#30 Daily Financial News Round Up - Nov 30,2021
What news caught my attention?
Wyoming seems to be leading the FinTech regulation by integrating digital assets and cryptocurrencies into the financial system, while the Fed appears to be blocking/ delaying this move. Starting in 2019, Wyoming State's legislators wrote bills addressing issues from asset custody to money laundering. They created a heavily regulated digital bank and called it a special-purpose depository institution (SPDI). Two Wyoming SPDIs - Kraken and Avanti received their bank charters in 2020 and applied for master accounts with the Federal Reserve Bank of Kansas City. It's been over a year, and the Fed still hasn't processed their master account applications.
Omicron concerns cause the stocks and oil prices to slide. Inflation concerns further added to the price decline. The asymmetry in investor response to bad vs good news is a well-documented fact. We observe this bias in complete form as concerns for the omicron variant have taken over worldwide.
The maximum size for home loans to be eligible for backing by Fannie Mae and Freddie Mac in high-cost areas such as New York and California will increase to $970,800 starting from 2022. The previous loan limit was $822,375. This increase reflects the rising home valuations across the country. For the rest of the country, the loan limit will increase to $647,000 from $548,250. If the government is willing to back bigger mortgages because house prices have gone up, that seems like a logical move. On the other hand, the larger loan limit will not restrict mortgage originators from pushing for originating bigger mortgages. Consumers will have an increase in credit access that will allow them to purchase bigger houses. Increased credit access translates to larger home loans for consumers. Does this sound vaguely familiar? Consumers get into bigger dollar value loans as they are eligible for them, but they were not. It should be! Something similar happened before the 2007-08 crisis, which ultimately led to the crisis. It's time for the warning bells!
My Takeaways:
Everybody should take Wyoming’s lead in integrating digital assets. Specifically, regulating digital assets and cryptocurrency should have happened yesterday.
Omicron concerns increases volatility in the markets.