Wall Street Journal
Activist investors have brought about another change to how banks to business. Banks have increasingly pushed for provisions in loan agreements to require corporate borrowers to repay a loan in full if a majority of directors are ousted by activists. Banks are ultimately worried that if an activist seizes control of a board, it might force the company to pursue debt-fueled stock buybacks, which would erode the company's credit rating. However, lawsuits are being filed against banks challenging the clauses, saying they only serve to entrench incumbent directors. The legal provisions, known as proxy puts, have been included in agreements at about 200 companies since the beginning of 2014. Bank of America, Wells Fargo, Citigroup and SunTrust Banks are among the banks to have been sued to challenge the proxy-put provision.
Ginnie Mae said it needs to hire more staff to deal with the rising number of nonbank mortgage lenders that have cropped up. Ginnie Mae said it needs more people to vet these new lending companies, which have made riskier loans insured by the Federal Housing Administration. Nonbank lenders like LoanDepot and Guild Mortgage have filled a void in the market, after Wells Fargo, Bank of America and JPMorgan Chase have backed out of it as a result of stepped-up regulatory scrutiny.
A Federal Reserve research paper questions the conventional wisdom that it's good to be a too big to fail bank. Markets should not expect the government to rescue the largest banks if they get into financial trouble, the Fed paper says. However, the "Heard on the Street" column says the Fed got it wrong and that credit investors have it correct in assuming that big banks will get bailed out if things turn south.
The paper has a brief story looking at the Consumer Financial Protection Bureau's $7.5 million fine levied on Regions Financial for charging overdraft fees to consumers who did not opt-in for overdraft coverage. American Banker had two stories on Tuesday on the fine, one a straightforward news piece, and the other a broader look at the CFPB's efforts to make an example out of Regions.
Banks are watching closely to see if Securities and Exchange Commission Chair Mary Jo White will recuse herself from granting waivers to banks, now that her two-year recusal agreement has expired. As a former lawyer who represented banks, White agreed to stay out of votes for the two-year period to avoid the appearance of a conflict. Whether White continues to recuse herself is important concerning upcoming votes on whether to grant banks waivers in light of allegations they rigged foreign-exchange markets.
New York Times
Whether banks are comfortable with using analytics remains an open question. A recent development involving the tanking of Twitter's stock price shows advanced analytics technologies are being used in a wide range of applications. Financial-analytics firm Selerity on Tuesday tweeted a release of Twitter's disappointing earnings report. Selerity's tweet came about an hour before Twitter released the news itself. Selerity gets its early information by poring through social-media sites and the Internet for early signs of potential news.
WBAL-TV: As Baltimore cleaned up after rioters burned and looted businesses, more reports emerged about the banks that suffered damage. A Bank of America branch was one of several businesses that had glass shattered. Several credit unions shut down branches or reduced hours on Tuesday, including Municipal Employees Credit Union, State Employees CU of Maryland, Johns Hopkins FCU and SecurityPlus FCU. An American Banker article Tuesday noted some of Baltimore's hardest-hit neighborhoods suffer from a lack of bank branches.
The Republican (Springfield, Mass.): The paper looks at the merger between Merchants Bank of Vermont and Nuvo Bank & Trust Co. The deal, if it closes, will mean there will be no banks headquartered in Springfield, Mass.