Federal - Executive Branch
Federal - Executive Branch
News releases, reports, statements and associated documents from the U.S. Executive Branch, covering all aspects of the Obama administration including cabinet departments, federal agencies, regulatory and independent agencies.
Featured Stories
U.S. Embassy in Ghana Issues Remarks on U.S. Independence Day 2020 Message
ACCRA, Ghana, July 4 -- The U.S. Embassy in Ghana issued the following remarks on July 3 by Ambassador Stephanie S. Sullivan on U.S. Independence Day 2020:Before I talk about American independence, I want to start by commending the government and people of Ghana for your resiliency throughout the COVID-19 pandemic. The United States has been honored to partner with you in our common effort to combat this disease. Together, we will achieve the shared goal of emerging healthier, stronger, and more united.
Today, we observe the signing of the Declaration of Independence by a group of American patriots ... Show Full Article ACCRA, Ghana, July 4 -- The U.S. Embassy in Ghana issued the following remarks on July 3 by Ambassador Stephanie S. Sullivan on U.S. Independence Day 2020: Before I talk about American independence, I want to start by commending the government and people of Ghana for your resiliency throughout the COVID-19 pandemic. The United States has been honored to partner with you in our common effort to combat this disease. Together, we will achieve the shared goal of emerging healthier, stronger, and more united. Today, we observe the signing of the Declaration of Independence by a group of American patriots244 years ago. However, what we celebrate today is not independence, per se, but rather freedom.
The freedom to think independently, the freedom to speak our mind without fear, the freedom to assemble peacefully, and the freedom to worship as we wish.
Declaring independence from the British crown was a means to an end, not an end in itself. It was a bold action. And it represented an ideal, thought radical at the time, that we are all created equal and endowed by our Creator "with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness."
The American founders charted a new course for human history through a great experiment in self-governance that continues to this day. Many countries over the past two centuries have found in the American experience the inspiration to free their own people from oppression and tyranny.
Our nation has much to celebrate. Yet we must also recognize that we have far to go to transform our ideals into the daily reality of better lives for all Americans. I grew up reciting the pledge of allegiance at school every day, which ends "with liberty and justice for all."
Throughout our history, we, as a country, have had to confront our shortcomings in living up to our ideals. We expanded our young nation westward at the cost of countless lives of Native Americans and injury to indigenous cultures that long predated the founding of our Republic.
We countenanced a culture of slavery and, when slavery was ended, we saw new legal structures emerge that denied African Americans those inalienable rights with which they should have been endowed.
And it was only 100 years ago that women gained the right to participate fully in our political life. At each of these moments, we have faced a reckoning as to what exactly we mean by all people and by unalienable rights.
In previous times, we fought a bloody civil war to end slavery. We struck down old laws that created separate, and unequal, Americas depending on the color of one's skin. And we amended our Constitution to enshrine the right of women to vote.
Today, once again, we face such a reckoning. The killing of George Floyd in Minneapolis five weeks ago, the murders of Ahmaud Arbery, Breonna Taylor, and so many similar unjust deaths over the years, have filled the hearts of Americans, Ghanaians, and people across the globe with grief.
It falls to us - this generation -to recognize the pervasiveness of systemic racism.
And it falls to this generation to summon the will to make racism a relic of history. We have faced existential challenges before and summoned that will. On the eve of our Civil War, President Abraham Lincoln foresaw the day when the nation would be touched by what he called "the better angels of our nature."
Little more than a decade after declaring independence, our founders recognized that our loose confederation of states was sliding into chaos and tore up their original plan for governing the country.
They responded to the moment and drafted our Constitution, which remains the oldest such written document in the world. They did so in order "to form a more perfect union." The words resonate because they recognize that this experiment in freedom is a continuing struggle to translate the ideals of 1776 into the reality of today.
Now it is our turn to respond to the moment.
Times change, and what was accepted yesterday is abhorrent today as we wipe our eyes to see with greater clarity. For African Americans and others who have been denied justice and access to the American dream, change comes slowly. We must do better.
"The arc of the moral universe is long," Martin Luther King Jr. said, "but it bends toward justice." However, it does not bend on its own accord. It bends by the collective will of a nation, acting in unity of purpose. It calls for a diverse people working together. Inscribed on the Great Seal of the United States is our national motto, E pluribus unum (out of many, one).
Here in Accra, I can see that this is a sentiment that Ghanaians appreciate as well. Ghana has known its own divisions, yet time and again it has summoned the will to work together across ethnic lines, religious faiths, and political affiliation for the common good.
We hear that message in the second stanza of Ghana's national anthem: "To thee we make our solemn vow: Steadfast to build together/A nation strong in unity."
To all of you hearing this message today, I wish for you those three pillars of a democratic society: Life, Liberty, and the Pursuit of Happiness.
And let me add a fourth wish: That all of you will be champions for justice, active participants in your democracy, and unwavering voices in your commitment to the fullness of freedom for all people everywhere.
U.S. Ambassador to Greece Pyatt Issues Remarks at 8th Regional Growth Conference in Patras, July 3
PATRAS, Greece, July 4 -- U.S. Ambassador to Greece Geoffrey Pyatt issued following remarks on July 3 at the 8th Regional Growth Conference:As you all know, Patras is close to my heart, and I was really sorry to miss the Race of Sacrifice to Kalavryta this year because of the pandemic. But I look forward to returning to western Greece later this summer and, of course, enjoying more of your stunning sunsets and vibrant economic and cultural life.
The American Embassy is closed today for the Independence Day holiday, but I'm happy for this opportunity to participate in the 8th Regional Growth ... Show Full Article PATRAS, Greece, July 4 -- U.S. Ambassador to Greece Geoffrey Pyatt issued following remarks on July 3 at the 8th Regional Growth Conference: As you all know, Patras is close to my heart, and I was really sorry to miss the Race of Sacrifice to Kalavryta this year because of the pandemic. But I look forward to returning to western Greece later this summer and, of course, enjoying more of your stunning sunsets and vibrant economic and cultural life. The American Embassy is closed today for the Independence Day holiday, but I'm happy for this opportunity to participate in the 8th Regional GrowthConference and to be reunited with my friend Minister Georgiadis following our joint appearance last September here at the beautiful Achaia Claus winery.
Now that Greece has begun the process of reopening its economy, we at the U.S. Embassy, too, have shifted our focus back to the economy--how we can help to ensure that Greece has a V-shaped recovery curve, returning to positive growth as quickly as possible, jointly with American companies and American investors.
That recovery effort will be helped by two factors: one is the reputational boost that Greece has enjoyed because of the government's effective, data-driven management of the pandemic. Once viewed as the black sheep of Europe, Greece has outperformed many of its European neighbors in terms of managing the disease.
Second is the tremendous progress that Prime Minister Mitsotakis, Minister Pierrakakis, Minister Georgiadis, and so many others on the Greek government team have made on the digital transformation of this country since I spoke at this venue last September.
Greece once ranked near the bottom of the European Union in this area, but now, the digital transformation of Greek government processes is well underway. So the subject of this panel, "Digital Transformation of Regional Business" could not be more timely.
I am very proud of the fact that American companies and American technology have played such an important role in helping Greece to digitize its government. And as I've learned over the past four years, Western Greece lies at the heart of this country's digital revolution.
In an important development on April 29th, The U.S. Trade Representative removed Greece from its Special 301 report as a reflection of the government's successful efforts to acquire licensed Microsoft software for public sector employees. The conversations that began as part of the Greek state's effort to acquire legal software have clearly put Greece on the map for Microsoft leadership in Redmond, Washington.
And Greece's relationship with Microsoft is growing dramatically. Microsoft has already invested in an augmented reality application nearby in ancient Olympia to help tourists and visitors to appreciate that fabulous, classical site. But Microsoft has also acquired the Greek company SoftoMotive, with which it will launch a Robotic Process Automation development hub in Athens.
The improved investment climate in Greece and the value proposition of Greece's highly skilled tech force were also reflected in the May 4 announcement that Think Silicon, a Patras start-up specializing in graphic processors had been acquired by California's Applied Materials. I warmly remember how impressed I was by my visit to Think Silicon at the Patras Science Park not so long ago.
The American Embassy will continue to invest in Greece's entrepreneurship ecosystem and the digital up-skilling of Greek youth. Next week alone, I will be speaking at three entrepreneurship events: the launch of Tech Academy, a new initiative to teach digital skills to young professionals; the Trophy Challenge, one of the top agro-food and agro-tech startup competitions in Greece, and the Panorama of Entrepreneurship, a leading conference for university students, graduates, and young professionals interested in entrepreneurship.
We're also collaborating with Minister Georgiadis in a number of other sectors to bring more U.S. investment to Greece.
The American-Central European Business Association, or ACEBA, is working with us on a business mission that will come to Greece in December, which will include leading American companies in aerospace, defense, healthcare, energy, and information technology.
And we are moving ahead with planning for a Partnership Opportunity Delegation, an exciting mission of innovative American companies looking to invest in the digital and cyber sectors here in Greece.
And in tourism, I'm glad that work has finally begun to clear out the old Hellenikon airport, and I've been happy to see Minister Georgiadis prominently posting pictures of bulldozers on his Twitter feed. Once the tender for the integrated resort complex is finally decided, we expect this to represent an approximately one billion U.S. dollar investment in Greece's critical tourism sector and a vote of confidence in this government.
Meanwhile, we're working closely with the Development Finance Corporation, a government entity created by the U.S. Congress to offer an alternative to the checkbook diplomacy that China and other great power rivals have been engaged with through mechanisms like the Belt and Road initiative.
Just recently, the Development Finance Corporation signed a retainer letter with the American company ONEX to pursue the purchase and renovation of the Elefsina Shipyards, which supports key regional energy projects and is in line with U.S. and Greek efforts to diversify energy supplies.
And just last week, DFC CEO Adam Boehler wrote a letter to Minister Georgiadis reaffirming the Corporation's commitment to the Elefsina project. The DFC is now proceeding with required due diligence so as to be able to make a final determination, moving forward jointly with the Greek government on this investment. The DFC has recognized that the project has the potential to revitalize a strategic asset and support significant job creation here in Greece.
U.S. investors are also looking to partner with the DFC to invest in other key infrastructure that will enhance energy security and the diversification of energy sources in this region, including the ports in Alexandroupoli and Kavala.
Minister Georgiadis has been involved with DFC from the very beginning and has encouraged the Corporation's participation in these strategic infrastructure projects, both for the financing that would come but also for the signal that U.S. government involvement sends to the broader investment community that Greece is open for business.
Finally, since we are here in Patras, I should say a few words about Greece's bicentennial in 2021, which is so deeply tied to America's independence.
We are working with the Greek government on a full range of programming to help commemorate the 200th anniversary of the Greek Revolution as well as our countries' shared democratic values and interests.
With its rich history and thriving community of American citizens, western Greece will play an important role in our Embassy plans for celebrating the Greek bicentennial.
We know what an important role western Greece has played in the country's fight for independence. Bishop Germanos of Patras raised the flag of revolution over the Monastery of Agia Lavra, and of course the heroism of Greeks and Philhellenes during the Third Siege of Messolonghi won the sympathy of Europe and the Great Powers, leading to the Battle of Navarino and Greece's ultimate independence.
The United States is going to continue to work with Greece across all of the pillars of our Strategic Dialogue, but with a particular focus on supporting Greece's economic recovery, building our trade and investment relationship, leveraging tools like the Development Finance Corporation, and identifying the sectors where we see Greece poised for a rapid growth. We'll also be looking for opportunities to celebrate alongside you in 2021 and highlight this region - western Greece's special contributions to Greece's storied past and its bright future.
So, I look forward to continuing the conversation today in the weeks and months ahead.
Texas U.S. Attorney: Killeen Woman Faces Federal Charge in Connection With Disappearance of U.S. Army Specialist Vanessa Guillen
SAN ANTONIO, Texas, July 4 -- The U.S. Attorney for the Western District of Texas, John F. Bash, issued the following news release:Federal authorities filed a criminal complaint against 22-year-old Cecily Aguilar in connection with the disappearance of U.S. Army Specialist Vanessa Guillen, announced U.S. Attorney John F. Bash, U.S. Army Criminal Investigative Command (USACID) Special Agent in Charge Vanessa Neff at Fort Hood, and FBI Special Agent in Charge Christopher Combs, San Antonio Division.
The criminal complaint charges Aguilar with one count of conspiracy to tamper with evidence. According ... Show Full Article SAN ANTONIO, Texas, July 4 -- The U.S. Attorney for the Western District of Texas, John F. Bash, issued the following news release: Federal authorities filed a criminal complaint against 22-year-old Cecily Aguilar in connection with the disappearance of U.S. Army Specialist Vanessa Guillen, announced U.S. Attorney John F. Bash, U.S. Army Criminal Investigative Command (USACID) Special Agent in Charge Vanessa Neff at Fort Hood, and FBI Special Agent in Charge Christopher Combs, San Antonio Division. The criminal complaint charges Aguilar with one count of conspiracy to tamper with evidence. Accordingto the complaint, 20-year-old U.S. Army Specialist Aaron Robinson told Aguilar that he killed a female soldier by striking her in the head with a hammer while on Ft. Hood on April 22, 2020. Robinson further admitted to Aguilar that he transferred the woman's body off of Ft. Hood to a remote site in Bell County. Subsequently, Robinson enlisted the help of Aguilar in disposing of the dead female's body. The complaint further alleges that at a later time Aguilar recognized the deceased, whom she helped Robinson mutilate and dispose of, as Vanessa Guillen. The remains found in Bell County have yet to be formally identified by authorities.
The complaint further states that earlier this week, Robinson shot and killed himself when confronted by police.
Upon conviction, Aguilar faces up to 20 years in federal prison and a maximum $250,000 fine. She remains in custody at this time awaiting her Initial Appearance in federal court in Waco. The hearing is expected to take place early next week.
Agents and investigators from USACID, FBI, Texas Rangers, Bell County Sheriff's Office, Killeen Police Department, Belton Police Department, Texas Parks and Wildlife and the U.S. Marshals Service are continuing to investigate this case. Assistant U.S. Attorneys Mark Frazier and Greg Gloff are prosecuting this case on behalf of the government.
A criminal complaint is merely a charge and should not be considered as evidence of guilt. The defendant is presumed innocent until proven guilty in a court of law.
Join U.S. Embassy South Africa's Independence Day Commemoration
PRETORIA, South Africa, July 4 -- The U.S. Embassy in South Africa issued the following news release:This July 4th, we celebrate the 244th anniversary of the founding of the United States of America. Each year on this date, we pause for a moment to recommit ourselves to the principles enshrined in our Declaration of Independence, and to celebrate our freedom.
2020 has proven to be a year for reflection, not just on how we do business and interact with one another during a global pandemic, but also on how we address racial injustice in the United States, and the global response to these issues. ... Show Full Article PRETORIA, South Africa, July 4 -- The U.S. Embassy in South Africa issued the following news release: This July 4th, we celebrate the 244th anniversary of the founding of the United States of America. Each year on this date, we pause for a moment to recommit ourselves to the principles enshrined in our Declaration of Independence, and to celebrate our freedom. 2020 has proven to be a year for reflection, not just on how we do business and interact with one another during a global pandemic, but also on how we address racial injustice in the United States, and the global response to these issues.The United States remains committed to the principles of freedom, liberty, equality, and justice enshrined in our Constitution, and July 4 is an opportunity to reflect on how we will move forward as a country to uphold those ideals and be better, stronger, and greater than ever before.
Our Independence Day celebration this year is tempered by the knowledge that many Americans, South Africans, and people all over the world are struggling - with illness, with economic strain, and with uncertainty regarding the future. In keeping with the times, U.S. Ambassador to South Africa, Lana Marks, will host a pyrotechnic display from Hill House in Waterkloof Ridge at 18:30 for Pretorians in the area to enjoy from the comfort of their homes. Ambassador Marks says, "I am confident that we will get through this pandemic as a global community, and the United States is committed to helping our fellow citizens and our friends here in South Africa and around the world as we work together to beat COVID-19. I hope this pyrotechnic display brings some joy to everyone enduring these difficult times."
The pyrotechnics are made in the U.S.A. in the state of Alabama, will be launched with a firing system from New York, and a South African company will manage the display.
For the previous press release on the U.S. government's initial funding to South Africa to support COVID-19, please visit here: Ford fulfils 50 000 Face Shields Order from US Department of Defense to Assist COVID-19 Efforts in Southern Africa (https://za.usembassy.gov/ford-fulfils-50-000-face-shields-order-from-us-department-of-defense-to-assist-covid-19-efforts-in-southernafrica/).
Ill. U.S. Attorney: Nigerian National Expelled From United Arab Emirates to Face Cyber Fraud Charge in Chicago
ROCKFORD, Illinois, July 4 -- The U.S. Attorney for the Northern District of Illinois, John R. Lausch Jr., issued the following news release:A Nigerian national who allegedly orchestrated an international cyber fraud scheme targeting several U.S.-based companies has been expelled from the United Arab Emirates to face a federal criminal charge in Chicago.
OLALEKAN JACOB PONLE, also known as "Mr. Woodbery" and "Mark Kain," 29, originally of Lagos, Nigeria, is charged in U.S. District Court in Chicago with conspiracy to commit wire fraud. A criminal complaint accuses Ponle of orchestrating "business ... Show Full Article ROCKFORD, Illinois, July 4 -- The U.S. Attorney for the Northern District of Illinois, John R. Lausch Jr., issued the following news release: A Nigerian national who allegedly orchestrated an international cyber fraud scheme targeting several U.S.-based companies has been expelled from the United Arab Emirates to face a federal criminal charge in Chicago. OLALEKAN JACOB PONLE, also known as "Mr. Woodbery" and "Mark Kain," 29, originally of Lagos, Nigeria, is charged in U.S. District Court in Chicago with conspiracy to commit wire fraud. A criminal complaint accuses Ponle of orchestrating "businessemail compromise" schemes to defraud several U.S.-based companies. The schemes resulted in attempted or actual losses to victim companies in the tens of millions of dollars, including a Chicago-based company that was defrauded into sending wire transfers totaling $15.2 million, the complaint states.
Ponle was arrested last month by law enforcement in the United Arab Emirates, where he had been residing. He was subsequently expelled from the UAE into the custody of the FBI and arrived in Chicago Thursday evening. Ponle made an initial court appearance this morning in Chicago. U.S. Magistrate Judge Jeffrey T. Gilbert set a detention hearing for July 9, 2020, at 4:00 p.m.
The complaint and expulsion were announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Emmerson Buie, Jr., Special Agent-in-Charge of the Chicago office of the FBI. The Criminal Division's Office of International Affairs at the Justice Department provided substantial assistance. The government of the United Arab Emirates and the Dubai Police Department provided valuable assistance. Assistant U.S. Attorney Melody Wells of the Northern District of Illinois is prosecuting the case.
Ponle's alleged cyber fraud scheme spanned at least the first nine months of 2019. The complaint describes several instances in which one or more unknown subjects gained unauthorized access to a U.S.-based company's email account and sent messages to unwitting employees claiming to be from the company or a known business contact. The emails were nearly identical to prior legitimate emails sent over the company's email account, but the fraudulent emails instructed victims to wire funds to a bank account that was set up by money mules at the direction of Ponle, the complaint states. Ponle then instructed the mules to convert the fraud proceeds to Bitcoin and send them to a virtual wallet that Ponle owned and operated, the complaint states.
In addition to the Chicago-based companies, other victims included companies based in Iowa, Kansas, Michigan, New York, and California, the complaint states.
The public is reminded that a complaint contains only accusations and is not evidence of guilt. The defendant is presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt. Conspiracy to commit wire fraud is punishable by up to 20 years in federal prison. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory U.S. Sentencing Guidelines.
Hartmann's Mountain Zebra Born at the Smithsonian Conservation Biology Institute
WASHINGTON, July 4 -- The Smithsonian Conservation Biology Institute issued the following news release on July 3:For the first time in the Smithsonian Conservation Biology Institute's (SCBI) history, ungulate keepers celebrated the birth of a male Hartmann's mountain zebra at the Front Royal, Virginia, facility. The colt was born overnight July 2 to 6-year-old mother Mackenzie and 5-year-old father Rogan. He is the first offspring for both parents. Ungulate keepers are closely monitoring the colt, and they report that he appears to be nursing well and sticking close by Mackenzie's side.
Before ... Show Full Article WASHINGTON, July 4 -- The Smithsonian Conservation Biology Institute issued the following news release on July 3: For the first time in the Smithsonian Conservation Biology Institute's (SCBI) history, ungulate keepers celebrated the birth of a male Hartmann's mountain zebra at the Front Royal, Virginia, facility. The colt was born overnight July 2 to 6-year-old mother Mackenzie and 5-year-old father Rogan. He is the first offspring for both parents. Ungulate keepers are closely monitoring the colt, and they report that he appears to be nursing well and sticking close by Mackenzie's side. Beforetheir arrival at SCBI, Mackenzie and Rogan received a recommendation to breed from the Association of Zoos and Aquariums' Species Survival Plan (SSP). The SSP scientists determine which animals to breed by considering their genetic makeup, health, personality and temperament, among other factors. In October 2018, Mackenzie and Rogan were transferred to SCBI from the Elmwood Park Zoo in Pennsylvania and the Cleveland Zoo in Ohio, respectively. Females typically reach sexual maturity around 2 to 3 years of age, while males become sexually mature around age 4 or 5. The pair bred naturally in June and July of 2019; Hartmann's mountain zebra gestation is about one year.
Each zebra is a unique individual, and keepers are looking forward to seeing how the colt's personality develops. While mother Mackenzie is feisty and a bit standoffish, father Rogan is quirky and easygoing. The colt lives with Mackenzie and an unrelated female, 7-year-old Xolani, in a herd. Since male zebras do not provide any parental care to their offspring, Rogan lives in a separate enclosure nearby. Although the colt sticks close by Mackenzie's side now, keepers say they are excited to see the foal explore his surrounding and watch his curiosity grow. Over the next two months, the colt will start sampling grass and pellets.
As a public health precaution due to COVID-19, the Smithsonian's National Zoo and Conservation Biology Institute is temporarily closed to the public. Animal keepers and veterinary staff remain working on site at the Zoo and SCBI to provide the usual highest quality care for the animals. Additional information on the Zoo's COVID-19 response is posted to the Zoo's website.
Hartmann's mountain zebras are a subspecies of the mountain zebra, which is one of three zebra species. Considered vulnerable by the International Union for Conservation of Nature, Hartmann's mountain zebras live in dry mountain habitats of Namibia. Unlike other zebra species, Hartmann's mountain zebras live in small herds, have vertical stripes on their neck and torso and horizontal stripes on their backside, and have a small fold of skin under their chin (called a dewlap). With less than 25,000 individuals left in the wild, the biggest threat to this species' survival is habitat loss and fragmentation as the result of livestock production and agriculture.
The Smithsonian's National Zoo's legacy of conservation work extends beyond the public Zoo in Washington, D.C., to SCBI in Front Royal, Virginia. Scientists at SCBI study and breed more than 20 species, including some that were once extinct in the wild, such as black-footed ferrets and scimitar-horned oryx. Animals thrive in specialized barns and building complexes spread over more than 3,200 acres. The sprawling environment allows for unique studies that contribute to the survival of threatened, difficult-to-breed species with distinct needs, especially those requiring large areas, natural group sizes and minimal public disturbance.
SCBI spearheads research programs at its headquarters in Virginia, the Zoo in Washington, D.C., and at field research stations and training sites worldwide. SCBI scientists tackle some of today's most complex conservation challenges by applying and sharing what they learn about animal behavior and reproduction, ecology, genetics, migration and conservation sustainability.
Fed: Bank Complexity, Governance and Risk
WASHINGTON, July 4 -- The Federal Reserve issued the following white paper by economist Ricardo Correa and Senior Vice President Linda S. Goldberg entitled "Bank Complexity, Governance, and Risk":Abstract:
Bank holding companies (BHCs) can be complex organizations, conducting multiple lines of business through many distinct legal entities and across a range of geographies. While such complexity raises the the costs of bank resolution when organizations fail, the effect of complexity on BHCs' broader risk profiles is less well understood. Business, organizational, and geographic complexity can ... Show Full Article WASHINGTON, July 4 -- The Federal Reserve issued the following white paper by economist Ricardo Correa and Senior Vice President Linda S. Goldberg entitled "Bank Complexity, Governance, and Risk": Abstract: Bank holding companies (BHCs) can be complex organizations, conducting multiple lines of business through many distinct legal entities and across a range of geographies. While such complexity raises the the costs of bank resolution when organizations fail, the effect of complexity on BHCs' broader risk profiles is less well understood. Business, organizational, and geographic complexity canengender explicit trade-offs between the agency problems that increase risk and the diversification, liquidity management, and synergy improvements that reduce risk. The outcomes of such trade-offs may depend on bank governance arrangements. We test these conjectures using data on large U.S. BHCs for the 1996-2018 period. Organizational complexity and geographic scope tend to provide diversification gains and reduce idiosyncratic and liquidity risks while also increasing BHCs' exposure to systematic and systemic risks. Regulatory changes focused on organizational complexity have significantly reduced this type of complexity, leading to a decrease in systemic risk and an increase in liquidity risk among BHCs. While bank governance structures have, in some cases, significantly affected the buildup of BHC complexity, better governance arrangements have not moderated the effects of complexity on risk outcomes.
Introduction
Large and complex banking organizations in the United States have received considerable regulatory scrutiny after the global financial crisis (GFC), with a focus on improving their resilience and reducing the costly externalities that could occur when these organizations fail. While bank size and balance sheet structures have garnered extensive analytical attention in too-big-to-fail (TBTF) discussions (Gandhi and Lustig, 2015), relatively little analytical work has focused on the implications of bank complexity. The main orientation has been on how complexity could impede orderly resolution when an institution fails (Carmassi and Herring, 2016). Bank holding company (BHC) complexity rose prior to the GFC and later declined, coinciding with new regulations aimed at enhancing the resolvability of banks in periods of stress (Goldberg and Meehl, 2020). Our study focuses on the important knowledge gap in the analysis of the relationship between complexity and different types of bank risk. We also study how regulatory changes induce complexity changes and alter the risks BHCs face.1
Alternative conjectures underlie the potential competing risk effects of complexity. We posit that, in theory, complexity should reduce the idiosyncratic risk profile of BHCs if it is accompanied by an increase in diversification of the BHCs income streams and by more efficient internal liquidity management. For instance, a broader business and geographic scope provides BHCs with a form of insurance against default risks given some forms of shocks (Luciano and Wihlborg, 2018), and may reduce their exposures to liquidity risk (Cetorelli and Goldberg, 2016) and sovereign stress (Baggatini, Fecht and Weber, 2018). Alternatively, complexity may instead increase the idiosyncratic risk profile if agency problems, internal to the organization, dominate the consequences of complexity.
Adverse effects can arise if managers pursuing an unchecked "empire building" strategy generate an excessively complex structure, with resulting lapses in risk management. A weak corporate governance environment, incentivized by external factors such as implicit subsidies from the government (as denoted in Freixas, Loranth and Morrison, 2007) could exacerbate this likelihood.
We posit that the optimization problem of the BHC entails balancing the benefits of income diversification through more complex structures with the costs associated with agency problems.
The net effect of these opposite forces is constructed to depend on the strength of monitoring and corporate governance. We provide the econometric testing approaches that explore the average association between BHC complexity, diversification and risk over time using panel techniques, including a set of tests following an instrumental variables approach. We then focus more specifically on the roles of regulation and corporate governance, as drivers of the development of banking organization complexity. We test for the relation between complexity and bank risk by using the change in the effective cost of complexity after the introduction of the living will provision of the DFA. We also test how BHC size and governance strength alter outcomes for the different types of risk metrics.
Our analysis explores these hypotheses across all US BHCs larger than $25 billion (in 2012 prices) and using quarterly data that spans 1996 through 2018. We compute measures of three types of complexity for these US BHCs: organizational, business, and geographic. BHCs have expanded their scope into new areas and geographies in the financial intermediation spectrum in the past 30 years, potentially yielding efficiencies in income diversification (Cetorelli, Jacobides and Stern, 2017). As noted in Goldberg and Meehl (2020), these three areas of complexity decreased for some of the largest BHCs after the GFC. We also construct a broad spectrum of BHC-specific risk measures, covering idiosyncratic risk, systematic or market risk, liquidity risk, and systemic risks.
As we conjecture that both realizations and effects of complexity relate to BHC governance, we construct measures of the institutional investor ownership shares, the duality of CEO and Board of Director chair roles, and BHC board independence.
We test our hypotheses on the complexity-risk-governance nexus using panel specifications, which establish the average relations between complexity and risk over time, and using differencein-difference estimations around relevant regulatory changes, which have a more explicit causal interpretation. We posit that bank complexity reduces the risk profile of banks if it is accompanied by increased diversification of income streams and improved liquidity management. We further conjecture that these outcomes are more likely for better governed organizations. In terms of regulatory drivers, our primary tests explore whether the introduction and accompanying regulations of the 2010 Living Will (LW) guidance of the Dodd Frank Consumer Protection Act (DFA) altered the relationship between bank risk and complexity. The DFA includes BHC resolution planning and guidance on legal entity rationalization (in 2017), requiring organizationally complex banks to simplify their structures to ease resolution. The DFA liquidity requirements raised the costs of some forms of complexity by taking into account potential ring fencing, made capital requirements more sensitive to the risks in off balance sheet accounts, and in some cases, directly addressed banks' organizational structures by requiring a single point of entry for resolvability.
Our first set of results shows that increases in BHC organizational and geographic complexity are associated with better income diversification, and with lower BHC idiosyncratic and liquidity risks.
In contrast, BHCs with more organizational and geographic complexity have greater systematic and systemic risks. These results are economically significant, especially for the largest BHCs (more than $750 billion in assets). For example, a one standard deviation increase in organizational (equivalent to adding 1,000 legal entities) and geographic complexity is associated with an almost four standard deviation increase in income diversification and a reduction in idiosyncratic risks of roughly three standard deviations. The changes in systematic and liquidity risks are of lesser magnitude, but still economically significant. The results for smaller BHCs are still economically meaningful, but an order of magnitude smaller than for the larger BHCs. These findings suggest that as BHCs increase organizational and geographic complexity, they trade off the beneficial reductions in idiosyncratic and liquidity risks for greater exposures to systematic or market risks and systemic risks.
Another important finding is that BHC complexity increases with better governance, supporting the hypothesis that better governed banks pursue more complex arrangements to achieve gains in income and liquidity diversification. The alternative hypothesis, of agency problems dominating risk outcomes due to complexity, is not empirically supported. While we also find some spillbacks from BHC risk levels back to organizational and geographic complexity, these effects are economically smaller.
Our second set of results address the consequences of regulatory changes and show substantial effects on both BHC complexity and risk. BHCs reduced organizational complexity after being required to submit living wills. The risk profiles of US BHCs also changed. Banks' balance sheet income diversification increased, on average, translating into a drop in idiosyncratic risks. An interesting finding is that these gains were smaller for those banks that ex ante had more complex organizational structures. The introduction of this resolution tool was associated with a decrease in systemic risks for the largest and more complex banks, consistent with the objective of this regulation. As in the first set of results, the decrease in organizational complexity was associated with an increase in liquidity risk for the banks affected by the regulation. A consequence of these findings, possibly not highly visible in prior literature, is that regulators can face trade-offs when actions targeted at reducing complexity may increase some risks that are reduced from more complex structures (e.g., liquidity risk), while reducing risks(e.g., systemic risk).
This novel analysis contributes to three important literatures. First, we contribute to the significant advances are being made in measuring BHC complexity (Cetorelli and Goldberg 2014, Cetorelli and Goldberg 2016, Flood et al. 2020, Carmassi and Herring 2016, Barth and Wihlborg 2017, and Goldberg and Meehl 2020). Most of these studies utilize information on legal entities within BHCs, working primarily with counts of entities and some information about industry type and geographic location. Flood et al. (2020) use network concepts that group entities in the BHC through which communication and coordination is relatively easy. Our contributions toward measurement of complexity stem from also using principle component analysis to extract key features from a range of distinct measures of business and geographic complexity. Included in these components are balance sheet data for BHCs, alongside bank structure information.
Second, our work adds a new set of insights to the rich literature on bank risk taking (Berger et al., 2017; Cetorelli, Jacobides and Stern, 2017), too-big-to-fail and moral hazard for banking organizations (Gandhi and Lustig, 2015; Cetorelli and Traina, 2018; Dam and Koetter, 2012), market pricing of diversification or geographic expansion in financial conglomerates (Laeven and Levine, 2007, Goetz, Laeven and Levine, 2013), and bank governance and risks (Laeven and Levine, 2009, Brewer and Jagtiani, 2013). Generally, size is viewed as generating the too-big-to-fail subsidies that lower the cost of funding for the largest and systemically important institutions. Yet, increases in business scope across banks have been found to be driven by leaders in the banking sector, with associated changes in equity returns and funding costs. Geographic diversification within the United States has been linked to lower BHC valuations (Goetz, Laeven and Levine, 2016), while living will regulation increase banks' cost of capital, especially for banks that were systemically important before the crisis (Cetorelli and Traina, 2018). Our work starts with the observation that BHCs optimize over a set of different types of risks. We show that living will regulation reduced organizational complexity, raised liquidity risks, and reduced systemic risks. This analysis is consistent with the evolution of market's view of sources of systemic risk, from an exclusive focus on size prior to the crisis, to post-crisis additional consideration of complexity and interconnectedness (Antill and Sarkar, 2018).
Third, and relatedly, we contribute to the literature on the consequences of post-global financial crisis bank reforms. Regulations that cover bank liquidity, bank capital and bank resolution are likely to influence the optimal degree of BHC complexity, altering the trade-offs among the risks that BHCs internalize and the externalities associated with systemic risks. An extensive literature addresses the consequences of liquidity and capital regulations. The literature directly related to complexity includes documenting how the lengthy bankruptcy process and complexity of Lehman Brothers slowed resolution and magnified costs (Fleming and Sarkar, 2014). Some banks may have transformed their organizational structure to minimize the impact of regulatory costs (Flood et al., 2020). However, BHCs also may have used a variety of legal entities, such as Asset Backed Commercial Paper vehicles, to arbitrage regulations and increase risk-taking (Gong, Huizinga and Laeven, 2018). Our contribution around U.S. BHCs is a systematic exploration of trade-offs among types of risks that can be altered by complexity, and by related regulatory drivers. In our section of discussion, for example, we argue liquidity regulations that reduce BHC exposure to liquidity risk will have the unanticipated consequence of reducing the benefits to BHCs from pursuing geographic and organizational complexity. Living wills and resolution planning push firms to better internalize the costly contributions of complexity to systemic risk and generate lower organizational complexity.
Bank capital regulations can either raise or lower optimal complexity depending on the relative effects on the costs of different types of BHC risks.
The remainder of this paper proceeds as follows. First, Section 2 presents the key hypotheses on the relationships between complexity, governance, and risk. Section 3 introduces the concepts for BHC complexity, governance, and risk, and presents key patterns in these metrics for large US BHCs (in excess of $25 billion in total assets), for 1996Q1 through 2018Q2. Section 4 provides the results of econometric tests of key hypotheses, starting with estimates of the average relationships between complexity, risk, and governance. The tests respectively present the consequences for BHC diversification gains, idiosyncratic risk, liquidity risk, market risk, and systemic risk using systems of equations with and without instrumental variables. This section then tests for changes around living will provisions of the DFA, and concludes with tests of robustness. Section 5 concludes with a discussion of the ramifications of our results for regulatory frameworks, as organizational and geographic complexity for better governed BHCs may lower the probability of an idiosyncratic or liquidity BHC stress event while possibly increasing the severity of stress consequences of market stresses when they occur. The trade-offs imply that BHC-specific reductions in idiosyncratic and liquidity risks may come at the expense of an increase in systematic and systemic risks, reducing the benefits of complexity from a societal perspective. The balance of risks, we argue, is relevant for regulatory approaches - beyond just the systemic risk consequences. Moreover, different tools used in regulation and supervision alter the individual BHC versus societal welfare disconnects.
Conclusion
The links between BHC complexity and risk became apparent during the global financial crisis.
Large and complex BHCs had significant systemic risk exposures and, given their systemic importance, were very difficult to resolve during the crisis. The TBTF phenomenon was also a too complex to fail phenomenon, underscoring extensive post crisis efforts to make BHCs more resilient so that failure probabilities would decline, and make banks less complex, so that externalities from failures would have fewer costly externalities.
A starting point of this paper has been that the broader relationship between types of BHC complexity and the frontier of types of BHC risks has not been well understood. Agency problems weigh against diversification gains in driving risk outcomes. We show that the regulatory actions taken after the global financial crisis, specifically living wills guidance, were associated with significant declines in organizational complexity among US BHCs with over $25 billion in assets. These changes translated into reductions in BHCs' idiosyncratic and systemic risks, partially explained by a decrease in BHCs' income variability.
BHC governance and regulatory changes can jointly influence BHCs' risk profiles. In some cases, regulatory changes force BHCs to adjust their complex structures. BHCs with weak governance change the most, as they are pushed into taking actions that improves their risk profile. In other cases, BHCs with better governance are able to navigate complex structures, reaping benefits in their income diversification and reducing their exposures to idiosyncratic risks and liquidity risks. Although new regulations have decreased idiosyncratic and systemic risks through changes in complexity, liquidity risk (and less so for systematic risk) exposures increased. This finding is consistent with average results measured over a longer horizon between profiles of BHC risk and types of organizational, business, and geographic complexity. These organizational, business, and geographic complexity types go well beyond the more balance sheet and opacity based constructs more regularly used in international policy circles to describe complexity. The ability of BHCs to manage complexity, taking the form of extracting diversification benefits and reducing agency problems, and thereby reducing adverse risk consequences, also depends on the governance of BHCs.
References
Acharya, Viral, Deniz Anginer, and Joseph Warburton. 2016. "The End of Market Discipline?
Investor Expectations of Implicit Government Guarantees." working paper, NYU Stern.
Antill, Sam, and Asani Sarkar. 2018. "Is Size Everything?"Technical Report 864, Federal Reserve Bank of New York Staff Report.
Arteta, Carlos, Mark Carey, Ricardo Correa, and Jason Kotter. 2019. "Revenge of the Steamroller: ABCP as a Window on Risk Choices." Review of Finance, 24(3): 497-528.
Atanasov, Vladimir, and Bernard Black. 2016. "Shock-Based Causal Inference in Corporate Finance and Accounting Research." Critical Finance Review, 5(2): 207-304.
Baggatini, Giulio, Falko Fecht, and Patrick Weber. 2018. "The Fire-Sale Channel of Universal Banks in the European Sovereign Debt Crisis." manuscript.
Balasubramnian, Bhanu, and Ken Cyree. 2014. "Has market discipline on banks improved after the DoddFrank Act?" Journal of Banking and Finance, 41(C): 155-166.
Baldenius, Tim, Nahum Melumad, and Xiaojing Meng. 2014. "Board composition and CEO power." Journal of Financial Economics, 112(1): 53 - 68.
Bali, Turan G., Robert F. Engle, and Yi Tang. 2017. "Dynamic Conditional Beta is Alive and Well in the Cross Section of Daily Stock Returns." Management Science, 63(11): 3760 - 3779.
Barth, James, and Clas Wihlborg. 2017. "Too big to fail: Measures, remedies, and consequences for efficiency and stability." Financial Markets, Institutions, and Instruments, 26(4): 175-245.
Bekaert, Geert, Eric Engstrom, and Nancy Xu. 2017. "The Time Variation in Risk Appetite and Uncertainty." Research paper 17-108, Columbia Business School.
Berger, Allen, Sadok El Ghoul, Omrane Guedhami, and Raluca Roman. 2017. "Internationalization and Bank Risk." Management Science, 63(7): 2283-2301.
Brandao-Marques, Luis, Ricardo Correa, and Horacio Sapriza. 2018. "Government support, regulation, and risk taking in the banking sector." Journal of Banking and Finance, Forthcoming.
Brewer, Elijah, and Julapa Jagtiani. 2013. "How Much Did Bankgs Pay to Become Too-BigTo-Fail and to Become Systemically Important?" Journal of Financial Services Research, 43(1): 1-35.
Brownlees, Christian, and Robert F. Engle. 2016. "SRISK: A Conditional Capital Shortfall Measure of Systemic Risk." The Review of Financial Studies, 30(1): 48-79.
Buch, C. M., C. T. Koch, and M. Koetter. 2013. "Do Banks Benefit from Internationalization?
Revisiting the Market Power - Risk Nexus." Review of Finance, 17(4): 1401-1435.
Carmassi, Jacopo, and Richard Herring. 2016. "The Corporate Complexity of Global Systemically Important Banks." Journal of Financial Services Research, 49(2): 175-201.
Cetorelli, Nicola, and Linda Goldberg. 2014. "Measuring Complexity in Global Banks." Federal Reserve Bank of New York Economic Policy Review, 20(2): 107-126.
Cetorelli, Nicola, and Linda Goldberg. 2016. "Organizational Complexity and Balance Sheet Management in Global Banks." Working Paper 22169, National Bureau of Economic Research.
Cetorelli, Nicola, Michael Jacobides, and Sam Stern. 2017. "Transformation of Corporate Scote in U.S. Banks: Patterns and Performance Implications." Staff Report 813, Federal Reserve Bank of New York.
Cetorelli, Nicola, Jamie McAndrews, and James Traina. 2014. "Evolution in Bank Complexity." Federal Reserve Bank of New York, Economic Policy Review, 20(2): 85-106.
Cetorelli, Nicola, and Samuel Stern. 2015. "Same Name, New Businesses: Evolution in the Bank Holding Company." blog, Liberty Street Economics.
Cetorelli, Nicola, and James Traina. 2018. "Resolving "Too Big to Fail"." Staff Report 859, Federal Reserve Bank of New York.
Chernobai, Anna, Ali Ozdagli, and Jianlin Wang. 2020. "Business Complexity and Risk Management: Evidence from Operational Risk Events in U.S. Bank Holding Companies." Journal of Monetary Economics, Forthcoming.
Claessens, Stijn, and Neeltje Van Horen. 2014a. "Foreign Banks: Trends and Impact." Journal of Money, Credit and Banking, 46(s1): 295-326.
Claessens, Stijn, and Neeltje Van Horen. 2014b. "Location Decisions of Foreign Banks and Competitor Remoteness." Journal of Money, Credit and Banking, 46(1): 145-170.
Coles, Jeffrey, Naveen D. Daniel, and Lalitha Naveen. 2006. "Managerial incentives and risk-taking." Journal of Financial Economics, 79(2): 431-468.
Dam, L., and M. Koetter. 2012. "Bank Bailouts and Moral Hazard: Evidence from Germany." Review of Financial Studies, 25(8): 2343-2380.
DeYoung, Robert, Emma Peng, and Meng Yan. 2013. "Executive Compensation and Business Policy Choices at U.S. Commercial Banks." Journal of Financial and Quantitative Analysis, 48(1): 165-196.
Duchin, R., and D. Sosyura. 2014. "Safer ratios, riskier portfolios: Banks' response to government aid." Journal of Financial Economics, 113(1): 1-28.
Engle, Robert F. 2016. "Dynamic Conditional Beta." Journal of Financial Econometrics, 14(4): 643-667.
Fama, Eugene F., and James D. MacBeth. 1973. "Risk, Return, and Equilibrium: Empirical Tests." Journal of Political Economy, 81(3): 607-636.
Fleming, Michael, and Asani Sarkar. 2014. "The Failure Resolution at Lehman Borthers." Federal Reserve Bank of New York, Economic Policy Review, 20(2): 175-206.
Flood, Mark, Dror Kennett, Robin Lumsdaine, and Jonathan Simon. 2020. "The Complexity of Bank Holding Companies: A Topological Approach." Journal of Banking and Finance, Forthcoming.
Freixas, Xavier, Gyongyi Loranth, and Alan Morrison. 2007. "Regulating Financial Conglomerates." Journal of Financial Intermediation, 16(4): 479-514.
Gandhi, Priyank, and Hanno Lustig. 2015. "Size Anomalies in U.S. Bank Stock Returns." Journal of Finance, 70(2): 733-768.
Gaspar, Jose-Miguel, Massimo Massa, and Pedro Matos. 2005. "Shareholder investment horizons and the market for corporate control." Journal of Financial Economics, 76(1): 135-165.
Goetz, Martin, Luc Laeven, and Ross Levine. 2013. "Identifying the valuation effects and agency costs of corporate diversification: Evidence from the geographic diversification of U.S. Banks.." Review of Financial Studies, 26(7): 1787-1823.
Goetz, Martin, Luc Laeven, and Ross Levine. 2016. "Does the geographic expansion of banks reduce risk?" Journal of Financial Economics, 120(2): 346-362.
Goldberg, Linda, and April Meehl. 2020. "Complexity in Large U.S. Banks." Federal Reserve Bank of New York, Economic Policy Review, 26(2): 1-28.
Gong, D., H. Huizinga, and L. Laeven. 2018. "Nonconsolidated Subsidiaries, Bank Capitalization and Risk Taking." Journal of Banking and Finance, 97(1): 109-129.
Jensen, Michael, and William Meckling. 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure." Journal of Financial Economics, 3(4): 305 - 360.
Laeven, Luc, and Ross Levine. 2007. "Is there a diversification discount in financial conglomerates?" Journal of Financial Economics, 85(2): 331-367.
Laeven, Luc, and Ross Levine. 2009. "Bank governance, regulation and risk taking." Journal of Financial Economics, 93(2): 259-275.
Lepetit, Laetitia, Emmanuelle Nys, Philippe Rous, and Amine Tarazi. 2008. "Bank income structure and risk: An empirical analysis of European banks." Journal of Banking and Finance, 32(8): 1452-1467.
Luciano, Elisa, and Clas Wihlborg. 2018. "Financial Synergies and the Organization of Bank Affiliates: A Theoretical Perspective on Risk and Efficiency." Journal of Banking and Finance, 88(C): 208-224.
Penas, Maria, and Hanak Unal. 2004. "Gains in Bank Mergers: Evidence from the Bond Markets." Journal of Financial Economics, 74(1): 149-179.
Ragu, Rajan, and Luigi Zingales. 2001. "The Firm as a Dedicated Heirarchy: A Theory of Origins and Growth of Firms." Quarterly Journal of Economics, 116(3): 805-851.
Scharfstein, David, and Jeremy Stein. 2000. "The Dark side of Internal Capital markets: Divisional Rent Seeking and Inefficient Investments." Journal of Finance, 55(6): 2537-2564.
Shleifer, Andrei, and Robert W. Vishny. 1989. "Management entrenchment: The case of manager-specific investments." Journal of Financial Economics, 25(1): 123 - 139.
Shleifer, Andrei, and Robert W. Vishny. 1997. "A Survey of Corporate Governance." Journal of Finance, 52(2): 737-783.
Stein, Jeremy. 2002. "Information Production and Capital Allocation: Decentralized versus Heirarchical Firms." Journal of Finance, 57(5): 1891-1921.
Xuan, Yuhai. 2009. "Empire-Building or Bridge-Building? Evidence from New CEOs Internal Capital Allocation Decisions." The Review of Financial Studies, 22(12): 4919-4948.
* * *
Footnotes:
1/ Our analysis is part of a coordinated cross-country research initiative of the International Banking Research Network (IBRN), with teams developing analytical tests and approaches to inform this complexity and risk topic.
* * *
The charts, tables and full text of the document can be viewed at https://www.federalreserve.gov/econres/ifdp/files/ifdp1287.pdf
* * *
[CaptureJune30]