Fed Supervision Revamp; Rain & Modern Treasury Seek Charters; Homeward Series D

September’s job report disappoints. Fed keeps eye on inflation. Bowman proposes supervision revamp. Rain and Modern Treasury both apply for trust bank charters. Mission Lane gets charter conditional approval. Experian launches cashflow bureau. Octane and Settle announce debt deals. Homeward lands Series D.

Our Chief AI Officer, Pravesh Rijal, explores why we need continuous identity that flows with transactions so identity can move at the same speed as stablecoins. By verifying once through a regulated entity and continuously evaluating against transaction behavior, trust, settlement, and identity can move at the same speed as money.

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September Jobs Report Disappoints

September’s job numbers disappointed. The Bureau of Labor Statistics report showed a seasonally adjusted 29,000 non-farm jobs added last month, falling far short of a forecast of 84,000 roles. Numbers for August and July were downwardly revised, with revised data showing 60,000 fewer job gains in those months vs. initial data. The unemployment rate in September nudged up 0.1% points, from 4.1% to 4.2%. Markets interpreted the soft jobs data as increasing the likelihood the Fed opts to keep rates where they are rather than continuing to hike. However, minutes from the most recent Federal Open Market Committee meeting released last week suggest Fed officials continue to view elevated inflation as the most significant risk in their outlook. The FOMC voted unanimously to increase rates by 0.25% points at their September meeting, and inflation has consistently overshot the Fed’s long-term 2% target. The U.S. dollar has held near 18-month highs on the back of higher rates.

Bowman Proposes Fed Supervision Revamp

Federal Reserve Vice Chair for Supervision Michelle Bowman proposed significant changes to the Fed’s supervisory structure last week. The new structure, which, Bowman said, is informed by the Conference of State Bank Supervisors’ approach, will break the country into five regions, rather than the current approach that uses the boundaries of the 12 Federal Reserve Bank districts. The Fed also intends to improve its use of committees, with Vice Chair Bowman commenting that “a complex web of committees” have become a “source of delay” and have “obfuscated decisionmaking responsibility and accountability.” The move to change the Fed’s approach to supervision comes in the wake of the first installment of Starling Advisory Group’s report on the failure of Silicon Valley Bank. Bowman commissioned the independent report to supplement earlier internal Fed reviews. Among other issues, that report pointed to “a culture of risk aversion” and a “lack of clarity regarding decision rights” at the Fed as impeding the effectiveness of its supervision of SVB.

Rain, Modern Treasury Apply for Trust Bank Charters

Two additional companies are applying with the Office of the Comptroller of the Currency to charter national trust banks: crypto card issuer Rain and money movement platform Modern Treasury. Rain’s proposed Rain National Trust Bank would allow the company to handle custody, reserve management, and stablecoin issuance and redemption directly under a single federal supervisory framework, the company said. Currently, custody of assets related to Rain’s stablecoin cards and wallets leverages numerous state licenses and third parties. Rain cofounder and CEO Farooq Malik commented on the application, saying, “The institutions building on Rain want the assets behind their programs held by a fiduciary that answers to a federal regulator. Rain National Trust Bank is how we plan to meet that expectation. Rain remains a payments platform. The proposed trust bank will be a separate subsidiary that holds client assets in custody, as a fiduciary and subject to OCC examination.”

Modern Treasury also announced it is applying with the OCC to form Modern Treasury National Trust Bank. Modern Treasury offers a variety of payment-, stablecoin-, and ledger-related capabilities. If approved, the proposed bank would allow Modern Treasury to offer its customers a “unified custody solution,” the company said in its announcement. Modern Treasury cofounder and CEO Matt Marcus added context on the application, saying, “We believe stablecoins are foundational economic infrastructure for the future. We have now fully integrated stablecoins to our payments platform. Pursuing this charter will add direct federally supervised digital asset custody and related services to the infrastructure our customers already use.” The proposed bank would operate as a separate, limited-purpose entity, with Modern Treasury continuing to provide payment infrastructure and software as a payment services provider.

Mission Lane Gets Charter Conditional Approval

Fintech credit card issuer Mission Lane has received conditional approval from the OCC to charter a credit card bank. The limited-purpose bank charter was created by the 1987 Competitive Equality Banking Act. There hasn’t been an application to form a credit card bank in more than 20 years. The last approved application was 2005’s Department Stores National Bank, which was subsequently acquired by Citibank. Mission Lane’s conditional approval comes just five months after the company submitted the charter application. Currently, Mission Lane partners with TAB Bank and WebBank to issue its cards.

Experian Launches Cashflow Bureau

Experian announced the launch of its Experian Cashflow Data Bureau. The new entity operates as a Consumer Reporting Agency under the Fair Credit Reporting Act. The new bureau leverages user-permissioned bank account transaction data to “help support more informed underwriting decisions and responsibly expand access to credit,” Experian’s announcement said. Experian claims that cash flow data paired with traditional credit data can improve predictive performance by as much as 40% and can enable creditors to increase approvals by as much as 25% with the same risk. Experian North America CEO Jeff Softley commented on the launch, saying, “We’ve spent decades building the trusted data, analytics, technology and expertise financial institutions depend on every day. With Experian Cashflow Data Bureau, we’re applying that experience to cash flow and making it easier for our clients to adopt these insights with confidence and at scale.”

Octane Forward Flow, Settle Credit Facility, Homeward’s Series D

Specialty lender Octane announced it has entered into a new $1.4Bn forward flow agreement. The company, which offers loans for powersports and outdoor sports equipment, said it's the largest forward flow transaction to date. New York Life served as loan arranger and lead investor in the deal, which also included participation from MetLife, Equitable, Pacific Life, and Victory Park Capital. Including the new facility, Octane has sold or secured commitments to sell more than $6.3Bn of loans it has originated.

Meanwhile, Settle, an accounts payable, procurement, and working capital provider, announced it has secured a new $240Mn financing facility. The funding is being provided by an unnamed “major international financial institution and an asset manager” based in New York. The additional credit facility will enable Settle to expand its lending and offer additional types of financing.

Finally, Homeward, a real estate sales and financing platform, concurrently announced a $120Mn Series D fundraise and a new $330Mn asset-backed debt facility. The financing was led by Saluda Grade, with participation from Citi Ventures, Continental General Insurance Company, Magnetar, Harmony Partners, Norwest, LiveOak Ventures, and others. Homeward enables users to “buy before they sell,” by offering short-term bridge financing and a guaranteed backup offer, the ability to sell their home for cash while participating in potential upside from a later resale, and enables users to make a cash offer to buy a home and later refinance into a traditional mortgage.