The Week Ahead: Non-Bank SIFI Process Under Microscope

Non-bank systemically important financial institutions (SIFIs) have received a lot of attention lately in the financial industry, with a judge removing the SIFI tag from MetLife in April and Treasury suing to have that tag reattached to the insurance provider. Last month, however, Treasury removed the SIFI designation from GE Capital after determining that the failure of GE would not be catastrophic for the U.S. financial system.

The designation of SIFIs by the Financial Stability Oversight Council (FSOC), an agency created by Dodd-Frank, has generated no small amount of controversy. The House Financial Services Committee's Oversight and Investigations Subcommittee will examine the FSOC's designation of non-bank SIFIs this Thursday, July 14, in a hearing starting at 10 a.m. EST.

The FSOC, like the CFPB, was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. While supporters of Dodd-Frank claim that the controversial legislation put an end to the taxpayer-funded bailouts for institutions deemed “Too Big to Fail,” its opponents claim that the law actually codifies “Too Big to Fail” by giving the FSOC the authority to designate certain institutions as “systemically important.” The Council’s criteria for designating institutions as such as been another highly debated topic in Washington.

“Of all of the Council’s activities, none generates more controversy than its designation of non-bank financial institutions as ‘systemically important financial institutions,’ or SIFIs. Designation anoints institutions as Too Big to Fail, meaning today’s SIFI designations are tomorrow’s taxpayer-funded bailouts,” said Jeb Hensarling (R-Texas), Chairman of the Committee. “Designation also ominously grants the Federal Reserve near de facto management authority over such institutions, thus allowing huge swaths of the economy to potentially be controlled by the federal government.”

Tuesday, July 12—National Home Price Perception Index (HPPI) for June 2016, Quicken Loans

How did American homeowners' expectations of their home values compare with actual appraised values of those homes in June? The industry will find out on Tuesday, June 12, when Quicken Loans publishes its National Home Price Perception Index (HPPI) for June. For May, homeowners' expectations of their homes' value (nationwide) were 1.89 percent higher than their actual appraised value, though the numbers played out different in Western markets. Denver had the highest HPPI value in May of any city with appraisals of home values showing an average of 3.28 percent higher than homeowners expectations. Eastern markets like Philadelphia, Detroit, and Baltimore saw the opposite happen; in each of those markets, appraised home values were more than 3 percent less than what consumers thought they would be.

“The hot housing markets along the west coast are growing quicker than owners realize, giving way to higher than expected prices for buyers and more home equity for existing owners,” said Quicken Loans Chief Economist Bob Walters. “On the other hand, the housing markets are more balanced in the East and Midwest, leading owners to be slightly over enthusiastic about their home’s appreciation.”

Tuesday, July 12

National Home Price Perception Index (HPPI) for June 2016, Quicken Loans

Thursday, July 14

JPMorgan Chase Q2 earnings report

Hearing titled “The Financial Stability Oversight Council and the Designation of Non-Bank Financial Companies," House Financial Oversight and Investigations Subcommittee, 10 a.m. EST

Friday, July 15

Q2 earnings reports for Citi, PNC, U.S. Bank, and Wells Fargo