Breaking News This Morning
Sold for a buck: Banco Santander, Spain's largest bank, said it will pay a nominal €1, about $1.12, to rescue troubled rival Banco Popular (not the one in Puerto Rico), while raising another €7 billion, or about $7.9 billion, to strengthen its balance sheet. The takeover is the first test of new European Central Bank rules to save banks that are "failing or likely to fail." Wall Street Journal, Financial Times here and here, New York Times
Receiving Wide Coverage ...
Cordray in contempt?: A Republican staff report for the House Financial Services Committee says Consumer Financial Protection Bureau Director Richard Cordray didn't cooperate with the panel's investigation into the Wells Fargo phony accounts scandal and recommends Congress investigate him for contempt. The report said Cordray failed "to honor his legal obligation to produce all records responsive to the committee's subpoena," creating "an impasse" in the Wells probe. It also recommended that the committee issue subpoenas to CFPB employees as part of its investigation into Cordray's behavior. Wall Street Journal, American Banker
It didn't start with Wells: Separately, the Justice Department filed a friend-of-the-court brief in a 2011 whistle-blower lawsuit brought by two former employees of banks that were later acquired by Wells. The two men, who worked at Wachovia and World Savings, charged that the banks engaged in mortgage improprieties and hid billions of dollars in losses from federal regulators.
"The government's filing adds heft to a long-running case that involves behavior that predates the 2008 financial crisis and the sham-accounts scandal that came to light at Wells Fargo last year," the New York Times said. "Although the Justice Department's filing does not opine on the whistle-blowers' claims, it argues that an appellate court should revise the analysis it made when it dismissed the case last year."
Wall Street Journal
VC partner: International Finance Corp., the World Bank's investment arm, is investing $3 million in LMRKTS LLC, a New York startup founded by former traders to help banks reduce their financial exposure to each other. "The project, which focuses on currency trading for emerging-market banks, is part of a recent surge of investment into startups aiming to offer tools to help manage the cost and complexity of trading," the Journal said. "But unlike the Silicon Valley venture-capital money pouring into consumer-facing 'fintech' startups, most of the funding for these firms is coming from bankers or other parts of the existing financial system," including the World Bank.
What, me worry?: Bitcoin hit another all-time high of $2,967 on Tuesday, and has now nearly tripled since the beginning of the year. So a correction would seem inevitable and reasonable, right? "The currency's backers don't necessarily disagree," the Journal writes. "They just don't care."
Another close call: Royal Bank of Scotland settled another lawsuit at the eleventh hour on Tuesday, this time agreeing to a £200 million settlement with about 9,000 shareholders. The settlement once again spared former CEO Fred Goodwin from appearing in court. The shareholders claim that the bank misrepresented the state of its health when it sold a rights issue in 2008, just before it nearly failed and was rescued by the British government, causing the shareholders to lose most of their investment.
New York Times
Unwise move: Mark Roe, a professor at Harvard Law School, says a House proposal to allow failing banks to file for bankruptcy, rather than be wound down or restructured by regulators, is a "dangerous action" that "risks turning a tumultuous bank failure into a deep and full financial crisis, like that of the 2008-9 financial panic. Bankruptcy alone cannot handle a financial crisis emanating from collapsed banks," he writes.
"Adding a robust bankruptcy channel makes much sense," he adds in the op-ed piece. "But repealing the regulatory-led system and replacing it with bankruptcy is unwise. Replacing it with the narrow, limited bankruptcy structure moving forward in the House is exceedingly unwise."
"This is probably the third or fourth bubble, if you want to call it that, in digital currency that we've gone through." — Brian Armstrong, founder and chief executive of Coinbase.