BTN with Ethan Heisler

In addition to telling Senators this month during his confirmation that he is not a sock puppet, Kevin Warsh insisted that the Fed’s balance sheet is too big, is harming the economy, and that his job on Day 1 will be to shrink it back to where it was before anyone had ever heard of QE. But here is a question for the newsletter’s fellow bloggers, posters, and readers: how has it hurt the economy? Because, to hear the bank executives who met with investors this month, who were all about optimism and how everything is fine (for now), the harm it is causing is not much in evidence. Certainly, the Fed’s balance sheet cannot be as harmful as all the other chaos these days roiling markets, the price of gas, and fertilizer. The newsletter looks at the plan Kevin Warsh would pursue to shrink the Fed’s balance sheet and what would need to change to get the job done.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

Sometimes, bank treasurers might feel like they’re living in a make-believe world. It’s really tough to stay focused when they’re worried about things like a war in Iran, economic uncertainty, political instability, Fed uncertainty, and big changes like moving to instant payments, rapid industry consolidation, and new, empowered fintech competitors, NDFIs, and AI—all at the same time. They also need to adjust to a new tone with their bank supervisors. This month’s newsletter podcast talks about these challenges and how bank treasurers are navigating through all these rapid changes and 10X volatility.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn.

Tried as he might on his African safari vacation, your editor in chief could not ignore the news from back home. He saw a lot of lions, giraffes, zebras, rhinos, hippos, elephants, cheetahs, and leopards, witnessed real-life drama when a cheetah tried and failed to kill a baby wildebeest, and spent countless hours with a guide to point out all the amazing birds in the Serengeti. But all he could focus on was the Kevin Warsh nomination, the FDIC’s new willingness to approve Industrial Loan Company charter applications, and the OCC’s approval of stablecoin-related trust bank charters. If that was not enough to occupy his attention, he could not stop thinking about how the Small Business Administration’s new Small Business Investment Company could be good news for bank treasury.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

Trump’s feud with Powell adds to the chaos in financial markets, but recalls many other episodes in American history when presidents and central bankers clashed. From Andrew Jackson and Nicholas Biddle fighting over the future of the Second Bank of the United States, to Harry Truman firing then-Fed Chair Tom McCabe, which led to the 1951 Treasury Accord, politicians and the Fed manage an uneasy alliance with implications for the future direction of interest rates and the economy. Bank treasurers might think that the Fed’s political independence is sacrosanct, but forget that when the politicians in Congress chartered the Fed in 1914, the Treasury Secretary was a voting member of the FOMC. Bank treasurers who successfully manage through market and economic uncertainty are only doing their jobs by delivering consistent performance through ups and downs.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

AI is the future, and the future is now, at least it is one of next year's top priorities for every bank treasurer at large and small banks and credit unions. The question is how? How do you implement AI? The answer to that question is another question: what do you want to do with it? Answering that question is not the IT department's or the intern's responsibility. The use cases need leadership at the top to decide and see implementation through if pilot projects are ever to yield the productivity gains the technology promises.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

You heard about the business with the pennies, right?Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

Dear Bank Treasury Subscribers, Connecting the dots is an age-old pastime, but the dots that bank treasurers see these days are very confusing and challenging to connect, at least without some form of AI. Even the voting members of the FOMC are not sure what picture they see. Amid significant market volatility and economic uncertainty, bank treasurers are just trying to keep their eyes on the horizon and keep their net interest margins steady.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

Dear Bank Treasury Subscribers, Deposit insurance reform is back in the news. You must have heard about it. The Senate Banking Committee held a hearing on it this month, and judging by the comments from the committee members, they could not have chosen a better bipartisan topic to take up and do some legislating like they get paid to do.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

Dear Bank Treasury Subscribers, If you are like most of the bank treasurers who talk to our editors these days, you probably think that the stablecoin hoopla is a fad, a distraction from what you are thinking about right now. We hear you.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.

The banking industry reported another solid quarter of earnings, which met and, in some respects, exceeded analyst estimates. Storm clouds on the horizon remain muted…Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.Music by Phantom Sun.

This month’s newsletter covers speculation on the timing of the first rate cut, the positives and negatives of an inverted yield curve and higher for longer, the effect of QT on reserves and bank deposits now that the balance of the RRP appears to have hit a floor, and why rate cuts will not necessarily lead to lower deposit rates.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.Music by Phantom Sun.

This month's newsletter is dedicated to the memory of Gerry Corrigan, the sixth president of the New York Fed from 1985 to 1993, known as the Fed's plumber, the go-to guy Paul Volcker and Alan Greenspan turned to in a financial crisis. Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts,Spotify, and Amazon. Follow us on LinkedIn.Music by Phantom Sun.

Wonders never cease in the bank treasury world, what with earthquakes in the metro NYC area to eclipses of the sun, but surely the sudden flattening of the yield curve this month, which is now half as inverted as it was last month, must stir the imagination of even the most experienced bank treasurer. This month’s newsletter pulls back the curtain on key talking points in the bank treasury world, explaining why a neutral balance sheet is not risk-free, why neutral, risk-free interest rates may not exist, why bank treasurers should never count on liquidity to be there when they need it, and why regulators trying to prevent liquidity problems in the banking system with pre-positioned collateral at the discount window may make bank treasury even more complicated than it already is.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

On the first anniversary of the crisis last March, this month’s newsletter looks at the unique circumstances and mistakes that ultimately led to the failure of SVB and lessons learned. One of those lessons is to beware of lessons learned, especially when they are based on “flawed, post-mortem reviews,” as Fed Governor Bowman argued this month. Even if the Basel 3 Endgame proposal looks like it is headed for a delay, our bank treasury contacts tell the newsletter that bank supervisors are already tightening guidance. A particular NYC regional bank was likely a victim of their new hardball approach. On a positive note, banks see stabilizing trends in their deposit balances and pricing and uninsured depositors are not in crisis mode anymore. However, most also believe that unless rates go back to 0%, depositors are not going to shift back to checking levels held as recently as two years ago, when noninterest-bearing deposits in the system equaled 30% of total deposits, compared to 23% last quarter.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

This month’s newsletter discusses how bank treasurers restructured their underwater bond portfolios last quarter when the 10-year rallied in November and December. It also explains why bank treasurers, most of whom believe they have more to fear from the Fed cutting rates by 300 basis points than raising them, are more hedged for higher rates going into 2024 than they were going into 2023.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

Ethan Heisler talks to privacy experts about the value of personal information and what banks need to do to protect their employee and customer data given escalating risks in the cyber-security space. Leading 25-year expert in cybersecurity, Jonathan Nguyen, and Tom Daly, founder and chief of MePrism explain why companies need to think beyond just preventing data breaches and make a real plan for what happens after they’ve already occurred.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

There are a lot of strange things going on in the bank treasury world, and as always, bank treasurers know to prepare for anything. You have a yield curve that is inverted for the longest time in decades, and where the marginal cost to fund a loan makes it difficult to lend profitably. You have high-interest rate volatility as reflected in the MOVE index that, like the inverted yield curve, has persisted for a very long time. None of these things are good for the bank treasury business. But, on the bright side, if you have cash to invest, an overnight risk- free rate from the Fed still cannot be beat, and if you are paid to do nothing, do nothing.As far as bank treasurers are concerned, a couple of rate cuts at the end of the year would be ideal for trends in their NIMs and NIIs this year. It could certainly help with AOCI recapture. Profits have been under pressure from rising deposit repricing expenses that bank treasurers see as just starting to crest. This month’s newsletter covers these issues and goes through some of the other key topics on the bank treasury agenda, from the Basel 3 Endgame to the fallout from the FHFA’s FHLB100.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

Sam Theodore, a veteran European bank analyst, reflects on what to expect from the unexpected both in the US and in the Eurozone. Has digitalization changed the nature of deposit funding? What new metrics do analysts need to consider, and how do artificial intelligence and machine learning fit into credit analysis? How should analysts incorporate exogenous risk into their thinking about credit safety?Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

In this age of heightened uncertainty, bank treasurers are reviewing and updating their ALM toolkits. Join me for a conversation with Michael Riddle and Geoffrey Sharp to find out how ERIS SOFR Swap Futures offers users the sophistication of an interest rate swap with the simplicity of a futures contract.Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Music by Phantom Sun.

Moorad Choudhry, author of The Principles of Banking, on his takeaways from the failure of Silicon Valley Bank, Signature, and First Republic, and what he has learned from his study of U.K. banking that bank treasurers in the States should consider as they seek to shore up their interest rate and liquidity risk management. Subscribe to The Bank Treasury Newsletter and Podcast at thebanktreasurynewsletter.com for professional Insights and commentary on bank treasury issues, investment portfolio strategy, and more. Listen on Apple Podcasts, Spotify, and Amazon. Follow us on LinkedIn. Produced and engineered by Alicia Heisler. Music by Phantom Sun.