Incompetence Elevated to Performance Art in Foreclosure Settlement; Chairman Moynihan?

Breaking News This Morning ...

Earnings: BB&T, Fifth Third, KeyCorp, Popular

Receiving Wide Coverage ...

Insult to Injury: You can't make this stuff up. A handful of the checks sent to borrowers under the foreclosure settlement bounced. Fingers are pointing in the direction of Rust Consulting, the firm hired to distribute the checks. Anonymice tell the Times that "after collecting the $3.6 billion from the banks … Rust failed to move the money into a central account at Huntington. … Many banks, after spotting a phone number for Huntington on the back of the checks and confirming the legitimacy of the money, agreed to process the payments. But some credit unions, check cashers and community banks apparently looked only at the account number on the unfamiliar-looking checks and ultimately found a zero balance." Even though Rust says it knows of only a dozen cases of this happening, it's a fittingly embarrassing end to the thoroughly bungled foreclosure review process. Wall Street Journal, New York Times, Huffington Post

Bank of America's Earnings Miss: Deep in the Journal's main story you'll find the revelation that some directors have informally discussed giving CEO Brian Moynihan the chairman title, though other board members oppose this idea. The "Heard on the Street" column homes in on B of A's home loan woes — "seemingly never-ending litigation risk" and a lending arm that relies heavily on refinancing (91% of originations in the first quarter). The FT notes that B of A "was the first of the big institutions to miss analysts' forecasts" this earnings season. Reuters Breakingviews snarkily suggests that if results don't significantly improve, Moynihan could forfeit a chunk of his long-term pay tied to performance.

New York Times

"Analysts think the banks' first-quarter profits will be their best ever. But as welcome as such profits are to the banks, they may also become a source of discomfort. The ballooning bottom lines could embolden the lawmakers and regulators who want to introduce additional measures to overhaul the banking system." Especially if no one mentions how much of those profits are coming from loan-loss reserve releases. The article notes other recent sources of significant income: the refi boom (sputtering out), commercial loan growth (ditto) and investment banking (which is "banking" in the sense that fisher cats are "cats"). Still, the piece features some great zinger quotes from Sheila Bair, e.g. "As far as the banks are concerned, there is never a good time to raise capital or increase regulation."