Breaking News This Morning ...
B of A Earnings: Bank of America continued the mixed bag of big bank earnings this morning, reporting an increase in third-quarter profit due to improved credit quality, which offset weak fixed income and a decline in mortgage revenue. Wall Street Journal, New York Times, Financial Times
Receiving Wide Coverage ...
U.S. Default Looms: Senate talks have resumed after a House proposal to end the fiscal crisis failed, and the U.S. edges closer to default. Yesterday, Fitch Ratings warned that it could downgrade the nation's credit rating, should the government shutdown continue. Big picture coverage is here: New York Times, Wall Street Journal, Washington Post
Another Day, Another 'Whale' Fine: Anonymice are telling their favorite news outlets that JPMorgan Chase has agreed to pay the Commodity Futures Trading Commission $100 million to settle "London Whale" allegations. Scan readers will recall the CFTC was not part of the $920 million "Whale" settlement the bank struck with U.S. and U.K. regulators last month. The CFTC settlement, like the broader one, does contain an admission of guilt. In this instance, JPM will admit the trade violated a Dodd-Frank law preventing banks from recklessly using a "manipulative device" in the credit derivatives market. This is the first time the CFTC has used the Dodd-Frank authority. According to the Times, the deal could "set a precedent that potentially exposes a bank to scrutiny whenever it builds a huge trading position that alters the market." However, the article also reports that the admission of wrongdoing is worded carefully enough to provide "the bank some cover from private litigation." Still, JPM's "Whale" woes may not be over. Two former traders involved in the $6 billion trading loss have been indicted and the Securities and Exchange Commission is continuing its civil investigation into JPM employees connected to the matter. Also on deck for the bank, though decidedly less 'Whale'-related, is the Justice Department's reported $11 billion fine attached to a mortgage-backed securities probe. The CFTC's settlement could be formally announced as early as today, but may face a few setbacks, given the ongoing government shutdown. Wall Street Journal, Financial Times
Citi Earnings, Take Two: Now that analysts and news outlets have had some time to review Citi's lackluster third-quarter earnings, a few new takeaways have emerged. Forbes blogger Maggie McGrath notes that light profits could lead to more cost-cutting in the future, while American Banker's Maria Aspan reports the results reveal some lackluster consumer bank prospects. The FT's Lex column summarizes: "The restructuring story at Citigroup is moving along, but the volatility of capital markets and the global economic slowdown meant there was no growth story to accompany it." The results have earned CEO Michael Corbat some scrutiny. "Mr. Corbat needs to demonstrate that the overall disappointing third-quarter showing is a one-off," writes Breakingviews columnist Antony Currie. But others, including MarketWatch's David Weidner think Corbat (and, yes, even ousted predecessor Vikram Pandit), still deserve some credit. "If Citi's stock is down today it's simply because the bank failed to perform to what are becoming increasingly optimistic expectations," he wrote in a column on Tuesday. "Citi is being held to a standard it could never hope to meet before. It may not be there yet, but it's getting closer."
Senior U.S. bank executives are not in favor of the "light-touch regulatory regime proposed for Chinese banks" by U.K. Chancellor George Osborne. Says one unnamed American banker: "It is extraordinary to treat Chinese banks differently It's very inconsistent. This is just a crazy lovefest."
New York Times
Deal Professor Steven Davidoff looks at an attempt by "pro-corporate forces" to end shareholders' ability to sue companies for securities fraud that hinges on a case that could be reconsidered by the Supreme Court. "For good or bad like so many other issues before the Supreme Court these days the opponents need only one more vote to change everything," he concludes.
A profile in the New Yorker of Twitter founder (and American Banker's 2012 Innovator of the Year) Jack Dorsey features some insights into the thinking beyond his other creation, payments startup Square. The insights come toward the end of the 11-page profile, but here's a highlight: "The service had to compete with other Internet payment companies, but the biggest such firm, PayPal, had a lackluster interface, and seemed an easy target. Dorsey knew that choosing a good name was key. First, he and his team called the service Squirrel, with its suggestion of small-bore savings, and made the credit-card reader in the shape of an acorn. 'A cute idea, but probably not a great one,' Dorsey says. The device was renamed Square, and reshaped accordingly."