CompliancEX

Fund manager gets 15 years in prison for $35M scam

By Associated Press, November 24, 2009

A Philadelphia-area fund manager has been sentenced to 15 years in prison for running a Ponzi scheme that cheated investors out of $35 million.

Federal prosecutors say 53-year-old Joseph Forte (FOR'-tay) (above) of Broomall tried to boost his social status by accumulating wealth and pledging large charitable gifts. He also used the investments on a beach house and to raise his family.

Forte ran an investment fund from his basement and dummied up reports showing high returns from about 80 investors between 1995 and 2008. He pleaded guilty to fraud and money laundering.

Several victims testified Tuesday that Forte wiped out their life savings.

Forte's lawyer says the former gym owner had delusions of grandeur and thought he could make his clients money.

 

 

Stanford victims ask why Texas didn't act sooner

By Brian Gaar for AMERICAN-STATESMAN,  November 25, 2009

In the aftermath of the R. Allen Stanford case, some local investors are asking: Where was the State of Texas?

Investors who lost money in the Houston financier's alleged Ponzi scheme now say the state's financial oversight was too lax.

"We have the right to know what the (Texas State Securities Board) knew and when they knew it, details of their past investigations, and why they didn't disclose anything to the citizens of Texas all these years," Austin investor Annalisa Mendez said.

In fact, the state looked into Stanford's dealings years ago.

The Securities Board wrote a memo in the mid-1990s, expressing concern "that the high return rates and commissions for CDs made it difficult for the Stanford bank to make a legitimate profit on the CDs," according to a September Financial Industry Regulatory Authority report on the aftermath of both the Bernard Madoff and Stanford cases.

FINRA is a private corporation that provides regulatory oversight of all securities firms nationwide.

Texas Securities Commissioner Denise Voigt Crawford (above) mentioned the securities board's involvement with the Stanford case in Feb. 20 testimony to the state Senate Committee on Finance, just after the scandal broke.

"We looked at him about 10 years ago, because there was evidence of potential money-laundering," Crawford said in response to a question from state Sen. Steve Ogden, R-Bryan.

The FBI and the Securities and Exchange Commission took the case, "which is what should have happened," she said. "But why it took 10 years for the feds to move on it, I could not answer."

The SEC has been criticized by investors who say the agency didn't do enough, quickly enough, to stop Stanford.

In 2003, some Stanford employees told the SEC they suspected fraud at the company.

In 2005, the SEC's Fort Worth office started an informal investigation into the sale of certificates of deposit by Stanford International Bank, which is based in Antigua.

But it was not until this past February that the SEC sued Stanford, alleging he was running a "massive Ponzi scheme" based on fraudulent CDs.

The SEC's inspector general concluded in a report that the agency had fulfilled its duty to check out accusations against Stanford.

The report found that the agency's inquiry was "hampered by a lack of cooperation" from Stanford and his attorneys, as well as by jurisdictional obstacles and obstruction by regulators in Antigua.

Stanford's attorney, Kent Schaffer, denied that his client had operated a Ponzi scheme, saying that money from the CD program was invested in a "wide range of investments."

What caused the losses were the government's lawsuit and fraud investigation, which prompted a run on the bank, he said.

 

Connecticut to Sue Rating Firms for ‘Reckless’ Work

By Caroline Salas and Matthew Leising for Bloomberg, November 25, 2009

Connecticut plans to join Ohio in suing credit-rating companies for “negligent, reckless and incompetent work” in grading debt purchased by state pension funds, according to Attorney General Richard Blumenthal (above).

Connecticut and “a number of other states” are preparing legal action against Standard & Poor’s, Moody’s Corp. and Fitch Ratings, Blumenthal said today in a Bloomberg Television interview. Ohio Attorney General Richard Cordray sued the debt raters this month on behalf of five Ohio public employee retirement funds, saying “improper” ratings cost the funds more than $457 million.

The state actions come amid criticism of the ratings services by investors and lawmakers including Senate Banking Committee Chairman Christopher Dodd, who has said the companies wrongly assigned top credit rankings to U.S. subprime-mortgage bonds just before that market collapsed in 2007. Defaults on the debt ignited a credit crisis that has led to more than $1.7 trillion in writedowns and losses since the start of 2007.

“We want money back for our taxpayers as a consequence of these misratings,” Blumenthal said. “They gave AAAs to financial instruments that deserved much, much less. They were the enablers to this structured finance debacle.”

Blumenthal also sued the credit-rating companies last year, saying they unfairly gave municipal bonds lower ratings than comparable corporate or structured debt.

‘Seeking New Scapegoats’

S&P is a unit of McGraw-Hill Cos. Steven Weiss, a spokesman for the parent company, and Fitch spokesman Kevin Duignan, both in New York, didn’t return calls seeking comment.

“While it is unfortunate that the Connecticut attorney general plans to follow Ohio in seeking new scapegoats for investment losses created by the unprecedented global market turmoil of the past year, Moody’s continues to be confident in the integrity of its ratings, its people and its processes and believes there is no basis for such a lawsuit,” spokesman Anthony Mirenda said in an e-mail.

The rating companies have fought lawsuits by arguing that the letter grades they assign to bonds to predict the risk of default are opinions protected by the First Amendment of the U.S. Constitution.

The companies have no right to “blanket immunity” by claiming First Amendment protection, Blumenthal said in a separate interview.

‘Shrink the Defense’

“Courts are beginning to erode and shrink the defense and very likely shred it in coming years,” Blumenthal said on Bloomberg Radio. “Their opinions have been given great weight and authority in part because they claimed to have done a great amount of research.”

“This fight will be a long and difficult one” because the companies “will raise every procedural obstacle” and defense possible, he said.

Blumenthal said he seeks to reform the credit-ratings industry by eliminating the model where issuers pay the companies to grade their debt.

California will investigate the asset-backed securities evaluations of Moody’s, S&P and Fitch and the role their ratings played in the deepest recession since the Great Depression, California Attorney General Jerry Brown said Sept. 17. Brown issued subpoenas to the companies that day and will seek to determine if they violated state law when they gave “their highest ratings” to securities that plummeted in value, Brown said at the time.

‘Sharing Information’

“We’re cooperating and sharing information” with other states, Blumenthal said. “We’re working with both California and Ohio.”

Blumenthal said his staff hasn’t determined whether to file a separate action or amend the existing Connecticut lawsuit.

New York-based Moody’s has also faced criticism from former employees.

The company gave its former compliance executive Scott McCleskey the “old mushroom treatment” by “keeping him in the dark and burying him in fertilizer,” Edolphus Towns, a New York Democrat and chairman of the House Committee on Oversight and Government Reform, said at a Sept. 30 hearing.

McCleskey told the committee that Moody’s executives ignored his warnings that ratings on municipal bonds weren’t updated at regular intervals. Another former employee at the firm, Eric Kolchinsky, said Moody’s violated securities laws by knowingly providing “incorrect” ratings. The House is considering legislation that would increase oversight of credit- ratings companies.

Denial of Wrongdoing

“They knew the ratings were incorrect,” Kolchinsky said in September. “They had knowledge of it, and yet they still went forward and issued the ratings.”

Moody’s has denied any wrongdoing, saying Kolchinsky’s allegations are “a series of evolving claims” made over the last year, Richard Cantor, Moody’s chief credit officer, said at the time.

The 100 largest U.S. public pension systems lost a total of $600 billion in asset value during the year ended June 30, according to an Oct. 29 report from the U.S. Census Bureau.

Cordray, Ohio’s attorney general, said Nov. 20 that he filed suit against S&P, Moody’s and Fitch on behalf of five Ohio public employee retirement funds over “misleading evaluations” of mortgage-backed securities.

Trustees of the $6.8 billion Missouri public employees pension fund, which lost almost $2 billion in 2008, voted Nov. 19 to consider lawsuits seeking damages if they suffer future investment losses.

“The litigation policy is for going-forward issues, not market losses,” Chris Rackers, a spokeswoman for the system, said in an e-mail.

Florida’s State Board of Administration, which manages a $107 billion retirement fund, the nation’s fourth-largest, “has no immediate plans on the issue,” said its spokesman, Dennis MacKee.

“We certainly continue to look at any and all options,” he said.

 

UBS Threatens to Move HQ From Switzerland

By Jonathan Lynn for Reuters, November 29, 2009

 

Swiss bank UBS<UBSN.VX> is threatening to move its headquarters out of Switzerland if the authorities impose too many new regulations in the wake of the global financial crisis, Swiss weekly paper Sonntag CH said.

Oswald Gruebel, chief executive of Switzerland's biggest bank by assets, made the threat in a speech to businessmen last week, citing the possibility that the authorities would force major banks to reorganize as holding companies, the paper said on Sunday.

A UBS spokeswoman declined to comment on the report.

Gruebel spoke to the Zurich Business Club on Thursday at a closed-door event at which reporters were not present.

The idea of forcing banks in Switzerland to operate as holding companies is part of the discussion on supervising banks deemed "too big to fail."

Switzerland's relatively small economy is dominated by two mega-banks, UBS and Credit Suisse <CSGN.VX>.

Swiss National Bank Vice-Chairman Philipp Hildebrand, noting total banking assets are more than seven times the size of Swiss gross domestic product, said earlier this month that the country urgently needed tougher regulatory standards than other countries given the relative size of its banks. [ID:nLI129832]

The Swiss government bailed out UBS in October 2008 by injecting 6 billion Swiss francs ($5.95 billion) in return for a stake of some 9 percent, subsequently sold at a profit.

UBS also originally planned to transfer some $60 billion in illiquid assets to the central bank, but this was later reduced to $39 billion.

Swiss regulators believe that forcing multinational banks to operate as national institutions in different countries, controlled by a central holding company, would allow the authorities in a crisis to rescue the Swiss company while letting foreign subsidies go under, the paper said.

But such a structure would oblige the bank to inject capital into the subsidiaries, which would be expensive.

In such circumstances it would be logical to move the holding company abroad, the paper quoted Gruebel as saying.

Gruebel is not the only banker to threaten a move.

Bankers and hedge funds in London often say they will move to Switzerland if UK regulation and taxation becomes too oppressive.

($1=1.009 Swiss Franc)

SEC's expansion of Sarbanes-Oxley Act could mean big costs for smaller companies

 Dallas News, November 23, 2009

This was a newsy little tidbit affecting thousands of small public companies, but it was mostly relegated to the back pages of newspapers, if it was covered at all.

The Securities and Exchange Commission announced recently that small public companies will no longer get a reprieve from complying with the Sarbanes-Oxley Act of 2002.

Next year, they will have to hire auditors to attest to the adequacy of their companies' internal control systems, and that means heavy additional expense. Internal control basically refers to the way a company tracks inventory, accounts payable and cash.

If there are cracks in the internal control system, the data used to compile the financial statements could be flawed. Before Sarbanes-Oxley, only the company's financial statements had to be audited, but under Section 404 of the law, a second report is required on the adequacy of internal controls.

Until now, companies with market capitalization below $75 million did not have to comply with Section 404. In fact, the SEC delayed their compliance four times over the years.

Business groups have intensely argued that they would have to pay disproportionately high costs for these audits because of the fixed-cost nature of compliance. As it turns out, they are right.

Reliable data on the cost of Section 404 compliance for small companies has been slow in coming, but a Pennsylvania State University finance professor said his research shows that small firms are in fact taking a big hit.

Big hit for small firms

Professor Peter Iliev (above) said he nailed down the cost of Section 404 compliance by examining companies with market caps just above $75 million and those just below it. Those below that cap have not had to comply until now.

"We needed a control group that didn't have to comply," Iliev said. "This allowed us to look at those who did comply and attribute any differences to the new regulation."

What he found was that there were some rim-rocking costs associated with auditing internal controls. These smaller firms had to pay an additional $697,890 in audit fees in 2004 – the year he examined – which amounted to a 98 percent increase over the companies not in compliance.

These companies had a median market cap of just over $110 million, which is not very big. Many companies have market caps of $100 billion or more.

As it turned out, the average earnings for these firms were negative $1.4 million in that year, meaning a good chunk of the loss could be attributed to the additional audit expense.

"Small firms pay disproportionately. The burden was large, and this is a recurring cost," Iliev said.

Does law go too far?

The Sarbanes-Oxley Act was passed in 2002 in response to the high-profile scandals at Enron Corp., WorldCom Inc. and other companies that used accounting tricks to vastly overstate their profits. The law's purpose was to improve the quality of financial reports and to give investors more confidence in what companies report.

Perhaps the act has done that, but the question is whether the costs of compliance at smaller firms are worth the benefit.

Or more specifically, does the burden of Sarbanes-Oxley go beyond what Congress intended? I put that question to Iliev, and his response was, "For small companies, yes."

 

Bernanke makes case for strong Fed role on banks

By EILEEN AJ CONNELLY for Associated Press, November 29, 2009

The chairman of the Federal Reserve is concerned that congressional efforts at financial reform could weaken the central bank's ability to handle future crises and may politicize monetary policy.

Fed Chairman Ben S. Bernanke made the comments in an Op-Ed piece to appear in Sunday's Washington Post, five days before the Senate Banking committee holds a hearing on his nomination for a second term. His current four-year term expires Jan. 31.

Bernanke wrote the nation is challenged to design a financial oversight system that will "embody the lessons of the past two years and provide a robust framework for preventing future crises and the economic damage they cause."

But two proposals being considered "are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," he said.

The first item in question is a bill before the Senate that would strip the Fed of its bank regulation authority and give the Senate a role in selecting the 12 regional Federal Reserve bank presidents, proposed by Banking Committee Chairman Chris Dodd, D-Conn.

Dodd says his measure would return the Fed to its core mission of setting monetary policy, claiming it proved itself "an abysmal failure" by not cracking down on risky lending practices that led to the financial meltdown.

Bernanke countered that the Fed played "a major part in arresting the crisis."

In what will likely be seen as an implicit defense of Treasury Secretary Timothy Geithner, who was president of the New York Federal Reserve Bank last year, Bernanke said some government actions may have been "distasteful and unfair" but were needed to avoid a global economic catastrophe rivaling the Great Depression.

"My colleagues at the Federal Reserve and I were determined not to allow that to happen," Bernanke wrote.

Notably, he makes no mention of the bill's language that would strip the Fed of consumer protection authorities, which he has previously opposed. That may indicate a concession to political and populist demands for a new pro-consumer agency.

The second piece of legislation Bernanke comments on is an amendment from Rep. Ron Paul (above), R-Texas, in a House financial regulatory bill that would repeal a 1978 ban on congressional audits of Fed interest-rate decisions.

Paul maintains the repeal would bring more transparency and accountability, and notes it contains language that states it should not be construed as interference in or dictation of monetary policy by Congress.

Bernanke said the Fed's ability to set interest rates and provide stimulus through lending and asset-purchase programs depends upon being able to operate independently of political influence. Opening monetary policy decisions to the scrutiny of Congress "would undermine the confidence the public and the markets have in the Fed to act in the long-term economic interest of the nation."

The Fed chairman recognized that the proposals are in part born of public anger over the financial crisis and the rescues of big financial firms. He said he strongly supports measures to ensure that such interventions never happen again. He wants tougher oversight of large, complex financial firms to make sure that no one company is "too big to fail," and that the costs of future failures are not borne by taxpayers.

"There is a strong case for a continued role for the Federal Reserve in bank supervision," he said, citing expertise needed to supervise "highly complex financial firms" and the information gleaned from regulating banks that is used to set monetary policy. He also pointed to the results of the "stress tests" done on banks earlier this year, maintaining they helped restore public confidence in the banking system.

 

Audit would hurt economic prospects: Bernanke

By Mark Felsenthal for Reuters, November 27, 2009

Federal Reserve Chairman Ben Bernanke said on Friday congressional proposals to audit the Fed and strip it of regulatory powers as part of post-crisis reforms could damage prospects for economic and financial health in the future.

"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote in a column posted on the Washington Post's website.

The rare newspaper column by a Fed chairman comes shortly before Bernanke testifies before a Senate panel on his renomination to serve a second four-year term at the helm of the central bank and answers a series of steps on Capitol Hill that could diminish the central bank's role.

Lawmakers are angry with the Fed over its emergency bailouts of major financial firms and its failure to prevent the contagion of mortgage delinquencies that crashed the financial system. A proposal to audit the Fed's monetary policy deliberations won a committee vote recently over the objections of House Financial Services Committee Chairman Barney Frank.

Frank's Senate counterpart, Banking Committee Chairman Christopher Dodd, is himself the author of a proposal to consign the Fed solely to making decisions about setting benchmark interest rates.

Bernanke, in his column, conceded the Fed had missed some of the riskiest behavior in the lead up to the crisis. But he said the Fed had helped avoid an even more damaging economic meltdown and has stepped up its policing of the financial system.

"The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation," he said.

Bernanke acknowledged that lawmakers are responding to public anger over the government's response to the turmoil.

"The Federal Reserve, like other regulators around the world, did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis," he said.

However, the central bank has moved "aggressively" to fix the problems, Bernanke said. The Fed's knowledge of complex financial institutions is invaluable in supervising them, he said.

The Fed's ability to slash interest rates to combat a recession without fueling inflation depends on its political independence he said. Allowing audits of its monetary policy -- as proposed legislation would do -- would increase the perceived influence of Congress on interest rate decisions, he said.

That, in turn "would undermine the confidence the public and the markets have in the Fed to act in the long-term economic interest of the nation," Bernanke wrote.

Frank has said the audit provision is likely to be revisited as legislation winds through both houses of Congress.

Dodd has said his proposal is a starting point for debate.

 

Thirty financial groups on systemic risk list

By Patrick Jenkins and Paul J Davies for the Financial Times, November 30, 2009

Thirty global financial institutions make up a list that regulators are earmarking for cross-border supervision exercises, the Financial Times has learnt.

The list includes six insurance companies – Axa, Aegon, Allianz, Aviva, Zurich and Swiss Re – which sit alongside 24 banks from the UK, continental Europe, North America and Japan.

The list has been drawn up by regulators under the auspices of the Financial Stability Board, in an effort to pre-empt systemic risks from spreading around the world in any future financial crisis.

Insurers are considered systemically important for a variety of reasons: they might, for example, have a large lending arm, such as Aviva, or a complex financial engineering business, akin to that of Swiss Re.

AIG of the US, the failed insurance group, was proven to be a vast systemic risk last year, in large part because of its diversification from insurance into complex financial engineering.

Raj Singh, chief risk officer of Swiss Re, said: “The real interconnectivity for the insurance industry is more muffled in that there needs to be a dual trigger for there to be any big systemic effects.”

The list, which is not public, contains many of the multinational bank names that would be widely expected.

The exercise follows the establishment of the FSB in the summer and is principally designed to address the issue of systemically important cross-border financial institutions through the setting up of supervisory colleges.

These colleges will comprise regulators from the main countries in which a bank or insurer operates and will have the job of better co-ordinating the supervision of cross-border financial groups.

As a spin-off from that process, the groups on the list will also be asked to start drawing up so-called living wills – documents outlining how each bank could be wound up in the event of a crisis.

Regulators are keen to see living wills prepared for all systemically important financial groups, but the concept has split the banking world, with the more complex groups arguing that such documents will be almost impossible to draft without knowing the cause of any future crisis.

Paul Tucker, deputy governor of the Bank of England, and head of the FSB working group on cross-border crisis management, said recently that the wills – also known as “recovery and resolution” plans – would have to be drawn up over the next six to nine months.

National regulators, led by the UK, are known to have begun pilot-testing the living wills exercise with some of the listed banks in the past few weeks.

 

Feds raid Ind. offices of National Lampoon Inc.'s chief executive

By Associated Press, November 25, 2009 

Federal agents searched the Indiana and Ohio offices of two companies owned by an Indianapolis businessman Tuesday, serving warrants a month after a newspaper questioned whether the Ohio firm is capable of repaying some $168 million owed to investors.

 FBI special agent Michael Welch said in a statement that agents served search warrants Tuesday at Obsidian Enterprises of Indiana, a leveraged-buyout firm with offices on the top floor of Indianapolis' 48-story Chase Tower.

At the same time, agents began raiding the offices of Fair Financial Services in Akron, Ohio, Welch said.

Both companies are owned by 47-year-old Timothy S. Durham (above) of Indianapolis.

Welch said the warrants are sealed and the FBI would have no additional comment, but his statement also urged "anyone who has had dealings with Fair Financial Services or has information or concerns" about it to contact the FBI.

FBI agent Wendy Osborne, who provided the statement, declined to comment further.

Durham did not immediately respond to phone messages left after hours Tuesday at his Obsidian and Fair Financial Services offices and his Indianapolis home.

An Indianapolis Business Journal investigative story published in October raised questions about whether Fair Financial could repay Ohio investors who bought more than $168 million in investment certificates.

The newspaper said Durham purchased the consumer-loan company in 2002, but has treated it like a personal bank since. It reported that Ohio securities filings show that Durham, partners and relative firms owe investors more than $168 million.

Durham has owned Obsidian Enterprises since 1998, pooling $15 million from investors to acquire Lake City Forge, an auto parts maker, in a leveraged buyout. Eighteen months later, he sold the company for $30 million.

That success was followed by a series of purchases of trailer makers, a truck body manufacturer, a luxury coach leasing firm and a rubber reclaiming business.

Meanwhile, legal questions loom over another business where Durham is a major investor, Los Angeles-based National Lampoon Inc., the comedy film company best known for the "Animal House" and the "Vacation" film series.

Lampoon's shares have traded for less than 50 cents since December, when the U.S. Securities and Exchange Commission filed civil fraud charges against the company and a grand jury indicted then-CEO Dan Laikin on stock-manipulation charges.

Laikin pleaded guilty in September to conspiracy in exchange for prosecutors dropping a count of securities fraud.

Durham, who was not implicated in the criminal case or named in the SEC's civil lawsuit, now serves as the company's acting CEO.

 

 

Fed told rule change could help with exit

By Kristina Cooke for Reuters, November 25, 2009

 A handful of banks have told the Federal Reserve they could do more to support the central bank's exit from its emergency cash infusions if a key accounting rule was changed, according to a person familiar with the situation.

At issue are reverse repurchase agreements, a cash-draining tool, that the banks said could be used to a greater extent when the time comes if dealers did not have to record them on their balance sheets when they act as middle-men, the source said.

In its efforts to help the economy recover from a severe recession, the Fed cut interest rates to near zero last December, and this year further eased financial conditions by buying longer-term Treasuries and mortgage-related securities. The Fed's balance sheet has more than doubled to $2 trillion in the process.

No decision has been made on what tools the Fed will use and in what order to eventually tighten monetary policy once the recovery picks up steam.

Reverse repurchase agreements are one option, but given the scale at which they might be needed, the Fed has said it could go beyond its usual primary dealer partners to tap cash-rich money market mutual funds.

In a reverse repo, the Fed sells assets for cash with an agreement to buy them back at a later date, thus draining extra cash from the system.

Dealers told the Fed they could play a bigger role as middle-men between the Fed and money market mutual funds if they didn't have to record the assets in the reverse repo transactions on their balance sheets and could "net" them instead, the source said.

An accounting rule change that would enable dealers to net their positions would mean the dealers could be intermediaries on reverse repo trades without incurring the costs of having to hold additional capital against a bigger balance sheet, the source said.

A precedent for this is the netting of positions used between dealers in the Fixed Income Clearing Corp (FICC), but with money market mutual funds and the Fed on either side of the transaction, the source said.

If dealers act as middle-men between the Fed and money market mutual funds they would be expanding their balance sheets for little benefit, the source said.

"All the dealer community receives is a big balance sheet consequence," the source said.

"And that is why dealers have made the point to the Fed that encouraging large balance sheet charges without positive economics will not serve as a strong foundation for a successful program."

Any accounting rule change would have to be made by the accounting standard setter, the Financial Accounting Standards Board (FASB). The Securities and Exchange Commission can also provide accounting guidance.

A FASB spokesman said board was "unaware of any current accounting issues pertaining to repos"; the SEC was not immediately available for comment. The New York Federal Reserve Bank -- the Fed's operational arm on Wall Street -- declined to comment.

Accounting rules would require banks to record assets on their balance sheets when they act as go-betweens if they take on credit risk in a transaction.

Direct reverse repurchase transactions between the Fed and money market mutual funds would likely prove more difficult than using dealers as intermediaries, because the Fed does not have existing relationships with these funds -- and thus would have to craft new documentation, the source said.

The New York Fed said in a statement in October that it has been testing the mechanics of conducting tri-party reverse repos.

However, the New York Fed stressed that just because it was conducting tests to have its toolkit ready when needed, it didn't mean it was about to use it.