Friday, November 20, 2009

Receiving Wide Coverage ...

Fed Under Fire: The House Financial Services Committee approved a proposal to allow Congress to order audits of all the Fed's lending programs as well as of its basic decisions to set monetary policy by raising or lowering interest rates. The Journal said the vote was "the latest blow to the central bank, which has been become a lightning rod for politicians responding to popular anger that Wall Street was bailed out while the public wasn't." The Times described the move as "a display of populist anger." Wall Street Journal, New York Times, Washington Post

In an op ed in the Post, former Federal Reserve vice chairman Alan Blinder said the amendment would effectively end the central bank. "Passage of the Paul bill would be a step away from independent monetary policy and a step toward ending the Fed as we know it."

Another story in the Journal looked at what it called "one of the clearest examples of how the weak economy is overtaking Obama administration priorities," the Congressional Black Caucus forced the House to shelve its revamp of financial-sector regulation for two weeks."

Untying Tarp: The Treasury Department said Thursday that it would auction off its remaining investments in three large banks, JPMorgan Chase, Capital One and TCF Financial, a move that could raise between $1.3 billion and $3.1 billion. The Times noted that other banks, such as Goldman Sachs, negotiated deals to buy back their warrants, which it said "did not benefit taxpayers as much as auctions might have." A Journal editorial expressed outrage at Tarp Inspector General Neil Barofsky's recent disclosure that the New York Federal Reserve did not believe that AIG's credit-default swap counterparties posed a systemic financial risk. It said Barofsky "keeps committing flagrant acts of political transparency, which if nothing else ought to inform the debate going forward over financial reform." Commenting on the financial industry bailout in general, Times columnist Paul Krugman said that the seemingly safe choices of government have now placed the economy in grave danger. "Here's the real tragedy of the botched bailout: Government officials, perhaps influenced by spending too much time with bankers, forgot that if you want to govern effectively you have retain the trust of the people. And by treating the financial industry — which got us into this mess in the first place — with kid gloves, they have squandered that trust." Times columnist David Brooks retorted that Treasury Secretary Timothy Geithner's path was a middling one, but it helped the country muddle toward recovery: "The evidence of the past eight months suggests that Geithner was mostly right and his critics were mostly wrong. The financial sector is in much better shape than it was then. TARP money is being repaid, and the debate now is what to do with the billions that were never needed. It now seems clear that nationalization would have been an unnecessary mistake — potentially expensive and dangerously disruptive."

Card Watch: A Government Accountability Office report warned that legislative proposals to rein in rising credit-card fees paid to banks by merchants would be difficult to implement and could hurt consumers and store owners. The Journal noted that the report "comes amid an escalating tussle over interchange fees and interest by lawmakers in putting a leash on various fees collected by financial institutions." An editorial in the Times entitled "A Gift to Credit Card Companies" criticized Senator Thad Cochran for blocking a vote on a bill that would have immediately frozen credit card interest rates and fees. "It is difficult not to see his maneuver in yet another act of obeisance by Senate Republicans to the banking and credit card industries. …With December almost upon us, the measure should long since have become law." Wall Street Journal, New York Times

Mortgage Delinquencies Reach Record: A record 14% of American households with mortgages were behind on payments or in foreclosure in the third quarter, according to the Mortgage Bankers Association. The Post said, "the foreclosure problem is building despite a massive government program that pays lenders to lower borrowers' payments." The Times said the figures "underlined the level of stress on a large segment of the country, a situation that could snuff out the modest recovery in home prices over the last few months and impede any economic rebound. Unless foreclosure modification efforts begin succeeding on a permanent basis — which many analysts say they think is unlikely — millions more foreclosed homes will come to market." Wall Street Journal, New York Times, Washington Post

A separate story in the Journal looked at an unusual indicator of the health of the housing market: "Each year at its convention, the National Association of Home Builders highlights 'The New American Home,' a high-end model home designed to capture emerging trends in residential building and the shifting lifestyles of Americans. For its builder, the project is usually a career-boosting — and profitable — venture." This year, it has unexpectedly become a "poster child for the building industry's money troubles." Domanico Custom Homes, the small private builder selected for the project, had to halt construction this month after a private investor pulled out.

JPMorgan Chase Seals Deal: As expected, JPMorgan Chase agreed to buy the rest of Cazenove Group, its partner in a British investment banking joint venture, for $1.7 billion. The Times said the deal would "strengthen its franchise in a country whose banks have either struggled to return to profit or looked abroad for growth." Wall Street Journal, New York Times

Wall Street Journal

Some of Goldman Sachs' largest shareholders have urged the firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors, according to people familiar with the situation. The paper said their complaints, made in private conversations with the company and at analyst meetings, "show how anger over its big-money culture is spilling into the ranks of investors who typically shy away from debates over Wall Street pay."

The European Commission stepped up its investigation into allegations of monopoly abuse by Standard & Poor's on Thursday, saying it has sent the credit-rating provider a list of formal charges.

Fresh details on China International Capital Corp.'s "phantom share" program have emerged, illustrating the complications it poses for potential buyers of Morgan Stanley's stake in the Chinese investment bank.

Mall owner General Growth Properties Inc. told a bankruptcy court it had reached a deal with lenders and servicers to restructure $8.9 billion of mortgages on 77 malls in hopes of removing them from bankruptcy protection by year's end.

New York Times

A front page article in the "Back to Business" series considered the impact of the extension of FHA insurance: "In its efforts to prop up a shattered housing market, the government is greatly extending its traditional support of real estate, including guaranteeing the mortgages of middle-class and even upper-class buyers against default. …Policy changes like the shift in insurance, while often introduced on a temporary basis, are becoming so popular that they could prove difficult to undo. With government finances already under great strain, the policy expansions are creating new risks for American taxpayers."