Karen Petrou
@KarenPetrou
Managing Partner of Federal Financial Analytics. Author of Engine of Inequality. Provides analytical & advisory services on FinServ issues.
Reminder: The Federal Reserve Act gives Treasury the power to take authority over Fed policy it deems to intervene with fiscal policy. The 1951 Accord constrains this, but arguably not to the extent of QE, which is a grey zone. @kev_warsh is also absolutely right: QE is a…
The last time a Fed chief was bounced, says @johnauthers, also marked the central bank's independence as we know it (via @opinion) bloomberg.com/opinion/articl…
FedFin first called this to client attention on Thursday bit.ly/4nSxsI0: the for-cause fusillade is indeed organized as rightly noted here and could prove deadly. For how and why, see bit.ly/44uo7hZ.
All the president's men are coming after Jerome Powell, says @johnauthers. Prediction markets still back him to finish the year bloomberg.com/opinion/newsle…
Maybe we are not yet at a Kindleberger moment -- I hope not – but Republican voices are calling not only for an end to interest on reserves, especially for foreign banks, but also on central-bank swap lines (see: bit.ly/3HAbxVr). Reason? They want the interest paid to…
Central banks are beginning to fret about dollar swap lines - Gillian Tett on.ft.com/4kHWwiS
What fun talking the is morning to @DavidBrancaccio @Marketplace! Great questions following Bessent call for a Fed investigation on how to hold the Fed accountable without making it unduly political. marketplace.org/episode/2025/0…
Anyone who thinks the FDIC’s RFI on ILCs is same-old should think anew. As I point out this week, the RFI makes it clear that the FDIC is contemplating consequential changes likely to change the competitive balance between legacy banks and nonbanking companies, crypto and huge…
Great piece, @dgtokar and @ginaheeb, and happy to add a few thoughts. The regulatory hurdles are super-high now that this framework is almost law. How really to ensure reserve-asset par value? Even if you can, is there liquidity to ensure seamless on/off-ramp into dollars?…
Stablecoins are coming for your bank deposits! wsj.com/finance/curren… via @WSJ w @ginaheeb
Great article by @samjsutton late Friday on for-cause dismissal of Jay Powell. For more on what Trump could do and latest from the Fed, see my weekly memo (bit.ly/44uo7hZ) out this morning.
“They appear to be trying to build a strong case for mismanagement and the violation of certain federal rules,” said @KarenPetrou. “All of the accusations on monetary policy are irrelevant to this. It is a straightforward administrative action.” politico.com/news/2025/07/1…
FedFin’s analysis of the inter-agency proposal to ease the enhanced supplementary leverage ratio concludes that its impact on Treasury-market liquidity is at best uncertain. Indeed, the agencies know this, laying out detailed alternatives they could quickly adopt in a final reg…
Last week, Ripple and Circle filed bank-charter applications. They aren’t exactly slow about getting ready for the new federal framework that gives them an array of advantages over old-school banks and BHCs. What’s next? My latest memo makes it clear that the stablecoin issuers…
Looks for sure that there will soon be a federal stablecoin framework, but will stablecoins amount to much other than trouble? I take a look, concluding that the most important use case outside of illicit finance and interchange-fee evasion is retail cross-border payments.…
New FedFin report on the GENIUS Act: We read the fine print and found a lot of waivers or options buried therein. For example, the bill bars nonfinancial public companies from stablecoin-issuer affiliation -- or maybe not. There is no obstacle to a Libra-like consortium the…
Note to regulators: You won’t be doing near enough to rewire the leverage ratio if you only tinker with it. Now may not be the time just to junk the leverage ratio, but you can at least fix it by applying it only to assets where risks aren’t captured by the market/operational…
A new FedFin report shows how the President’s “golden share” in U.S. Steel is a plausible precedent for GSE redesign. Governing law allowing this is uncertain, but what the heck – is allows the Administration to monetize the GSEs yet keep the implicit guarantee, not to mention…
Most banks dismiss the risk that Congress now or the Fed soon could yank $176B in interest on reserves. I show (see my memo) why IORB is ripe for reversal and that even central-bank swaps face surprising risks. These days, just because you think something can’t be done doesn’t…
How to rewrite the bank capital regs now that Bowman has launched a truly-holistic review? Think big, go simple, get tough. For what this means in practice, see my memo. It’s really not as hard as it looks if supervision comes to matter as it should. fedfin.com/karen-petrou-h…
Why am I not surprised by the magnitude of this supervisory goof?
Good point re: the FDIC IG Pulaski Bank Review. FDIC examiners were quite active in issuing findings and downgrades ... and yet didn't notice that a $45m asset bank had lost track of $20m in deposits? (Maybe that's an unfair reading; we'll see when the in-depth report is done).
Thanks, @judyshel – the admiration is much appreciated and reciprocal. Sadly, economic inequality has only gotten worse since my book bit.ly/3OHwEGS, in part because the Fed’s role has only gotten bigger and, especially re inflation, still more misguided. You’re also…
@KarenPetrou I appreciate as well her acknowledgment in the post below that foreign banks are not big lenders in the United States. Their operating model is to park cash assets at the Fed in their master deposit accounts to reap the hefty 4.4% risk free policy interest rate…
A new front in the trade war: interest on the reserves banks hold at the Fed. For how this might pan out, see my memo. In short, foreign banks have a lot to worry about -- $78 billion a year, in fact. fedfin.com/karen-petrou-a…