Equitable Growth’s Amanda Fischer finds the acting Comptroller of the Currency going way beyond his competence, apparently in order to try to curry favor with his political masters. It is his job to help avoid unnecessary negative financial and economic fallout from necessary public health measures. It is not his job to try to put constraints that would prevent undertaking necessary and desirable public health measures:
Amanda Fischer: ‘About this letter from Acting @USOCC head Brian Brooks to mayors & county officials... https://twitter.com/amandalfischer/status/1267831757950328832: ‘I have not seen such an opportunistic, inappropriate & frankly dangerous statement from a financial regulatory official maybe ever https://occ.gov/news-issuances/news-releases/2020/nr-occ-2020-73a.pdf. Brooks wrote to state & city officials basically telling them, "nice economy you have there; I wouldn't want anything to happen to it." It should be read as more of a threat than a warning. And it is obviously theatrics meant to endear himself to the President. Brooks is telling mayors & county officials that there may be a banking crisis if they don't reopen, as commercial businesses default on loans & cause a cascade of defaults that elected officials should consider.
A couple points on why Brooks is wildly inappropriate:
First, he's not an epidemiologist, and the OCC is independent of the Executive branch. He has no idea if reopening is actually worse for the economy. In fact, plenty of economists have cautioned against premature reopening as being bad for long-term growth & public health.
Second, it is not mayors' or county officials' responsibility to worry about financial stability. His examiners should do a better job of predicting losses, and the OCC and Federal Reserve should do a better job of ensuring banks are well-capitalized. Don't put this on mayors. It is also rich given the actions taken by the OCC and Federal Reserve to deplete banks' loss-absorbing capital, including allowing banks to continue to pay out dividends given all the risks Brooks cites in this letter.
Finally, the letter is wild, considering the debate in Congress right now. A simple way to keep the economy on ice is to ensure people & small businesses have adequate money to pay their bills. If people have money, creditors have money, & banks will be fine. Brooks' own political leadership seems to oppose extending UI, direct payments or other relief—relief that would ease pressure on the banking sector. Instead, Brooks is trying to threaten states and cities to reopen without regard for public health recommendations…
#coronavirus #macro #noted #orangehairedbaboons #2020-06-02