Receiving Wide Coverage ...
JPM Ditches School: JPMorgan Chase is dropping out of the student loan business. The Journal calls the exit "the latest development in a larger push by JPMorgan to exit businesses it no longer dominates." The government, of course, is the dominant lender in this space, accounting for over 85% of the market. Wells Fargo now stands as the only big bank still making student loans, though Discover Financial Services has widened its student lending business over the last few years. JPM's decision gave the bank the opportunity to tell Reuters, which broke the news, that not making more loans "puts us in a position to redeploy those resources, as well as focus on our No. 1 priority, which is getting the regulatory control environment strengthened." As the Washington Post reminds readers, "in the past few months, the nation's largest bank has found itself entangled in litigation and investigations into a wide range of its businesses." JPM now joins Bank of America and Citi to be the subject of downsizing news this week. As previously scanned, B of A is selling its stake in China Construction Bank, while Citi has been steadily shedding its private-equity and hedge fund investments over the last month.
Not-So-Fast on Summers: Following news that President Obama is likely to tap Lawrence Summers as the next Federal Reserve chair, the Journal reports that three Democrats on the Senate Banking Committee Jeff Merkley, Sherrod Brown and Elizabeth Warren are expected to oppose the nomination. "The loss of three Democrats would make it impossible for Mr. Summers to advance to the full Senate for a confirmation vote without the backing of some of the 10 Republicans," the Journal explains. "No Republican has publicly expressed support so far for any potential White House nominee for Fed chief." The FT, out with its own profile of Summers, argues that the Democratic opposition could throw a monkey wrench into the selection process. "The result could be something the White House would like to avoid," the paper notes. "A messy and contentious confirmation fight that risks damaging a new Fed chairman, a position which generally operates above the political din." Meanwhile, the Washington Post reports that significant turnover at the Fed, which is not limited to the "looming departure" of Fed chairman Ben Bernanke, is adding uncertainty to the central banks' interest rate and QE3 promises.
New York Times
Columnist Floyd Norris looks at what can happen when big banks stop focusing on loans and deposits and start focusing on risky investments. "There is nothing intrinsically wrong with many of the things that the megabanks do," he writes. "The issue is whether they should be done by banks that have the benefit of deposit insurance and an implicit federal guarantee."
A small bank holding company in Wisconsin plans to use Chapter 11 bankruptcy to recapitalize rather than liquidate in hopes that it can avoid having its bank taken over by regulators.
A long read from Bloomberg looks at how proposed U.S. money market fund reform ended up getting watered down. One source tells the news outlet the Securities and Exchange Commission "might have achieved a stronger rule had it moved forward with fuller reforms in 2010. The crisis was fresher in the minds of investors, regulators and taxpayers at that time."
Economist Simon Johnson calls bank leverage "the defining debate of our time" in his latest Bloomberg column. "The stakes are high," he writes. "Excessive leverage could bring down the world economy again. And the next financial collapse could be even worse than what we experienced in the fall of 2008 and the prolonged recession that followed."