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Simpson and Bowles Offer Deficit Fix (Again); Walter's SEC Agenda; Will Wall Street Ever Get More than a Symbolic Reprimand?

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Wall Street Journal

Fourth time's a charm? The paper reports "deficit hawks" Alan Simpson and Erskine Bowles plan to offer up a deficit fix to Washington sometime later today. According to the duo, this new plan "would reduce the federal budget deficit by $2.4 trillion over 10 years" primarily through reductions to Medicare and Medicaid, curbing or axing certain tax breaks, lowering caps on discretionary spending and adjusting how cost-of-living increases are calculated for Social Security checks. Of course, Simpson and Bowles' prior attempts to solve the nation's fiscal woes, including as co-chairs of a White House panel in 2010 "fell flat." The article attributes this to their pitches being "more popular with rank-and-file members looking to support a bipartisan plan than with congressional leaders ... locked in negotiations."

The paper profiles William Demchak, PNC Financial's CEO-to-be. Demchak said one of his goals is to build revenue in the Southeast. He also spoke candidly about his time at JPMorgan Chase back in 2002, saying the bank "wasn't a terribly enjoyable place to work" and that "there was a lot of animosity" lingering after Chase Manhattan Corp. bought J.P. Morgan & Co. in 2000.

Financial Times

Federal Reserve officials fear a public relations nightmare will ensue when it comes time to raise interest rates and pay out billions of dollars in interest on bank reserves to commercial banks, even though, as the article notes, "that interest should not turn into profits for the banks" since "they will have to pass the revenues on by paying more interest to their depositors."

This op-ed argues "the quest for profit" is actually making banks safer since non-risky businesses "such as advisory work or retail brokerage are being preferred because they are 'capital light' and so good for overall ROE." Additionally, bankers have had to rethink their bonus plans in order to pay out more to shareholders. The op-ed was written in response to the book "The Bankers' New Clothes," which asserts capital requirement are too low and that banks' obsession with ROE remains a big part of the "Too Big to Fail" problem since ROE "is higher when profits are leveraged with debt."

New York Times

Expect the Justice Department to push for more guilty pleas in financial fraud cases, officials involved in ongoing investigations tell Dealbook. But whether these guilty pleas will serve as little more than the latest incarnation of a "symbolic reprimand" — previously personified by high fines, wagging fingers and new regulations — remains to be seen as prosecutors try to determine what types of legal action can be pursued without threatening the stability of the entire financial system.

Andrew Bailey has been named chief executive of the Prudential Regulatory Authority, a new overseer in charge of the U.K.'s big banks.

Morgan Stanley is urging its traders and investment bankers to work with its retail brokers to increase profits. "For instance, Morgan Stanley may take a company public and the executives at that company may need advice managing their personal wealth," the article notes. "In such an instance, the bankers would alert wealth management, which could dispatch a broker to assess the situation."

Washington Post

The jury may still be out on Mary Jo White, President Obama's nominee as chairman of the Securities and Exchange Commission, but Elisse Walter, acting chairman, has no intentions of serving as a lame duck in the interim. According to the paper, Walter will try to address key issues facing the SEC while in office, including high-frequency trading and wrapping up regulations mandated by Dodd-Frank. She does plan to retire, however, when "her term expires in December."

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