Week InReview | Treasury Secretary Jacob J. Lew on Tuesday delivered "The Annual Testimony of the Secretary of the Treasury on the State of the International Financial System" before the House Committee on Financial Services.

Among the many subjects discussed during a Q&A session: the Financial Stability Board, SIFI designations, FSOC data security, fixed income market liquidity, regulatory burdens, and commercial mortgage-backed securities. Read summaries of these segments below.

Read the Treasurer's written testimony here. Watch the 3-1/2 hour video here. Read the full 159-page transcript here.
Friday, March 25, 2016
Let's recap
In case you missed it . . .


Repo Failures at Highest Level Since 2008 (WSJ subscription required) (Mar 21)

When an Analyst Has a Stake in the Stock He Picks (NYT subscription required) (Mar 20)
Financial Stability Board
March 22, 2016 | House Financial Services
Representative Scott Garrett (R-NJ) asked Lew if he would commit to engaging in a notice and comment period on international negotiations at the Financial Stability Board (FSB). Lew said there is not an appropriate notice and comment process for international negotiations. He said Treasury consults with stakeholders. He emphasized that the FSB does not make U.S. policy. He said if policy were to be implemented in the U.S. there would be a formal rulemaking process.
SIFI designations
March 22, 2016 | House Financial Services
Representative Blaine Luetkemeyer (R-MO) said Lew previously testified in opposition to raising the asset threshold for bank systemically important financial institutions (SIFIs) to $500 billion. Lew said $500 billion is a very large financial institution. Luetkemeyer said other factors besides assets should be examined. Lew said many criteria besides size affect risk, but size is an important factor. Luetkemeyer said two companies have sold off major books of business to avoid designation, but have not been de-designated. He stressed the need for an off-ramp. Lew noted that one of those companies has said their changes were not for the purpose of being designated. He said there is an annual review process.
FSOC data security
March 22, 2016 | House Financial Services
Representative Frank Guinta (R-NH) asked about Lew's efforts to ensure that FSOC members are properly safeguarding proprietary information. Lew said each FSOC member has an obligation to protect information in their area. He stated that doing systemic reviews requires information sharing, but noted that the data provided to FSOC is anonymized. Guinta asked if Lew would provide the Committee with an outline of the policies and procedures to protect proprietary information. Lew said he would follow up with Guinta on this issue.
Fixed income market liquidity
March 22, 2016 | House Financial Services
Representative Keith Rothfus (R-PA) stated that the Dodd-Frank Act is hurting consumers and did not end too big to fail. He said market liquidity has become more fragile and broker-dealer inventories have shrunk. He said an Office of Financial Research (OFR) report suggested that the Volcker Rule and bank capital standards have contributed to reduced liquidity in the fixed income market. Lew said Treasury is open to looking at all of the factors. He stated that liquidity is within historical normal ranges by most measures. He pointed to the increased role of high frequency trading (HFT) and algorithmic trading in the market. He said he does not believe regulatory changes are a key driver behind the changes in the market.
Regulatory burdens
March 22, 2016 | House Financial Services
Representative Ann Wagner (R-MO) said the EU has called for evidence on unnecessary regulatory burdens. She asked if Lew supports the EU's call for a regulatory review. Lew said he also supports regulatory reviews. Wagner said FSOC has never called for a comparable regulatory review. Lew said the U.S. regulators engage in a look back every five years. He said this should be done through the individual agencies, not FSOC. Wagner asked how FSOC has examined future regulations like "Basel 4.0." Lew said FSOC continually reviews the regulatory regime.
Commercial mortgage-backed securities
March 22, 2016 | House Financial Services
Representative French Hill (R-AR) said the Committee recently marked up his bill on commercial mortgage-backed securities (CMBS), the Preserving Access to CRE Capital Act (H.R. 4620). He stated that the Federal Reserve is working on regulations which would put conduit loans and other commercial loans in jeopardy. Lew said he would look at Hill's bill.
Binge reading disorder
Hand-curated, chosen with love
How to Transform Your Coffee Into a Wonder Drug: There's a right way to dose yourself with coffee so that you get the most of its performance-enhancing benefits

Meet the Former Porn Marketer Who Did Crisis PR for Martin Shkreli

Wall Street's 0.01%: An Inside Look at a Secret Client List

Warmer weather, finer wines: As climate change rolls out, French grape growers get a boost, but it may prove illusory, study says

Investors Are Differentiating Between CLOs Even If Rating Agencies Aren't: A wide dispersion in loan prices
Transparency.
Inclusiveness.
Consensus.