Smoke and Mirrors at the Fed?
So, the Federal Reserve, in its infinite wisdom, has decided to tweak the rules for what qualifies as a "well managed" large bank. Oh, joy. According to them, it's all about "ensuring ratings more accurately reflect a firm’s overall safety and soundness." Yeah, right. As if the ratings ever reflected reality in the first place.
What this REALLY sounds like is a way to massage the numbers and make things look rosier than they are. They're basically saying, "Hey, as long as a bank only has one major screw-up, it's still doing great!" Give me a break.
Michelle Bowman, the Fed's Vice Chair for Supervision, says the revisions "help ensure that overall firm condition is the primary consideration in a bank’s rating.” Okay, Michelle, let's be real. "Overall firm condition" sounds suspiciously like "we're trying to avoid another 2008-level meltdown, so let's lower the bar a bit."
Calibrating Risk or Cooking the Books?
The Bank Policy Institute (BPI), bless their hearts, is spinning this as making the LFI rating system "a more useful tool for regulators by calibrating supervisory measures to more accurately reflect risk." You can read the BPI Statement on Federal Reserve Changes to LFI Rating System for their full take. Calibrating risk? Or just making it easier for banks to skate by? I'm going with the latter. It's like saying, "We're not lowering the speed limit, we're just making it harder to get a speeding ticket."
And what's with the "commensurate changes to the CAMELS rating framework" they're hoping for? More of the same, I bet. More ways to let these behemoths off the hook.
I mean, are we really supposed to believe that tweaking a few definitions is going to magically fix the underlying problems? It's like putting a band-aid on a gaping wound and calling it a cure.
Offcourse, the timing is impeccable. With interest rate decisions looming and a potential government shutdown still casting a shadow, the Fed wants to project an image of stability and control. This "well managed" tweak is just another piece of that PR puzzle.
The Rate Cut Charade
Speaking of interest rates, remember that "cooler than expected" inflation rate? The one that's supposedly paving the way for a rate cut? Economists are practically tripping over themselves to declare that a cut is a "done deal."
Scott Helfstein from Global X says, "Nothing in the inflation print should stop the Fed from cutting rates next week. Yes, prices are higher, but not enough to keep them from helping the economy." Translation: "We need to juice the market, even if it means kicking the can down the road on inflation."
And how will this impact your money? Credit cards and HELOCs might see a slight dip, but mortgage rates have "already dipped ahead of the Fed's rate decision." So, basically, the big banks get bailed out, and the average Joe gets a few crumbs. Sounds about right.
Then again, maybe I'm the crazy one here. Maybe the Fed really does have our best interests at heart. Maybe unicorns are real, and politicians always tell the truth.
...Nah.
