Receiving Wide Coverage ...

Crisis, Reform and Redress: In an op-ed in the Journal, Treasury Secretary Timothy Geithner says financial companies that complain about regulatory reform must have “crisis amnesia”: “My wife occasionally looks up from the newspaper with bewilderment while reading another story about people in the financial world or their lobbyists complaining about Wall Street reform or claiming they didn't need the Troubled Asset Relief Program. She reminds me of the panicked calls she answered for me at home late at night or early in the morning in 2008 from the then-giants of our financial system.” Of course, one can agree on the need for reform while questioning the kind of reforms that have been enacted. For example, in an op-ed in the FT, former FDIC head William Isaac and former Wells Fargo chief Dick Kovacevich argue that imposing “breathtaking” capital requirements is a less-than-ideal way to discourage reckless risk-taking. Equity holders, they note, have less power, and less incentive, to control risk than creditors do. As an alternative, Isaac and Kovacevich suggest requiring big banks to regularly issue senior and subordinated long-term debt, whose holders would absorb losses ahead of the FDIC and hence shield taxpayers. The mandatory debt issuance would subject banks to “market discipline”: “A risky bank would have to pay higher interest and ultimately might not be able to issue debt, which would curtail growth and force it to adopt a new strategy.” (The piece does express some qualified support for Dodd-Frank’s “living wills,” however.) The question of how to prevent another meltdown to one side, Phil Angelides, who chaired the Financial Crisis Inquiry Commission, wants to make sure those responsible for the one we just went through get their just desserts. “After the savings-and-loan debacle of the late 1980s, more than 1,000 bank and thrift executives were convicted of felonies. But today the rate of federal prosecutions for financial fraud is less than half of what it was then,” Angelides writes in the Times. The president’s new mortgage securities fraud task force holds promise, Angelides says, but the Obama administration must give it the proper tools, mandate and budget to succeed in investigating and prosecuting mortgage mischief. Wall Street Journal, Financial Times, New York Times.

Wall Street Journal

Wal-Mart and Target are among a group of about two dozen retailers that have banded together to develop a mobile wallet, the Journal reports. The merchants find the current offerings, like Google Wallet and the telecom carrier-controlled Isis, wanting. Among other reasons, “they are concerned about potential security and privacy risks in the existing services.”

Elsewhere ...

IT World: Speaking of Google, the search-engine juggernaut once considered creating its own peer-to-peer currency, which it would have called Google Bucks, but nixed the idea when the company concluded such an undertaking would have been illegal. CEO Eric Schmidt revealed this tidbit at a mobile conference in Barcelona this week covered by IT World, a tech website. So are actual P2P currencies like Bitcoin illegal then? Well, it’s complicated, but not necessarily, according to this podcast. Still, as American Banker recently reported, Facebook, which issues its own digital currency, is erring on the side of legal caution, obtaining state money transmitter licenses across the country.

 

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