BANKTHINK

Pushovers in the Boardroom; Serial Bungling in the Foreclosure Settlement; Should Art Galleries File SARs?

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Receiving Wide Coverage ...

Doormat Directors: With little more than a week to go before JPMorgan's annual meeting, some shareholders are wondering whether Lee Raymond, the board's lead director, "has been an effective counterbalance" to chairman and CEO Jamie Dimon, the Times reports. If they conclude that Raymond, a former CEO of Exxon-Mobil, has been too lax in his oversight of the bank's management, these shareholders may vote to split the chairman and CEO roles. In her weekly column, Gretchen Morgenson takes a broad look at the ways in which "directors of public companies often let down their outside shareholders" in areas such as succession planning and pay for performance.

Wall Street Journal

"Lawmakers and federal bank regulators are stepping up scrutiny of a consulting firm that twice bungled payments to consumers in a foreclosure-abuse settlement." The firm is Rust Consulting, the bungles were bounced checks and incorrect amounts (lower than the consumers were supposed to get, naturally), and the settlement is the one that ended the also-mightily-bungled OCC/Fed foreclosure reviews.

Fed Vice Chairman Janet Yellen, "a top contender" to succeed Bernanke when his term ends next year, would face a tough call about when to reverse his easy-money policies. Critics call Yellen overly dovish on inflation.

"Rating firms' controversial business model looks set to escape wholesale changes as regulators struggle to agree on an alternative." The conflict-ridden "issuer-pays model is not going to be easily replaced," a Moody's veteran says. Dithering by the SEC is just one reason why so little has changed. For example, shifting the costs of credit ratings to investors would create a new conflict of interest, one portfolio manager points out, since "Investors could pressure rating firms to hold ratings steady in order to prevent changes in the value of their bonds."

Wealth-management businesses at international banks like UBS and Citigroup are increasingly courting "people of Indian origin living outside of India. Private banks are bulking up their specialized teams that cater to the global Indian community and expanding their offerings as Indian entrepreneurs and professionals take on more prominence globally."

Financial Times

"The scandal-plagued Libor benchmark is likely to be replaced by a dual-track system with survey-based lending rates running alongside transaction-linked indices as soon as next year." The surveys traditionally used to compute Libor, in which bankers answer hypothetical questions about their borrowing costs, proved susceptible to gaming. But going cold turkey to more volatile, purely transaction-based interest rates like the overnight index swap rate could be jarring to markets.

New York Times

"The Mellowing of Maxine Waters" Since the California Democrat succeeded Barney Frank as chairman of the House Financial Services Committee, "Waters has softened somewhat, not just toward local bankers in her district who might expect her ear, but also toward the Wall Street C.E.O.'s she formerly reviled." She's not only taking meetings with Dimon, Stumpf, and Corbat, she also pushed the CFTC to delay new derivatives rules.

"Student Debt and the Crushing of the American Dream" An op-ed by economist Joe Stiglitz predicts a student loan crisis on the scale of the housing crash. In both cases, he writes, "Bankers encourage[d] people to borrow beyond their means, preying especially on those who are financially unsophisticated." To fix the student lending market, Stiglitz calls for "tougher regulation of for-profit schools and the banks they connive with, and more humane bankruptcy laws." (Student debt is generally not dischargeable in bankruptcy.)

Should art galleries have to file suspicious activity reports? They already do in Europe, and some say it should be a requirement here. "Thousands of valuable artworks [are] being used by criminals to hide illicit profits and illegally transfer assets around the globe. As other traditional money-laundering techniques have come under closer scrutiny, smugglers, drug traffickers, arms dealers and the like have increasingly turned to the famously opaque art market. It is hard to imagine a business more custom-made for money laundering, with million-dollar sales conducted in secrecy and with virtually no oversight." A government lawyer tut-tuts: "you can have a transaction where the seller is listed as 'private collection' and the buyer is listed as 'private collection.'" The article suggests this happens for frivolous reasons ("secrecy is a crucial element of the art market's mystique"). But wouldn't disclosing who bought a Basquiat be a bonanza for burglars?

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Big Winners and Losers for Banks on Election Night

Republicans won a sizable victory late Tuesday, retaking the Senate after losing it eight years ago. Banks, too, largely benefited, as an ally of the industry captured a Senate seat in West Virginia, two credit union allies fell and a key Democratic senator squeaked past. Here's how election night played out for banks.

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