BankThink

The Federal Reserve board disclosed the initial round of results required under the Dodd-Frank law on the portfolios of the 18 largest bank holding companies.

"Attorney General Eric Holder's stunning admission that it was difficult to prosecute large banks because of the potential economic impact may be a turning point of the drive to break them up," writes American Banker's Rob Blackwell and Victoria Finkle.

Banks have convinced policymakers, regulators and sometimes the courts that new regulations might be too expensive. However, the point of public intervention is to induce banks to take account of costs they impose on others.

Receiving Wide Coverage ...Reaction Split on Stress Test Results: Seventeen of the 18 largest banks have enough capital on hand to weather a sharp economic downturn, according to the first set of results from the Federal Reserve's latest stress tests. Full explainer, plus graph, of the results are available in this American Banker article. You'll notice Ally Financial standing out as the only bank failing to meet the Fed's requirement of a minimum Tier 1 common capital ratio of 5% with two other firms — Goldman Sachs and Morgan Stanley — seeing their Tier 1 common ratio fall below 6%. (The Financial Times focuses on Goldman Sachs' performance in this round up of results, headlined "Goldman exposed to $20bn loss in a crisis.") Reaction to the overall results thus far appears mixed. "Banks Health on the Mend," declares this Journal headline, with one analyst noting "One way to address too big to fail is to keep capital levels too onerous in order to have the banks shrink. These results are pretty much in line with that." But others argue banks fared well because the Fed went too easy and that there are vulnerabilities the tests fail to account for. "The derivatives market is huge — $600 trillion — and a potential source of instability for the banks, though you are likely to see little indication of that in the Fed's stress tests," writes Fortune senior editor Stephen Gandel. Perhaps David Reilly sums it up best in his "Heard on the Street" column: "Overall, many aspects of the test should soothe investors still worried about bank strength. But they shouldn't engender complacency about the need to keep shoring up the financial system." Meanwhile, Citigroup has already publicized its request to buy back $1.2 billion of shares without seeking a dividend. The FT believes the Fed's stress test results may ultimately rein in U.S. bank payouts. The Federal Reserve is expected to respond to Citi and other requests next week.

Our hope and plan was that the settlement would show principal reduction works and that it would spur the use of writedowns in other loan modifications. That is now occurring.

Augmented reality has the potential to enhance customer service and promote sales during customers’ in-store transactions.

Receiving Wide Coverage ...Stress Test Results Are Coming: Today is the day the Federal Reserve tells banks how they fared on their stress tests and whether they'll be able to return more capital to shareholders through dividends or buying back stock. Results won't be made public until March 14, but according to the Journal's Heard on the Street column, "analysts expect healthy capital returns overall." This doesn't mean investors should expect big payouts, as some banks, including Bank of America and Citigroup, which have previously seen return requests denied, and JPMorgan Chase have indicated their requests will be modest. "While chances are good that the 2013 capital-return announcements won't include nasty surprises, they also aren't likely to be game changers," the column concludes. "For that, investors still have to look to prospects for the economy, lending growth and interest rates." Meanwhile, this Dealbook article written by Jesse Eisinger of ProPublica takes issues with the fact that Bank of America is likely to get the Federal Reserve's green light on payouts, since the bank "has been underestimating its legal risks for years." The article cites a lawsuit over an $8.5 billion settlement with investors reached in 2011 concerning Countrywide's bad mortgages as the latest legal risk B of A may be downplaying on its legal reserves accounting books. "In keeping the reserves low, Bank of America has already won," Eisinger writes. "If it turns out that the bank loses its cases and has to pay much more money, it nevertheless has managed to make its books look that much better for years. That surely helped as it has tried to dig itself out of its financial crisis hole."

Banks have made hugely successful bets on emerging technologies that changed their industry and they barely have time to perfect one innovation before the pressure to find new ways of staying relevant starts up all over again.

The Home Affordable Refinancing Program should not be judged by the total number of completed refis. The true measure of success of any mortgage relief program should be the percentage of high-risk borrowers who ultimately benefit.

Sen. Richard Shelby, R-Ala., a senior member on the Senate Banking Committee, introduced two bills on Tuesday aimed at fixing technical errors in the 2010 Dodd-Frank Act and requiring regulators to complete economic analysis when crafting any new rules.