Jay Powell signals a retreat on banking rules

Jay Powell’s surprise

For months, Wall Street CEOs have bitterly complained and lobbied against the prospect of higher capital requirements, which would require them to keep more money on hand and reduce their profits. It looks like they’ve won a big win.

Jay Powell dropped the bomb in his testimony before the House of Representatives on Wednesday. Markets were still digesting the Fed chairman’s slow comments on rate cuts when he indicated that proposed new rules to force lenders to shore up their books scaled back or reworked.

“I do expect that there will be broad and substantive changes to the proposal,” he said.

The capital rules, known as the ‘Basel III endgame’, would apply to the largest banks. They would need to set aside a larger emergency cushion to absorb losses from shocks such as last year’s bank run, which led to the collapse of Silicon Valley Bank and sparked a broader crisis.

But the proposals have come under fire from bank executives, industry lobbyists, Republican lawmakers and even some liberal members of Congress, who fear that a mandate to set aside billions to combat the next potential crisis could another.

Critics fear Basel III will restrict lending, just as banks struggle with commercial real estate turmoil. Lenders face a looming “maturity wall” of as much as $1.5 trillion in commercial real estate loans coming in the next two years.

That risk was evident during Powell’s testimony. The stock price of New York Community Bank, a Long Island lender with a mountain of souring real estate loans, plummeted on news that the bank was seeking emergency financing. (More on that below.)

Does political will wane in an election year? When pressed by members of the House of Representatives on the same issue last month, Treasury Secretary Janet Yellen said she was concerned about the availability of credit. “has not been significantly reduced.” Last year she sounded more supportive of Basel III as a defense against the next crisis.

(It’s worth noting that Yellen doesn’t set the rules. That responsibility lies with the Fed, the FDIC, and the Office of the Comptroller of the Monetary Fund, in conjunction with the international standards set by the Basel Committee for Banking Supervision, the global supervisory body. )

Expect round two on Thursday. Powell will testify before the Senate Banking Committee. Elizabeth Warren, the Massachusetts Democrat and member of the committee, pushed Powell to “resist the pressure from the banking lobbyAnd approve stricter capital requirements for banks.

HERE’S WHAT’S HAPPENING

President Biden will make a pitch about raising corporate taxes in his State of the Union address. Tonight’s speech is expected to highlight Bidenomics’ achievements and point to second-term policy goals such as raising levies on big businesses and lowering housing costs. Polls consistently show voters questioning Biden’s handling of the economy, despite a range of indicators showing the U.S. doing far better than most of its peers.

The House of Representatives passes a $460 billion bill to prevent a partial government shutdown. Speaker Mike Johnson once again needed votes from Democrats to defeat the far-right members of his Republican Party. The deal will fund much of the federal government through September 30.

JPMorgan Chase has reportedly been considering a deal for Discover. The banking giant opened talks with the credit card company in 2021, according to The Financial Times, before Capital One made a $35 billion bid for the company last month. A partnership between JPMorgan and Discover would most likely have faced intense regulatory scrutiny.

A former Google employee is accused of sending AI technology to a Chinese company. Prosecutors accused Linwei Ding, a Chinese national and former engineer at the tech giant, of trying to provide a Beijing-based company with artificial intelligence trade secrets. The case comes as the The US is pushing alliesincluding the Netherlands and Japan, to tighten restrictions on semiconductor technology exports to China.

NYCB gets a lifeline

Former Treasury Secretary Steven Mnuchin came to New York Community Bank’s rescue, leading a more than $1 billion investment round that appears to have allayed many of the concerns that have dogged the lender for weeks.

Shares of the Long Island bank rose in premarket trading after a wild ride on Wednesday. The transaction is also notable for its reliance on private equity, the big names involved, and the fact that the bank’s problems have not (yet) led to a broader crisis.

It is the latest example of a troubled bank seeking help from private equity in recent months. The deal from Liberty Strategic Capital, Mnuchin’s investment firm, follows a series of recent private equity and banking deals, including:

• FirstSun Capital Bancorp and HomeStreet announced a merger in January, backed by Wellington Management.

• The Banc of California’s agreement to buy PacWest, which was backed by Warburg Pincus and Centerbridge Partners last July.

Private equity firms are too engage in lendingtraditionally the domain of banks, in what some call a ‘boom’ in private credit or shadow banking.

Mnuchin reconnects with a familiar name. NYCB appointed Joseph Otting, the comptroller of the currency during the Trump administration, as CEO (he replaces Alessandro DiNello who was only appointed last week, but will return to a previous role as a non-executive director.)

Mnuchin and Otting worked together before as chairman and CEO of OneWest Bank, which bought most of IndyMac’s assets after the mortgage lender collapsed during the financial crisis. Mnuchin made hundreds of millions from that agreement. He will join the NYCB board.

NYCB’s problems have been isolated so far. The KBW Nasdaq Regional Bank Index, which tracks the performance of dozens of NYCB’s peers, has risen over the past month, while NYCB has sunk. That may be because NYCB is mainly exposed to commercial real estate. The sector is still struggling to recover from high interest rates and the pandemic-era shift to hybrid working.

Mnuchin was convinced that the cash injection would provide sufficient cushion. With the investment, he said, “we believe we now have sufficient capital.”

The PGA Tour signs a new deal

As the PGA Tour tries to fend off Saudi-backed LIV Golf, it has struck deals with the likes of Steve Cohen and LeBron James. Now a media company is being transferred to a start-up founded by two industry veterans. to write Benjamin Mullin and Lauren Hirsch.

The PGA Tour sells Skratch to Pro Shop. Skratch publishes a range of golf content, including instructional videos and behind-the-scenes footage of professional players; Pro Shop will also receive the rights to show clips and highlights. The PGA Tour will take a minority stake in Pro Shop as part of a $20 million financing round (the companies did not disclose Pro Shop’s valuation).

Pro Shop wants to connect content and commerce digital advertising is languishing. The company was founded by Joe Purzycki, a former CEO of Puck, and Chad Mumm, an executive producer of “Full Swing,” a Netflix documentary series about the PGA Tour.

Pro Shop plans to acquire a golf equipment company and sell programs to media companies. “We’re not trying to serve everyone,” Purzycki told DealBook. “We have a very specific ethos in bringing golf and culture together.”

“Full Swing” was an attempt by the PGA Tour to expand its reach. The The second season premiered on Wednesday. Christopher Wandell, senior vice president of media development at the PGA Tour, said 63 percent of Season 1 viewers tuned in to the PGA Tour’s coverage shortly after its debut. “Everything we’re doing between now and the next time our media rights are available in the US in 2031 is generating more and diversified fans,” Wandell told DealBook.

The bet is that Skratch will have success outside the PGA Tour. “Our vision for Skratch was always to reach a different kind of audience – but to reach that kind of audience, Skratch has to have a real talent in front of the camera with an opinion,” Wandell added, saying that was difficult during the PGA Tour. .

Other Pro Shop backers include Powerhouse Capital, the venture capital firm that previously invested in the podcast start-up Wondery and The Athletic, the sports website that was acquired by The New York Times in 2022.

A star lawyer sets up his own shop

As a senior trial attorney under Benjamin Brafman, Marc Agnifilo built a reputation as a top criminal defense lawyer, with the likes of Martin Shkreli and Roger Ng, a former Goldman Sachs banker prosecuted in the 1MDB scandal.

Now Agnifilo and two colleagues, Zach Intrater and Teny Geragos, are setting up their own store, Agnifilo Intrater, DealBook first reported.

The three have climbed the ranks of the criminal court. Agnifilo began his career as a prosecutor at the Manhattan District Attorney’s Office and then at the U.S. Department of Justice in New Jersey, where he prosecuted gangs as head of the Violent Crimes Unit. He later joined Brafman & Associates in 2006, where he became a senior trial attorney and, in the role of his now former boss one-time estimatehis ‘apparent heir’.

Intrater worked at the U.S. Attorney’s Office in New Jersey for 11 years before joining Brafman’s office. And Geragos – whose father is Mark Geragos, the well-known lawyer – joined in 2016.

Among their notable cases: In addition to Shkreli and Ng, Agnifilo has also defended Keith Raniere, the founder of the Nxivm sect who has served 120 years for sex trafficking and other crimes.

Agnifilo also represented John Venditto, the former Supervisor of the City of Oyster Bay, NY, in a political corruption trial, and Stefan Boka Swiss banker accused of helping wealthy American clients commit tax fraud.

Agnifilo Intrater will specialize in large, complex criminal defenses. “We will relentlessly focus on what we do best: winning tough criminal cases,” Agnifilo told DealBook in a statement.

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