Fed’s Input Spurned By “Narrow Bank” In Master Account Suit
A "narrow bank” startup that’s suing for access to the Federal Reserve’s payments system urged a Manhattan federal judge on Wednesday to block the Fed’s Board of Governors from seconding the New York Fed’s bid to shut down the case, accusing the federal banking regulators of delay tactics.
The Federal Reserve Board asked U.S. District Judge Andrew L. Carter Jr. for permission this week to file an amicus brief supporting the Federal Reserve Bank of New York’s arguments for dismissing the lawsuit from TNB USA Inc., a Connecticut state chartered bank with a novel, deposit sonly business model that alleges federal banking regulators are trying to kill it by withholding the keys to a Fed “master account.”
But TNB — short for “the narrow bank” — told Judge Carter that the Fed’s Board is essentially throwing paper at the court and should have its amicus request denied, painting the brief as the latest in a string of efforts by the regulators to stymie the bank and its master account application.
“FRBNY, working hand in glove with the Board, has made every effort to delay resolution of TNB’s application with the transparent intention of putting TNB out of business,” TNB said in a letter to the judge. "The Board’s and FRBNY’s delay tactics here are unbecoming of those charged with promoting the public interest. TNB needs a resolution and should not be forced to endure further delay because the Board did not make a timely amicus request.”
Likened to a bank account for banks, master accounts allow banks to tap into critical Federal Reserve services like its electronic payments system. For TNB, a master account is also the lynchpin of its planned business model, which it says will be strictly limited to collecting deposits from large institutional money market investors and stashing them in the master account, where they would earn higher interest rates than at a normal bank.
But TNB and the New York Fed disagree over how much discretion regulators have to turn away applicants. Ever since filing suit last year, TNB has argued that it’s statutorily entitled to open a master account, while in its dismissal bid, the New York Fed has countered that no such right exists and that Fed officials have “serious concerns” about the potential for TNB’s business model to interfere with monetary policy...
“This case is about interpretation of a federal statute,” TNB said. "FRBNY’s attorneys are undoubtedly competent to represent the Board’s views, and this court undoubtedly capable of interpreting federal law without the aid of yet another team of lawyers."
“The court should deny the Board’s request to gang up on TNB with an amicus brief that is neither timely nor useful,” the bank said...
TNB is represented by Thomas E.L. Dewey, David Pegno and Anders W. Pauley of Dewey Pegno & Kramarsky LLP.
Fed's Input Spurned By 'Narrow Bank' In Master Account Suit
Law360, March 28, 2019
By Jon Hill