The Washington Wrap is a weekly recap of financial regulation, news and chatter from around the capital. Send tips and ideas to alison.bennett@spglobal.com and tim.weatherhead@spglobal.com.
At the Federal Reserve
The Fed on Wednesday raised its benchmark interest rate by half a percentage point and announced plans to reduce its $9 trillion asset portfolio starting June 1, The Wall Street Journal reported.
The moves will raise the central bank's benchmark federal-funds rate to a target range between 0.75% and 1%.
The two-prong move is the most aggressive tightening of monetary policy in decades by the Fed as it tries to rapidly reduce the economic stimulus that has contributed to rising price pressures. The Fed last raised rates by a half point in 2000.
The Federal Open Market Committee approved the decision unanimously. The committee said it "anticipates that ongoing increases in the target range will be appropriate," setting the stage for another large rate rise at its next meeting next month.
At the Department of Labor
The U.S. economy added 428,000 jobs in April, and the unemployment rate held steady at 3.6%, The Wall Street Journal reported.
The labor-force participation rate fell by 0.2 percentage point to 62.2%, and average hourly earnings rose 0.3% sequentially, slower than the expectations of Wall Street analysts.
The leisure and hospitality sector drove the April job gains, adding 78,000 jobs, while factories added 55,000 employees and the transportation and warehousing sector contributed 52,000 in job gains.
At the bank regulators
The Fed, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released their long-awaited joint rulemaking proposal to amend the 1977 Community Reinvestment Act, which requires banks to provide services to low- and moderate-income, or LMI, communities.
Under the new rules, the regulators would assess online and mobile banking, branchless banking and hybrid models and would scrutinize smaller-value loans and investments "that can have high impact and be more responsive to the needs of LMI communities," according to a memo.
The CRA framework would categorize banks based on size and business models, defining small banks as having less than $600 million, intermediate banks as having between $600 million and $2 billion in assets, and large banks as having more than $2 billion in assets.
Smaller banks would continue to be evaluated under the existing CRA regulatory framework, but they would be given the option to be evaluated under aspects of the new framework.
Examiners would look at banks' activities both in the physical communities where they operate and across the country, and, in a significant change, the proposal would include subsidiaries.
At the CFPB
The Consumer Financial Protection Bureau ordered Bank of America Corp. to pay a $10 million civil penalty for allegedly processing illegal, out-of-state garnishment orders against at least 3,700 customer accounts since Aug. 1, 2011.
The bureau said the bank "unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived."
The CFPB also ordered Bank of America to refund or cancel the imposed fees of at least $592,000 from the illegal garnishments, remove the unenforceable clauses from its contracts, and fix its garnishment process.
On Capitol Hill
Sens. Elizabeth Warren, D-Mass., and Cory Booker, D-N.J., as well as Rep. Carolyn Maloney, D-N.Y., in letters sent to JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America criticized the giant banks for continuing to profit from overdraft fees.
The lawmakers said the three banks accounted for 44% of overdraft and nonsufficient fund fees collected by big banks in 2019 and called for a complete repeal of their overdraft fees.
The banks have been asked to reply to a set of questions by no later than May 18.
Warren and Sen. Tina Smith, D-Minn., also sent a letter to Fidelity Investments CEO Abigail Johnson questioning the company's plan to let investors put bitcoin in their 401(k)s, citing the potential risk of the cryptocurrency as well as conflicts of interest.
"Investing in cryptocurrencies is a risky and speculative gamble, and we are concerned that Fidelity would take these risks with millions of Americans' retirement savings," the letter said.
The senators said the company may have a conflict offering bitcoin in retirement funds given that it has mined the cryptocurrency and the fact that it offers a crypto fund for wealthy investors.
At the SEC
The Securities and Exchange Commission added 20 positions to the unit responsible for protecting investors in crypto markets and from cyber-related threats. Formerly known as the Cyber Unit, the newly renamed Crypto Assets and Cyber Unit will grow to 50 dedicated positions and be housed within the Division of Enforcement, according to a press release.
The addition of 20 extra positions will bolster the number of supervisors, investigative staff attorneys, trial counsels and fraud analysts in the agency's headquarters in Washington, D.C., and in multiple regional offices, according to the release.
