BankThink

Receiving Wide Coverage ...Volcker Rule: A flurry of comment letters, both for and against the ban of proprietary trading by insured commercial banks, were filed by the midnight deadline — including one by the old lion who conceived the rule, rebutting critics’ “futile stonewalling.” Paul Volcker also wrote an op-ed in the FT responding specifically to foreign governments that have complained the rule will hurt liquidity for sovereign debt. Noting that the regulation will allow market making and underwriting of securities, the former Fed chairman writes that banks also “can continue to purchase foreign sovereign debt for their investment portfolios — should I say à la MF Global? What would be prohibited would be proprietary trading, usually labelled as ‘speculative.’ How often have we heard complaints by European governments about speculative trading in their securities, particularly when markets are under pressure?” In the Times, “DealBook” columnist Andrew Ross Sorkin reiterates the industry argument that the line between acting as a middleman and acting as a principal is sometimes hazy: “Historically, [a] bank could buy, say, 1,000 bonds and hand over the 889 that its client had requested. The 111 other bonds would sit on the firm’s balance sheet until it could parcel them out to other clients who wanted to buy them. Now, such trades may become impossible — or at least, impossibly expensive.” In a Fox Business interview, a casually dressed Jamie Dimon makes this same point, likening his bank’s securities operations to “these stores down the street — when they buy a lot of polka dot dresses, they hope they’re gonna sell. They’re making a judgment call. They may be wrong.” The JPMorgan chief is also reliably irreverent: “Paul Volcker, by his own admission, says he doesn’t understand capital markets. Honestly, he’s proven that to me.” Dimon’s bank submitted a 67-page comment letter that said the regulation “appears to take the view that banking entities, their customers, and the economy must pay almost any price in order to ensure absolute certainty that there can never be an instance of prohibited proprietary trading,” and that the Volcker rule could "chill legitimate market making and impose needless costs." The pension giant CalPERS was one of the rule’s notable defenders, calling the costs of the rule “acceptable” in light of the reduced risk to the financial system. Wall Street Journal, Financial Times, New York Times.

Fees for closing an account within a few months of opening it shouldn’t be lumped in with truly abusive industry practices.

With the recess appointment of the director of the Consumer Financial Protection Bureau, the agency is becoming even more active and issues are coming into focus. Financial institutions subject to its jurisdiction should pay attention to its Supervision and Examination Manual published in late 2011.

Those $1,500-$2,500 checks being sent to foreclosed-upon borrowers wouldn't cover Jamie Dimon's travel expenses to Davos.

Many credit unions lack focus in their planning and, specifically, are missing the ability to agree to "Just Say No."

A reader responds to "The Dilemma Raised By Growth In Assets, Members" [Jan. 9, 2012]

BOLI is a proven asset for banks, and can be as powerful for credit unions when understood — and prudently implemented following a well-documented pre-purchase analysis.

Receiving Wide Coverage ...PE Probe: The SEC has begun an informal inquiry into the private equity business, the papers report, citing anonymous sources. While Mitt Romney’s candidacy has sparked a national debate about whether PE firms are net creators or destroyers of jobs, the SEC is more concerned with in-the-weeds matters. “One focus of the inquiry is how private equity firms value their investments and report performance,” according to the Times. “The S.E.C.’s concern … is that some private equity funds might overstate the value of their portfolios to attract investors for future funds.” The papers also briefly mention the fee structures of PE firms as an area of interest for the Feds. Wall Street Journal, New York Times

There is no such thing as a "Consumer Financial Protection Bureau." That’s a false label. Rather, there is a Bureau of Consumer Financial Protection ("BCFP," if you like), established by Title X of the "Dodd-Frank Act."

With new channels and services, I've often thought that consumers don't care as much about security as they claim to — but they do care about reliability. So I was surprised to see that Citi blamed a recent payment problem on the coding of its iPad app when the problem has occurred in other channels.