Fintech Takes

S6 Ep3: Banks Gaming the Fed, The Fight Over ILCs Ramps Back Up, and Frequent Flyer Mile Madness

Jan 24, 2024

This podcast episode covers topics such as challenges banks may face in 2024, industrial loan charters and senate cracking down, US Transportation Department's scrutiny of frequent flyer programs, the Fed's many roles, and the interest rate risks and role of regulators in the banking industry.

01:35:18

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Quick takeaways

Central banks have multiple roles and responsibilities, including regulating and supervising banks, conducting monetary policy, and operating payment systems.

Regulatory agencies with differing priorities can create conflicts in the regulatory system, but having multiple agencies overseeing different aspects of regulation can be beneficial for a robust system.

Deep dives

Central banks and their roles

Central banks have multiple roles and responsibilities because of their historical development and the needs of the financial system. One key reason is that central banks act as regulators and supervisors of banks, ensuring their stability and safety. They also have the important task of conducting and managing monetary policy, which involves setting interest rates and controlling the money supply to maintain price stability and economic growth. Additionally, central banks often operate payment systems to facilitate the smooth functioning of financial transactions. These different roles and responsibilities can sometimes create conflicts as they require distinct approaches and objectives. However, central banks aim to maintain financial stability, foster economic growth, and protect the interests of consumers and the overall economy. While the roles of central banks may seem diverse, they all ultimately serve the purpose of maintaining and promoting a stable financial system.

Introduction

2min

Extreme weather, infrastructure, and a bank rescue program

4min

Liquidity Program and Usage of Federal Reserve Facilities

8min

Differences between ILCs and bank holding companies

24min

The Department of Transportation's Concerns

11min

Conflicting Roles and Responsibilities of Central Banks

29min

Racial Discrimination in Mortgage Approvals and Regulator Response

3min

Examining Risk Landscape and Process Steps

12min

Addressing Interest Rate Risks and the Role of Regulators

1min

We’ve all barely recovered from the frosty Arctic blast this past week, but that balmy -37-degree Montana weather isn’t slowing down our favorite fintech obsessive one bit. Alex joins banking and fintech editor at Bank Director, Kiah Haslett to discuss the latest and greatest news happening in the banking world.

Kiah and Alex cover the potential challenges banks may face in 2024, including the impact of lower interest rates and the possibility of earnings conditions leading to "zombie banks." How fine are taxpayers with banks making some risk-free money from the Fed’s emergency funding program?

And there’s no evidence that industrial loan charters have ever wrecked any part of the banking industry… so why, then, is the Senate banking Chair looking to crack down on tech companies looking to expand into financial services through ILCs? Is this overkill?

Kiah and Alex also dive into the US Transportation Department’s scrutiny of frequent flyer programs—why are we treating them like banks?

Plus, what does the Fed have too many jobs? And should banks quit trying to make digital wallets happen? Is it ever going to happen?

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