Receiving Wide Coverage ...
Consultant Crackdown: Deloitte Financial Advisory Services has struck an agreement with New York's Department of Financial Services that will see the advisory firm pay $10 million and receive a one-year ban from soliciting new work in the state in order to settle allegations it mishandled its anti-money laundering review of U.K. bank Standard Chartered. The agreement, which also requires Deloitte "to implement reforms designed to address conflicts of interest," is part of DFS leader Benjamin Lawsky's "unparalleled crackdown on independent consulting firms." According to the FT, Lawsky used an obscure state banking law "to revoke consultants' access to confidential supervisory information if the access does not 'serve the ends of justice and the public advantage.'" In a statement, New York Governor Andrew Cuomo said the move against Deloitte was laying the groundwork for broader change in the financial services consulting industry. However, there's no real consensus yet on whether other states or federal authorities will follow Lawsky's lead or if it's time to dust off his old nickname. While he was taking action against Deloitte, Dealbook notes, the Federal Reserve was ordering a large regional bank to hire a consulting firm to go through high-risk customer accounts. "It is unclear whether actions by state regulators like Mr. Lawsky who has a history of irking his federal counterparts by running ahead of them portend an overhaul of the consulting industry or a coming clash of state and federal banking regulators," the article (semi-)concludes.
Fed Watch, Day 3: Today's the day that the Federal Reserve will meet and hopefully provide some indication of if, when and how it will begin to taper off its current accommodative monetary policy. We say hopefully as this New York Times curtain-raiser on today's meeting notes, "the Fed is not expected to announce any immediate changes on Wednesday, at the close of the meeting, but investors are watching for signs that the Fed is considering scaling back later this year."
Meanwhile, concern over rising interest rates, as you may have already heard, has caused a bond exodus, and there's some debate on how the housing market will be affected by a scaling back in bond-buying by the Fed. According to the Washington Post, economists fear a sustained spike in mortgage rates will "hurt a fragile housing recovery." But economists the Journal say "the home market is well-positioned to keep growing, though ... rising rates could slow the pace of price and sales gains The bigger concern for housing buyers is that the supply of homes for sale is low, and that is pushing prices out of their range."
Co-op Update: Subordinated bondholders affected by Co-operative Bank's "so-called bail-in" will lose "roughly 25% to 30% of their capital," sources familiar with the matter tell the Journal, which also calls the move "a win for the government and regulators because the plan spares taxpayers the financial burden they would have faced had the government rescued the lender in a bailout like those seen during the financial crisis." Those interested in how the bank and the U.K. arrived at this bailout alternative can check out the FT's round up of deals that led to its crisis. Meanwhile, another column in the paper notes: "This is the future. Taxpayer bailouts are out. So are raids on insured depositors, after the debacle in Cyprus. Bondholder bail-ins are the new blueprint for dealing with troubled banks."
Wall Street Journal
Cyprus is asking European leaders to help its biggest bank overcome a cash shortage, noting in a letter that "this spring's bank-rescue deal was struck 'without careful preparation' and was imperiling its ability to meet budget targets."
Consider the size of a financial institution as you plot your career in banking. "The advantages of a large institution might include opportunities for travel, acquiring a broad range of skills or specialization, rapid promotions and movement between departments," this article notes. "But smaller banks might offer an even broader range of opportunities for learning and experience and the chance of greater responsibility."
New York Times
Columnist Eduardo Porter makes a case for a rise in inflation: "One main feature is that it reduces the real value of debt. Think of the $13 trillion in outstanding mortgages or the $12 trillion in government debt held by the public. Inflation would eat away at those obligations, without any need for bankruptcy lawyers. And it would leave more disposable income for Americans to spend."
The Securities and Exchange Commission will start requiring admission of guilt in certain types of civil settlements.