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January 30, 2023

Fed Denies Custodia Bank After FTX Wreck As FOIAed on Moonstone Bank by Inner City Press

By Matthew Russell Lee, Patreon

SDNY COURTHOUSE, Jan 27  – Amid the prosecution of Samuel Bankman-Fried on wire fraud, money laundering and campaign finance violation charges, the role of the Federal Reserve is coming to the fore.  Now it seeks to step back from its brink by denying the application of Custodia, with order still withheld. See below.

 Inner City Press was unsurprised to learn of Fed laxity as Alameda invested in Farmington State Bank, renamed Moonstone Bank.

Inner City Press submitted to the Federal Reserve a Freedom of Information Act request including: "This is a FOIA request for all record regarding the FRS' approval for the application / request for membership in the Federal Reserve System by Farmington State Bank (giving rise to FRBSF president Daly's approval on a delegated basis in 2021), and the subsequent renaming of the bank to Mooonstone and taking of a stake by FTX/Alameda.  Also, for Silvergate with its FTX connections, record reflecting any review by the FRS of Silvergate's (and Provident Bancorp Inc., Metropolitan Commercial Bank, Signature Bank, Customers Bancorp Inc.) of the banks' connections with crypto-currency firms... This is a request for expedited treatment, in light of the indictment of FTX / Alameda's Sam Bankman-Fried and Caroline Ellison (cooperating), and an upcoming January 3, 2023 hearing."

The Federal Reserve  acknowledged receipt: "Your request has been assigned number FOIA-2023-00178. Please reference this number in all future correspondence.    Request description:  This is a FOIA request for all record regarding the FRS' approval for the application / request for membership in the Federal Reserve System by Farmington State Bank [also] any review by the FRS of Silvergate's (and Provident Bancorp Inc., Metropolitan Commercial Bank, Signature Bank, Customers Bancorp Inc.) of the banks' connections with crypto-currency firms."

On January 27, still withholding documents, the Fed "announced its denial of the application by Custodia Bank, Inc., Cheyenne, Wyoming, to become a member of the Federal Reserve System. The Board has concluded that the firm's application as submitted is inconsistent with the required factors under the law.  Custodia is a special purpose depository institution, chartered by the state of Wyoming, which does not have federal deposit insurance. The firm proposed to engage in novel and untested crypto activities that include issuing a crypto asset on open, public and/or decentralized networks.  The firm's novel business model and proposed focus on crypto-assets presented significant safety and soundness risks. The Board has previously made clear that such crypto activities are highly likely to be inconsistent with safe and sound banking practices. The Board also found that Custodia's risk management framework was insufficient to address concerns regarding the heightened risks associated with its proposed crypto activities, including its ability to mitigate money laundering and terrorism financing risks.  In light of these and other concerns, the firm's application as submitted was inconsistent with the factors the Board is required to evaluate by law. The Board's order will be released following a review for confidential information."

January 23, 2023

Fed speak - but no live questions: "What: Federal Reserve Bank of Dallas President & CEO Lorie Logan will speak about U.S. economic outlook and monetary policy at the McCombs School of Business at The University of Texas at Austin. Logan took office last August, and with this speech she will introduce the monetary policy objectives that will guide her tenure. When: Wednesday, Jan. 18, 2023 4-4:05 p.m., Texas McCombs Dean Lillian Mills, welcome and introduction. 4:05-4:30 p.m., Dallas Fed President & CEO Lorie Logan. 4:30-4:45 p.m., Q&A moderated by Julia Coronado, Texas McCombs clinical associate professor of finance; time will not allow for live questions"

January 16, 2023

NY Fed Dissolved TRO to Fire Unvaccinated Staff Now Fed Accuses Lawyer of Contacts

By Matthew Russell Lee, Patreon Maxwell Book
BBC - Guardian UK - Honduras - ESPN

SDNY COURTHOUSE, Jan 13 – The Federal Reserve Bank of New York wants to fire longtime employees Lori Gardner-Alfred of The Bronx and Jeanette Diaz of Bayonne, New Jersey for not being vaccinated against COVID-19. And now it may be able to.

  The two women won a temporary restraining order in New York State court. But the FRBNY removed the case to Federal court and Friday argued to dissolve the TRO and fire the women, saying that their harm is not irreparable.      

       On March 4, U.S. District Court for the Southern District of New York Judge Lewis J. Liman held a proceeding. Inner City Press covered it.  

 FRBNY in-house lawyer Alex Leonard argued the TRO should be immediately lift. The women, representing themselves, asked for time to respond to the papers the Fed, their employer for decades, had just given them.

  Judge Liman to his credit did give them time, until Sunday to file their response to his chambers by email. Then, it should be docketed.

   Jeanette Diaz asked about the FRBNY's definition and denial of religious exemptions. Judge Liman said perhaps Mr. Leonard could answer. But he said no, that would be getting in to the merits and the Fed's focus was getting the TRO dissolved and presumably firing the employees.

  On March 7, Judge Liman heard from the parties again. Inner City Press live tweeted here:

now staffers the Federal Reserve Bank of NY wants to fire for being unvaccinated are before SDNY Judge Liman as they were Friday. FRBNY lawyer: Now plaintiffs over the weekend make a a Constitution argument. But the New York Fed is not a government agency.

[Inner City Press: Then how does NY Fed approve bank mergers? See, FRBNY Approves Berkshire Bank With NTI Rating, here

Judge Liman: Even if discrimination were being alleged, would an injunctions be issues? NY Fed staffer's new/1st lawyer: The very pressure put on these plaintiffs to abandoned their bona fide religious beliefs is irreparable harm, per se

Judge Liman: What do you say about the NY Fed not being a state agency? Lawyer: They removed to this court by saying that are an organ of the Federal government...  [And, the Fed Board had this "non government agency," owned by banks, approving bank mergers]

 Lawyer: On the merits we have this Federal Reserve agency, now trying to revoke the religious exemption based on their job titles. These jobs could be performed remotely. Or, in the office a few days a week.

Lawyer: The Fed has granted others an ongoing exemption. That burden is on the Fed to offer up some justification. Judge Liman: What about irreparable harm?

Lawyer: There's the Northern District of NY case...  Judge Liman: Citation? Lawyer: 17 F.4th 368, 370

 NY Fed's Leonard: He says we are forcing them to violate their religious beliefs. But it is a condition of employment. They got a temporary accommodation, but there's no longer a reasonable one. We understand that's difficult. See, the Hawaii Airlines case.

 NY Fed's Leonard: They did not claim in their state court submission any free exercise violation. NY Fed is not a government agency.  Judge Liman: Authority for that? A: Uh, uh, NY Fed's employment actions are not state action. Judge: Cases? A: Nothing on point.

NY Fed's Leonard: There is no irreparable harm.

Judge Liman: I'm going to take this under advisement. I will render a decision quite quickly. Expect to hear from me soon. Plaintiffs' lawyer: There's a case, Agricultural Bank of China, 2016 WL 27566661

 NY Fed's Leonard: US v. Wells Fargo case, while not on point, the Federal Reserve Bank for the purpose of emergency lending are government agencies, but by implication, not as employers. Plaintiffs' lawyer: 24 hours for an interlocutor appeal? NY Fed: We object. ]

NY Fed's Leonard: We are doing this in the middle of pandemic. We shouldn't be restrained any longer. Judge Liman: Do you want to dismiss the complaint under 12(b)(6)? NY Fed: There's no complaint, it's futile. Yes, dismiss. Judge Liman: I'm asking about process.

 NY Fed's Leonard: We'll submit more papers in 2 weeks.

Judge Liman: Reply by April 11. We are adjourned.

On March 11, this: "ORDER granting in part [7] Motion Emergency Motion to Dissolve Ex Parte Temporary Restraining Order and Dismiss . Accordingly, the TRO is dissolved as improperly issued under Rule 65. See Rabbi Jacob Joseph School v. Province of Mendoza, 342 F. Supp. 2d 124, 127 (E.D.N.Y. 2004) ("The temporary restraining order that was issued without notice to the attorney for the Defendant whose identity was known, without declaring in an affidavit or verified complaint that immediate and irreparable harm would result before the adverse party or his attorney could be heard in opposition, was plainly in violation of Fed.R.Civ.P. 65(b), and the temporary restraining order was vacated for the additional reason that it was improperly issued."); Dolan v. Portaro, 2015 WL 3444351, at *1 (N.D. Ohio May 28, 2015) ("Had Plaintiff Dolan initially filed this case in this Court, the TRO could not have been granted. When the motion for a TRO was first made in state court, Plaintiff's counsel did not provide the required certification as to what efforts were made to give notice and why notice should not be required. Nor did Plaintiff's counsel file such certification in this Court after removal. That deficiency alone justifies dissolving the TRO."). Moreover, "[o]n this motion to dissolve a temporary restraining order,... the party that obtained that order... bears the burden of justifying continued injunctive relief." Gardner v. Weisman, 2006 WL 2423376, at *1 (S.D.N.Y. Aug. 21, 2006) (internal quotation marks omitted) (quoting SC Cowen Sec. Corp. v. Messih, 2000 WL 663434, at *1 (S.D.N.Y. May 17, 2000)). The FRBNY argues that the evidence submitted by Plaintiffs does not satisfy that burden, because they have not shown irreparable harm, a likelihood of success, or a balance of hardships in their favor, as further set forth herein. Plaintiffs also have not demonstrated a likelihood of success on the merits of their claims; their operative pleadings are wholly conclusory, and their arguments regarding a likelihood of success on the merits again hinge entirely on the Free Exercise claims, Dkt. No. 14 at 5; once again, the operative pleadings assert no Free Exercise claims. As such, Plaintiffs have not carried their burden of justifying continued injunctive relief. For this additional reason, the TRO must be dissolved."

  On March 21 the New York Fed filed a motion to dismiss, leading that "the New York Fed - part of the nation's central bank and a federal instrumentality established pursuant to the Federal Reserve Act of 1913 is not a state agency whose decisions are subject to review under Article 78."

On June 21 Judge Liman held another proceeding. He said he did not anticipate granting a motion to dismiss, but also doubted in a preliminary injunction, given that the staffers have already been fired. (The Fed's lawyer slipped in that the Fed doubts that the lead plaintiff's beliefs are religious).

Judge Liman told counsel to discuss with their clients the option of an expedited hearing on a permanent injunctions. A case management plan is due July 8, with another conference set for July 18 at 2 pm. 

  Inner City Press covered the July 18 conference; there was a request for a trial in January but a decision to hold it in May. Then into the docket this: "ORDER deferring ruling on [27] Motion for Preliminary Injunction. Upon consent of the parties at Dkt. No. 41, the hearing on Plaintiffs' motion for a preliminary injunction will be consolidated with a trial on the merits pursuant to Federal Rule of Civil Procedure 65(a)(2). (HEREBY ORDERED by Judge Lewis J. Liman)."

As the weather grows colder, the plaintiffs' lawyer seek to leave them. Judge Liman ruled: "ORDER: On October 28, 2022, plaintiffs Jeanette Diaz and Lori Gardner ("Plaintiffs") emailed the Court asking if they could be represented by counsel at the conference scheduled for Thursday, November 3, 2022 at 2:00 p.m. The Court has not granted Plaintiffs' counsel's motion to withdraw. Accordingly, if Plaintiffs wish to communicate with the Court, they should do so through counsel and file the communication on the docket on ECF. SO ORDERED. (Signed by Judge Lewis J. Liman on 10/28/2022)."

On January 13, 2023, Judge Liman held another conference in the case, about discovery. But the Federal Reserve's lawyer dropped a bombshell, claiming that plaintiffs' counsel did not in fact have any agreement with the clients to actually produce discovery - and was communicating through a New York Fed staffer, William Christie. Even before the oral bombshell, the Fed's January 11 letter to Judge Liman roundly critiqued plaintiffs' counsel. We aim to have more on this.

Inner City Press will continue to cover the case and the Fed.

January 9, 2023

The Federal Reserve under the Change in Bank Control Act - the same one use or misused on its watch for FTX / Alameda to buy into Farmington State Bank now Moonstone - has declined to extend the comment period on: "Dear Mr. Lee: This concerns your correspondence dated December 6, 2022, regarding the notice filed under the Change in Bank Control Act of 1978, as amended (“CIBC Act”), 1 by (1) the Estate of Steven B. Schnall, Sherri Silver Schnall, as Preliminary Executor, both of New York, New York, to retain voting shares of Quontic Bank Acquisition Corp. (“QBAC”) and Quontic Bank Holdings Corp. (“QBHC”), and thereby retain voting shares of Quontic Bank, all of New York, New York; and (2) the Schnall Disclaimer Trust A, Sherri Silver Schnall, individually and as co-trustee, both of New York, New York, with Amie Hoffman, as co-trustee, New Hope, Pennsylvania; and the Sherri S. Schnall Family Irrevocable Trust, Amie Hoffman as trustee, both of New Hope, Pennsylvania, to acquire voting shares of QBAC and QBHC, and thereby indirectly acquire voting shares of Quontic Bank, all of New York, New York. You requested an extension of the comment period for this proposal. Notices were published in the Federal Register (November 21, 2022) and in the relevant newspaper of general circulation (the New York Daily News (October 31, 2022)) providing commenters until December 6, 2022, a total of 36 days, to submit their views on all aspects of the proposal. This period provided sufficient time for interested persons to prepare and submit their comments. The Board provides a public comment period for notices to provide interested persons the opportunity to submit information and views related to the statutory factors it 1 12 U.S.C. § 1817(j).  2  must consider under the CIBC Act. The Board’s Rules of Procedure (“Rules”)2 also establish a framework, based on the schedules followed by many courts, that limits iterative responses between applicants and commenters. The Rules contemplate that the public comment period will not be extended absent a clear demonstration of hardship or other meritorious reason for seeking additional time. Your request for additional time to comment does not identify circumstances that would warrant an extension of the public comment period for this proposal. Based on all the facts of record, including the reasons discussed above, I have determined, acting pursuant to authority delegated by the Board (12 CFR 265.5(a)(2)), not to extend the public comment period. Any comments received on or before December 6, 2022, have been made part of the record of the proposal that will be reviewed by the Board" Watch this site.

January 2, 2023

  While Inner City Press looks into how the Federal Reserve allowed FTX / Alameda to buy into Farmington State Bank / Moonstone Bank, it commented to the Fed on "Notice of Change in Bank Control (the “Notice”) by (i) the Estate of Steven B. Schnall, Sherri Silver Schnall as Preliminary Executor, both of New York, New York; to retain voting shares of Quontic Bank Acquisition Corp., and Quontic Bank Holdings Corp., all of New York, New York, and (ii), the Schnall Disclaimer Trust A, Sherri Silver Schnall, individually, and as co-trustee, both of New York, New York, with Amie Hoffman, as co-trustee, New Hope, Pennsylvania; and the Sherri S. Schnall Family Irrevocable Trust, Amie Hoffman as trustee, of New Hope, Pennsylvania (all parties to (i) and (ii) together, the “Notificants”); to acquire voting shares of Quontic Bank Acquisition Corp., and Quontic Bank Holdings Corp., and thereby indirectly acquire voting shares of Quontic Bank."

  Note that beyond its crypto rewards program, Quontic "has become the latest of a handful of US-based financial institutions to have agreed to work with the cryptocurrency sector... It opened a checking account for an unnamed Bitcoin ATM firm--its first crypto client--several weeks ago, and claims to be in contract negotiations to open accounts for another new cryptocurrency company, which was also unnamed."

 And how did Quontic respond to Inner City Press' comment? With pure arrogance. We'll have more on this. Watch this site.

  And how did Quontic,December 26, 2022

On FTX Wreck Federal Reserve FOIAed by on Moonstone Bank & Others By Inner City Press

By Matthew Russell Lee, Patreon

SDNY COURTHOUSE, Dec 22 – Amid the prosecution of Samuel Bankman-Fried on wire fraud, money laundering and campaign finance violation charges, the role of the Federal Reserve is coming to the fore. 

 Inner City Press was unsurprised to learn of Fed laxity as Alameda invested in Farmington State Bank, renamed Moonstone Bank.

Inner City Press submitted to the Federal Reserve a Freedom of Information Act request including: "This is a FOIA request for all record regarding the FRS' approval for the application / request for membership in the Federal Reserve System by Farmington State Bank (giving rise to FRBSF president Daly's approval on a delegated basis in 2021), and the subsequent renaming of the bank to Mooonstone and taking of a stake by FTX/Alameda.  Also, for Silvergate with its FTX connections, record reflecting any review by the FRS of Silvergate's (and Provident Bancorp Inc., Metropolitan Commercial Bank, Signature Bank, Customers Bancorp Inc.) of the banks' connections with crypto-currency firms... This is a request for expedited treatment, in light of the indictment of FTX / Alameda's Sam Bankman-Fried and Caroline Ellison (cooperating), and an upcoming January 3, 2023 hearing."

December 17, 2022

Does the Fed waiting until 4:30 pm on a comment period that ends at 5 pm to provide a copy of a bank's application requested a week ago meet any standard? We'll have more to say about Lakeland - Provident...

Brookline Bank Bid To Bring Disparities To NY By Buying PCSB Bank Rubber Stamped by Fed

By Matthew Russell Lee, Patreon Maxwell Book
BBC-Guardian UK - Honduras - ESPN NY Mag

SOUTH BRONX, Dec 15 –  New York and Massachusetts are portrayed as diverse and progressive places. But their banks, not so much. 

 Consider for example the proposed and today FRB approved merger between Brookline Bank in Massachusetts and PCSB Bank in New York, with branches in Mount Vernon, Eastchester and elsewhere.  

The Federal Reserve, while withholding beyond the comment period even the public portion of the application involving Lakeland Bank, with settled lending discrimination charges recently with DOJ, on December 15 rubber stamped Brookline's application, with this line: "The commenter objected to the proposal, alleging that in 2021, Brookline Bank made fewer home loans to African American individuals as compared to white individuals." They don't name the commenter - Inner City Press / FFW.

Bronx-based Inner City Press has long exposed redlining. Along with Fair Finance Watch it finds that in 2020, the most recent year for which Home Mortgage Disclosure Act data is publicly available, PCSB Bank in New York State made 79 loans to whites - and only seven to African America. The dollar volume difference is even worse, a twenty to one disparity.  

So what is the lending record in Massachusetts of Brookline Bank, the proposed acquirer of PCSB?

December 12, 2022

On December 9, Inner City Press filed with the Federal Reserve, in both NY and DC, asking for a copy of the Provident - Lakeland application that day. As of December 10, none has been provided. This is unacceptable - what this site.

December 5, 2022

Friday news dump from the Fed, Dec 2, 2022: The Federal Reserve Board on Friday invited public comment on proposed principles providing a high-level framework for the safe and sound management of exposures to climate-related financial risks for large banking organizations.  The proposed principles would apply to banking organizations with more than $100 billion in total assets and address both the physical risks and transition risks associated with climate change. The proposed principles would cover six areas: governance; policies, procedures, and limits; strategic planning; risk management; data, risk measurement and reporting; and scenario analysis.  The proposed principles are substantially similar to proposals issued by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, and the Board intends to work with those agencies to promote consistency in the supervision of large banks through final interagency guidance. Comments will be accepted for 60 days

November 28, 2022

The Federal Reserve wrote to Citigroup, which it has let abuse consumers for years, on November 22 thusly: Citigroup "must, on or before January 31, 2023, submit to the Agencies (1) a mapping document that identifies the actions in the GARP that are expected to improve the firm’s ability to accurately produce key data in a timely manner that would be relied upon to execute its resolution plan (Resolvability Data Mapping), (2) a detailed description of how each of the actions identified in the Resolvability Data Mapping will improve the firm’s ability to accurately produce data in a timely manner 13 The 2021 Targeted Plan also claimed that certain financial resource buffers and assumptions the Covered Company views as conservative about resolution-related capital and liquidity are sufficient to mitigate any effect of the data integrity and quality issues on the firm’s resolution capabilities. 7 integral to execution of the firm’s resolution strategy and which of these actions (either individually or in combination with other actions) the Covered Company anticipates will result in the greatest material improvement to the firm’s resolution capabilities and that accordingly are a priority for the firm, and (3) a detailed description of how the Covered Company will demonstrate, to itself and the Agencies, that the improvements to its data governance program will result in more accurate and timely data integral to execution of the firm’s resolution strategy (2 and 3 together, the Remediation Actions and Evaluations Descriptions). The shortcoming will remain outstanding until the Covered Company addresses the remedial actions in the Resolvability Data Mapping."

November 21, 2022