The Federal Reserve joins with the banking industry to pause the ongoing lawsuit regarding the large bank stress tests, agreeing to disclose the stress test models and seek comment on both the scenarios and future model changes. Stress tests are critical to the oversight of the largest, systemically important banks. Although the decision to make stress tests more transparent sounds like a good thing, it is actually making them weaker, less informative, and more susceptible to gaming. When the models and scenarios are published, they become less robust. Consequently, the test results will give a false sense of security and allow for capital ejection to shareholders and bank executives, which leaves less protection to be used in a crisis and more liability for taxpayers.

The SEC dismissed three cases alleging that firms who purchase debt from small issuers, convert that debt into stock, and sell the stock on the open market at high volumes and frequencies are securities dealers. Investors are left unprotected if firms that are in the business of buying and selling securities need not register as a securities dealer.

Chair Atkins said that the SEC is asking Congress for approval to dismantle the Strategic Hub for Innovation and Financial Technology (or “FinHub”). The elimination of FinHub, which was designed to support the agency’s oversight of not just crypto but also artificial intelligence, quantum computing, and automated investment advice, means investors will be less protected from emerging technologies.

The Federal Reserve will make the banking system and economy less safe and less stable with cuts to staffing. Fewer Federal Reserve staff to supervise banks, conduct monetary policy, and support the safe and smooth functioning of the banking system is a bad decision for all Americans. A shortage of trained and experienced bank supervisors was found to be a key cause of the 2023 bank failures. This decision will hurt the Federal Reserve and our banking system.

The SEC and FINRA withdrew staff guidance saying that broker-dealers needed to consider whether they could custody crypto assets in light of their unique risks and still comply with their obligation to safeguard customer assets. The withdrawal of the statement leaves customers unprotected from the unique risks that crypto assets pose.

The CFPB amended a prior settlement with remittance company Wise, which previously found that Wise advertised inaccurate fees and failed to properly disclose exchange rates and other costs. Although the previous settlement ordered Wise to pay approximately $450,000 to overcharged consumers and a $2.025 million fine to the CFPB’s victims relief fund, the new settlement reduces Wise’s fine from over $2 million to $44,955.