Breaking News This Morning ...
B of A Earnings: Bank of America more than doubled its second-quarter profits to $5.32 billion, up from $2.29 billion a year ago. What a difference the lack of a costly mortgage settlement makes! The Wall Street Journal has a handy list of other items to look out for in the bank's report.
Receiving Wide Coverage ...
Earnings Ahoy: What do early big-bank earnings reports tell us about the state of the financial system? For one thing, "the deadbeats are dead," according to the Wall Street Journal. Both JPMorgan Chase and Wells Fargo reported extremely low charge-off rates in the second quarter, a reflection of both banks' tighter underwriting standards and consumers' healthier finances. Meanwhile, the Financial Times says the two banks' reports paint a cheery picture of the housing market. David Reilly of "Heard on the Street" notes that JPMorgan and Wells are still getting dinged by the Fed's ultra-low interest rates, although banks may get some relief soon.
Wall Street Journal
The Queens district attorney's office has big plans for its piece of HSBC's $1.9 billion anti-money laundering settlement. The agency was awarded $116 million because one of its investigators was the first to flag HSBC's suspicious transactions. Now the D.A. plans to use the money to expand into the "largely empty" jail that sits beside its current office in the Queens criminal courthouse. (One question that's left unanswered in the article: what does largely empty mean, exactly?) One commenter argues that it's risky to reward police and prosecutors with shares in a settlement: "Having the money given to them makes them a 'company' that goes after the money and not the criminals."
The U.S. Chamber of Commerce is taking a stand against the Securities and Exchange Commission's in-house courts. The business trade group plans to release a report on Wednesday arguing the government agency should overhaul its use of administrative judges to ensure that defendants are treated fairly.
New York Fed official Simon Potter warned currency traders Tuesday if the industry fails to come up with and enact its own reforms, regulators may do it for them.
Financial Times
The paper takes a look at how large asset fund managers including BlackRock, Vanguard, Pimco and Fidelity managed to escape the dreaded "systemically important" label. (A massive two-year lobbying push, mostly.)
The Lex team digs into the mystery of why Santander Consumer USA showed its former chief Thomas Dundon the door when all evidence implies he was doing a good job. Santander wants to suggest Dundon was more cut out for entrepreneurial efforts than heading up a big foreign-owned company, but word on the street is Dundon was a sacrificial lamb offered up to appease regulators.
When it comes to Apple Pay, British banks may be tougher negotiators than their U.S. counterparts. U.K. banks reportedly pay only a few pence to Apple for each £100 transaction, while U.S. banks pay 15 cents to the tech giant.
Too big to fail is alive and well in the U.K., according to Bank of England Governor Mark Carney. He says only higher capital requirements and ringfencing measures will solve the problem.
Looking back, former HSBC chairman and chief executive Lord Green says he maybe should have handled things a little differently during his tenure at the bank particularly with respect to the acquisitions that wound up exposing the larger company to scandals at its Mexican and Swiss businesses. "I don't believe the problems lay in insufficient consideration of acquisitions up front," he told the House of Lords economic affairs committee. "I think in general problems have lain in insufficiently robust implementation of recommendations from internal audit reports and a weaker compliance function than was wise; and yes, we should have addressed those."
The Barclays board member who was reportedly instrumental in ousting the bank's former head Antony Jenkins is moving on himself. Sir Mike Rake plans to become chairman of payments processing company Worldpay.
New York Times
Job cuts at the New York Stock Exchange may have made last week's temporary shutdown even worse. "In addition to concerns about the length of the failure, some traders on the floor said it was hard to get information from the New York exchange about the nature of the problem and how long it would take to fix," the paper reports. "Senior workers who had served as the go-between with traders during past disruptions left over the last year."
Breakingviews' Antony Currie isn't a fan of the BB&T plan to reward top executives for a successful acquisition of Susquehanna Bancshares. The crux of his argument is arranging mergers is part of a CEO's basic job description. Why should a bank need to dangle further incentives?
Smith College professor Eric Reeves argues the Sudanese people deserve a large portion of BNP Paribas' $8.97 billion settlement for violating U.S. sanctions. Reeves says many of the transactions illegally processed by BNP Paribas supported the Sudanese government, which has carried out the mass genocide of Darfur civilians and is designated by the U.S. as a state sponsor of terrorism.
The economic conditions described by Fed chair Janet Yellen in a speech last week suggest the central bank should hold off raising interest rates, according to Teresa Tritch. Tritch points to low inflation, stagnant wage growth and a slow housing recovery as evidence the economy still has plenty of room for improvement.
Washington Post
Honda's auto financing unit has agreed to pay $24 million to minority borrowers as part of a settlement with the Department of Justice, according to the paper. The Honda business allegedly charged minorities higher interest rates than white customers. The company also agreed to lower the amount that dealers can mark up interest rates from 2.25% to 1.25% for loans of five years or less.
