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Trader Sneak Peek Ending: Thomson Reuters will suspend providing a select group of investors with advance results of an important consumer confidence survey from the University of Michigan. The financial information company pays the school more than $1 million a year for the privilege of being the exclusive distributor of the report and releases the data two seconds early to about a dozen clients, who pay a hefty fee. Legal experts claim that the arrangement does not violate insider trading laws, the New York Times says. Thomson Reuters is a not a government agency, so it can distribute information as it sees fit as long as it discloses the practice. But New York Attorney General Eric Schneiderman began investigating in April to see if the advance look violates state securities-fraud law. Thomson Reuters "is fully cooperating with the N.Y. Attorney General's review and made this change voluntarily at the request of the Attorney General," the company said in a statement, according to the Wall Street Journal. Wall Street Journal, New York Times
Wall Street Journal
The Volcker rule continues to create headaches for banks. The employee-participation provision of the rule will restrict bank employee and director access to bank-run investments. Under the current draft of the provision, directors and employees can't invest unless they are directly engaged in providing advisory or other services to the fund. Banks have interpreted "directly engaged" in many ways. Citigroup has prohibited all of its employees from investing with customers in these funds, while Morgan Stanley has restricted investments to employees actively involved with managing the fund and financial advisers with clients in the fund, the Journal writes, citing unnamed sources. The rule is currently being finalized and is expected to take effect by July 2014.
The federal government was sued by Perry Capital over a decision last year to recover earnings from Fannie Mae and Freddie Mac. In August the Treasury Department changed a stock purchase agreement to require the government sponsored enterprises to pay most of their profits to the department as a dividend. The hedge fund claims this move violated the government's 2008 bailout deal. Perry Capital argued in a filing that the government "maneuvered to ensure that Treasury would be the sole beneficiary of the companies' improved financial position," the Journal reports.
Larry Summers is reportedly being considered for Federal Reserve Board chairman. The former Treasury Secretary and economic adviser to President Obama was considered for the position in 2010, but instead Bernanke was appointed to a second term. Officials won't disclose a shortlist of potential candidates but Janet Yellen, Fed vice chairwoman, is seen as a contender. Former Treasury Secretary Timothy Geithner has said he doesn't want the job.
Perhaps Geithner isn't interested in becoming Fed chairman because he is raking in lucrative speaking fees. He earned roughly $400,000 for three recent speaking engagements, putting him alongside the likes of Bill Clinton and Tony Blair. Former government officials routinely try to increase their salaries through speaking engagements, but "attending an event immediately after leaving office strikes many former colleagues as unseemly," FT writes. Geithner had the good sense to wait a few months after leaving the Obama administration before offering to talk about policy, unlike former Fed Chairman Alan Greenspan, who was paid $250,000 to speak at a dinner within a week of leaving his post.
Lord Davies, former chairman of Standard Chartered, is leading an effort by a group of investors to buy the majority of the British government's 39% holdings in Lloyds Banking Group, FT says, citing people familiar with the consortium. Details of the potential bid were not known but the group is led by U.S. private equity firm Corsair. Davies heads up the firm's European operations. He is also leading a battle to land 315 Royal Bank of Scotland branches that the bank must sell.
Some banks have warned that clearing houses, such as CME Group in the U.S., pose a great risk to the financial system. The clearing houses work with both parties in a trade and guarantee the deal in the event of default. Bankers have complained to regulators that central clearing houses do not provide enough data on their own risks and require lower-quality collateral for swap transactions.
The Obama administration's resistance to including financial services regulation in transatlantic trade negotiations has him pitted against the European Union and Wall Street. The president is concerned that banks could use an international agreement as a way to avoid the tougher rules from Dodd-Frank. Wall Street firms are generally in favor of the goals of U.S. trade agreements.
Recent Fed data showed that U.S. banks have seen billions in unrealized gains from their securities portfolios evaporate as interest rates begin to rise. Higher interest rates should help improve net interest margins. But as yields increase, prices have declined. Gains in these portfolios fell from more than $40 billion at the beginning of the year to around $6 billion. Banks won't record losses for these assets but they will take a hit to capital levels. This is amid speculation that the Fed will begin reducing its bond buying.