Receiving Wide Coverage ...
HSBC Settlement Redux: Wednesday was the tail end of the HSBC money laundering news cycle, with major papers scrutinizing the bank's $1.9 billion deferred prosecution agreement with the U.S. According to the 21 law enforcement officials, the bank's misconduct was egregious, sustained, and possibly willful. (Either that or nobody noticed when people started regularly showing up at Mexican HSBC branches with boxes of cash that fit precisely through the holes in the teller windows.) But HSBC's behavior wasn't termed criminal, because the government decided that there would be too much collateral damage and opted for a "deferred" prosecution. The FT delves into the terms of the deal more deeply than its U.S. counterparts, reporting that HSBC will spend "$700 million on a global "know your customer" program, one of 26 points of a compliance agreement. Click on any of the links in the paragraph above and you'll find HSBC chief Stuart Gulliver apologizing.
The Times editorial board hates the settlement, and suggests that any company too big to indict should probably just be broken up.
The FT doesn't like it either, arguing there's something wimpy and unfair about enforcement actions that are paid for entirely out of shareholder funds. "Investors have only a limited ability to look over the shoulders of those they hire," the paper writes. "For managers to escape with bonuses that were based on bogus revenues would create a perverse incentive."
Wall Street Journal
Late 1970s economic research at MIT had better have been good, because it's now the go-to playbook for the world's central bankers, the Journal reports. At "secret" meetings in Basel every two months (meaning unrecorded) central bankers from the U.S., the U.K., Japan, China, India Israel and other countries talk shop — and generally agree that loose monetary policy is a good if somewhat risky strategy. Much of the policy is informed by influential members' time at MIT, which the Journal notes in a separate story produced an "activist" collection of "New Keynesians" that believed central banks could shape market expectations and thus markets. There are limits to their powers somewhere, a curmudgeonly Bank of International Settlements official declares: "Central banks cannot solve structural problems in the economy.... We've been saying this for years, and it's getting tiresome."
The Federal Reserve has been privately warning U.S. mega-banks not to pursue sizable acquisitions. Capital One was told not to acquire anything more after picking up HSBC's card unit and ING Direct's U.S. operation in short order, and Federal Reserve Board Governor Dan Tarullo has publicly called for "a strong, though not irrebuttable presumption of denial" for any acquisition by a global systemically important financial institution. This fits in with the biggest banks' higher capital buffers, too — did anyone really think that additional growth would go over well with regulators?
A former MF Global trader is likely heading to jail after a guilty plea. No, this isn't about that kerfuffle in which MF Global mishandled and lost billions of dollars in customer money — nobody's going to jail for that — it's about a guy who "jostled" the wheat markets in 2008.
The Treasury Department may be clearing out of AIG Group, but it's still holding some dog and cat small bank TARP investments, the paper reminds everyone. Recent government stakes have been sold at a loss, and the pace of auctions has been revved up over the last four weeks. Did something happen in early November that might have made the government more willing to publicly take its medicine?
"Libor Dragnet Snares Three Men in U.K.," the Journal announces in a headline that could would have more accurately read "UK Officials Ask Three Men to Come in for Questioning." Thomas Hayes, a former UBS and Citigroup trader who's alleged to have coordinated Libor manipulation, was among them.
Chinese banks have been shoveling high-yield wealth management products onto customers in advance of a year-end mandate to raise their deposits. There's now more than $1.2 trillion of the securities outstanding.
New York Times
An extension of the Transaction Account Guarantee Program has moved forward in the Senate. Small banks have pleaded for it to be sustained beyond the end of the year and the administration supports doing so, but the effort's probably doomed in the House, assuming it even gets there.
2013 is all about the implementation of Dodd Frank, A Dealbook column says. (And the end of the year is all about roundup stories.) Derivatives dealer registration has to be finished by Dec. 31, and the haggling over regulation will be less about policy design than putting rules into practice, the Times says. We're confident there's plenty of both haggling varieties left to do, however.