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Cordray's Confirmation; Barclays' Latest Fine; NSA's Idea of Bank Virus Protection

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Breaking News This Morning ...

BAC Earnings: Bank of America's profit rose 63% in the second quarter, due largely to strong trading revenue and cost-cutting. Wall Street Journal, New York Times, American Banker

More Earnings: PNC Financial Services; U.S. Bancorp

Receiving Wide Coverage ...

Confirmed: Richard Cordray was confirmed yesterday as director of the Consumer Financial Protection Bureau, after Senate Republicans agreed not to block his nomination as part of last-minute compromise over President Obama's executive nominees. The compromise was reached in order to avoid Democrats making good on threats to change the Senate's filibuster rules. (The Washington Post's Ezra Klein explains: "The Senate didn't actually go nuclear today. But the majority took out a nuke, put it on the table, and made clear they can detonate it whenever they feel like.") Cordray's nomination was ultimately approved by a vote of 66-34. He was confirmed "one day shy of the second anniversary of his nomination" by President Obama, notes the Times. General consensus among news outlets seems to be that his confirmation solidifies the CFPB's power. "The last big legal and political restraints on this very powerful agency are now gone," a former CFPB enforcement lawyer told the Journal. "The bureau can move forward full speed ahead without looking over its shoulder." The CFPB, however, continues to face "vocal opposition" from Republicans and trade groups, reports the Washington Post. "There will be a day the Democrats will wish they passed a commission and not put all the power in the hands of one individual," Richard Hunt, president of the Consumer Bankers Association and BankThink contributor, told the paper.

Fined: The Federal Energy Regulatory Commission has hit Barclays with a record fine for allegedly manipulating electricity prices in California and other western states between 2006 and 2008. (The exact amount of the penalty varies by news outlet: the Journal puts it at $435 million, the FT says $470 million and Reuters says $453 million.) The bank plans to contest the fine in court. The Journal calls FERC's case against Barclays, which was first made public last fall, "part of a broader crackdown by the energy regulator on large banks that trade in the energy markets, not just the energy firms that the agency has traditionally regulated." (Scan readers will recall FERC also took action against JPMorgan Chase back in November.) Reuters notes, "for Barclays, the sanction is the latest of a series of scandals that include a $450 million fine by U.S. and U.K. regulators for rigging global benchmark interest rates last year."

Goldman Earnings Revisited: Goldman Sachs' second-quarter earnings may not be as notable as a doubling of profit appears. "While the bottom line looked impressive, the elements that made it so do not look sustainable," the FT's Lex column argues. Meanwhile, the Journal's Heard on the Street column calls the investment bank out for evading questions about where it stood in relation to new leverage ratio rules. "This approach made little sense given investors don't expect Goldman to be that far off the new minimum, at least for the company overall," columnist David Reilly writes. "And where Goldman stands is important both in terms of the outlook for future capital returns as well as its ability to use additional leverage to amplify profits."

New York Times

Fed chairman Ben Bernanke's influence over the bond market has yet to cause big problems for the banks: "In the last few days, the three big American bond-trading firms JPMorgan Chase, Citigroup and Goldman Sachs all reported second-quarter financial results that were helped by healthy bond trading revenue."

A lawyer for Terry Farr, one of two ex-brokers charged in the U.K.'s latest Libor case, issued this statement: "Of all the very many organizations and individuals who may have contributed to the failings of Libor-setting, the S.F.O. has chosen to charge Mr. Farr, an unqualified interbank broker who had no responsibility whatsoever for setting Libor rates, a minnow in a very large pond, for doing what he believed to be his job."

Washington Post

The Financial Stability Oversight Council has moved insurer MetLife into the final stage of the process for being designated as a systemically important financial institution.

A look into NSA director Gen. Keith B. Alexander's mission to "collect it all" in order to avert terrorist threats mentions a solution he once proposed regarding computer malware designed to siphon data from firms, including banks: "Private companies should give the government access to their networks so it could screen out the harmful software. The NSA chief was offering to serve as an all-knowing virus-protection service, but at the cost, industry officials felt, of an unprecedented intrusion into the financial institutions' databases."

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(Image: Bloomberg News)

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