July 2009 – FRR Proposes Resolution Regime

The FRR Report Proposes a Resolution Regime to Aid Failing Firms

Securities Industry Alert

On June 17, 2009, the U.S. Department of the Treasury (Treasury) released a five-part report titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report). The FRR Report, as well as a speech by President Obama, outlined a proposal designed to amend supervision and regulation within the financial system, including, among other things, focusing on creating tools that will assist the Treasury in aiding failing firms during future financial crises.

The current financial system only provides two resolution mechanisms for an interconnected bank holding company (BHC) or another non-bank financial firm nearing failure during a financial crisis. These mechanisms include: (1) obtaining emergency funding from the federal government (like AIG); or (2) a bankruptcy filing (like Lehman Brothers). If the proposals are enacted, the Treasury authority would be expanded to aid failing firms under the current framework by proposing the creation of a “resolution regime.”The “resolution regime” will not replace bankruptcy in the normal course of business but rather will empower the Treasury with the authority to determine how to orderly sustain a failing BHC or non-bank firm. However, the Treasury’s augmented powers will only arise if a “systemic risk exception” is triggered and after consultation with the President.

A “systemic risk exception” would be activated if a firm’s failure would pose a severe risk to the entire financial system.The exception would permit the “resolution regime” to take any action justified, not only cost-effective alternatives, including, among other things, establishing a conservatorship or receivership for a failing firm, providing loans to a failing firm or BHC, purchasing assets from a failing firm, guaranteeing the liabilities of a failing firm or BHC or making equity investments in a failing entity. Although the authority to decide whether to resolve the failing firm will reside with the Treasury, the Federal Reserve Board (FRB), FDIC and even the SEC may initiate the process.

In addition to the “resolution regime,” the FRR Report also recommends that the Treasury be provided with the authority to oversee the FRB’s ability to extend emergency funding. It is proposed that Section 13(3) of the Federal Reserve Act be amended to require the Treasury Secretary’s prior written approval before the FRB provides any credit extensions to individuals, partnerships or corporations in “unusual and exigent circumstances.” This proposal will broadly extend the Treasury’s supervisory authority over the FRB.

The FRR Report’s proposals will produce vast changes to the supervision and regulation of the financial system. Significantly, the creation of a “regulatory regime” may severely impact the level of self-control struggling BHCs and non-bank firms would possess during future financial crises.

 

FRR Proposes Resolution Regime

On June 17, 2009, the U.S. Department of the Treasury (Treasury) released a five-part report titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report). The FRR Report, as well as a speech by President Obama, outlined a proposal designed to amend supervision and regulation within the financial system, including, among other things, focusing on creating tools that will assist the Treasury in aiding failing firms during future financial crises.

The current financial system only provides two resolution mechanisms for an interconnected bank holding company (BHC) or another non-bank financial firm nearing failure during a financial crisis. These mechanisms include: (1) obtaining emergency funding from the federal government (like AIG); or (2) a bankruptcy filing (like Lehman Brothers). If the proposals are enacted, the Treasury authority would be expanded to aid failing firms under the current framework by proposing the creation of a “resolution regime.”The “resolution regime” will not replace bankruptcy in the normal course of business but rather will empower the Treasury with the authority to determine how to orderly sustain a failing BHC or non-bank firm. However, the Treasury’s augmented powers will only arise if a “systemic risk exception” is triggered and after consultation with the President.

A “systemic risk exception” would be activated if a firm’s failure would pose a severe risk to the entire financial system.The exception would permit the “resolution regime” to take any action justified, not only cost-effective alternatives, including, among other things, establishing a conservatorship or receivership for a failing firm, providing loans to a failing firm or BHC, purchasing assets from a failing firm, guaranteeing the liabilities of a failing firm or BHC or making equity investments in a failing entity. Although the authority to decide whether to resolve the failing firm will reside with the Treasury, the Federal Reserve Board (FRB), FDIC and even the SEC may initiate the process.

In addition to the “resolution regime,” the FRR Report also recommends that the Treasury be provided with the authority to oversee the FRB’s ability to extend emergency funding. It is proposed that Section 13(3) of the Federal Reserve Act be amended to require the Treasury Secretary’s prior written approval before the FRB provides any credit extensions to individuals, partnerships or corporations in “unusual and exigent circumstances.” This proposal will broadly extend the Treasury’s supervisory authority over the FRB.

The FRR Report’s proposals will produce vast changes to the supervision and regulation of the financial system. Significantly, the creation of a “regulatory regime” may severely impact the level of self-control struggling BHCs and non-bank firms would possess during future financial crises.

June 2009 – SEC Proposes Amendments to IAA

SEC Proposes Amendments to Investment Advisers Act

Securities Industry Practice Group Alert

On May 20, 2009, the United States Securities and Exchange Commission (“Commission” or “SEC”) issued Release No. IA-2876, proposing certain amendments to the Investment Advisers Act of 1940 (“Advisers Act”). These proposed amendments, among other things, would require registered investment advisers (“RIAs”) who maintain custody of client funds or securities to undergo an annual surprise examination by an independent public accountant. This independent public accountant would be required to verify client funds and securities, and issue a written report to the RIA opining upon whether the controls in place for the custody of client assets are satisfactory. The SEC believes these amendments would provide the Commission with better information about RIAs’ custodial practices, and provide additional safeguards under the Advisers Act when an adviser (or its affiliates) has custody of client funds or securities. These proposed requirements are an obvious outgrowth of the Madoff scandal.

These proposed amendments are merely another step in the regulatory approach to RIAs various regulators have pursued since the financial scandals broke. For example, examiners from both the SEC and the various states have stepped up their RIA examination programs of RIAs even before these proposed amendments, typically focusing in on various records maintained by RIAs.

However, RIAs, with a little preparation,may be able to avoid many issues including those potentially posed by the proposed new amendments. We are advising our RIA clients to focus and manage their record-keeping with an eye towards the regulators’ interests. From our experience, regulators are looking at four broad categories of documents that they believe will provide them with insight into RIAs’ operations and whether clients are being protected. The individual categories and the documents generally requested follow:

  1.   Financial:

—¦ accounts payable

—¦ monthly journals (receipts and disbursements)

—¦ general ledgers

—¦ trade tickets and investment blotters

—¦ brokerage statements (business and personal)

—¦ bank registers and statements (checking, money market and savings)

—¦ credit card statements

—¦ financial statements (income statements and balance sheets)

—¦ tax returns

  1.   Administrative:

—¦ RIAs’ articles of incorporation

—¦ compliance and supervisory procedures manuals

—¦ lists of names and addresses forW-2 and Form 1099 employees

—¦ IAR current registrations

—¦ regulatory files (e.g., FINRA Forms U-4)

—¦ investment advisory agreements

—¦ disclosure documents (ADV Part II amendments)

—¦ POA authorizations

—¦ custody authorizations – no custody of funds except hedge funds

—¦ discretionary trading authorizations

—¦ IA fee debit authorizations

—¦ hard dollar fee schedules

—¦ soft dollar compensation agreements

—¦ arbitrations, complaints and litigation files

—¦ personal security transactions

—¦ unrelated business transactions

—¦ solicitors’ agreement

—¦ lists of names and addresses of paid referral networks

—¦ Privacy and Code of Ethics statements

—¦ Anti-Money Laundering documentation

—¦ Insider Information statements

—¦ do not call files

—¦ data processing (hardware and software) files

  1.   Advertising:

—¦ advertising files

—¦ sales literature

—¦ financial illustrations

—¦ client newsletters

—¦ web pages and e-mail

—¦ mutual fund prospectuses

  1.   Client Records:

—¦ lists of names and addresses of clients where the RIAs must identify discretionary, custodial or other types of accounts

—¦ client files

—¦ brokerage new account forms

—¦ investment advisory agreements

—¦ disclosure agreements (ADV-Part II)

—¦ authorizations (including custody, trading, disbursement and IA fees)

—¦ powers-of-attorney

—¦ suitability-risk profile worksheets

—¦ correspondence and e-mail files

—¦ account statements

As a result, well before these proposed amendments, federal and state RIA regulators have been actively investigating and examining RIAs and their business. Accordingly, we recommend that, in interacting with regulators, it is best to begin preparing before “they come a knockin’.”

 

July 2009 – FRR Proposes New Agencies

FRR Report Proposes Three New Regulatory Agencies

Securities Industry Alert

On June 17, 2009, President Obama announced a proposal to redesign the financial system of supervision and regulation. Coupled with this announcement, the U.S. Department of the Treasury released a report titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report).

Significantly, Section One of the FRR Report, titled “Promotion of Robust Supervision and Regulation of Financial Firms,” focuses on creating a stronger and more consolidated regulatory framework to identify and manage firms that pose potentially significant risks to the entire financial system. To accomplish this seemingly insurmountable feat, there are proposals to create three new regulatory agencies: (1) the Financial Services Oversight Council (FSOC); (2) the National Bank Supervisor (NBS); and (3) the Office of National Insurance (ONI). As part of this new approach, the FRR Report advocates increased transparency of hedge funds and legislation to reduce the consequences of money market fund runs.

FINANCIAL SERVICES OVERSIGHT COUNCIL

The proposed FSOC will be an independent agency with authority to gather information from any financial firm whose size or “interconnectedness” may pose a threat to the system if it were to fail. As such, some firms that may own insured depository institutions will not be exempt from FSOC scrutiny if those firms pose significant risks to the overall system. The FSOC’s duties will include:

  • Coordinating information sharing between regulatory agencies;
  • Identifying and advising the Federal Reserve Board (FRB) of firms that pose prospective threats to the stability of the financial system;
  • Reducing supervisory gaps; and
  • Providing a forum for jurisdictional disputes between regulators.

The FSOC membership will include the Secretary of the Treasury; the chairs of the FRB, SEC, CFTC and FDIC; and the directors of the National Bank Supervisor, the Federal Housing Finance Agency, and the Consumer Financial Protection Agency. Despite this coordination, the actual possession and implementation of regulatory power will still predominantly remain with various regulators.

NATIONAL BANK SUPERVISOR

The FRR Report also proposes the creation of the NBS, a federal banking agency within the Treasury Department. Presently, four federal agencies have authority over depository institutions:

  1. Office of the Comptroller of the Currency (OCC), regulating national banks;
  2. Office of Thrift Supervision (OTS), regulating savings and loan associations;
  3. FRB, representing member banks; and
  4. FDIC, covering all insured depository institutions.

The current system allows a bank to select its own regulator or, to be more precise, regulatory reporting structure. However, the NBS’ creation will amend that system since the NBS will supervise and regulate all federally chartered depository institutions as well as all national branches of foreign banks. Effectively, the NBS will succeed the OCC and OTS, but the FDIC and FRB will largely continue their same roles.

OTHER PROPOSED CHANGES IN THE FRR REPORT

If the FRR Report’s recommendations are enacted, banks and bank holding companies (BHC) would also have their capital and other requirements strengthened. For example, the SEC’s Supervised Investment BHC Program would be eliminated, causing all investment banking firms seeking consolidated supervision by a regulator to be subject to the FRB. Another proposal would allow the Treasury Department to reassess existing regulatory capital requirements for banks, issue new executive compensation standards and implement more forward-looking loan loss provisions. Stronger firewalls to protect the federal safety net were also recommended.

Other legislation proposals would increase transparency in both the insurance and hedge fund industries, requiring all hedge funds, private equity firms and other private pools of capital advisers to register with the SEC under the Investment Advisers Act of 1940. No longer will investment advisers be exempt from registration through current client or definitional exceptions if these proposals are approved. If passed, these entities will be subject to increased disclosure, record keeping and supervision. Another proposal would create the ONI within the Treasury to monitor the insurance industry. The ONI would gather information and identify regulatory gaps that may lead to future financial crises.

Finally, the FRR Report also proposes increased regulation of money market funds (MMF), special mutual funds that generally avoid large credit risks and volatility. However, as was seen with the Lehman Brothers failure, an MMF run—multiple investors simultaneously recalling their assets when the financial institution may not have sufficient reserves—may occur, resulting in severe liquidity issues. To strengthen the MMF regulatory framework, the FRR Report proposes that the SEC:

  • Require MMFs to maintain larger liquidity buffers;
  • Reduce the maximum weighted average maturity of MMF assets;
  • Tighten the credit concentration limits applicable to MMFs;
  • Improve the credit risk analysis of MMFs; and
  • Empower MMF boards of directors to suspend redemptions in extraordinary circumstances.

In sum, these new proposals may result in changes to the entire supervisory and regulatory structure of our domestic financial system. Creation of new government agencies such as the FSOC, NBS and ONI will certainly impact the regulatory structure and investigations. Thus, clients will need to carefully understand the changes, especially the broader power of the FRB, in contemplating future business decisions.

 

Raising International Regulatory Standards

In June, the U.S. Department of the Treasury and President Obama revealed a five-part report titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report) recommending several regulatory proposals for the financial system. Although the FRR Report predominantly focused on domestic reform, there was a portion dedicated to improvements in international regulation. The FRR Report made proposals in three distinct areas of international concern:

  1. strengthening the international capital framework;
  2. enhancing supervision of internationally active financial firms and global markets; and
  3. reforming crisis prevention and management authorities and procedures.

To strengthen the international capital framework, the FRR Report recommended the Basel Accord II (Basel II) be implemented. In 1988, the original Basel Accord was adopted to strengthen the banking system by initiating consistent bank regulatory capital requirements throughout the world and was subsequently amended by Basel II. The FRR Report encourages the widespread implementation of the Basel II recommendations. Further, the FRR Report recommends additional amendments to the Basel Accord, including, among other things:

  • Improving the regulatory capital framework for trading book and securitization exposures by 2010;
  • Implementing recommendations to mitigate pro-cyclicality by requiring banks to build capital buffers in favorable economic times;
  • Issuing guidelines to harmonize the definition of capital by the end of 2009; and
  • Developing a non-model-based measure of leverage.

The FRR Report also recommends enhanced supervision of internationally active financial firms and global markets. In particular, the Financial Stability Board (FSB) and other national authorities would be required to establish and maintain operational development of supervisory colleges under the FRR Report’s recommendations. Supervisory colleges are groups of advisors predominantly located in Europe that monitor and report on financial institutions. In fact, these supervisory colleges have already been established for 30 of the most significant global financial institutions, and the FRR Report encourages the establishment of additional groups of advisors as well as a careful review of their findings.

Similarly, the FRR Report seeks to improve the oversight of global financial markets. Specifically, the FRR Report recommends that the United States work with international partners to raise the standards for over-the-counter (OTC) derivatives markets and engage in a central clearing for all credit derivatives. The FRR Report further recommends the establishment of a peer review system to assess compliance and prevent money laundering and terrorist financing as well as police credit ratings agencies.

The FRR Report also proposes to strengthen international financial crises prevention procedures and related authorities. Particularly, it recommends that the International Monetary Fund, the FSB, World Bank and the Basel Committee on Banking Supervision develop an international framework for cross-border bank resolutions and information sharing. Additionally, the Obama Administration intends to encourage the FSB to continue cross-border crisis management planning.

Generally, the FRR Report identifies the dangers that may occur when various international jurisdictions have conflicting financial regulations, and, to avoid future international financial crises, it suggests that the United States intends to use its leadership role to encourage the global community to strengthen its supervision and regulation of financial markets.While the potential impact of the FRR Report’s domestic recommendations are easy to gauge, it is less clear to see how the FRR Report will affect the worldwide financial community.

New Consumer Financial Protection Agency

In an effort to protect consumers of financial products and services from fraud and corruption, President Obama and the Department of Treasury released a five-part regulatory reform proposal titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report). One of the centerpieces of the FRR Report is the creation of a Consumer Financial Protection Agency (CFPA) to protect these consumers.

If the recommendations are enacted into legislation, the CFPA will have the power to create, enforce and examine consumer protection regulations, serving as the sole authority for creating consumer financial protection statutes. The CFPA would also have the authority to regulate unfair, deceptive or abusive conduct or practices for “all credit, savings and payment products.” In particular, the FRR proposal would call for this new agency to have supervisory, examination and enforcement authority over banks and their unregulated affiliates, mortgage brokers, mortgage originators, debt collectors and debt counselors. The CFPA would also be the sole authority to interpret regulations under existing consumer financial services statutes such as the Truth in Lending Act, Home Mortgage Disclosure Act and the Equal Credit Opportunity Act.

The FRR Report suggests that the rationale for the CFPA is to create an agency free from the conflicting responsibility of maintaining the security of financial firms, while having the resources and broad jurisdiction to impose comprehensive reform. Under the current system, bank regulatory agencies are conflicted with maintaining the security of institutions while other government regulators do not have the jurisdiction or resources to broadly impose regulations. Although the FRR Report clearly states that the CFPA would only act as a floor, not a ceiling, all covered financial firms will remain subject to stricter requirements imposed by state agencies. Additionally, while the FRR Report shifts authority from the Federal Trade Commission (FTC) and bank regulatory agencies to the CFPA, the legislation maintains that the two should be retained as “back-up” authorities. For example, the FRR Report recommends that the FTC should remain as the lead federal consumer protection agency on matters of data security and that the SEC should retain its consumer protection responsibilities. However, the FRR Report is vague as to how all of these consumer protection agencies will serve these roles and co-exist.

In sum, if the CFPA is created, it will undoubtedly have an immense impact on the financial products and services industry, requiring increased disclosure and potentially new dispute resolution procedures.

FRR Would Decrease Reliance on CRAs

On June 17, 2009, the U.S. Department of the Treasury issued a report titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report) in conjunction with a speech by President Obama that outlined new proposals and recommendations to avoid a repeat of the current financial crisis. In particular, the President’s speech and the FRR Report addressed the financial market’s reliance on credit rating agencies (CRAs). Essentially, the FRR Report would reduce reliance upon the CRAs with a revised incentive structure for market participants. There will also be increased regulation covering systemically important payment, clearing and settlement systems.

The FRR Report specifically recommends increased regulation of CRAs, proposing that the SEC continue its efforts to strengthen regulation of CRAs and implement policies to force disclosure of conflicts. The FRR Report also recommends that CRAs publicly disclose, in a comprehensive manner, precisely the nature of what their risk ratings are designed to assess. Further, the proposals would require CRAs to publicly differentiate the credit ratings they assign to structured credit products from those assigned to unstructured debt. Ultimately, the FRR Report calls upon regulators to reduce wherever possible their use of credit ratings in regulations and supervisory practices.

The FRR Report also recommends that financial firms create appropriate incentives for participants to best serve the interests of their clients. Specifically, it proposes that the compensation of brokers, originators, sponsors, underwriters and others involved in the securitization process should be linked to long-term performance of an asset. The FRR Report recommends that federal banking agencies promulgate regulations requiring loan originators or sponsors to retain 5 percent of the credit risk of securitized instruments, and the originators or sponsors will then be prohibited from directly or indirectly hedging or transferring the risk. However, the federal banking agencies would still have the authority to specify the permissible forms and duration of the risks under these proposals.

Additionally, the FRR Report expressed concern that weaknesses in settlement arrangements may have led or contributed to the current crises, adding to our financial problems. The FRR Report recommended that the Federal Reserve Board (FRB) be provided with the authority to oversee systemically important payment, clearing and settlement systems (covered systems). If these recommendations are adopted, the FRB would have the power to provide various covered systems with access to FRB accounts and financial services. The FRR Report also proposed legislation providing the FRB with authority to define the characteristics of a covered system. Each system would then be subject to regular, consistent and rigorous on-site safety and soundness examinations by the FRB. In the event that a covered system would be subject to comprehensive federal regulation under the CFTC or SEC, the FRR Report recommended that either federal agency remain the primary regulatory authority. The FRB would retain emergency authority to take enforcement action if it disagrees with agency’s conclusions.

Clearly, discontinuing the use of CRAs will create changes in our financial system, and the potential enhanced regulation of covered systems will cause additional regulatory burdens.

FRR Proposes New Agencies

July 2009

On June 17, 2009, President Obama announced a proposal to redesign the financial system of supervision and regulation. Coupled with this announcement, the U.S. Department of the Treasury released a report titled “Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation” (FRR Report).

Significantly, Section One of the FRR Report, titled “Promotion of Robust Supervision and Regulation of Financial Firms,” focuses on creating a stronger and more consolidated regulatory framework to identify and manage firms that pose potentially significant risks to the entire financial system. To accomplish this seemingly insurmountable feat, there are proposals to create three new regulatory agencies: (1) the Financial Services Oversight Council (FSOC); (2) the National Bank Supervisor (NBS); and (3) the Office of National Insurance (ONI). As part of this new approach, the FRR Report advocates increased transparency of hedge funds and legislation to reduce the consequences of money market fund runs.

FINANCIAL SERVICES OVERSIGHT COUNCIL

The proposed FSOC will be an independent agency with authority to gather information from any financial firm whose size or “interconnectedness” may pose a threat to the system if it were to fail. As such, some firms that may own insured depository institutions will not be exempt from FSOC scrutiny if those firms pose significant risks to the overall system. The FSOC’s duties will include:

  • Coordinating information sharing between regulatory agencies;
  • Identifying and advising the Federal Reserve Board (FRB) of firms that pose prospective threats to the stability of the financial system;
  • Reducing supervisory gaps; and
  • Providing a forum for jurisdictional disputes between regulators.

The FSOC membership will include the Secretary of the Treasury; the chairs of the FRB, SEC, CFTC and FDIC; and the directors of the National Bank Supervisor, the Federal Housing Finance Agency, and the Consumer Financial Protection Agency. Despite this coordination, the actual possession and implementation of regulatory power will still predominantly remain with various regulators.

NATIONAL BANK SUPERVISOR

The FRR Report also proposes the creation of the NBS, a federal banking agency within the Treasury Department. Presently, four federal agencies have authority over depository institutions:

  1. Office of the Comptroller of the Currency (OCC), regulating national banks;
  2. Office of Thrift Supervision (OTS), regulating savings and loan associations;
  3. FRB, representing member banks; and
  4. FDIC, covering all insured depository institutions.

The current system allows a bank to select its own regulator or, to be more precise, regulatory reporting structure. However, the NBS’ creation will amend that system since the NBS will supervise and regulate all federally chartered depository institutions as well as all national branches of foreign banks. Effectively, the NBS will succeed the OCC and OTS, but the FDIC and FRB will largely continue their same roles.

OTHER PROPOSED CHANGES IN THE FRR REPORT

If the FRR Report’s recommendations are enacted, banks and bank holding companies (BHC) would also have their capital and other requirements strengthened. For example, the SEC’s Supervised Investment BHC Program would be eliminated, causing all investment banking firms seeking consolidated supervision by a regulator to be subject to the FRB. Another proposal would allow the Treasury Department to reassess existing regulatory capital requirements for banks, issue new executive compensation standards and implement more forward-looking loan loss provisions. Stronger firewalls to protect the federal safety net were also recommended.

Other legislation proposals would increase transparency in both the insurance and hedge fund industries, requiring all hedge funds, private equity firms and other private pools of capital advisers to register with the SEC under the Investment Advisers Act of 1940. No longer will investment advisers be exempt from registration through current client or definitional exceptions if these proposals are approved. If passed, these entities will be subject to increased disclosure, record keeping and supervision. Another proposal would create the ONI within the Treasury to monitor the insurance industry. The ONI would gather information and identify regulatory gaps that may lead to future financial crises.

Finally, the FRR Report also proposes increased regulation of money market funds (MMF), special mutual funds that generally avoid large credit risks and volatility. However, as was seen with the Lehman Brothers failure, an MMF run—multiple investors simultaneously recalling their assets when the financial institution may not have sufficient reserves—may occur, resulting in severe liquidity issues. To strengthen the MMF regulatory framework, the FRR Report proposes that the SEC:

  • Require MMFs to maintain larger liquidity buffers;
  • Reduce the maximum weighted average maturity of MMF assets;
  • Tighten the credit concentration limits applicable to MMFs;
  • Improve the credit risk analysis of MMFs; and
  • Empower MMF boards of directors to suspend redemptions in extraordinary circumstances.

In sum, these new proposals may result in changes to the entire supervisory and regulatory structure of our domestic financial system. Creation of new government agencies such as the FSOC, NBS and ONI will certainly impact the regulatory structure and investigations. Thus, clients will need to carefully understand the changes, especially the broader power of the FRB, in contemplating future business decisions.