The Next Fed Chair is…

Last month President Trump nominated Jerome Powell to become the next Federal Reserve chair, replacing current chair Janet Yellen in January.

The Next Fed Chair is...

So who is Jerome Powell? What can we expect from him that will directly affect public entities, higher Ed, and health care institutions?

Jerome Powell will be the first Fed chair that comes from the world of investment banking. He has extensive experience as a lawyer, and investment/private-equity banker, with considerable government expertise, having worked closely with the U.S. Treasury Department. What differentiates Powell from previous Fed chairs is that he was never an economist.

Most observers consider Powell to have much the same outlook on economic issues as Yellen.

So what can we expect from the new Fed chair, assuming he will be confirmed by the U.S. Senate?

Powell will take a more corporate approach to managing his office. You will also see more direct messaging by him and fewer opinions offered by various Fed board governors in public.

Powell will likely maintain a similar, centralist approach as Yellen’s on monetary policy. I don’t expect a shift in current Fed policy; that should be calming to the markets.

Under his leadership, we can expect the Fed to stay on track to bring up Fed rates to 2.0% by no later than 2019.

As a former Goldman Sachs investment banker, we can expect Powell to ease up on the level of regulations being imposed on banks under the 24,000+ pages of Dodd-Frank. The same with other various Federal regulations, including the Volker Rule.

While I expect him to go easy on some regulations, I don’t think he will unravel the rules that were established after the financial crisis of 2008 to protect the liquidities levels of the banking system.

Powell will set a strong balance between what economic numbers are surfacing with a strategy that will sustain the U.S. economy in case of a future U.S. recession.

I think Powell was an excellent choice and will prove to be a strong Fed chair. You will find him to be more sensitive to issues affecting smaller banks, as well as to the unnecessary and burdensome regulations on big banks that have piled on onerous costs and needless overhead.

The changes under Powell could lead to a methodical approach in raising short-term rates while making bank deposits and lending more appealing to banks and the marketplace, with hopefully less paperwork.

Happy Thanksgiving!

Happy Thanksgiving!

Sending our warmest wishes from our three+one office to your home and family for a very Happy Thanksgiving! We’re grateful and thankful in serving you and those you serve.

May this day be a reminder of the wonderful things in life.

-Joe, Peter, Scott, Garrett, Lena and Andrew

Is it Time to Act?

Last week Joe Rulison discussed the need to request a higher earnings credit rate (ECR) from your banks. As noted, the Fed Funds Target Rate has increased from the range of 0% to 0.25% in late 2015 to 1.00% to 1.25% in June of this year.

Yet during that 18+ month period the ECRs barely budged. Asking will help get you a better ECR, but it may not have an impact beyond that.

Asking is only the first step.

A higher ECR is only good to the degree you manage your balances to the correct level. Let’s walk through examples to illustrate the power of managing your balances.

Example #1:

Average Bank Deposit Average: $10,000,000

ECR: 0.25%

Annual ECR earnings: $25,000

Annual Fees: ($25,000)

Total Value of Cash: $25,000
Realized Gain: $0

In the above example, you completely offset your banking fees for the year. But with a higher ECR, you will need to lower your balances, or the effective ECR is still the same. Typically any excess earnings credit is not given to you in the form of interest; it is simply lost. Here is the example if you asked for and received a higher ECR:

Example #2:

Average Bank Deposit Average: $10,000,000

ECR: 0.50%

Annual ECR earnings: $50,000

Annual Fees: ($25,000)

Total Value of Cash: $50,000

Unrealized Gain $25,000

In this example, if you did not adjust your overall average balance, then the higher ECR did you no good. This loss is compounded when you realize you could be making at least 1.00% on your money when investing in the safest, most liquid investments, i.e., U.S. Treasuries.

Now let’s take a look at an example employing this strategy:

Example #3:

Average Bank Deposit Average: $5,000,000

ECR: 0.50%

Annual ECR earnings: $25,000

Annual Fees ($25,000)

Investment Balance: $5,000,000

Investment Rate: 1.00%

Interest Earnings $50,000

Total Value of Cash $75,000

Realized Gain $50,000

In this example, by properly managing your balance you’d increase the value your cash provided your organization by a whopping 300%!

However, doing this successfully requires good information. There are many variables that can impact ECRs, e.g., your relationship with your financial providers, and your ability to invest wisely without sacrificing safety and liquidity.

As always, the three+one team can provide you with all the information you need to be successful in maximizing the value of your cash. We look forward to helping you profit from today’s higher ECRs.

We are pleased to welcome Lena Smith to the three+one team.

Lena Smith


You Will Need To Ask…

Last year I blogged about the changing dynamics around the value of public deposits and the need to pursue higher rates. This topic once again surfaced in a Wall Street Journal article* two weeks ago about how wealthier bank clients are asking for and receiving higher deposit rates on their cash. The authors noted that valued, savvy clients could expect higher rates on their cash if only they asked.

You Will Need To Ask…


As the Federal Reserve has increased short-term interest rates, banks have been quick to raise rates on loans but very slow in raising deposit rates. This is especially true on public deposits given their collateral and legal requirements.

The value on deposits has increased for financial institutions over the last 18 months. Though the net interest margin all deposits has become more attractive, however, in order to receive the benefit of that increase one must provide solid information to make the case.

Having worked in the world of government, healthcare, and higher Ed banking for many years, I can assure you the more information you provide bank execs on the value, flow, and commitment of your cash deposits the more likely you’ll merit “exception pricing.” The type of information you provide, including the time duration of the deposits and extent of your banking relationship will play a critical role in receiving higher rates.

At three+one, our proprietary liquidity analysis and data algorithms can help your entity identify the necessary information needed to justify—and achieve—higher deposit rates.

Even though a public entity may have restrictions and collateral requirements, the quality and size of its deposits deserve to be recognized for its value.

The difference between what one asks for and what is received could be the difference in pay raises for staff, handling unbudgeted expenses, making up for limited resources, or narrowing a budget deficit.

Every dollar counts, so higher deposit rates are worth asking for. Make step one a well-prepared liquidity analysis by three+one.

*Demos, T. and Rexrode, C. Wealthier Depositors Pressure Banks To Pay Up. Wall Street Journal, Oct. 24, 2017. Retrieved from