Reacting to Williams’ appointment; Treasury seeks CRA changes

Receiving Wide Coverage ...

Eastward ho!: As was widely expected, John Williams, the president of the Federal Reserve Bank of San Francisco, was named head of the New York Fed, which supervises some of the country’s biggest banks and acts as the Fed’s main contact with Wall Street. He will replace William Dudley, who is retiring in June. Wall Street Journal, New York Times, Washington Post, American Banker

Williams, “a consummate central-bank insider,” was viewed as the person who “best complements Fed Chair Jerome Powell during a challenging period for monetary policy,” the Wall Street Journal says. The economist, “has shaped the central bank’s monetary policy when interest rates and inflation are low, as they have been for most of the past decade.”

Mark Compton

Williams’ appointment “provides Jay Powell with an experienced ally at a time when the central bank’s Washington leadership is short-staffed,” the Financial Times adds. “Of the three governors currently in post, only one, Lael Brainard, is an economist.”

Here’s where Williams stands on some important issues.

Wall Street Journal

Getting easier: The Treasury Department unveiled revisions to the Community Reinvestment Act to make it easier for banks to comply. “Under the proposed changes, banks would be held to more objective, numbers-based standards for complying with the law, compared with the current approach in which large parts of the exam hinge on regulators’ subjective judgments,” the paper says. “The changes also would make it easier for banks to meet certain lending requirements and lower penalties for compliance problems.” The new policy received a warm greeting from bankers and consumer advocates.

The good side of volatility: The first quarter is expected to be Wall Street banks' best for trading in the past several years.

A new direction: Goldman Sachs is “quietly plotting a move into commercial banking” and has hired a senior engineer away from rival JPMorgan Chase to make it happen. Hari Moorthy, a JPM managing director, was hired as a partner to build a suite of cash management tools and other products to offer corporate clients.

“It is a somewhat unorthodox move for Goldman, which is better known for its advice on mergers and capital raising,” the paper notes. But Goldman is looking for growth opportunities away from its core trading and investment banking businesses.

Financial Times

Tell us more: Shareholders of Citigroup and Goldman Sachs want the companies to be more transparent about their lobbying of public officials. Investors in the two banks will vote on proposals at their respective annual meetings to demand more disclosure on their lobbying activities.

New York Times

Bounced: Morgan Stanley fired Douglas E. Greenberg, one of its star financial advisers, after it came to light last week that several former wives and girlfriends had accused him of physical abuse and stalking. The paper reported last week that Morgan Stanley executives had known about the allegations for years; Greenberg was put on administrative leave after the story was published before being dismissed Tuesday. “We must and will do better,” a company spokeswoman said.

It’s complicated: Peter J. Henning, the Wayne State University law professor, has his doubts about the efficacy of Sen. Elizabeth Warren’s “Too Big to Jail Act” that would hold bank executives accountable for misconduct at their institutions. “Even if it did pass — which seems unlikely in the current anti-regulation environment — the proposed certification requirement is unlikely to result in a wave of prosecutions,” he writes in the White Collar Watch column. “Absent proof of an executive’s involvement, or at least knowledge, of fraud, a willful violation of the certification requirement in Ms. Warren’s legislation would be difficult to prove. There is no simple cure to the challenge of holding senior managers responsible for what takes place within their organizations.”

Quotable

“There is no one I can think of who has a deeper background and who has made more contributions to monetary policy at a research, academic level. That’s combined with long experience and a very strong record of contributions to real decision-making through a complicated period.” — Former Fed Chair Janet Yellen about John Williams, the next president of the New York Fed.