Receiving Wide Coverage ...
B of A's Stress Test Stress: Bank of America cleared a major hurdle Thursday, as the Federal Reserve announced it had approved the bank's resubmitted capital plan. As a result, the bank can continue its annual dividend and stock buyback. The regulatory OK was a huge relief to the company's executives, including chief Brian Moynihan, who had been working for months to remedy issues in coordination between units, according to the New York Times. In total, the bank said it was spending $100 million in 2015 to retool its stress test reporting processes. But the bank may not want to rest too easy, the Wall Street Journal argues. Technically, B of A met all of the Fed's quantitative capital requirements, but it was nonetheless forced to resubmit because of alleged faults in how the company assessed losses and revenue in the theoretical turndown. And the Fed warned the bank still needs "to make steady, demonstrable progress" before 2016's tests. What that shows is these tests aren't just a single bar to jump – it's more like an Olympic pole vaulting event. And the bar's going to go higher and higher.
A Big Hit: The film version of Michael Lewis' "The Big Short" is generating Oscars buzz as rave reviews and award nominations come pouring in. The movie was nominated for four Golden Globe Awards, including best motion picture (musical or comedy) and best screenplay. Critics have also welcomed the film, which they say paints a portrait of the lead-up to the financial crisis both hilarious and deeply discomforting. New York Times film critic A. O. Scott noted the movie left him sick to his stomach from its adrenaline rush, saying, "But that queasy, empty feeling is the point: This is a terrifically enjoyable movie that leaves you in a state of rage, nausea and despair." The movie was directed and co-written by Adam McKay, best known for his collaborations with actor Will Ferrell including "Anchorman." The picture's main cast includes Brad Pitt, Ryan Gosling, Steve Carell and Christian Bale, and it also features a number of humorous celebrity cameos, including one in which actress Margot Robbie sips champagne in the bathtub and lectures on subprime mortgages. The comedic moments, according to the Wall Street Journal's Joe Morgenstern, serve a greater purpose. "What gives 'The Big Short' its surprising resonance is the breadth of its comic vision, which makes room for collateral tragedy," he writes.
Wall Street Journal
California state regulators are launching an inquiry into the marketplace lending industry, serving 14 companies with requests for details regarding their lending practices and business models. The paper noted the identities of all 14 companies could not be determined, but the list included Kabbage, Prosper Marketplace, Avant, OnDeck Capital and Social Finance. Most of the companies told the paper they would cooperate with the regulators. The regulators are looking to see whether the companies are operating with appropriate licenses and supervision, which could lead to changes in the state's lending laws. The inquiry, which began before questions about Prosper Marketplace were raised in the wake of the San Bernardino terrorist shooting, fits into a growing trend nationwide of increased scrutiny of marketplace lenders.
If you want to find the world's brightest minds when it comes to data encryption, then you must head to Belgium. The paper details how a small Belgian university, Katholieke Universiteit Leuven (Catholic University of Leuven), has become a hotbed for data encryption thinking thanks to its Computer Security and Industrial Cryptography group. While the group, led by Professor Bart Preneel, leads developments in cryptography practice and ethics, it has found itself at odds with both those who support greater government surveillance and those who align with WikiLeak's concept of openness. Nonetheless, the school is the go-to for governments and private corporations alike when it comes to testing security programs.
Brick-and-mortar banks in the U.S. may face a renewed battle with their online competitors following an interest rate hike from the Federal Reserve. The paper describes how the banking landscape has changed since the last time interest rates were increased in 2006. Since then, Ally Financial, American Express and Discover Financial Services have become bank holding companies. As banks, their lower cost structures have meant they can offer higher deposit rates. The paper notes this spread between online banks and their brick-and-mortars competitors like JPMorgan Chase and Bank of America could widen once the Fed acts. And because low rates have eaten into margins for the traditional banks far more than they have for their online counterparts, the younger upstarts could have an advantage and build business even further in the months to come.
New York Times
Just because the big banks are told they can't retaliate against whistleblowers doesn't mean they don't face blowback for their actions. As detailed last week in Morning Scan, the going hasn't been so easy for former JPMorgan Chase employee Johnny Burris since he raised issues with the bank. The paper details the repercussions Burris has faced since he balked at company practices he encountered as a top-producing broker, which included alleged mandates to push JPMorgan's investment products even if they weren't the best for a given client. Burris was fired on charges he says are trumped up and has become the subject of three customer complaints he believes JPMorgan fabricated. And while an arbitration panel called to rule on the authenticity of the complaints ruled in the bank's favor, Burris contends he ascertained the bank did manufacture the complaints in affidavits from his former clients. But Burris may have the last laugh – even though JPMorgan is using all of its power to fight his allegations. If the SEC resolves claims of inadequate disclosures, the bank could pay up to $200 million. And if the regulator decides Burris gave it information that led to the enforcement action, he'd be entitled to between 10% and 30% of the sanction – up to $60 million.
A former Lehman Brothers trader is still fighting to receive an $83 million bonus he was owed before the firm collapsed, representing one of the final hurdles in resolving the company's bankruptcy. Jonathan Hoffman, a bond trader, helped the bank earn $700 million in profits, which entitled him to the major bonus. But since the institution crumbled, he has gone to Barclays. Lehman's trustees argue his Barclays earnings are what he was owed by Lehman, and to give him the bonus would be to pay him twice. He says his income from Barclays is separate. Hoffman's not alone either – other former lehman employees are fighting for more than $150 million in bonuses. Nonetheless, this case has become a grudge match according to the paper. But more importantly, it has thrown a spotlight on federal rules regarding excessive pay.