Wall Street Journal

Bank of America is accelerating its job cuts, aiming to trim 16,000 positions by the end of the year, according to a front-page story in the paper.

U.S. prosecutors have asked the banks under investigation in the Libor affair to sign "tolling" agreements, in which they promise not to challenge any enforcement actions on the grounds that the five-year statute of limitations had expired. Why would the banks agree to waive a defense against charges not yet filed? Because refusing might provoke the authorities "into filing charges simply to beat the clock, according to people close to the investigation" (who bravely relayed this threat through the press without attaching their names to it). "Any government enforcement actions could provide powerful added ammunition for a number of private lawsuits." An offer the banks can't refuse, as it were.

Columnist David Weidner looks at the hundreds of "zombie" banks that have yet to pay back their Tarp funds, some of which have skipped dividend payments. He focuses on the struggling Saigon National in Orange County, Calif., "the first national bank chartered and owned by Vietnamese-Americans."

In an op-ed, Rep. Randy Neugebauer (R-Tex.) depicts the CFPB as an unaccountable money pit. It pays 60% of its 958 employees six-figure salaries, but "Congress can't really tell how else the agency's money is spent."

"Mortgage lending declined to its lowest level in 16 years in 2011 amid weak demand for mortgages and tighter lending standards," the annual Home Mortgage Disclosure Act data showed.

Financial Times

FDIC board member Tom Hoenig worries that QE3 will encourage banks to take undue risks by taking on higher-yielding, longer-duration assets in an environment of super-low interest rates. (Another Tom — Tom Day, from SunGard — raised this issue during American Banker's recent Risk Management Roundtable; he talks about it in the last video clip here and at the end of this story.)

New York Times

That the tax code lets businesses deduct interest payments on debt but not dividend payments on equity, encouraging leverage, is a well-known "distortion," but the special benefits this confers on banks are underappreciated, writes columnist Jesse Eisinger. Banks not only "gorge" on cheap borrowing themselves but also enjoy a reliable earnings stream from underwriting bonds, an "underpriced and overconsumed" type of financing, for corporate customers, he argues. Presumably, when he speaks of "the nation's banks" he means the large, diversified kind, and/or investment banks, not the thousands of community banks that don't underwrite securities and whose employees are undoubtedly bristling at being lumped in once again with "Wall Street" (though thankfully that fuzzy catch-all isn't used in the article). Then again, maybe the same tax incentives apply to the local restaurateur taking out a six-figure loan from the corner bank as to Caterpillar floating a multimillion-dollar bond issue? Taxonomical nitpicks aside, Eisinger makes a fair point about the tax code's favoring of debt over equity. We'd just caution that incentives aren't always clinchers. As one Times reader commented, "If I don't care about anything but the cost of capital I will choose 100% debt every time. It's just much cheaper [than equity], and it will be cheaper whether I get the tax benefit or not." But given the risks inherent in overleveraging, "it's a damn fool CFO who is making capital stack decisions based purely on how much he/she can save in interest tax benefit."

Washington Post

Chase's online banking site suffered outages a day after the same thing happened to Bank of America.

Oboy. A government mortgage aid program may have paid more than $1 billion in false claims, according to HUD's inspector general. That would be more than half the total claims paid under the Preforeclosure Sale Program, which covered the deficiencies for some 20,000 short sales on FHA-backed loans from 2010 to 2011. To qualify, you had to be living in the home and prove you can't afford the loan. But in the sample of 80 random cases the IG looked at, HUD "paid claims to a dozen borrowers who did not occupy the properties they defaulted on, and it gave money to four homeowners who had at least $5,000 in cash." The report faulted participating lenders for failing to check expenses claimed by the borrowers against the bank statements they provided. On the bright side, the inspector general said, the final cost to the FHA (read: taxpayers) is probably less than that $1 billion estimate, since at least some of these loans would have otherwise gone into foreclosure. Six of one, half a dozen of the other?

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