Receiving Wide Coverage ...
Probe of Banks' Commodities Role: It is apparently not enough that banks are winding down some of their commodities operations to evade scrutiny over alleged price manipulation. It was widely reported Monday that the Commodity Futures Trading Commission issued subpoenas to institutions with subsidiaries that store and deliver aluminum, seeking documents as part of an investigation. "The subpoenas come," according to the Wall Street Journal, "amid heightened scrutiny of Wall Street's involvement in commodity and energy markets." The paper also reported another move by a big firm, this time Morgan Stanley, to reorganize its commodities business. The Times, citing two sources, said the CFTC requests "seek all internal documents, e-mails, correspondence, voice recordings and other records concerning the warehouse operations dating back to January 2010." The FT reported that the CFTC inquiry corresponds with a potential ruling by the Federal Reserve on whether firms "should be allowed to continue owning physical commodity assets."
Online Payday Suit: Like other states, authorities in New York are continuing their pressure on online payday lenders. A lawsuit filed by New York's attorney general, Eric Schneiderman, alleges exorbitantly high interest rates charged by Western Sky Financial LLC a firm with ties to an American Indian tribe and its affiliates. Meanwhile, 16 tribes that offer short-term online loans told state banking regulator Benjamin Lawsky that they would not comply with cease-and-desist orders issued last week. Wall Street Journal, New York Times
Persistent Big-Bank Legal Troubles: The Times revisited the significance of a looming Securities and Exchange Commission settlement with JPMorgan Chase over the bank's "London Whale" trades, in which the agency is attempting to get the bank to take the unprecedented step of formally admitting blame as part of the deal. The settlement could make such trades "live on in the annals of notoriety, if the" SEC "can extract an admission of wrongdoing from the bank." The Journal's "Heard on the Street" examined the continual "legal cloud" over big banks related to how they sold off subprime mortgage debt. "Many investors had hoped such legal charges would dwindle as the crisis receded further, especially since the top three U.S. banks by assets have booked about $35 billion in litigation expense from 2010 to 2012."
Wall Street Journal
A detailed profile of Fed Vice Chairman Janet Yellen who with Larry Summers are the two top candidates to run the central bank when Ben Bernanke leaves said even though the regulator has "evolved" into a supporter of tougher rules on banks, "critics note that she had a front-row seat for some of the turbulence that sent the economy into a tailspin and could have done more to prevent rampant real-estate speculation." While Yellen has received more attention for her views on monetary policy, her positions are less known when it comes to bank supervision. That "contrasts" with Summers, who has "long called" for a simpler regulatory structure.
The Public Company Accounting Oversight Board is expected Tuesday to propose tougher rules that expand what auditors must reveal to investors about companies they are evaluating. "Regulators and industry critics say investors need more information from auditors about matters such as whether a company's accounting is aggressive, and what auditors think are the most important features of a company's finances."
New York Times
The paper connected the dots of stakeholders affected by the sale of a toxic mortgage bond sold by Goldman Sachs in 2007. The bond "still lives," leaving "its mark on ordinary borrowers" as well as the "bankers who sold the deal" and even taxpayers "who ended up owning a large slice of the Goldman bond." Even though big banks are now reporting profits years later, "the financial crisis still reverberates for many others, in large part because of the insidious reach of the financial products that Wall Street created. Subprime securities still pose a significant legal risk to the firms that packaged them, and they use up capital that could be deployed elsewhere in the economy."
SAC Capital Advisors "quietly shuttered" Parameter Capital Management, a stock trading subsidiary, as the hedge fund is "adjusting to life as a criminal defendant." Parameter recently liquidated all of its investments and by Monday "its phone lines were disconnected and its e-mail addresses defunct."
Columnist Joe Nocera had these simple words for policymakers, including President Obama, developing a new housing finance scheme: "Don't Kill Fannie Mae." Responding to Obama's housing speech that he gave last week in Phoenix, Nocera said it is just wrong to blame Fannie and Freddie Mac for the 2008 housing mess. Proposals to wind down the mortgage giants amount to "capitulation," Nocera said, while the truth is that the two companies had initially declined getting involved with subprime mortgages. "When the banks first jumped into subprime mortgages, Fannie and Freddie hung back. Only after they began losing significant market share did Fannie and Freddie decide, belatedly, to get into the game. Because they were so thinly capitalized, they had almost no cushion when the losses began to pile up."