Receiving Wide Coverage ...
Third Verse, Different from the First: Treasury Secretary Timothy Geithner clarified to lawmakers Thursday that President Obama "does not believe that we get to determine how profitable individual financial institutions are across the country." This followed Obama's remark in a televised interview Monday that banks "don't have some inherent right" to "a certain amount of profit" and his suggestion that the government could stop Bank of America's $5 debit card fee. There was also some fairly tough talk about banks from Geithner himself in public appearances on the intervening days. Yet appearing before the Senate Banking Committee Thursday, the Treasury secretary said the administration's goal is simply "to have a system of oversight and protection where consumers understand what they are being charged." Which, to us, sounds a lot closer to what the acting head of the Consumer Financial Protection Bureau, Raj Date, has been saying. (Geithner also made some reassuring remarks about the safety of the U.S. banking sector, which boosted financial stocks.) In another sign that cooler heads may yet prevail on the matter of bank fees, Washington Post personal finance columnist Michelle Singletary asks her readers to look at the bigger picture: "Just because something was free once doesn't mean it can be offered free forever, right? Don't the banks have a right to charge for the convenience they provide to customers who don't want the burden of carrying around cash or a checkbook? Isn't your time worth money?" But before bankers and their lobbyists start tweeting and emailing her column around, they should be forewarned: Singletary goes on to advise consumers who are repulsed by new debit fees to go back to paying with cash.
Housing Heresy: Over 10 years, the national homeownership rate has dropped by the most since the 1940s -1.1 percentage points, to 65.1% at the end of last year, the Census Bureau reported. Even though the average 30-year fixed mortgage rate has for the first time on record fallen below 4%, "I wouldn't be surprised if we saw the homeownership rate at a level with a five in front of it in the next few years," a real estate executive is quoted as saying in a Journal story headlined "Owning One's Home Loses Some Appeal." Well, we at the Morning Scan will have none of this. Not only is homeownership part of the American Dream, it also strengthens communities. Back when we were renting, we used to spray graffiti on the walls and relieve ourselves in the stairwells of the building we lived in. But since we bought our apartment a few years ago, we've learned what it means to own property. So now we only do those things in other people's buildings. … Seriously, there are still some hardcore housing advocates out there: The Journal separately reports House Democrats are pushing the administration to replace Edward DeMarco, who for two years (and counting) has been the acting head of the Federal Housing Finance Agency, and thus the de facto CEO of Fannie Mae and Freddie Mac. The Democrats complain he isn't doing enough to support the ailing housing market, though, as has been noted elsewhere, that goal often conflicts with his conservator's mandate to save taxpayers money by stanching the two companies' losses. Finally, the Journal takes a closer look at Standard & Poor's use of "dummy" assets to rate mortgage-related securities during 2007, a time when it hadn't yet dawned on a lot of people that the housing bubble had burst. As previously reported, S&P's parent McGraw-Hill faces potential civil charges from the SEC over the practice. Somehow, dummy ratings remind us of lenders using the appraisal of a model home to value an actual home under construction - something the FHA allowed lenders to do until January.
European Rescue: Really, if we tried to summarize everything that's been happening on the European bank front in the last 24 hours, this would turn into the Late Afternoon Scan. So we'll just point you to an interesting analysis by the FT's Gillian Tett in which she draws six lessons from the U.S. experience with Tarp for European leaders as they belatedly move to shore up their banks. For those who really want the tick-tock from across the pond, we recommend the U.K. Guardian's "European Debt Crisis Live" blog. It's there that we found this fitting quote from Bank of England governor Mervyn King, explaining why he's on board the quantitative easing ship: "This is the most serious financial crisis at least since the 1930s if not ever." (And if you don't want to go to the Guardian because you think it's produced by a bunch of old bearded lefties who "only write about single mothers in Guatemala," as a British wag once said to us, the FT has a serviceable euro crisis live blog as well.)
Occupy Wall Street: The protests have continued to spread across the country, and some are now suggesting that this movement could become a force for progressive politics on a level with the conservative Tea Party. No less than Richard Fisher, the president of the Dallas Fed, told a group of businesspeople: "I am somewhat sympathetic - that will shock you. … We have too many people out of work. We have a very uneven distribution of income. We have too many people out of work for too long. We have a very frustrated people, and I can understand their frustration." Another economist with gravitas is more than "somewhat" sympathetic - Nobel Prize-winning economist Joseph Stiglitz of Columbia University recently gave a speech to the protestors in New York, which has been spreading via YouTube (we found the video by way of Slate; the awkward call-and-response between the wonkish Stiglitz and the idealistic, earnest young crowd is funny, but we gather they're in on the joke.) Truth be told, some of Sitglitz's remarks might not sound all that out of place at a community bankers' conference: "Our financial markets have an important role to play. They're supposed to allocate capital, manage risks. But they misallocated capital, and they created risk. We are bearing the cost of their misdeeds. There's a system where we've socialized losses and privatized gains. That's not capitalism; that's not a market economy. That's a distorted economy."
Lehman Litigation: A federal judge dismissed a lawsuit filed by Lehman Brother retirees, which charged the investment bank's executives and directors with "squandering their retirement savings in the investment bank's stock." Meanwhile the firm filed a suit against a Goldman Sachs-run real estate fund seeking $100 million in damages because the fund abandoned a $1.26 billion deal to buy 10 office buildings.
Wall Street Journal
Was it something we said? No, it's something we published. "Bankers, lobbyists and lawmakers … scrambled to dissect, analyze and react to a leaked proposal" for the Volcker rule, the Journal reports. "The leak left regulators fuming.… The draft gave banking industry lobbyists several days to discuss it before Tuesday, when the Federal Deposit Insurance Corp. is scheduled to consider issuing a version for public comment. … A team of seven lawyers at the law firm Davis Polk & Wardwell … worked through the night … to ensure clients got briefings with their Thursday breakfast. Congressional staffers pored over the document. … Talk spread that the leak could prompt regulators to move more quickly to release an official version. A lobbyist for a large Wall Street bank assigned a staffer to continuously monitor the website of the Federal Reserve, which is helping draft the rule." This is all well and good, but did the Journal have to wait until the fifteenth paragraph to mention the name American Banker?
The mortgage servicing settlement talks may continue after all. "California Attorney General Kamala Harris, who dropped out last week from talks aimed at wringing a huge settlement from banks accused of foreclosure abuses, remains open to a deal if it involves 'a stronger proposal' from lenders, according to a person familiar with the situation."
New York Times
"Mitt Romney's presidential campaign has lassoed a few big Wall Street supporters. … Among them are James B. Lee, Jr., the marquee J.P. Morgan banker, and several prominent hedge fund managers."
"The Commodity Futures Trading Commission filed a record number of enforcement cases over the last year as it moved to clean up the mess from the financial crisis."
"Richard Cordray's bid to lead the Consumer Financial Protection Bureau moved a step forward on Thursday, as a Senate committee approved his nomination along party lines. But with Senate Republicans united against the nomination, the move was largely symbolic." Maybe Raj Date ought to call Ed DeMarco for advice on the job of an indefinitely "acting" leader.
