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People Still Talking About Mortgage Settlement They Haven't Seen

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Receiving Wide Coverage ...

Stress Tests: The results of the latest round of regulatory assessments of big banks’ ability to withstand economic shocks are due out this week. The test results “are expected to show broadly improved balance sheets at most institutions,” says the Times. According to the FT, the average share of profits that large banks are permitted to pay out as dividends is seen doubling to 48%. New York Times, Financial Times

Wall Street Journal

The elusive documents for the national mortgage settlement could be filed as soon as today, the Journal says as an aside in a story analyzing the trade-offs made during negotiations. Weren’t the papers supposed to be filed on Friday? And before that, the previous Friday? Anyway, today’s Journal story explains how the settlement ended up letting banks earn credit toward their obligations by writing down the first liens they service for investors without eating the second liens on the banks’ balance sheets. It was a concession that got the banks to agree to principal reductions in the first place and increased the dollar amount of the settlement and the number of borrowers who will get relief, the article says. Although without seeing the final agreement, who really knows?

The Fed should increase the cash reserve requirement for bank deposits, Columbia Business School professor Charles Calomiris writes in an op-ed. This would act as an “insurance policy” against inflation without immediately hurting the availability of credit, he argues.

Financial Times

A feature story rounds up the big changes happening at Citigroup: chairman Richard Parsons is stepping down, to be succeeded by Michael O’Neill; the stress test results may clear the company to begin returning capital to shareholders; investor Prince Alaweed of Saudi Arabia declares that he’s “extremely optimistic” about Citi and that the stock is trading at “an unwarranted discount” to book value. Unlike Parsons, who “was an experienced executive outside of banking and a political schmoozer,” the article says, O’Neill “is a banker through and through.” That Citi can make such a swap indicates how far the company has come since 2008, when failure and nationalization were serious risks.

New York Times

A story on the front page of the Sunday Times described the efforts big banks are making to win business from the "mass affluent" (defined as those with assets in six figures): the equivalent of the airport first-class lounge in bank branches; separate branches altogether for private-banking clients; appointments outside traditional bankers' hours to accommodate customers' busy schedules, etc. The banks are focusing on these customers with an eye toward cross-selling products and services like stocks, mutual funds and retirement advice. "This shift raises delicate issues at a time when existing savers are fed up with fees, and income inequality has become a hot-button issue."

In an op-ed, Felix Salmon argues that higher fees for regular Joes who bank with the big institutions are a welcome development. The new charges lay bare the true cost of accounts (previously subsidized by interchange and overdraft revenues that new regulations are curtailing), and will drive customers to smaller banks that are run more efficiently, Salmon argues.

The "Haggler" column looks at a 21-day hold that PayPal has put on payments to certain eBay sellers, to those customers' great frustration. The hold was supposed to apply only to sellers with track records indicating high risk of chargebacks, but in at least one case a seller with a perfect record was subjected to the policy, simply because he had taken several weeks off from transacting on eBay and when he returned he was selling cheaper items than before. After being contacted by the Times, PayPal pledged to refine its model so customers like the one who complained to the paper won't have to wait for their money for such reasons.

 

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Q1 Earnings Outlook to Put Focus on Lawsuits, Stress Tests, Lending
With JPMorgan Chase (JPM) and Wells Fargo (WFC) set to issue the initial round of first-quarter earnings reports Friday, big bank CEOs are bracing to answer questions about executive departures, capital shortfalls, seemingly unending legal risks and oh, yeah how they are going to make money.

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Comments (1)
The grand settlement never was nor would be. The Banks will have to write down the loans that comprise $13B of the agreed upon amount anyway, leaving only $12B. The actual fine - punitive damages - is $5B. The reality is that less than 5% of distressed borrowers will be helped by this global settlement.

There could have been another way to settle the matter - through regulators and Congress. Well, we know Congress would not take any action in this election year and probably never as too much in campaign contributions come from the financial industry. FDIC, OCC, and now CFPB could enter the fray but know enough not to, or else. Congress is like the father who threatens THE BELT. The only difference here is that the use of THE BELT is to tighten budgets for the offending agencies.

What we have in reality is a decision whether to force the economy to stop in its tracks by pushing more foreclosures with the hope that once they are done the housing market will return to normal. Anyone who pays attention should realize that the displacement of 2M+ homeowners isn't going to bode well for anyone but landlords. If the music stops and there is a chair missing, who loses? In this case, the U.S. economy for a generation to come.

As long as things move in a positive direction UPWARD, the world will still treat the U.S. and the $USD as an important factor. If the economy weakens enough, the EU and China will abandon this market leaving us without economic friends. The sad part of this is that no one seems to want to tell the truth. We are in a precarious position and deals must be made that are not what they appear to be on the surface. The Settlement documents may never be seen in their entirety and even if they are, who will be enforcing the terms?

For those who need closure on issues, the Settlement is good. For those who need help with their mortgage, the Grand Agreement may be of no solace.
Posted by riisacoff | Monday, March 12 2012 at 12:42PM ET
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