Receiving Wide Coverage ...
More Mortgage Woes for B of A? Bank of America has disclosed that the Justice Department intends to file civil charges against the bank over claims it mishandled "one or two jumbo prime securitizations." The Securities and Exchange Commission is also weighing civil charges related to how B of A brokerage house Merrill Lynch handled its securities and the New York Attorney General's office is recommending action against Merrill Lynch over residential mortgage-backed securities. The Journal calls the disclosures "the latest sign that banks' battle to contain the high cost of the financial crisis continues to escalate, despite a five-year slog of lawsuits, losses and profit-sapping regulations." New York Times, Financial Times
Liable: A federal jury found former Goldman Sachs trader Fabrice Tourre liable on six out of seven counts of civil securities fraud on Thursday. A judge will meet with the SEC later this year to determine the punishment associated with the verdict, which could include monetary penalties and a ban from the financial services industry. Legal experts tell the Journal the verdict "adds credibility to a new policy [SEC chairman Mary Jo White] announced in June of forcing companies and individuals to admit wrongdoing to settle certain cases or face being taken to trial." But the SEC's victory is not without scrutiny. "Some critics have questioned why the agency chose to make Mr. Tourre a midlevel employee who was stationed in the bowels of Goldman's mortgage machine the face of the crisis," Dealbook notes. "Rather than aim at a high-flying executive, the agency pursued someone barely known on Wall Street." Washington Post columnist Neil Irwin offered this explanation: "There were thousands of people on Wall Street and beyond who helped inflate a fraudulent mortgage bubble. What differentiates Tourre from the others is that he was both smart enough to understand what he was actually going on, and dumb enough to brag about it in an e-mail."
Named: Royal Bank of Scotland has confirmed that Ross McEwan, head of its retail bank, will take over as CEO in October. He succeeds an ousted Stephen Hester, who announced plans to step down in June. McEwan will be paid a salary of $1.5 million and has asked not to receive a bonus for 2014. "The bonus sacrifice and reduced salary represent an acknowledgment of the fierce public scrutiny that pay still attracts within the bailed-out banking sector," the FT notes. McEwan faces several challenges at the helm. "The 56-year-old will be expected to carry on the work of his predecessor, namely trying to squeeze profit from the bank's slimmed-down operations, boiling down legacy bad loans and eventually ensuring the British government can recoup the £45 billion ($68.04 billion) it pumped into the bank in 2008," the Journal reports. (It also notes McEwan is "a keen water-skier and cyclist.") A second FT article breaks down some of the pros and cons associated with the government-owned RBS' pick. "Critics raised Mr. McEwan's lack of political and regulatory contacts in the U.K.," the paper notes. "Fans say he is the right person to take RBS into the next phase of its restructuring towards a more focused retail and commercial bank."
Wall Street Journal
Regulators in the U.S. and Europe are beginning to rethink their approach to capital rules, feeling that the current ones may have gotten too complex and easy to game. "Among the ideas: find new ways to strengthen further the financial cushions banks must have to protect against market downturns," the paper reports. "Also under discussion is replicating U.S. efforts to embrace a blunter instrument for capturing a bank's overall risk profile."
New York Times
New York State Attorney General Eric Schneiderman is investigating big banks' use of credit-reporting databases that disqualify customers who are looking to open a savings or checking account, a practice the Times coincidentally reported on earlier this week. Per the article, Schneiderman "is requesting more information about the use of the databases, zeroing in, for example, on how the lenders decide whether to accept a customer."
Your latest Federal Reserve Chair update from reporter Annie Lowrey: President Obama "is now in the process of interviewing three candidates for the position at the helm of the central bank" former U.S. Treasury Secretary Lawrence Summers, Fed Vice Chairman Janet Yellen and former Fed Vice Chairman Donald Kohn. Former Treasury Secretary Timothy Geithner was asked by the White House if he would like to be considered for the job, but he declined.
Correction: A federal judge overturned the Federal Reserve's cap on debit card swipe fees because he deemed it too high not too low, as the email version of Thursday's Scan said.