Receiving Wide Coverage ...
BofA's 'Mortgage Sins': Documents released as part of Bank of America's $17 billion settlement with the U.S. government "read like a highlight reel of the mortgage sins that fed the 2008 financial crisis," the New York Times reports. The Times and the Wall Street Journal focus on a few particularly striking passages. Former Countrywide Financial chief Angelo Mozilo warned in a 2005 email that a possible condo-market crash would be a "financial and reputational catastrophe" for the company if it held certain loans on its balance sheet, but it continued selling those loans to buyers. A Merrill Lynch due-diligence consultant assigned to look over a pool of mortgage loans wrote in an internal email, "[h]ow much time do you want me to spend looking at these [loans] if [the co-head of Merrill Lynch's RMBS business] is going to keep them regardless of issues?...Makes you wonder why we have due diligence performed other than making sure the loan closed." And a Bank of America underwriter submitted a loan application to a Countrywide evaluation system more than 40 times in an effort to get it accepted. Wall Street Journal, New York Times
Meanwhile, the papers take a closer look at various components of the deal. The Journal says the $7 billion earmarked for homeowner relief will be used to reduce mortgage principal and monthly payments for troubled borrowers, raze or renovate abandoned homes and provide assistance for building or improving affordable rental housing. The Times points out that BofA's "actual financial burden may not exceed $12 billion," depending on how much of the cost of consumer relief the bank winds up shouldering. The Financial Times wonders what will become of BofA chief Brian Moynihan now that legacy issues stemming from the bank's acquisitions of Countrywide Financial and Merrill Lynch are largely behind him. "His big challenge is to increase revenues," but investors are curious about his growth strategy. And an unsigned editorial in the Journal rises to BofA's defense, arguing that "during the crisis the feds were delighted that a bank with reservoirs of private capital was willing to rescue the two firms from bankruptcy."
A 'Hole' Lot of Central Bankers: The Federal Reserve's annual conference in Jackson Hole has a no-Wall Street-economists-allowed policy this year, a move that "reflects Fed sensitivity about any perception of privileged access for financiers," according to the FT. The Journal takes a look at how the rocky global economy may impact the central bank's policy discussions in Jackson Hole. San Francisco Fed President John Williams tells the paper that he's worried about the uneven pace of recovery across nations. "The cross currents are really strong," he said. "Typically countries are moving together."
Wall Street Journal
Existing home sales ticked up 2.4% in July from the previous month, rising to 5.15 million a 10-month high. And there's more good news: "Not only were sales last month at their highest level since last September," the Journal reports, "but fewer transactions came from short sales of underwater homes and foreclosures."
Citigroup's August settlement with the Securities and Exchange Commission over the sale of collateralized debt obligations "will prevent it from selling investments in hedge funds and private-equity funds to wealthy clients" unless it can obtain a waiver, the paper reports.
U.S. regulators are out of line in their attempts to become "world financial regulator," writes columnist Jonathan Guthrie. He argues that part of the problem is the decentralized nature of regulation over foreign banks, which results in "unpredictability, raised costs for banks and growing resentment abroad."
Getting out of retail banking in Japan is a smart move for Citi, according to the FT's Lex team. "Letting go of wealthy and global-minded customers in the world's third-largest economy degrades Citi's image as the great international bank," they write. "Good. The era of image is over; banks' territory cannot extend past their profitability."
Silicon Valley firms are closing M&A deals without the advice of investment bankers, and financial journalist Felix Salmon feels great about it. "This is heartening news for all of us who think that financial services companies in general, and investment banks in particular, are too big and too important," he writes. He also says it's a sign of investment banking's dwindling appeal for bright young things, who are forgoing the prospect of Wall Street bonuses and heading to San Francisco to seek their fortunes.
The United Arab Emirates' central bank is none too pleased about the terms of Standard Chartered's anti-money laundering settlement with New York financial regulator Benjamin Lawsky. The deal requires the British bank to cut ties with small business clients in the UAE. The UAE central bank says clients may sue "because of the material and moral damage which is falling on them."
New York Times
An inherent conflict of interest mars the objectivity of reports issued by credit ratings agencies and auditors, according to columnist Floyd Norris. Credit agencies and auditors report on the companies that employ them, and they may be reluctant to bite a hand full of money. "One way to improve audits might be to require the firms to identify the partner in charge of each audit, as is done in many European countries," Norris suggests. As for ratings agencies, "There is no apparent alternative to having those rated pay for the ratings. Having investors pay sounds promising, but who would volunteer to pay if the ratings were to be disclosed to those who did not pay?"
A day after the Journal and FT reported that Wall Street banks are upping entry-level pay in an effort to appeal to recent college grads, the Times follows suit. "Larger salaries are not the only thing being dangled in front of the fresh-faced hires," the paper reports. "In what amounts to a radical shift in policy, almost all the major banks have instructed analysts to take a few days off a month, on the weekends."
The Bitcoin community will have an extra 45 days to comment on the New York State's Department of Financial Services proposed regulations for virtual currency. "It's obvious that this is a novel regulation," DFS watchdog Benjamin Lawsky told the Times. "It's really the collision of banking regulations with new technology, and we want to make sure we get it right."
Washington Examiner: Consumer Financial Protection Bureau employees cycle back and forth between financial-industry jobs and government work just like workers at other financial regulatory agencies, despite promises that it would be exempt from "revolving-door action," writes Washington Examiner columnist Timothy P. Carney. "There's no reason to posit these men and women served anyone but the public while at the CFPB," he writes. "But it tells you something about government that our public servants were so well-served by creating new regulations."