Jeanine Skowronski

Receiving Wide Coverage ...AIG vs. B of A: The battle over Countrywide's bad mortgage-backed securities continues as the New York State Supreme Court is set to hear arguments on Monday over whether the $8.5 billion settlement Bank of America reached with investors over the soured investments should be approved. Insurer AIG is leading opposition to the settlement, believing its sum should be much higher. The Journal calls the hearing "part of a broader battle … over which company should bear the brunt of losses suffered during the financial crisis." AIG is also pushing B of A to settle its separate $10.5 billion claim over mortgage-backed securities losses and "people familiar with the matter" tell the paper the insurer would drop objections to the investor settlement if the bank were to negotiate deal on those claims. The FT, which makes a point of noting that AIG and B of A collectively received $225 billion in government bailouts during the financial crisis, says denial of the settlement could ultimately saddle B of A with a bigger bill while approval, though "an important step forward" in the "subprime mortgage mess," is likely to be met by an appeal from AIG. This Lex column elaborates on what settlement approval would mean for the bank: "B of A faces other cases, but if this settlement stands, it will go a long way to clearing out the crisis-related clouds that have followed the bank."

Editor's Note: Morning Scan will not publish on Monday, May 27, in observance of the Memorial Day holiday.

Receiving Wide Coverage ...Fed's Mixed Message: The Federal Reserve sent a "garbled message" about the fate of its QE3 program on Wednesday. First, Chairman Ben Bernanke endorsed ongoing stimulus efforts while testifying at a congressional hearing, though he did reveal the central bank could begin to slow down bond-buying in its "next few meetings," labor market conditions permitting. Then, just hours later, April meeting minutes revealed some Fed officials were hoping to pare down the program as early as June. Markets spiked, and then tumbled as a result of the information, illustrating "the communications challenge facing the Fed as it ponders the next steps for its historic stimulus efforts," the Washington Post reports. Now that the dust has settled, some analysts are predicting the slowdown — which, Bernanke noted was different than a complete wind-down of the program, since the Fed could always raise purchases if the economic outlook worsens — will begin in a few months, most likely around September. Several news outlets cite this statement William C. Dudley, president of the Federal Reserve Bank of New York, made on Bloomberg TV as evidence of this scenario: "I think three or four months from now you'll have a much better sense of is the economy healthy enough to overcome the fiscal drag or not." Wall Street Journal, Bloomberg

Receiving Wide Coverage ...Dimon's Big Day: The votes are in and it's Jamie Dimon by a landslide. After all the hoopla, the still chairman and CEO of JPMorgan Chase won the support of 68% of shareholders who rejected a proposal to strip him of the dual roles. For those keeping score, that means 32% voted in favor of separating the titles, a decrease from the 40% of shareholders who supported a similar proposal last year. "Vote Strengthens Dimon's Grip" at JPM, this Journal article proclaims. "The victory leaves Mr. Dimon, 57 years old, in a stronger position to grapple with his No. 1 priority: getting [the bank] through a thicket of regulatory problems threatening to hamstring the company for years." What led Dimon to such a decisive victory? Lobbying efforts? No doubt. Threats of resignation? Those could have helped, but Washington Post columnist Jena McGregor offers this explanation: "Despite big questions about Dimon's role in the 'London Whale' trading scandal and potential changes to the make-up of JPMorgan's board, the bank still posted record profits last year even after posting huge losses. And JPMorgan's shares have risen by more than 50% in the last 12 months." Still, it's not all sunshine and roses at JPM. While Dimon won his vote, three board members — David Cote, James Crown and Ellen Futter, who was conspicuously absent from the meeting — drew less than 60% support, leading many news outlets to predict a board shake-up may be on the way. "The vote created enough waves that JPMorgan might have to do something," the FT's Lex column argues. "Both JPMorgan's board and management are implicated in the Whale debacle (and presumably responsible for the bank's long-term success) but board members are more expendable." And the bank "is facing inquiries on multiple fronts," another Washington Post article notes, including, but not limited to a Federal Energy Regulatory Commission probe into its bidding practices and a lawsuit from California Attorney General Kamala Harris over alleged credit card abuses. As for Dimon himself, some news outlets note he still has a reputational issue to overcome. "The vote's outcome can't erase the months of harsh spotlight it focused on Dimon's power, his board's composition and governance style, and the London Whale trading losses that, a year later, continue to nip at Dimon's once-pristine reputation as the industry's best CEO," American Banker reports. But others see the vote as a sign that JPM's exec is made of Teflon. "No matter what happens, it seems that as long as Jamie Dimon is making money for JPMorgan, he can get away with basically anything," New York magazine columnist Kevin Roose concludes. And others were quick to label the proposal's failure an overall defeat for corporate governance. "The episode perfectly illustrates the common sense behind separating the two roles," write Agnes T. Crane and Antony Currie at the Times.

Receiving Wide Coverage ...National News: A devastating tornado swept through Oklahoma yesterday. Full news coverage: Wall Street Journal, New York Times, Financial Times

Following ample debate over whether JPMorgan Chase’s CEO should lose his chairman title, there’s no clear indication of how Tuesday's shareholder vote will play out.

Receiving Wide Coverage ...JPM … Again: News outlet continue to closely monitor JPMorgan Chase ahead of Tuesday's shareholder vote on a proposal that could see Jamie Dimon stripped of his dual title as chairman and CEO. Dealbook reports the Council of Institutional Investors has asked the Securities and Exchange Commission "to intervene" after Broadridge, the firm that provides tabulations on these types of votes, stopped giving updates to the investors sponsoring the proposal, though the article gives no indication of whether the SEC is likely to do so. Another Dealbook column classifies the forthcoming vote as a test of stockholder power. Per the article, "a victory against a bank that prides itself on its 'fortress balance sheet' would go a long way toward proving that shareholders can push for changes even at strong companies." Meanwhile, the Financial Times has its own ode to the bank's executive, entitled "Jamie Dimon, the Last King of Wall Street," — see here and here for prior versions — though this rendition does end on a semi-somber note. "Maybe these are grey days," U.S. banking editor Tom Braithwaite writes. "The best hope for Mr. Dimon's large coterie of supporters is that this backdrop gives him something to prove for the first time since the crisis and that, whether he retains his chairmanship or not, all the hurdles and criticism might provoke another lease of life."

Receiving Wide Coverage ...More JPM Woes: California Attorney General Kamala Harris is suing JPMorgan Chase over alleged credit card debt collection abuses. Per the lawsuit, JPM "engaged in widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a three-year period." The bank, thus far, is declining to comment on the lawsuit. Various news outlets report other enforcement actions from regulators concerning the collection issues may follow. These developments shouldn't surprise American Banker readers. Risk management editor Jeff Horowitz broke the news of a pending OCC probe when he profiled the bank's aggressive credit card collection practices back in March 2012. New York Times, Financial Times, Washington Post, Wall Street Journal, American Banker

Receiving Wide Coverage ...Another Foreclosure Error: First, the OCC and Federal Reserve oversaw a foreclosure review process that benefited independent consultants more than actual homeowners. Next, the regulators replaced this costly foreclosure review with a settlement that gave only $300 to most affected borrowers. Then some of the checks mailed to borrowers bounced. Now regulators have disclosed that nearly 100,000 borrowers received checks for less than what they were owed, due to a clerical error by Rust Consulting, the firm hired to distribute the payments. (The New York Times article about the error begins: "At least these checks cleared.") Rust has been ordered by the Fed to fix its mistake by sending supplemental checks to affected borrowers. These checks are expected to go out as soon as May 17. Meanwhile, Jon Stewart may want to issue an update to his very recent Daily Show segment (with a cameo from American Banker Editor in Chief Neil Weinberg) on just how bungled this review/settlement has been. Wall Street Journal, Washington Post

Receiving Wide Coverage ...HSBC Earnings: HSBC's first quarter earnings almost doubled year over year, with pre-tax profit rising to $8.4 billion compared with $4.3 billion during the same period in 2012. The increase is attributed largely to all that cost-cutting the bank has been doing and a decline in bad debts. Expect the cost-cutting efforts to continue. Per the FT, "the bank is expected to close or sell a further eight to 10 businesses this year and next, in addition to the 49 already divested since 2011." Wall Street Journal, New York Times

Receiving Wide Coverage ...Buffett Holds (Uneventful) Shareholder Meeting: Many members of the media spent the weekend with Warren Buffett, but the news coming out of Berkshire Hathaway's annual shareholder meeting — per articles in both the Times and the Journal — is that the Oracle of Omaha managed to avoid making any "big news." Buffett did engage in a discussion with "bear" Douglas Kass, who was invited to ask questions since he is "betting that the price of Berkshire shares will drop." But Kass "didn't draw much blood" and, overall, "Buffett largely reiterated positions he has stated publicly before — yes, he has decided on a successor, but, no, he is not saying who it is," notes the Journal. Perhaps those hoping for more details and/or insights can try following the Berkshire Hathaway chairman and CEO on Twitter.

If they get on their high horse, bankers risk coming off as disingenuous. Concentrate instead on developing products that will help consumers meet a specific financial goal.

Receiving Wide Coverage ...Bank Payday Loan Update: Regulators officially unveiled on Thursday their expected guidance on the payday-style loans or checking account advances offered by a few financial institutions. The guidance, which calls for more underwriting and stringent cooling-off periods between loans, was issued along with "a scathing assessment of the loans" from the OCC, which "warned banks that the loans could pose 'reputational risk,'" reports Dealbook. But proponents of bank payday-style products have argued they prevent needy customers from seeking out loans from less reputable and decidedly unregulated businesses. And a report, profiled today by the Washington Post, finds there is consumer demand for these short-term loans with nearly one in four Americans having used a payday product. "The rise of this kind of borrowing … reflects the needs of a population struggling to make ends meet," the Post notes. Meanwhile, this op-ed in the FT urges more British banks to challenge the burgeoning payday business by offering alternative short-term credit. "The banks have steered clear of high-interest microloans — they fear reputational damage — but I would welcome a responsible high-street challenger to the payday lending market," the author writes. But are there any suitable alternatives?

Receiving Wide Coverage ...Brown-Vitter TBTF Bill: Sens. Sherrod Brown and David Vitter formally unveiled their TBTF bill — or the pointedly named Terminating Bailouts for Taxpayer Fairness Act — Wednesday. Key components include a 15% capital requirement for banks with more than $500 billion in assets. Regional banks would be required to meet an 8% capital requirement while community banks would be exempt from the proposal. The bill, if passed, would also impose restrictions on a bank holding company's ability to move assets or liabilities from nonbanking to banking affiliates. (You can find a full roundup of its central elements here.) "Requiring the largest banks to finance themselves with more equity and with less debt will provide them with a simple choice," the senators explained in a New York Times op-ed. "They can either ensure they can weather the next crisis without a bailout, or they can become smaller." Reaction to the bill, thus far, appears to include some general support ("This is the appropriate direction for regulation," writes Slate blogger Matthew Yglesias), calls to give existing legislation a chance ("I'm fighting for [Dodd-Frank]," Sen. Carl Levin tells Bloomberg. "I can't at the same time give up on that and say 'break up the banks.'") and early Wall Street rallying cries. Whether the bill can actually pass is another issue entirely. "Brown and Vitter may have a difficult time getting their bill through Congress," the Washington Post notes. The bill does "not appear to have — at least so far — broad enough support in Congress to move forward," the FT echoes. "[It] was not immediately endorsed by any co-sponsors, for instance, and Mike Crapo, the top Republican on the Senate banking committee, recently disavowed the need for more stringent capital standards to be set by law."

Receiving Wide Coverage ...HSBC's Job 'Demise': HSBC got some extra attention for what could have been a routine — and somewhat expected — job cut announcement when someone got creative with the language in its press release. In announcing plans to cut more than 1,100 U.K. jobs due to new wealth adviser regulations, the bank noted "the integration of advisers means the roles of commercial financial advisers will be demised." And then, again, a bit further down, "the bank will be demising the roles of 942 relationship managers." The use of the word "demise" in lieu of, say, cut or downsize drew the ire of Britain's largest workers' union, which said it may ask workers if they want to consider a strike ballot. It also earned the bank a fresh wave of criticism from a few media pundits, despite the bank's plan to create 2,017 new positions for which affected (or perhaps demised?) workers would be able to apply. "Let's hope HSBC used this absurd euphemism only in its baffling press release, and not in its formal letter to 3,166 employees warning them that they are at risk of redundancy," writes Nils Pratley of The Guardian. A London headhunter didn't mince words when talking to the I: "I've heard a lot of HR guff in my time. But this is something else. It makes them look not only foolish, but callous and thoughtless, too." A HSBC spokesman explained to the Journal's MoneyBeat blog (which was quick to point out demising doesn't mean what HSBC thinks it does) "the bank likes 'demising' because it suggests that while the jobs will disappear, the employees won't necessarily leave the bank." (So, perhaps, this is the opposite of job creation?) New York Times, Bloomberg

Receiving Wide Coverage ...A Whole Lot of 'Puffery': Standard & Poor's is formally urging a judge to dismiss the government's civil lawsuit alleging the agency ignored its own standards and rated mortgage investments much higher than they should have been in years leading up to the financial crisis. S&P argued on Monday that the DOJ "had failed to substantiate its allegation that the CDO ratings would have been lower based on the deteriorating housing market," reports the Financial Times. It is also arguing that "snippets" of conversation cited in the DOJ's claim don't constitute evidence and, instead, "add up to 'classic puffery,' the vague and overblown language that businesses often use to describe the virtues of their products and services," Dealbook reports. Lawyers appear to be going with this argument since it has worked in the past. "Legally, that might be a tenable defense," some lawyers tell the Journal, "but politically and reputation-wise," it's not a good look for an agency that essentially sells its seal of approval to clients. A hearing to decide whether the case will proceed is scheduled for May 20, but Bloomberg reports a complete dismissal is unlikely. "S&P can't support its request to dismiss the case by supplying evidence to contradict the allegations," a formal federal prosecutor said. "It can only argue that the Justice Department will never be able to prove its civil fraud claims." Another lawyer, however, told the news provider that, in the long run, the case isn't likely to go to trial, predicting "the company will eventually reach a settlement with the government."

Receiving Wide Coverage ...SEC's New Enforcer: Chairman Mary Jo White is set to appoint long-time colleague Andrew Ceresney as co-head of the Securities and Exchange Commission's enforcement unit pretty much any day now. Ceresney, who served with White while she was U.S. Attorney for the Southern District of New York and at law firm Debevoise & Plimpton LLP, will share the role with interim enforcement chief George Canellos. Dealbook calls the joint leadership "unusual, if not unprecedented," but also reports it will be temporary. Anonymous sources tell the website Canellos "is expected to return to private practice well before the end of President Obama's second term." The Journal says Ceresney's "appointment will add to the conflict-of-interest headaches at the federal agency," though it also notes such "conflicts aren't unusual." (Recall, White's own former client list includes JPMorgan Chase, Deloitte & Touche, General Electric, Verizon Communications and former Bank of America chief executive Kenneth Lewis.) According to the paper, one of the issues Ceresney and White will have to address involves "whether to change the specialized enforcement units" set up by predecessor Robert Khuzami.

Breaking News This Morning ...JPM Earnings: JPMorgan Chase kicked off earnings season today by announcing a 33% rise in net income in the first quarter. The bank reported a profit $6.53 billion, or $1.59 a share, besting analyst expectations of about $5.4 billion in net income. Per the Journal, "strong investment-banking results offset declining mortgage revenue." Per some live-tweeting, JPM CEO Jamie Dimon dodged questions regarding the shareholder proposal to break up his role as CEO and chairman during the earnings call. "You guys can ask me this question 15 times. This is an earnings call." American Banker's Maria Aspan reported in a tweet. "JPM's Dimon really doesn't want to talk chairman/CEO split proposal." More big picture coverage: Financial Times, Washington Post, New York Times, American Banker

Receiving Wide Coverage ...Chairman and CEO?: Goldman Sachs' Lloyd Blankfein has successfully skirted a vote that could have split up his role as CEO and chairman after striking a deal with the investment group putting forth the proposal. The deal beefs up the role of lead director James Schiro, who will, moving forward, "set the agenda for the board, instead of merely approving it" and "write his own letter to shareholders in the proxy statement," Dealbook reports. Now the world waits to see what happens to JPMorgan Chase CEO Jamie Dimon, who faces a nonbinding vote on a similar issue at his bank's annual shareholder meeting next month. Dimon, the FT reports, "will not get off so easily" largely due to a little thing called the London Whale. This may be why, as the Journal reports, Dimon's annual letter to shareholders "lacked the feisty tone of years past." In the 30-page letter, Dimon "renewed his apologies" for the trading debacle, calling it "the stupidest and most embarrassing situation I have ever been a part of" and pledged to focus on compliance control. One analyst told Bloomberg earlier this week that Dimon may leave JPM "maybe not immediately but within the year" if the vote doesn't go his way. After all, he has all that new office space.

Receiving Wide Coverage ...Mortgage Settlement Checks to Be Mailed: Regulators announced yesterday that the first round of checks related to their $8.5 billion settlement with banks over alleged foreclosure processing mistakes will soon be in the mail. Many news outlets led with the stats. The Fed and the OCC "are set to dole out roughly $1.2 billion in the first batch of payments," Dealbook reports. "By April 12, the regulators expect to mail 1.4 million checks." Others focused on just how little the borrowers are actually getting. As the opening paragraph of the Wall Street Journal article notes, "The vast majority of borrowers … will get $1,000 or less apiece, a sobering coda to a protracted attempt to help those who may have been placed into foreclosure as a result of banks' mistakes." Or, as the American Banker headline summarizes, "Foreclosure Review Amounts to Peanuts for Most Borrowers." Regulators' attempts to address this issue have long been on the receiving end of criticism. American Banker readers will recall that the settlement replaced a "bungled" foreclosure review process that appeared to benefit consultants more than the involved homeowners. More big picture coverage on the soon-to-be mailed settlement checks can be found here: Bloomberg, Reuters