New York Fed study questions new money market rules. Liberty Street Economics, a blog of the Federal Reserve Bank of New York, summarized a recent New York Fed staff report which studied the effect of redemption gates. The study concludes that a financial intermediary’s ability to suspend redemptions may cause “preemptive runs.” (8/18/2014) Preemptive runs.
US accounting overseer reports on the audits of broker-dealers. The US Public Company Accounting Oversight Board issued its third annual report concerning the audits of brokers and dealers. The report notes that there continues to be a high number of independence findings and audit deficiencies. Audit deficiencies were found in portions of 70 of the 90 audits. Independence findings were found in 21 of the 90 audits, where firms helped with the bookkeeping or preparation of the financial statements they audited contrary to SEC rules. (8/18/2014) PCAOB press release.
Early termination of derivative contracts. Thomas Hoenig, Vice Chair of the FDIC was interviewed by Reuters concerning bank “living wills.” Hoenig said that banks need to amend the early termination provisions of their derivatives contracts so that the contracts may be stayed in the event of a bank’s failure. (8/14/2014) Amended wills.
New RMBS structure proposed. The Federal Housing Finance Agency proposed a new mortgage backed security, the “Single Security,” that would be issued and guaranteed by Fannie Mae or Freddie Mac. Comments should be submitted on or before October 13, 2014. (8/12/2014) FHFA press release.