Receiving Wide Coverage ...
Shutdown Showdown: News outlets are heavily focused on a looming government shutdown as political tensions resulted in a Congressional stalemate just ahead of tonight's deadline to avert closure of non-essential government offices. The House did pass legislation over the weekend that would keep the government open through mid-December, but it includes provisions that would delay implementation of the Affordable Care Act for one year. Democrats have already indicated they will strip out these measures when the Senate reconvenes today. This will leave GOP leaders with "a stark choice," the Washington Post notes, "approve the simple funding bill the Senate has already passed or permit federal agencies to close." (The Wall Street Journal has put together a roundup of what services could be suspended on Tuesday if no agreement is reached.) A shutdown would set the stage for a battle over the debt ceiling, which must be raised by mid-October or else the U.S. risks defaulting on its debt. Economists "remain fearful of the fallout" from a prolonged government shutdown and potential default. "If the disagreements persist, the reaction in the markets is likely to become much more pronounced as Oct. 17 draws closer," Dealbook reports. More big picture coverage can be found here: Wall Street Journal, New York Times, Financial Times
Wall Street Journal
Regulators are allowing weak (or "significantly undercapitalized") banks to stay open longer before stepping in to shut them down. This "go-slow approach can prompt banks' management to take extreme risks to survive and can lead to bigger price tags for the government if they ultimately fail," industry experts tell the paper. A spokesman for the OCC says the agency has had "considerable success" in giving banks additional time to return to health. The article highlights Capitol Bancorp, a bank holding company hard hit by the recession that has seen five of its banks closed since May, as an example.
A new report suggests tighter mortgage standards are holding back economic growth and "the government is partly to blame."
JPMorgan Chase, Goldman Sachs, Barclays and Credit Suisse are planning to build a platform that would pool vital client data for banks, broker-dealers, asset managers and hedge funds in an effort to combat heightened compliance costs. The platform would be run by a third party, the Depository Trust and Clearing Corporation. "The announcement underscores how slashing costs and improving compliance amid a string of new rules has risen close to the top of investment banks' concerns," the paper notes.
Legal costs and a decline in trading revenue have led earnings estimates for the top five Wall Street banks to drop by $1 billion. Leading the decline is you guessed it JPMorgan Chase. "Its growing legal bills alone are expected to add $2 billion in costs when it kicks off the banks' earnings season on October 11," the paper notes.
U.S. issuance of risky collateralized loan obligations has reached its highest level since before the financial crisis. The news comes just as the head of the Basel Committee on Banking Supervision tells the FT that rules on securitized products "could well be softened as part of a second look at the instruments."
Scandals and their resulting regulatory fines (see: JPMorgan and the Whale) are leading financial firms to bring back "safe and boring" compliance controls. "At this point, investors might well be asking why these companies did not put the proper controls in place to begin with," columnist Brooke Masters writes.
New York Times
Dealbook previews the Securities and Exchange Commission's insider trading trial against celebrity billionaire Mark Cuban, set to begin today in a Dallas courtroom. "A victory in Mr. Cuban's case might further embolden the SEC as it seeks to hold individuals accountable at trial," the article notes.