Another Fed contrarian considered for board; Deutsche’s AML glitch

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Change agent
President Trump is considering nominating “longtime Fed critic” Judy Shelton to the Federal Reserve Board, putting her in “a leadership role at an institution she would like to drastically change.” Shelton, a former campaign advisor to candidate Trump, is director of the European Bank for Reconstruction and Development.

“She has regularly praised Mr. Trump’s economic policies, and now favors near-zero interest rates, a position likely to curry favor with the president,” the New York Times says.

“If nominated and confirmed, Ms. Shelton said her main objective would be to scrap the way the Fed currently implements its monetary policy decisions,” the Wall Street Journal reports.

“What bothers me most about the way the Federal Reserve currently operates is more the mechanism,” she told the paper. “We can talk about whether rates should go up or down. I would like to see more market-determined rates.”

Separately, the president plans to promote Brent McIntosh, the Treasury Department’s general counsel, to become its undersecretary for international affairs, essentially its top financial diplomat.

Guilty plea
Detelina Subeva, a former vice president at Credit Suisse, pleaded guilty to federal money laundering charges. Two other Credit Suisse bankers have also been charged in the scheme involving $2 billion of debt issued by Mozambique.

“Prosecutors accused the trio of working with Mozambique’s former finance minister and a representative of Privinvest, an Abu Dhabi-based shipbuilder, to siphon bribes connected to the debt. The loans imploded not long after being sold on to global investors.”

Financial Times

Pay protest
Shareholder support for JPMorgan Chase’s executive compensation policies dropped sharply at the bank’s annual meeting, falling to less than 72% approval compared to 93% last year, the “worst ‘say on pay’ result the company has faced since 2015.” That “significant shareholder revolt” contrasts with the more than 90% approvals at rivals Goldman Sachs and Citigroup.

That 72% approval vote included CEO Jamie Dimon’s $31 million pay, “just above the 70% threshold that is viewed as a minimum by corporate-governance experts.”

American Banker reports, "An advisory firm criticized the bank's policy as too subjective."

Proxy challenge rejected
Chairman Vernon Hill and the rest of Metro Bank’s board “largely avoided major protests over their reappointments” at the under-fire British bank’s annual meeting. Approximately 88% of shareholders voted in favor of Hill’s re-election, the company said. “Advisory groups and investors including Metro’s largest European shareholder had called for Mr. Hill to be removed as chairman, but the company’s loyal U.S. shareholder base largely backed the company.” However, shareholders “issued a rebuke” to the heads of the bank’s audit and risk oversight committees, as more than a quarter of voters opposed their reappointments.

Glitch discovered
Just one day “ahead of a potentially tumultuous shareholder meeting,” Deutsche Bank said its employees last year found a software glitch in the bank’s anti-money laundering software “that for almost a decade prevented the flagging of some potentially suspicious clients’ payments to law enforcement authorities.” However, the bank “is currently assessing the potential fallout of the software glitch ... and so did not know how many, if any, suspicious transactions were not flagged to authorities. As the bank has several overlapping systems in place, it is possible that dubious transactions missed by one were still caught by another.”

The bank’s “alleged failure to submit suspicious activity reports on transactions by companies associated with President Trump and son-in-law Jared Kushner loomed over a Senate Banking Committee hearing Tuesday meant to discuss efforts to reform anti-money laundering laws.”


Under my thumb
Comptroller of the Currency Joseph Otting plans to “invoke a little-known law” to put Wells Fargo’s CEO candidates through a grueling screening process “that could rival that of top U.S. government officials. “The CEO candidate must complete a 17-page document detailing their work history, qualifications, finances and business dealings. They must also agree to hand over their tax records, provide copies of their fingerprints and possibly submit to a background check, according to public OCC documents.” The OCC review is “so unusual because Wells Fargo, the nation’s fourth-largest lender, is both financially sound and so big.”


“Finding a new CEO was going to be difficult before, but this has made it even harder. The difficulty was upped to 10.” — Isaac Boltansky, director of policy research at Compass Point Research & Trading, about the OCC’s involvement in vetting Wells Fargo’s choice for its next CEO

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Crime and misconduct Compensation Consumer banking AML Joseph Otting Wells Fargo