Consumer banking buoys earnings; Facebook faces a hostile Senate

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BofA earnings
Consumer banking and wealth management boosted Bank of America's profit, which rose 8% in the second quarter.

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Consumers rule
Second quarter results from JPMorgan Chase, Goldman Sachs and Wells Fargo “showed slowing loan growth and declining net interest margins.”

But while core lending took a hit, the retail lending business looked good, “as U.S. consumers are taking advantage of low interest rates to borrow and spend, boosting banks that cater to Main Street and leaving behind those that don’t. Booming consumer businesses drove quarterly profits” at JPM, Wells and Citigroup, “while trading and deal fees shrank. The results show American consumers are more upbeat about the economy than businesses and institutional investors.”

“The consumer in the United States is doing fine,” JPM CEO Jamie Dimon said. “The business sentiment is a little bit worse.” Wall Street Journal, Financial Times here and here, American Banker

Unfriendly confines
Facebook faced a mostly skeptical if not hostile Senate Banking Committee on Tuesday as it continued to seek approval to launch its own digital currency, Libra. Sherrod Brown of Ohio, the ranking Democrat on the panel, said the company “had repeatedly broken the public’s trust and should not be trusted to run a digital currency.”

“The last thing we need is to concentrate even more power in huge corporations,” Brown said. “Look at Facebook's record. We’d be crazy to give them a chance to experiment with people's bank accounts; to use powerful tools they don't understand like monetary policy; to jeopardize hardworking Americans ability to provide for their families.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker, Coindesk

Two days after it announced its digital currency plans, Facebook “presented a 12-page white paper to more than a dozen officials from the Treasury Department, the Securities and Exchange Commission and other agencies,” the Washington Post reports. “Some of the regulators came away from the meeting stunned that Facebook wasn’t more prepared to address concerns about money laundering, consumer protection and other potential financial risks caused by Libra. The early encounter shows how Facebook, despite several years of run-ins with policymakers, is paying the price in Washington for the lack of trust resulting from its many privacy scandals.”

Facebook’s troubles are “rubbing off on bitcoin,” whose value has recently dropped by nearly a third to $9,300 from more than $13,000 just a week ago.

Wall Street Journal

Smoother sales
The Federal Deposit Insurance Corp. proposed lessening disclosure requirements to make it easier for banks to sell pools of residential mortgages “as part of an effort to spur competition in a market dominated by government-backed entities such as Fannie Mae and Freddie Mac.”

“The proposal we are considering today would remove one potential obstacle that [banks] face in providing mortgage credit to homeowners,” FDIC Chairman Jelena McWilliams said. “With respect to any concerns that this could lead to a repeat of practices that contributed to the financial crisis, regulatory requirements are dramatically different today.”

The FDIC also voted 3-1 to give large banks more time to comply with new rules that force them to keep better track of insured deposits.

Thrown for a loss
KeyCorp said it recently detected fraudulent activity by one of its business customers last year that could cost the bank as much as $90 million. The bank said “it is investigating the activity to determine the potential exposure” and “that it plans to pursue all available sources of recovery and other means of mitigating the potential loss.”

Financial Times

The lure of the green
Deutsche Bank is paying “danger money” to lure 13 bankers in Italy from Credit Suisse “as the troubled lender seeks to increase its wealth management business even as it has been forced to make dramatic cuts to its staff elsewhere.”

Stefan Simon has swiftly “become one of the most influential figures at Deutsche Bank.” His new role as head of legal and regulatory affairs, which makes him one of the nine members of the bank’s executive board, “will be pivotal for a lender with a reputation battered by misconduct and shortfalls in compliance and anti-money laundering.”

Quotable

“They are like a toddler who has gotten his hands on a book of matches. Facebook has burned down the house over and over and called every arson a learning experience.” — Sen. Sherrod Brown of Ohio, the ranking Democrat on the Senate Banking Committee, on Facebook’s plan to launch a digital currency

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