Breaking News This Morning ...
Earnings: Bank of America
Receiving Wide Coverage ...
Volcker Rule Exemption: Federal regulators approved a rule on Tuesday that allows banks to retain their ownership of trust-preferred securities structured as collateralized debt obligations. Without the exemption, holders of the CDOs were expecting as much as $600 million in losses as regulators begin to implement the Volcker Rule, a part of the Dodd-Frank Act that aims to curb proprietary trading activity by banks. The American Bankers Association filed a lawsuit against the regulators over the issue and not surprisingly several stories on the exemption included a quote from Frank Keating, ABA president, commending the change. The lobbying group plans to announce a decision regarding the pending litigation today. Although several publications cited the potential $600 million in losses, the New York Times did a swell job explaining why. Banks sold trust-preferreds into the CDOs prior to the 2008 crisis and the main buyers were other banks. The securities have lost much of their value and if banks were forced to sell them to comply with the Volcker Rule they would have to acknowledge the embedded losses. American Banker, Financial Times, Wall Street Journal, New York Times
Big Banks Share the Ink: JPMorgan Chase reported 2013 earnings of $17.9 billion on Tuesday, while Wells Fargo reported earnings of $21.9 billion and the Wall Street Journal saw an opportunity to pit the two against each other. The newspaper notes that JPMorgan "relinquished" its position to Wells as the highest annual earning bank, a position it had held since 2010. Of course, JPMorgan would have kept its top spot had it not had to set aside $11.1 billion for legal expenses related to several settlements the company struck in 2013. Shortly after crowning Wells, the newspaper calls its seizing of the throne "largely symbolic" of the San Francisco-based company's expansion following the economic downturn of 2008. The Financial Times focused its story about the companies' earnings on JPMorgan's legal issues, which included a $13 billion settlement for mortgage securities missteps and a $2.6 billion settlement related to Bernard Madoff's Ponzi scheme. FT notes that JPMorgan CEO Jamie Dimon told investors to "take a rain check" when asked if it would be able to deal with all of its remaining legal and regulatory issues in 2014. The continued tepid demand for new mortgages was the angle of the New York Times' coverage. The newspaper notes that although some of the markers of a strong housing market are there home prices are up, the federal government has pledged its support and banks are making money fourth quarter new mortgage activity was down drastically from a year earlier iat JPMorgan and Wells. Meanwhile, at least one newspaper saw fit to cover JPMorgan's and Wells' results discretely. Wall Street Journal, Financial Times, New York Times
Payments company Square has a $5 billion valuation, according to unnamed sources. The valuation, raised from $3.25 billion in 2012, was updated as part of a private placement that allowed insiders to cash out investments worth $135 million. FT reports the private placement gives the company some breathing room on going public. The newspaper previously reported that Square could look to go public as early as this year.
A new accounting acronym is afoot in determining the value of derivatives at investment banks. It's FVA, or funding valuation adjustment and it stems from the crisis and relates to the cost of funding collateral. The acronym carries a punch, too. It took a $1.5 billion bite out of JPMorgan's earnings.
New York Times
Wall Street regulators are expected to get slightly bigger budgets this year, but the raises are a far cry from what they requested. In a $1.1 trillion budget proposal agreed upon Monday, the Securities and Exchange Commission would have a $1.35 billion budget in 2014, compared to $1.32 billion last year, and its request for $1.67 billion. The Commodity Futures Trading Commission would have a $215 million budget, compared to $205 million last year and a requested $315 million.