Receiving Wide Coverage ...
SEC Problems: More information is emerging on why Democratic commissioner Luis A. Aguilar decided to vote against Securities and Exchange Commission Chairman Mary Schapiro's plan to regulate money market mutual funds. Apparently, Aguilar "didn't appreciate" Schapiro's move to show Congress a report on the risks of money funds he viewed as misleading. The Journal reports Aguilar was already on the fence about the new proposal when news of the report's circulation was mentioned by several media outlets. Aguilar believed the proposal, which would require money funds to either float share prices like other mutual funds or to post capital against losses on their asset holdings, could have unintended consequences and possibly spread systemic risk to unregulated corners of markets. Many of Aguilar's colleagues are more than a little displeased with his decision. Schapiro called the failed vote "tragic," while former SEC chairman Arthur Levitt said Aguilar's decision represented a "sad day for the commission and the country."
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Conversely, lobbyists, who felt the rule represented an "unnecessary burden" are thrilled by the vote's failure, but the fund industry shouldn't breathe easy just yet. According to the Times, government officials are currently looking for alternate ways to regulate what's largely considered a threat to the financial system. Under the authority provided by Dodd-Frank financial reform, the Financial Stability Oversight Council could vote to designate money market funds as "systemically important, which would pave the way for stricter regulations." This vote would send the matter back to the SEC, which would have to draw up a new proposal. The FSOC could alternately vote to designate specific money funds or fund managers as systemically important, which would transfer regulatory power to the Federal Reserve.
Nasdaq's Facebook Woes Grow: UBS has joined Citi in decrying Nasdaq's proposed $62 million compensation package designed to make up for trading losses during Facebook's botched initial public offering. In its own letter to the SEC, the Swiss banking group called the plan "woefully inadequate" and urged the commission to "reconsider the level of the proposed cap in light of the actual damages caused by Nasdaq in its mismanagement of the Facebook IPO." UBS is estimated to have lost $356 million during the debacle, the Times reports. Smaller firms, including First New York Securities, T3 Trading Group and Avatar Securities are also displeased with Nasdaq's proposal, but Knight Capital Group and Citadel have supported the plan. The SEC, which is perhaps bogged down by more pressing problems right now, is not required to turn in a decision on the Nasdaq plan until March 29.
Unwound: The Federal Reserve Bank of New York is finally done with American International Group, selling on Thursday the last of the toxic assets it acquired during the 2008 bailout. According to the Times, New York Fed President William C. Dudley says the sale of the bonds "marks the end of an important chapter." Of all the bailouts (and, you know, there were many), AIG's rescue ranks among the most controversial, but at least there was a return on the investment. The Journal reports the New York Fed "reaped $6.6 billion in profits" from selling the complex mortgage securities it took on at the height of the financial crisis.
Wall Street Journal
Small banks are getting back into the credit card market, largely due to new rules that make debit cards less profitable and a need to generate profit in a low interest rate environment. The article name checks Regions Financial, Sovereign Bank and Huntington Bancshares of Columbus, Ohio, as smaller players trying to compete with large financial institutions by cross-selling existing customers competitive credit card products.
Financial Times
A summer's worth of banking scandals may indicate U.S. regulators have got their work cut out for them, but at least they're doing a better job of instilling fear in financial institutions than their U.K. counterparts, says Martin Woods, managing director of Hermes Forensic Solutions, in a new op-ed. According to Woods, here in the U.S., "financial penalties are substantial and the future imprisonment of some bankers and brokers is probably inevitable." Maybe this should be classified a grass-is-always-greener thing?
New York Times
Former JPMorgan Chase chief executive William B. Harrison Jr. has joined the debate about breaking up big banks, but, unlike fellow banking veteran Sandy Weill, he doesn't think a return to Glass-Steagall is in order. In an op-ed, Harrison argues "breaking up some big banks would hurt their customers, clients and the broader economy" and that "it would actually inject new risks into the financial system."
Elsewhere ...
The payment wars may appear to center on swipe fees as talks heat up about whether tech start-ups like Square and PayPal will be able to offer merchants cheaper alternatives to the existing behemoth networks, but this TechCrunch article points out the real money is in data. "Companies who maintain a direct relationship with the consumer — such as American Express, PayPal, Square, Discover, etc. — are in the perfect position to serve as an Amazon recommendation system for 'everything,'" the author writes. "You bought a tennis racket at Sports Authority? How about tennis lessons with Saul the tennis pro, at a discount thanks to your purchase of a tennis racket, only redeemable with the same payment instrument?"
