Receiving Wide Coverage ...
Systemically Important: The Financial Stability Oversight Council took an important step toward implementing a key provision of Dodd-Frank when it voted on a proposal to designate a group of nonbank financial firms as systemically important on Monday. FSOC isn't saying what companies made the list just yet, but AIG, Prudential and GE Capital have disclosed that they received the designations. These firms now have 30 days to fight the proposal. Per reports, GE is reviewing the details and Prudential is evaluating an appeal. AIG wasn't commenting, but Bloomberg points out the insurer "previously said it wouldn't oppose such a ruling." The Journal cites "concern about companies forcing hearings or bringing lawsuits" as "one of the reasons it has taken regulators so long to name the first round of nonbanks." Of course, resistance may ultimately prove futile. As American Banker reported earlier, "While it's likely any number of the companies named will protest the decision, their ability to successfully reverse it is slim." And there's some debate over whether these companies should want to. Similar to arguments surrounding systemically important banks, some analysts suggest the designation serves as an implicit guarantee that the government will bail out the firm should it get into trouble, which, in turn, could create a competitive advantage, the Washington Post notes. Others, however, believe the additional oversight from regulators could help reduce risk in the financial sector and stave off another crisis. In either case, yesterday's vote is only the beginning. Per an unnamed source cited in the Post article, "Monday's vote is the first of many to come as the council considers whether to include several other nonbank firms." Insurer MetLife is also expecting to receive the designation at some point.
Wall Street Journal
An important note for any bank that's found itself faced with a patent troll: President Obama is set to unveil on Tuesday a set of executive measures to stop companies from abusing the patent system. These measures will include directing "the Patent and Trademark Office to start a rule-making process aimed at requiring patent holders to disclose the owner of a patent" and asking Congress to pass legislation that allows "sanctions on litigants who file lawsuits deemed abusive by courts."
"VaR shock" has become a concern for large banks due largely to rising volatility in the bond market. "Investors who target a stable Value-at-Risk tend to take larger positions as volatility collapses," a report from JPMorgan analysts explains. "The same investors are forced to cut their positions when hit by a shock, triggering self-reinforcing volatility-induced selling."
New York Times
You can add this op-ed from economics professor Nancy Folbre to the pile of articles comparing burgeoning student loan debt to the subprime mortgage crisis. "The number of student borrowers increased 54% from 2005 to 2012, while the average debt per borrower increased 56%, to $25,000," Folbre writes. "Whether or not you call it a bubble, evidence shows something is likely to pop."
The Federal Reserve's monetary policies may or may not be driving inequality.
Here's a story that will sound a bit familiar: Wall Street investors are behind the rise in housing prices, especially in struggling areas of the country. "The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out," the article notes. "Some are already wondering if prices will slump anew if the big money stops flowing."
Per this Dealbook headline, the Securities and Exchange Commission "is 'bringin' sexy back' to accounting investigations," which appears to mean the SEC "wants to be more proactive by using risk modeling to analyze corporate filings to identify companies that might be outliers in reporting their results."