August 30, 2023

The Board of Governors of the Federal Reserve System (FRB), Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation (FDIC) invited public comment on proposed guidance regarding long-term debt and resolution plans for domestic and foreign triennial full filers (FDIC and FRB only). The long-term debt proposal would require large banks with total assets of $100 billion or more to maintain a layer of long-term debt, which would improve financial stability by increasing the resolvability and resiliency of such institutions. The resolution plan proposal would generally apply to bank holding companies and foreign banking organizations with more than $250 billion in total assets but that are not the largest and most complex companies, which are already subject to guidance on resolution planning. The guidance would address the specific characteristics of, and risks posed by, this group of companies. The FDIC’s Board of Directors discussed the proposed guidance during an open session on Tuesday, August 29. Meeting materials relative to the Board’s actions and a recording of the meeting are available here

Comments on the proposals are due by November 30. 

Long-term Debt Proposal Board Memo

Long-term Debt Proposal Fact Sheet

Resolution Plan Proposal Board Memo

Resolution Plan Proposal Fact Sheet

FRB Governor Michelle Bowman issued a statement expressing significant concerns with both proposals.

FRB Governor Christopher Waller issued a statement expressing concern with the long-term debt proposal. 

FDIC Chair Gruenberg issued a statement supporting the long-term debt proposal and a statement supporting the resolution plans for insured depository institutions.

FDIC Vice Chairman Travis Hill issued a statement supporting the long-term debt proposal. He also issued a statement supporting the high-level objectives of resolution planning for large insured depository institutions but said he planned to vote against the proposed amendments. In a separate statement, he said he was voting against the proposed guidance for domestic and foreign triennial filers. 

FDIC Director Jonathan McKernan issued a statement supporting the proposed guidance for resolution plan submissions of triennial full filers. He also issued a separate statement saying he did not support the proposal based on the FDIC’s statutory authorities with respect to submission requirements for certain insured depository institutions. Director McKernan also issued a statement supporting generally the long-term debt proposal.

Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, a member of the FDIC Board of Directors, issued a statement drawing attention to areas the FRB, FDIC, and OCC must consider carefully in the proposals.

Acting Comptroller Michael Hsu issued a statement supporting the resolution plan proposal and a statement supporting the long-term debt proposal.

The FDIC Board of Directors, which includes FDIC Chair Gruenberg, Acting Comptroller Hsu, and CFPB Director Chopra, agreed to a more formalized role for its members when the agency is looking to sell a large insolvent bank. Under the new procedure, each board member would be consulted on the sale of a failed bank with more than $50 billion in assets, and if a majority of the board wanted to hold a vote on the deal reached by staff, it would have such a vote. 

House Financial Services Committee (HFSC) Chairman Patrick McHenry (R-NC), released a statement in response to the FDIC board’s actions.

The Treasury issued a first-of-its kind report entitled Labor Unions and the Middle Class.

The CFPB entered into a proposed settlement with a ring of corporate entities operating some of the largest credit repair brands in the country, including Lexington Law and The agreement follows a court ruling that the companies collected illegal advance fees for credit repair services through telemarketing in violation of federal law. If approved, the settlement would impose a $2.7 billion judgment against the companies. The order will also ban the companies from telemarketing credit repair services for 10 years.

The Federal Trade Commission (FTC) posted a Consumer Alert warning consumers about cryptocurrency scams.  

The Securities and Exchange Commission (SEC) charged Impact Theory, LLC, a media and entertainment company headquartered in Los Angeles, with conducting an unregistered offering of crypto asset securities in the form of purported non-fungible tokens (NFTs). Impact Theory raised approximately $30 million from hundreds of investors, including investors across the United States, through the offering. The settlement order finds that the NFTs offered and sold to investors were investment contracts and therefore securities. The order concludes that Impact Theory violated the federal securities laws by offering and selling these crypto asset securities to the public in an unregistered offering that was not otherwise exempt from registration. Commissioners Hester Peirce and Mark Uyeda dissented in part based on the application of the Howey Test in this case and raised questions on how to pursue future NFT-related cases. 

The U.S. Court of Appeals for the District of Columbia Circuit ruled that the SEC’s denial of Grayscale’s proposal to convert its Grayscale Bitcoin Trust into an exchange-traded fund (ETF) was arbitrary and capricious because the Commission failed to explain its different treatment of similar products.

Senator Elizabeth Warren (D-MA) sent a letter to FRB Chairman Powell urging him to “quickly finalize” recent proposed rules to raise capital requirements for big banks. 

HFSC Chair McHenry, Rep. French Hill (R-AR), HFSC Vice Chairman and Chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee, and Rep. Bill Huizenga (R-MI), Chairman of the Oversight and Investigations Subcommittee, sent a letter to FRB Chairman Powell objecting to the “Fed’s efforts to undermine Congress’ progress on legislation to establish a regulatory framework for payment stablecoins through recent supervision and regulation letters.”

Representative Bryan Steil (R-WI) is drafting legislation related to earned wage access (EWA), entitled the Earned Wage Access Consumer Protection Act (EWACPA). The text of the draft bill, which has not yet been introduced, can be found here. The legislation would for the first time explicitly regulate the provision of EWA services to consumers at the federal level. Read our summary of the EWACPA here

The U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released proposed regulations regarding reporting requirements for the sale and exchange of digital assets by “brokers,” the term used to describe digital asset trading platforms, digital asset payment processors, certain digital asset hosted wallet providers, and persons who regularly offer to redeem digital assets created or issued by that person (e.g., ICO token issuers and stablecoin issuers). The proposed regulations would also subject digital assets brokers to the same information reporting rules as brokers for securities and other financial instruments. They are open for public comment until October 30. 

HFSC Chair Patrick McHenry said in a statement, “Following the passage of the Infrastructure Investment and Jobs Act, numerous lawmakers of both parties made clear that any proposed rule must be narrow, tailored, and clear. I’m glad to see the delayed effective date and exemptions for other activities in the proposed rule mirror my bipartisan bill, the Keep Innovation in America Act. However, it fails on numerous other counts. Any additional rulemakings related to the other sections from the law must adhere to Congressional intent.”

Need to catch up on what happened last week? Check out our End of Week Wrap Up here