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Talk of an FHA Bailout; FERC Zaps JPM; 'Damning' MF Global Report

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Receiving Wide Coverage ...

The Next Bailout? The Journal and the Times report today that the Federal Housing Administration's annual report, due later this week, will show that its financial condition has worsened considerably. The Journal story prominently suggests the agency may need to draw on taxpayer funds, a prospect downplayed somewhat in the Times article. If you're feeling déjà vu, it may be because on Tuesday American Banker's Kate Berry reported that the FHA was facing its own fiscal cliff.

JPMorgan Unplugged (Sorta): As punishment for allegedly submitting false information to an investigation, the Federal Energy Regulatory Commission banned JPMorgan Chase from trading electricity at market rates for six months. The suspension doesn't begin until April of next year to give the bank and the system operator time to prepare. And during the six-month penalty period, JPM will still be allowed to trade electricity at prices set by counterparties. "In essence, the order limits the bank's profits while allowing it to continue operating in power markets," according to the FT; the Journal says FERC wants "to make sure there was enough electricity on the grid to meet demand." This situation gives a whole new meaning to the phrase "Too Interconnected to Fail." The action from FERC against JPMorgan follows the agency's order against Barclays a few weeks ago demanding some $500 million; as finance professor John Alan James wrote in BankThink recently, this may be a stronger regulator than the big banks are used to dealing with.

MF Global: A House subcommittee is expected to deliver a report today on the demise of Jon Corzine's brokerage. The FT got its hands on a copy and calls the report "damning," saying the subcommittee found that MF Global misled regulators about its bets on European sovereign debt. The Journal says a press release the panel issued in advance of the report contained little new information and "stopped short of saying anyone at the company broke the law." Wall Street Journal, Financial Times, New York Times

Financial Times

The national mortgage settlement has forced investors to take severe writedowns of (first-lien) mortgage-backed securities serviced by the big banks, despite the administration's assurances that bank-owned loans (typically second liens) would bear the brunt of principal reductions.

New York Times

Ken Chenault was the lone financial services executive at a White House gathering of business leaders Wednesday.

The Times profiles an entrepreneur whose firm helps retail customers buy gold and store it outside the banking system, wherever they want. (There are also professional vault companies who will store the stuff for people who don't want to keep it at home.)

Columnist Jesse Eisinger derides the "bipartisan cowardice" and "plodding impotence" of various financial regulators.

 

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