Buffett offers Wells CEO advice; Leveraged loans again sparking fear
Receiving Wide Coverage ...
White House officials are standing behind Herman Cain, one of President Trump’s stated choices for open Federal Reserve Board seats, despite warnings by Cain over the weekend “that he expects renewed scrutiny of sexual-harassment allegations against him,” referring to charges that forced him to drop out of the presidential race in 2011. “You better believe that the people who hate me, who do not like conservatism and Republicans are already digging up all the negative stuff that’s in storage from eight years ago. So be it. Let them dig up eight-year-old stuff,” Cain said.
At the same time, Trump’s “renewed public demand for easier monetary policy has injected a further political dimension into decision-making at a Federal Reserve that is anxious to display its independence,” the Financial Times comments. “The president’s willingness to trample over the Fed’s independence will only make the next decision more vexed given central bankers’ desire to prove they are not being steered by politicians.”
“What makes Mr. Trump’s approach to the Fed so unusual is that he has repeatedly, publicly undermined a Fed chief he appointed (Jerome Powell), and, if successful, he would put two officials with a background in partisan politics in the inner sanctum of Fed policymaking,” said the New York Times, referring to Cain and Stephen Moore, another conservative Trump wants on the Fed.
By nominating Moore and Cain, “Trump means to remake the 105-year-old agency into a partisan tool,” Washington Post charges. “Were Trump to fill the board with partisans, the Fed’s prestige would collapse, and so would its ability to implement policy. The Senate must stop Trump from ruining a great and vital institution.”
When Nordic banks like Danske Bank and Swedbank expanded into Baltic countries about 20 years ago, “the Baltic countries were positioning themselves as financial bridges between Russia and the EU. The very same business, however, has now become a career-ending embarrassment as an extraordinary money laundering scandal involving Russian and other ex-Soviet oligarchs and criminals slowly spills its secrets. Not only are the revelations damaging Nordic banks and their regulators but also hurting the reputations of entire countries.”
The New York Times offers its own take on the Scandinavian bank mess.
Separately, Commercial Bank of Ivanovo, a regional Russian bank in which former North Carolina Rep. Charles Taylor has an 80% stake, had its license revoked for violations including breaking money laundering rules.
Wall Street Journal
The Consumer Financial Protection Bureau has begun requiring issuers of prepaid cards to guarantee customers the same basic protections from fraud, unauthorized charges and errors as bank debit card customers enjoy.
Outside the box
Warren Buffett, Wells Fargo’s largest shareholder, said the bank needs to find its next CEO from somewhere other than Wall Street. “They just have to come from someplace [outside Wells] and they shouldn’t come from Wall Street,” Buffett told the paper. “They probably shouldn’t come from JPMorgan or Goldman Sachs. There are plenty of good people to run it [from the Wall Street banks], but they are automatically going to draw the ire of a significant percentage of the Senate and the U.S. House of Representatives, and that’s just not smart.”
Separately, American Banker's Kate Berry discusses the differences between the bank's "public and private reactions."
An “elite” London law firm hired by UBS to look into a rape allegation at the bank is being “scrutinized” by the U.K.’s Solicitors Regulation Authority for allegedly failing to disclose its full relationship with the bank to the complainant. The lawyers’ group “is looking into complaints” that the law firm “did not properly explain” to the woman, a graduate trainee at UBS at the time of the alleged incident, “that evidence she turned over to the firm would be reviewed by UBS, and that its findings would be subject to legal privilege, which keeps advice between lawyers and clients confidential, meaning she would not see a full and final version. The woman has since filed an employment claim against UBS for sexual harassment, sex discrimination and victimization as a result of whistleblowing.”
The governor of the Bank of France wants the European Union to loosen capital requirements on banks in the region in order to facilitate mergers. The comments by François Villeroy de Galhau “come as the issue of banking consolidation has resurfaced in Europe — after almost a decade without major deals in the sector — prompted by merger talks between Deutsche Bank and Commerzbank in Germany.”
Branch International, a start-up that wants to “become the first provider of financial services to the emerging middle class in developing markets, who are underserved by traditional banks,” has raised $170 million in a financing, part of an alliance with Visa.
New York Times
Equifax CEO Mark Begor tells the paper he wants his company “to be the most consumer-friendly credit reporting agency.” Should you believe him? “Not yet at least,” the paper says. “But given how rare it is to hear from him and his brethren at Experian and TransUnion, it’s worth hearing him out.”
Fearing a repeat
Financial deregulation that “paved the way for banks and other financial companies to issue more than $1 trillion in risky corporate loans” is “sparking fears that Washington and Wall Street are repeating the mistakes made before the financial crisis. Now, regulators and even White House officials are struggling to comprehend the scope and potential dangers of the massive pool of credits, known as leveraged loans, they helped create.”
“It’s more overtly political than anything we’ve seen since at least the ’80s, and historically when we’ve had political appointments and interventions in the Fed, there have been unintended consequences that last. It may be expedient in the near term, but what’s good for the next year or two may not be good for the next decade.” — Julia Coronado, president of MacroPolicy Perspectives, about President Trump’s intention to name two supporters to the Federal Reserve Board.