BankThink

An increase in capital requirements may reduce earnings, minimize returns and contribute to a stagnant environment where loan production is at a minimum and bank acquisitions are very few.

Receiving Wide Coverage ...Libor Shuffle: We suspected Libor was going to be big news this week. Following CFTC chairman Gary Gensler's call for radical reform of the Libor system, reports surfaced that the British Bankers' Association has voted to give control of the benchmark interest rate — which the BBA itself created back in 1986 — to someone else. The trade association's vote, which took place earlier this month, precedes the formal recommendations from U.K. Financial Services Authority managing director Martin Wheatley expected to be unveiled on Friday. The Times says the group's potential removal is "a blow to the organization," while the FT's Jonathan Guthrie calls the BBA's decision "the decent thing" to do. His op-ed, however, also points out that the trade association should have stepped down much sooner and equates the move to "an old-fashioned army suicide" preceding a dishonorable discharge at the hands of Wheatley. "The pre-emptive move amounts to banks telling customers: 'We can't be trusted,'" Guthrie writes, while adding that a switch in oversight may not preclude more scandals from popping up since "regulation and Whack a Mole have much in common."

Market participants will quickly fill the home finance gap. Financing homes is an excellent business. The S&Ls were successful in this market for 50 years before they were destroyed by government policy.

The decision by three state attorneys generals to join a lawsuit challenging the constitutionality of the Dodd-Frank Act gives the suit a significant boost, improving its chances and broadening its scope.

The Federal Reserve chairman has the correct diagnosis, but limited tools to solve the problem. Meanwhile, inflation hawks are trying to cure the nation from a disease it doesn't have.

Central clearing for over-the-counter contracts will undoubtedly reduce risks, but the market still has multiple regulators and multiple sets of rules for different players and for different instruments.

The CFPB's issued a $200 million penalty against Discover in the agency's second enforment action. Cordray says expect more of the same, and he's sending a clear message that financial institutions should make sure they're not doing anything deceptive or misleading in marketing.

Fincen must be independent enough to be an honest broker in its rulemaking and enforcement network roles, while remaining responsive to the policy objectives of Treasury and statutory mandates from Congress.

Receiving Wide Coverage ...Global Threat on the Horizon: The central banks' efforts are all well and good, but the U.S. and European governments will need to do more to prevent global growth from screeching to a halt, says International Monetary Fund managing director Christine Lagarde. In an address at the Peterson Institute for International Economics, Lagarde warned the IMF may cut its estimates of global growth again this year during its meetings in Japan next month. She urged the U.S. to put aside political wrangling in order to address its deficit, calling the widening debt ceiling and uncertainty over the fiscal cliff "a threat for the global economy." , Washington PostNew York Times

The banking system should not be used to hide the cost of Congress's social programs.