fed's first-quarter report in 2009, during the Great Financial Crisis.

Demand for C&I loans remained weak, though not to the degree reported in the previous survey covering the first three months of the year when banks said business demand for credit was the softest since 2009.

In the latest survey, conducted in the last two weeks of June, the net share of banks reporting stronger demand from large and medium firms was -51.6%, compared with -55.6% in the prior period and from small firms was -47.5%, up from -53.3%.

On the consumer slate, credit terms continued tightening and demand slackening, though in some categories conditions were somewhat improved from the first quarter.

For instance, the net percentage of banks reporting greater willingness to make consumer installment loans was -21.8% versus the first quarter's -22.8%, which had been the lowest outside of the pandemic since 2008.

Smaller net shares of banks reported tightening standards for auto loans, though terms for credit cards did tighten somewhat.

While still weak, demand for auto loans was the least soft in four quarters, while demand for credit card loans was essentially flat after two straight negative quarters.

Reporting by Ann Saphir; Editing by Nick Zieminski, Dan Burns and Cynthia Osterman

https://www.reuters.com/business/financ ... 023-07-31/

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REUTERS

"US bank credit contracts, loans drop in latest week: Fed data"

Reuters

August 18, 2023

Aug 18 (Reuters) - Bank credit at U.S. commercial banks shrank in the latest week as commercial banks pulled back on lending to businesses, data published by the Federal Reserve showed on Friday.

Overall bank credit fell to $17.23 trillion in the week ending Aug. 9, down from $17.25 trillion a week earlier and $17.32 trillion a year earlier, its second straight year-over-year drop.

Loans and leases fell to $12.13 trillion, from $12.15 trillion the week prior; commercial and industrial loans slipped to $2.74 trillion, from $2.75 trillion in the week ending Aug. 2.

From a year earlier, commercial and industrial (C&I) loan growth slowed sharply to less than 1%.

The trends reflect reduced demand from borrowers amid the Fed's rapid interest-rate hikes, as well as tightening credit standards and the fallout from the U.S. regional bank failures this year.

Reporting by Ann Saphir; editing by Jonathan Oatis and Josie Kao

https://www.reuters.com/business/financ ... 023-08-18/