Morning Scan
Friday, July 30, 2010
|
Updated every business day, circa 9 a.m. ET. To receive by email, click here. Links may require registration/subscription. |
Receiving Wide Coverage ...
Citi Settles: Citigroup agreed to pay $75 million to settle SEC charges that it misled investors by failing to disclose the full extent of its exposure to subprime-mortgage related assets. The Journal said some critics complained that the agency's charge of unintentional fraud was relatively minor. It quoted Boston University law school professor Cornelius Hurley as saying he thought the SEC made a case for tougher fraud charges. "It appears they pulled their punch," he said. The Post said the case was unusual because the SEC sanctioned two senior executives of Citigroup suspected of being involved in the wrongdoing. Wall Street Journal, New York Times, Washington Post
The Journal's "Overheard" column compared the "paltry" fine Citi paid with the $30 billion in losses caused by its subprime mortgage exposure; it also compared the $100,000 fine paid by Citi's former CFO with the executive's 2007 compensation of nearly $20 million.
Bullard Cautious on Low Rates: St. Louis Fed President James Bullard warned that the Fed's promise to keep interest rates low for an "extended period" could undercut its efforts to boost the economy and that the country faces the risk of deflation. He argued in a paper that the central bank should consider purchasing more Treasury bonds as an alternative way to boost the economy. Wall Street Journal, Washington Post
Another pair of articles looked at another consequence of low rates: cheap financing. The Journal said this month has been the busiest July on record for issuance of junk corporate bonds. The paper said many companies are borrowing to refinance old debt; it didn't say whether any of the debt being refinanced was bank loans or lines of credit. An FT article focused on a burst of fundraising by U.S. banks. "Less than two years after the government was forced to intervene to ease a dramatic credit crunch, US banks sold more than $7 billion in debt last week - the largest weekly total since September 2009, says Dealogic." The paper noted that many recent issues were triggered by reverse inquiries from fund managers. Wall Street Journal, Financial Times
IMF Faults Financial Reform: The papers previewed an IMF review of the U.S. economy. The Journal said the IMF faulted Congress and the administration for failing to streamline a regulatory system marked by turf battles and overlapping responsibilities. The Post focused on the IMF's conclusion that small and mid-size U.S. banks need to raise another $45 billion in capital. While the IMF praised "the government response to the financial crisis and newly passed regulatory legislation," it argued that "in some areas the government has not gone far enough in correcting frailties that contributed to the crisis," the paper said. The Times said the IMF claims the financial reform bill fails "to simplify the complicated regulatory architecture that oversees the banking and securities industries" and the effectiveness of the legislation "will rely heavily on how it is carried out." Wall Street Journal, New York Times, Washington Post
New Rules for Debt Settlement: The Federal Trade Commission "issued stringent new rules" preventing debt settlement companies from collecting fees in advance. The Post called the move a "significant victory for consumer advocacy groups that have lobbied extensively over the past year for tighter oversight of the industry." New York Times, Washington Post
Wall Street Journal
An editorial critical of the small business loan fund said, "the false assumption here is that banks are reluctant to lend because they lack the capital. This ignores that small business lending is also down because the business demand for loans is weak. Businesses don't typically expand when Washington is raising dividend, capital gains and personal income tax rates while piling on the new costs of ObamaCare and other regulations."
New York Times
Many economists expect the latest GDP report to show a slowdown, and some have recently downgraded their expectations for growth in the second half of the year. "Though some people started the year hoping for stronger results, economists say that the slow pace of growth should have been expected."
In "High & Low Finance," Floyd Norris wrote that the meeting of the Basel Committee on Banking Supervision this week "seems to many to be an anticlimax. There was no solid countercyclical proposal. There were backtracking and delay on major parts of the December proposals. The concessions appeared to be aimed at pacifying upset bankers."
Columnist Paul Krugman asked why the appointment of a leader for the new consumer financial protection bureau is "still up in the air." His choice would be Elizabeth Warren, who proposed the agency. "Yes, Republicans might well try to filibuster a Warren appointment, but that's a fight the administration should welcome," Krugman wrote.
Washington Post
A column by former Treasury Secretary Hank Paulson said the new financial reform law was "a much-needed modernization of our regulatory structure" and "will provide tools to help mitigate and manage the next financial crisis."
, with contributions from Sara Lepro and Rachel Witkowski.
