Bank Sues New York Fed Over Lack of Account

The Wall Street Journal reports:

A new bank is suing the Federal Reserve Bank of New York, saying it is unfairly preventing the firm from pursuing a novel business strategy.

TNB USA Inc.—run by a former top New York Fed staffer—said its primary business activity will be to enable large institutional money-market investors to earn higher interest rates from the Federal Reserve than they could otherwise, according a complaint filed in federal court Friday. Such investors include pension funds, companies and other entities managing large sums of money.

But first TNB, based in Connecticut, needs to open an interest-bearing account at the New York Fed, like those held by many large banks.

The Fed hasn’t granted or rejected TNB’s request, a process begun in August 2017, or provided a formal reason for not acting. TNB alleges in its court filing that New York Fed officials were prepared to open the account, but the Fed’s Washington-based board of governors blocked it because of unspecified “policy concerns.”

The plaintiffs said in the lawsuit they attributed the decision to the board chairman, Jerome Powell, based on their conversations with New York Fed officials.

TNB is asking the U.S. District Court for the Southern District of New York to order the New York Fed to open the account. The suit cites a 1980 law saying such accounts shall be available to any qualified depository institution that receives deposits other than trust funds.

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