Did the Federal Reserve really release the Kraken?

Kraken open the vault
We’re still asking questions about Kraken’s new access to the Fed’s payments systems, the much ballyhooed “master account” business. We’re still talking about it because the Kansas City Fed’s limited approval raised as many questions as it answered, as our Maria Volkova explored in today’s story.

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The big-picture question is, what does this mean for others? A whole host of crypto companies have applied for accounts at the Fed, including most noisily Custodia Bank, which sued after the Fed rejected its application. Now that one crypto company is inside the compound, will others be allowed in? And when?

And, why? Yes, obviously there are some benefits to Kraken for having this account. But how much will this really mean for their bottom line? How much will this really change their business? And it’s not just about the crypto companies. Kraken isn’t a bank. So if one nonbank can get this kind of access, why couldn’t others? Not just “nonbanks” as we understand that term, but non-nonbanks. Target handles a lot of money, I bet they’d love to have direct access to the Fed’s networks. Should they apply for a master account?

What does seem clear is that the Fed is very open to opening up its vaults, so to speak. The Kraken deal is something of an experiment – the Fed’s Vice Chair for Supervision, Michelle Bowman, said as much – and the high-profile “skinny” account idea may use the data from the Kraken experiment to tailor its specifications.

Dire Straits
I’ve already started complaining about gas prices, which were up about 30 cents at my local gas station. I paid it, but I grumbled. And I guess for now, grumbling is about all anybody’s doing. But what if the Iran war drags on? I know the president said it’ll be over quickly, but wars have a rather persistent habit of not doing what the people who start them expect.

That was a big concern among a number of banking executives, according to our Allissa Kline, who reported on the RBC Capital Markets’ financial institutions conference. Right now, bankers said they are in good shape and poised for growth. But the focus of their apprehension revolves around the Strait of Hormuz, how freely oil can flow out of the Persian Gulf and into the market, and what rising prices mean for people’s wallets.

Citi’s Jane Fraser said the longer the war goes on, the worse it’ll be for the economy, and in turn banks. A short conflict doesn’t change the math for the economy (it is a nightmare for those killed in the war and their families, of course). But should it last for a long time, its effect on the oil market in particular will feed into just about everything happening economically.

I’ve been thinking about where the war’s impact will be felt on the homefront, should it drag on. Prices at the pump are an obvious one, and one that everybody can see. The weekly jobless claims reports, and the monthly nonfarm payrolls are also highly visible. But I’d think that the more damaging effects will not be evident immediately. Things like unpaid credit-cards, missing mortgage payments, and rising delinquencies won’t be apparent for weeks or months after they start. Not for some of you, those of you who can track them inside your bank and can see them in real time. But for the rest of us, we won’t have a real sense of how bad it’s getting until it’s well under way.

Of course, my great hope is this ends soon, the blood shed is as limited as it can be, and the economy here doesn’t crater because of it. But that’s just my hope.

NuTok
Nubank is a neobank, a Brazilian fintech startup that is expanding overseas and in the U.S. TikTok is the buzziest social-media platform out there. And within the intersection of those two, my friends, lies the future of banking? Maybe.

Nubank hired away TikTok’s “global head of creators,” Kim Farrell, to be their new marketing director, our Melinda Huspen reports (really, Farrell’s title was global head of creators; I had to ask Mindy if that was right). You may scoff because Farrell came from TikTok, but it might just be a brilliant move. Do you want to find new customers or keep on servicing your boring but steady Boomers and Gen Xers? (And I’m a boring Gen Xer so I know.) That’s not a bad business, but the next generations of your customers aren’t reading the newspaper (snif!) or watching TV. They’re on TikTok, and if you want to find them you better get somebody who speaks their language.

The future of money
On Monday, M&T Bank CEO Rene Jones and myself sit down in American Banker’s Leaders series to talk about how M&T finds new growth opportunities, how it fends off competition from both other banks and nonbanks, private credit, regulations, and even the changing nature of money itself. You can register here (the fields on the right-hand side) to watch on Monday the 16th at 1:30 p.m. ET.