BankThink

If you live in Oklahoma: Sorry, you’re screwed. Your Attorney General is more worried about moral hazard and wouldn’t sign the agreement.

Is Dodd-Frank the real reason, or enough of a reason, for Wall Street to abandon Obama?

Receiving Wide Coverage ...Interpretations of the Mortgage Deal: Depending on which story you read, the $25 billion settlement between the federal government, 49 state attorneys general and the largest mortgage servicers is: A potential boon to the housing market and the economy (Wall Street Journal, Financial Times, Los Angeles Times); a shot across the bow for the banks (Washington Post); a source of limited relief for the banks (“Heard on the Street” in the Journal); already largely reserved for by the banks (Journal again); a source of limited relief for homeowners (New York Times); an egregious shakedown of banks by politicians (Journal editorial page); too soft on the banks and not generous enough to homeowners (Los Angeles Times again, Matt Taibbi in Rolling Stone, Adam Levitin at CreditSlips.org); and/or the denouement of a long-running drama (Journal, Post). And yes, the Journal’s “tick, tock” story reliably tells you what they ate at the negotiating table (cookies this time). A more interesting insider detail is the role played by Wells Fargo executive Mike Heid, who’s profiled, along with the more obvious government figures, in a Journal sidebar on key players in the talks. Heid “helped close ranks and find consensus” among the five megaservicers, the piece says. This was probably quite a feat considering that Wells also argued to the regulators “that it should be treated differently because its mortgage-servicing operation wasn't nearly as troubled as” B of A’s or JPMorgan’s.

President Obama's January 4th recess appointment of Richard Cordray as head of the director of the Consumer Financial Protection Bureau has threatened to set-off a contentious legal challenge in an already polarized Congress.

Freddie Mac's CEO responds to the NPR-ProPublica report that his company "bet against" homeowners.

Receiving Wide Coverage ...The Servicing Settlement: It’s apparently really, finally happening, with an announcement expected today. The holdout attorneys general, including New York’s Eric Schneiderman and California’s Kamala Harris, have been brought back into the fold, the papers report. To win over the dissident AGs, “the banks and other government negotiators preserved regulators’ and prosecutors’ ability to use facts assembled from foreclosure-related probes in their securitisation investigations,” the FT says. “While the banks would be released from claims involving foreclosure abuses, securitisation claims would remain.” Indeed, the Journal reports that the SEC plans to send Wells notices to several major financial institutions, warning it intends to sue them for misrepresenting mortgage-backed securities sold during the go-go years. (It's not clear which companies will get the head's up, but the agency's been looking at Bank of America, Citi, Ally Financial, Goldman Sachs and Deutsche Bank, the paper says.) Also, Schneiderman’s suit against MERS and three banks will be allowed to proceed, and he retains the right to sue other servicers for using the mortgage registry system, according to a very informative and detailed post by David Dayen on the FireDogLake blog. The papers give conflicting figures on the size of the settlement — it’s either $26 billion or $40 billion, depending on the headline. That’s because the bulk of the settlement ($17 billion) is not cash but principal reductions, and “the banks will not get dollar-for-dollar credit for every write-down,” according to the FireDogLake post. (Remember that the banks were supposed to get more credit for eating the loans they hold on balance sheet than for writing down mortgages they service for investors, though there’s still skepticism whether this incentive will work.) “Housing and Urban Development Secretary Shaun Donovan believes that they will be able to get between $35-$40 billion in principal reduction in real dollars out of the settlement,” Dayen writes. The Times appears to be the only one of the major news outlets to provide an infographic breaking down the settlement amount, which a story like this cries out for. Some more interesting tidbits: a chunk of the cash portion of the settlement is to go to the states, and according to Dayen they will use at least some of that money to fund legal aid services for borrowers facing foreclosure; he also reports that Oklahoma’s attorney general isn’t participating in the settlement, because he doesn’t think the banks should be penalized at all. Since we’re quoting so profusely from his post, we should also acknowledge that Dayen regards the settlement as still overly broad in releasing banks from liability, and still insufficient in compensating borrowers. As other consumer advocates probably will, too. Wall Street Journal, Financial Times, New York Times, Washington Post, Politico.

Credit unions are an aggressive bunch. As if their heavy-handed push to expand into prohibited business lending wasn't enough, it now seems they are adding on another power grab to increase their ability to raise supplemental capital and support investors.

Rather than try to make money market funds safer, David Merkel essentially wants everyone to recognize and admit and deal with the reality that they aren’t safe.

In an improving economy, many of the policies and procedures that were imposed on banks in 2008 have become counterproductive, and are hurting rather than helping the industry.

Receiving Wide Coverage ...Double Duty: Fed chairman Ben Bernanke defended the central bank’s dual mandate — control inflation and unemployment — in testimony before Congress. He reassured Republican lawmakers that the Fed is balancing the two goals rather than giving employment a higher priority. New York Times, Washington Post