Custodia Bank Loses Lawsuit Challenging Fed Rejection of Master Account Application

“Thus, unless Federal Reserve Banks possess discretion to deny or reject a master account application, state chartering laws would be the only layer of insulation for the U.S. financial system,” the judge wrote. “And in that scenario, one can readily foresee a ‘race to the bottom’ among states and politicians to attract business by reducing state chartering burdens through lax legislation, allowing minimally regulated institutions to gain ready access to the central bank’s balances and Federal Reserve services.”

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