Receiving Wide Coverage…
The American Bankers Association has pressed the idea of taking Congress to court over its decision last year to cut yearly dividend payments from the Federal Reserve to its member banks. The measure is part of a broad highway spending bill that "violates several legal principles" like breach of contract and taking of property without just compensation, ABA president Rob Nichols noted in a letter he wrote to Congress Thursday. Banks are required to buy Fed stock equal to 6% of their capital when they join the Fed system – half of which remains held at the regional reserve banks. Under the Federal Reserve Act of 1913, the Fed is required to pay member banks a 6% dividend on the money it holds. Nichols said the ABA "stands ready" to help the Fed's board of governors "with any appropriate measures that mitigate these concerns." Wall Street Journal, Financial Times.
Wall Street Journal
Fifteen-year-old Natalie Clarke wants to know what Bank of America is doing to raise its share price. The ninth grader, who owns 5,000 B of A shares given to her when she was a baby, attended her third annual meeting this week. "You and I are both looking at some pretty bad numbers," she said to chief executive Brian Moynihan at the meeting. Clarke said she has begun considering whether her shares could help her pay for college. In past meetings she has also raised concerns over why her father was laid off from the bank (he has since been rehired) and how women's salaries at the company compared with men's.
It seems like regulators listened to the banking industry's criticism on the opaqueness of its living wills judgment process. When they released the verdicts on eight large banks earlier this month they provided more information on the specifics of their decisions than they have previously, but split verdicts on Goldman Sachs and Morgan Stanley only added confusion and calls for even more transparency next year. Both regulators involved, the Fed and the Federal Deposit Insurance Corporation, have specified each of the banks' shortcomings. Both banks have said they're already mapping their way through them, meeting with both regulators in the coming weeks and are confident they can meet their demands by deadline in July 2017.
While the payments industry follows the rise of mobile transactions, banks' first quarter profits are gleaming with credit card balances, despite an otherwise dreary earnings season industry-wide. Citigroup is raving about its recent partnership with Costco, Wells Fargo, which grew credit card balances 10% year-over-year, is hinting at the idea of an "opportunistic" acquisition to round out its portfolio. U.S. Bancorp is looking to add another 6%-7% to its $20.2bn book this year. "The last recession cleansed the industry," says one Keefe, Bruyette & Woods analyst. As the Credit Card Accountability and Disclosure Act of 2009 cracked down on abusive practices, banks cut off riskier borrowers. "What you're left with is a really pristine set of accounts."
India's central bank is working on a proposal detailing how it would regulate peer-to-peer lending. Wary that regulation could be perceived as official approval for the peer-to-peer model, thereby attracting investors who don't understand its risks, it decided against banning it – as Israel and Japan have – as the competition could reduce market lending rates, lower costs and extend financial services "where formal finance is unable to reach."
The Federal Reserve Bank of Chicago has authorized three of the largest U.S. clearing houses – run by CME Group and Intercontinental Exchange – and the Options Clearing Corporation, to open an account with it. ICE's permit is for its US credit derivatives clearing house. The decision follows clearing houses' designation as systemically-important utilities, which addressed how detrimental their possible failures could be to financial system and gave them access to the Fed's cash in an emergency. The CME's only applies to house cash belonging to brokers. The accounts will open within the next few weeks.
New York Times
Robert Linton, chief executive of Drexel Burnham Lambert, died Tuesday. He was 90 years old. Drexel Burnham pioneered the junk bond industry and inspired the greed-is-good mentality of Wall Street in the 1980s. The firm imploded after a three-year insider trading and stock manipulation scandal. "Greed is behind every debacle in the Street involving futures trading," he told the Times in 1977. Linton himself was never accused of wrongdoing in the case.
Bloomberg: Visa and MasterCard have introduced software designed to make checkout times faster – by 10 seconds – for shoppers using chip-based debit and credit cards. Since U.S. retailers upgraded their systems and payment terminals to be able to accept the still seemingly new chip-enabled cards, a requirement as of last October, retailers and consumers alike have complained about the longer checkout times. The new software will allow customers to immediately remove their cards after inserting the chip, instead of waiting until the transaction is complete to remove them. Whether or not it actually reduces checkout times remains to be seen but at the very least, it will change customers' perceptions of the wait times, analysts say. Merchants are looking at making the switch between the holiday season and next year. Retailers will have to upgrade their payment terminals and get approval from their payment processors.
And finally: The pseudonymous Tyler Durdens behind Wall Street renegade blog ZeroHedge have been revealed.