Retreat: Deutsche Bank reported a 79% drop in first quarter net income and said it will shrink its U.S. investment bank, “effectively abandoning its ambition to be a member of Wall Street’s big leagues.” It would instead focus on its European business.
“The decision, which comes after years of losses, scandals, and management turmoil, ends a 20-year quest by Germany’s largest bank to compete eye to eye with the likes of Goldman Sachs and JPMorgan Chase,” the New York Times says. Wall Street Journal, Financial Times, New York Times
Receiving Wide Coverage ...
Back in trouble: The Federal Trade Commission accused LendingClub of hiding fees and removing money from customer accounts without their permission. The agency sued the company in federal court in California alleging the lender charged borrowers more than $1,000 to take out loans despite advertising “no hidden fees.” LendingClub’s shares plunged 15% to an all-time low of $2.77 and are down nearly 33% so far this year. The FTC has been looking into LendingClub’s business practices since May 2016 after former CEO and founder Renaud Laplanche left the company amid a loan-selling scandal. Wall Street Journal, Financial Times, American Banker
American Express received Chinese government approval to become the first U.S. card network to offer payments services in China after forming a joint venture with a Chinese mobile-payment provider. “Obtaining such regulatory consent marks an important, if only an initial step toward gaining a foothold in China’s fast-growing electronic-payment market,” the Wall Street Journal notes. “AmEx’s decision to take on a Chinese partner — instead of forming a wholly owned entity — shows the difficulties foreign firms face in going solo in a market where the government holds sway. Barriers to foreigners have been high for so long that Chinese institutions now thoroughly dominate many sectors, especially in finance.”
Don’t call them payday loans: Comptroller of the Currency Joseph Otting said his agency wants to loosen rules to make it attractive for commercial banks to make short-term, small-dollar loans rather than force consumers to turn to high-rate payday lenders. “Banks have historically shied away from providing unsecured loans to cash-strapped consumers, complaining that tough rules on underwriting — and the negative publicity of providing loans with very high effective annual interest rates — made the business more trouble than it was worth,” the Journal notes.
“If we can get people back into the regulated market, that will be better for them and the economy,” Otting said at an American Bankers Association conference.
Otting’s financial disclosure form prior to his being confirmed last November is raising questions that he may have bought shares in some banks while going through the congressional vetting process. His most recent disclosure shows he sold shares in Wells Fargo, Goldman Sachs and Morgan Stanley in January but earlier forms don’t show any stakes in those banks, indicating he may have bought them after he was nominated earlier last year.
Wall Street Journal
Awkward timing?: Is now the right time to be pushing for more financial deregulation? The paper has some doubts. “Deep into an economic boom with asset prices near records is when you’d expect the U.S. financial system’s guardians to tamp down risk-taking,” the paper says. “Instead, federal regulators and legislators are doing the opposite — watering down, narrowing or declining to enforce rules passed after the financial crisis. The deregulatory push could aggravate excesses that come back to haunt the economy in its next downturn.”
Playing by the rules: Gemini, the bitcoin exchange founded by Cameron and Tyler Winklevoss, has signed an agreement to use Nasdaq’s surveillance software to monitor trading for any abusive or fraudulent practices just as regulators have increased their surveillance of digital-currency exchanges. “We’re doing this because we believe in the importance of creating a rules-based marketplace,” said Cameron Winklevoss, Gemini’s president.
A first: BBVA has become what the paper says is the first international bank to issue a corporate loan using blockchain technology. The Spanish bank said blockchain enabled the lender and the borrower to stay informed on the loan’s progress and reduced the negotiation time for the loan from “days to hours.”
New York Times
Acquitted: A federal jury in Connecticut acquitted a former precious metals trader at UBS of “spoofing,” or trying to manipulate the price of commodities he was trading by placing fake orders. “It’s a huge setback for the government,” the trader’s lawyer said. “We basically smacked them in the face.”
“We had a hierarchy in my office in Congress. If you are a lobbyist who never gave us money, I didn’t talk to you. If you are a lobbyist who gave us money, I might talk to you. If you came from back home and sat in my lobby, I talked to you without exception, regardless of the financial contributions.” — Acting Consumer Financial Protection Bureau director Mick Mulvaney in a speech to the American Bankers Association, which has prompted calls from some Democrats for his resignation.