Morning Scan
Thursday, November 5, 2009
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Receiving Wide Coverage ...
Regulatory Overhaul Update: The Journal said Senate Banking Committee Chairman Christopher Dodd is readying legislation that would "dramatically redraw how the financial system is regulated, setting the chamber on a collision course with both the House of Representatives and the Obama administration, which have championed markedly different approaches." Another article pointed out that pending legislation aimed at tightening regulation of financial services would give state authorities significant clout in overseeing hedge funds, "a move some regulators fear could undermine Congress's goal." A third article said politicians are putting pressure on regulators to ease up on small community banks across the U.S., "a move some say could increase the cost of cleaning up the financial crisis."
An article in the Times reported advances in two pieces of legislation: a bill that "its supporters say would provide greater protection to investors sailed through a House committee on Wednesday, but not before the lawmakers added a provision to ease new auditing standards for small and medium-size companies," while the full House "overwhelmingly approved" a bill that would accelerate the deadline for compliance with the credit card law from February to next month. "That move faces significant obstacles in the Senate, however."
Bonuses Are Back: Incentive pay on Wall Street is set to rise by about 40% from the $20 billion in cash awards handed out last year, according to a survey by Johnson Associates set to be released today. The Journal said the increase comes "as stronger financial markets collide with the political backlash over bonuses." Wall Street Journal, New York Times
In the Times, "BreakingViews" said that companies need to be careful about offering executive pay incentives for acquisitions.
Fed Keeps Rates Low: The Federal Reserve affirmed its plan to keep interest rates "exceptionally low" for a long time despite signs of economic recovery. The papers said this could be interpreted as meaning policy makers are at least six months away from an eventual tightening. The Post said, "After a remarkable two years of aggressive interventions to support the credit markets and the economy, the Fed appears to be entering a more stable period of waiting to see whether the nascent economic recovery has any legs." And the Journal said the Fed "began to lay rhetorical groundwork for an eventual shift in its stance, suggesting that when the unemployment rate falls or if expectations of inflation turn up, it could change course." Wall Street Journal, New York Times, Financial Times, Washington Post
An editorial in the Journal said the Fed is keeping its eye on employment, rather than the dollar. "We'd prefer more cautious policy now to avoid more trouble later, but this Fed is clearly on autopilot."
Goldman Sachs: Goldman Sachs' quarterly filing with the SEC yielded some interesting tidbits. The Journal's "Heard on the Street" noted that the firm benefited even more than most banks the Federal Reserve's zero-interest-rate policy. It said the filing "contained an eye-popping number: The interest rate on its long-term borrowings was a minuscule 0.92% in the third quarter, down from 3.53% in the third quarter of 2008." The FT noted that Goldman recorded only one daily trading loss in the third quarter, a detail that "confirms that the authorities' drive to revive markets after the crisis is yielding huge windfalls for some banks." Wall Street Journal, Financial Times
JPMorgan Settles: J.P. Morgan Securities will pay $75 million and forfeit hundreds of millions in fees on derivative contracts to settle SEC charges that it bribed Alabama officials for underwriting work on municipal bond issuance. The Times said the deal "could offer hope to other governments staggering under similar deals." Wall Street Journal, New York Times, Financial Times, Washington Post
Buyout Bust: A Moody's Investors Service study found the largest private-equity deals of the decade's buyout boom have fared much worse than other leveraged buyouts. Wall Street Journal, New York Times
Wall Street Journal
TD Bank, a unit of Canadian banking giant TD Bank Financial Group, is facing accusations from customers that the bank allowed their accounts to be emptied without their approval. Investors allege the bank's actions may have helped Florida attorney Scott Rothstein carry out a possible fraud.
At the peak of his influence more than a century ago, John Pierpont Morgan Sr. reorganized — or "Morganized" as some dubbed it — bankrupt railroads and took them over. "While not as powerful as Mr. Morgan then, the bank bearing his name today has canceled big chunks of corporate loans in exchange for stakes in companies it never intended to acquire. "
"Ahead of the Tape" said "Like a rising tide that lifts all boats, this year's credit-market rally will give a boost to American International Group's third-quarter results."
Lloyds Banking Group could have to pay a company to acquire its retail bank if it doesn't find a buyer within four years. The disclosure came under "risk factors" in a prospectus detailing plans to raise money from shareholders.
In "Capital," David Wessel praised Adair Turner, chairman of Britain's Financial Services Authority, saying, "The repair of the global financial-regulatory system is too important to future prosperity to be left to technocrats and bankers. But the substance is so arcane and complicated that few politicians or informed citizens can grasp the issues, let alone choose solutions. That puts a premium on public-spirited insiders who think and speak clearly enough for the rest of us to understand, even if only to disagree with their diagnoses and remedies."
Financial Times
Dick Bezemer, an economist at the University of Groningen, calls in an op-ed for banks and the government to "to redirect lending away from bloating the financial sector and towards supporting the real economy, rather than loading it down with debt."
Washington Post
Jide Zeitlin, a former Goldman Sachs executive who is the nominee to represent the U.S. on issues related to financial reform at the United Nations, brushed away concerns about his financial and legal troubles on Wednesday. "No one bats a thousand," he told a Senate panel.
The Senate approved a measure on Wednesday that would extend the $8,000 tax credit for first-time homebuyers through the end of June. "The tax credit and the broader bill in which it is included are part of a series of Democratic-led initiatives aimed at helping the economy and people who have lost their jobs."
The FHA delayed the release of an independent audit of the agency because of problems related to some of the economic models used in the study. "FHA's financial health has been a growing topic of concern as the agency's loan volume exploded and its default rate climbed."
, with contributions from Maria Aspan, Emily Flitter and Steven Sloan.
