Receiving Wide Coverage ...
Battle over Money Market Funds Intensifies: A recent push by regulators to reform money market funds has become about much more than revamping a risky industry. According to the Journal, the showdown is "turning into a major test of a key change to the U.S. financial architecture after the most severe financial crisis in half a century" since the establishing new rules regarding the funds has now fallen to the Financial Stability Oversight Council, the "superregulator of sorts" created by the Dodd-Frank Act. Meanwhile, another Journal article points out money market funds are poised to receive an influx of cash between now and year-end since the Dodd-Frank Deposit Insurance Provision, which guarantees "an unlimited amount of non-interest-bearing deposits at banks" is set to expire.
Rule Reversal: Monday morning brings news on the regulation reversal front. The Journal reports the Financial Accounting Standards Board is "on the verge of rolling back" the much-maligned and "odd" debt or debit value adjustment provision, which "counterintuitively adds to U.S. banks' profits when their debt looks riskier to investors and penalizes them when it looks safer." (In other words, the rule doesn't favor the cautious banker.) The board is expected to formally approve an adjustment to the rule it tentatively agreed to last June by the end of the year. The adjustment would remove changes in debt value out of net income calculations and prevent earnings reports from being skewed by the provision.
Meanwhile, Dodd-Frank suffered a legal defeat on Friday when a federal judge ruled against the Commodity Futures Trading Commission's "so-called position limits rule," which caps the number of derivatives contracts a trader can hold on certain commodities. Judge Robert L. Wilkins vacated the rule because he felt the agency did not have a clear mandate to impose it. His decision sends the rule back to the CFTC for "further proceedings," but the Times seems to believe the agency will appeal, citing CFTC chairman Gary Gensler's statement that it is "considering ways to proceed." Either way, the paper says the judge's ruling "is sure to embolden Wall Street as it shifts the attack on Dodd-Frank from piecemeal lobbying to broader legal challenges," especially since, last summer, a federal appeals court overturned a Dodd-Frank provision that would have allowed shareholders to oust company directors.
Spain's Banking Blight: Spain's banking woes continue to widen as recent stress tests indicate seven out of 14 banks do not have enough capital on their books. The FT reports the country's banking sector would collectively need close to €60 billion in new capital to address concerns revealed by these stress tests. Meanwhile, the Journal reports the Spanish government's efforts to intercede on the failing banks' behalf would "widen its budget gap and increase its debt load." This assessment is based off of a budget plan presented to parliament over the weekend in which the government said bank aid will inflate its budget deficit to around 7.4% of gross domestic product this year. The estimate is well above the deficit target of 6.3% of GDP government officials previously committed to with the European Union.
Wall Street Journal
Regulators have closed First United Bank in Crete, Ill. Old Plank Trail Community Bank, also in Illinois, has agreed to take over all of the failed bank's deposits and "essentially" all of its assets, estimated back in June to be around $316.9 million and $328.4 million, respectively. This brings the total number of bank failures to 43 this year.
Who's borrowing from the Fed? According to data released by the central bank on Friday, regional and local banks in hard hit areas are "the biggest borrowers of short-term funds." Borrowing was heaviest in the Southeast, where the housing market continues to struggle, and the Midwest, a region "stung by … the automaker bankruptcies."
Deutsche Bank is facing a $37 million damages lawsuit filed by Puerto Rico-based investor Arco Capital, which is alleging the German bank dumped "'toxic or distressed' loans and derivatives into a structured product that it sold before the onset of the financial crisis." Deutsche Bank says the allegations are "without merit."
New York Times
The paper recapped last week's cyber attacks against six big banks (Wells Fargo, Citigroup, Bank of America, JPMorgan Chase, U.S. Bancorp and PNC), saying they failed to clearly convey to customers what was happening. "It was probably the least impressive corporate presentation of bad news I've ever seen," said one small-business owner affected by the outages.