Receiving Wide Coverage ...
Moynihan's Next Move: Bank of America chief executive Brian Moynihan received a vote of confidence from the bank's board of directors Wednesday as he was appointed to the additional role of chairman. The roles had been split at Bank of America since 2009, when then-head Ken Lewis was stripped of his chairman title. Chad Holliday, who Moynihan succeeds as chairman, will remain on the board. The Financial Times focuses the potential downside of Moynihan's expanded responsibilities, noting the move "risks angering investors concerned at the amount of power in the hands of one person." Analyst Mike Mayo tells the FT the decision "certainly goes against the trend of what's been pushed by corporate governance experts." Reuters Breakingviews columnist Antony Currie is among those angered by the board's decision: "A separate chairman is not mere box-ticking governance," he writes. "The position's duties include overseeing executives, particularly the chief executive. Combining the offices creates an inherent conflict of interest." The New York Times also mentions the corporate governance issue but highlights the board's attempt to manage potential conflicts of interest with the election of Jack Bovender as lead independent director. The Wall Street Journal has a more celebratory outlook, casting Moynihan as a comeback banker who has steered Bank of America through a period of intense regulatory scrutiny and pushed it to simplify rather than expand.
Bittersweet Symphony for Bloomberg? Goldman Sachs' new messaging service may turn out to be more than a way for employees to chat about trades and what's for lunch. The new chat platform, Symphony, unveiled Wednesday, "may be expanded to develop trading functions and other features," the Financial Times reports. A broader array of services could help Goldman and other financial firms achieve independence from Bloomberg's data terminals, which cost $20,000 per year. Symphony is jointly owned by Goldman and 13 other Wall Street firms, including JPMorgan Chase, Bank of America, Citi and Wells Fargo. Financial Times, New York Times
Wall Street Journal
Multiple articles in the paper address a federal judge's decision Tuesday to throw out lawsuits brought against the U.S. government by shareholders of Fannie Mae and Freddie Mac. An unsigned editorial says U.S. District Judge Royce Lamberth "did a service for taxpayers" by dismissing the argument that the U.S. Treasury has unfairly appropriated profits generated by the government-sponsored entities in the aftermath of their 2008 government bailout. A "Heard on the Street" column opines that "shareholders should stop expecting the courts to make them the beneficiaries" of Fannie and Freddie's profits, particularly since Lamberth's decision means that similar pending lawsuits are unlikely to triumph. Investors seem to be getting the message: shares of the GSEs fell steeply on Wednesday following the court decision.
The federal government needs to wake up and smell the student debt burden, write professors and authors Joel and Eric Best. The government "assumes that almost all student-loan debt can be treated as an asset because federal loans are not dischargeable under normal circumstances" and the loans are therefore likely to eventually be repaid, the authors write. But 44% of borrowers are not making payments on their student loans, according to New York Fed studies, which means the government will eventually have to accept them as losses and write them off. This will leave the government with a set of politically unpopular choices to cover the losses, the authors write: raise taxes, slash federal spending or increase the national debt. The Bests decline to name their preferred solution, but they do argue for the need to rein in tuition.
The third-quarter earnings season will come "against a backdrop of the strongest overall loan growth since 2008," according to "Heard on the Street." Commercial and industrial loans and commercial real estate loans are showing strong year-over-year growth, according to the latest Federal Reserve data, and even revolving consumer debt and home loans have edged into expanding territory. The column suggests banks may be lending more as they adjust to new capital requirements.
"Some of the world's largest banks have stopped contributing to dozens of financial benchmarks to avoid further litigation risk in the wake of the Libor and foreign exchange rate rigging scandals," the paper reports. That could leave investors in a pickle, since they'll have a hard time measuring their investments' performance if benchmarks vanish.
Chicago Fed president Charles Evans thinks the Fed should hold off on raising interest rates, even at the risk of overshooting its 2% inflation goal. If he had his druthers, he'd wait until 2016 to increase rates, he told the FT.
New York Times
"A federal appeals court on Wednesday denied a request by two American Indian tribes to stop New York State's top financial regulator from cracking down on their online lending businesses," the paper reports. At issue is the question of whether New York Department of Financial Services head Benjamin Lawsky has the right to enforce state payday lending rules on tribal reservations, an issue further complicated by the fact the tribes are conducting their business over the Internet. The case is moving on to federal district court.
More Indians are buying U.S. real estate in an effort to find a safe place to park their savings, according to the paper. While investors from other foreign countries are also snapping up real estate, Indian investors tend to be "less-than-superrich" and their chosen properties "much less grandiose," the paper reports.
Debt markets don't really function like markets these days, according to corporate governance and business ethics professor Stephen J. Lubben. He argues the leveraged loan market provides unreliable information and that the municipal debt market lacks liquidity, while the pricing of exchange-traded funds is under scrutiny.