Receiving Wide Coverage ...
Realty Check: The Journal's "Ahead of the Tape" column notes that the Mortgage Bankers Association has boosted its industry forecast for 2012 residential refinancing volume to $870 billion. Volume is still half what it was during the salad days, but loans are more profitable as there are fewer competitors to squeeze gain-on-sale margins. Another Journal story reports that the S&P/Case-Shiller Index of home prices in 20 major markets barely declined in March, and these days a flat report counts as good news on this front. Still another article in the paper says Wells Fargo settled a foreclosure-related discrimination suit from two municipalities in Tennessee by agreeing to spend $7.5 million on down payment and renovation grants as well as financial literacy programs. The bank also pledged to write $425 million of loans in Memphis and Shelby County over five years. Post columnist Michelle Singletary alerts consumers who've lost their homes to foreclosure that the July 31 deadline is fast approaching to have their cases reviewed for errors or improper actions under the federal banking regulators' consent order. And on the commercial side of the mortgage business, a story in the Journal says investors in securitizations are complaining about potential conflicts of interest at "special" servicers. These outfits play no role when things are going well; they're paid to step in when a loan runs into trouble, and to try to work out a restructuring deal or seize the property on bondholders' behalf. Among other complaints, critics say that the special servicers have sometimes sold assets to affiliated companies for less than the properties could fetch on the market.
Crime and Punishment: The Times' "White Collar Watch" columnist, Peter J. Henning, writes that the chances look increasingly slim for any criminal prosecution against an executive in connection with the financial crisis. Also in the Times, two law professors write that it's fine to allow companies to settle charges without admitting wrongdoing, but top executives should be required to pony up part of the penalty. A third Times story says investment advisers are warming to legislation that would give new powers over their profession to FINRA, the private self-policing body of the brokerage sector.
Wall Street Journal
The paper takes us inside a "banking boot camp" class, where students (mid-level managers or trainees in real life) do role-playing simulations, making tough calls about dividends, CD rates, layoffs and other issues for an imaginary bank.
"Heard on the Street" says the recent rout in financial stocks (thanks to the prospect of a "Grexit" from the euro and JPMorgan's trading loss), following a rally early this year, reminds us of investors' herd mentality. The potential for stampedes from the sector will remain so long as banks are as large and interconnected as they are today, the column says.
Morgan Stanley is still waiting for an answer from the Fed on a request to move a portion of the firm's derivatives portfolio to an FDIC-insured bank subsidiary. The story hints the real resistance may be coming from the FDIC, which the Fed is required to formally consult on such matters: "The Fed, which oversees Morgan Stanley as a [whole] and looks to safeguard the stability of the broader financial system, has a different mandate from the FDIC, whose concern is safeguarding bank deposits." Morgan Stanley wants the transfer because its counterparties would be less likely to yank their business if the derivative contracts are housed in the bank unit, even if Moody's downgrades the firm's credit rating.