Swaps Settlement Ahead: Twelve big banks plan to pay $1.9 billion to settle charges that they conspired to control the credit default swaps market during the run-up to the financial crisis, according to the papers.
The New York Times maintains an air of mystery about the details of the pending settlement, opting not to name the banks involved. But the Los Angeles Times names names including Bank of America, JPMorgan Chase and Citigroup and the Financial Times lists all 12 banks in the last paragraph of the article.
According to a complain filed in a federal district court in New York, the banks "met secretly to kill proposals that would put the trading of these insurance-like products onto an exchange through which they could be bought and sold like stocks and their prices made more transparent," the LA Times reports. A lawyer suing the banks on behalf of large investors tells the New York Times that banks have also agreed to improve the transparency of the swaps market as part of the deal.
Fed Watch: As the Federal Reserve's September meeting nears, the media is finding inventive ways to approach the question of when it will begin raising interest rates. The New York Times' Neil Irwin suggests in a column that the Federal Reserve officials most concerned about inflation may be the ones experienced rapidly increasing prices during their early adulthoods. His larger point is that personal experience inevitably informs our biases, but that we should seek out broader historical knowledge to provide a counterweight.
Meanwhile, the Wall Street Journal takes a look at central banks worldwide that have attempted to raise rates in recent years only to backtrack when their country's economies sputtered. A Royal Bank of Scotland economist advises central banks, "Be very, very cautious on raising rates. There needs to be a really, really strong case." Justin Lahart of "Heard on the Street" recommends a possible workaround for the Fed: go ahead and raise rates by a quarter point now, but avoid further increases until inflation gains steam. This approach would soothe market jitters, he suggests.
Wall Street Journal
Bank of America investors are unhappy about chief executive Brian Moynihan's dual role as chairman, sure. But they've got lots of other issues with the board too. The paper reports that investors are pushing for a number of changes, including shaking up the makeup of the board's governance committee and giving longtime directors the boot.
The paper takes an in-depth look at the fall of former trader Tom Hayes, who became the face of the Libor rate-rigging scandal. Hayes was depressed and suicidal as British investigators' investigation into the conspiracy unfolded in 2013, according to the profile. "It is unnerving to witness in high-definition the unraveling of a man's life, even if that man is one of those pulling the thread," writes reporter David Enrich, who came to know Hayes well over the course of months of secret meetings. This is the first in a five-part series.
So-called banking disruptors like Lending Club and SoFi actually have pretty traditional business models, according to a column by Tom Braithwaite. The article focuses mostly on SoFi, which has already expanded from student lending into mortgages and personal loans and has ambitions to get into wealth management, credit cards and even deposit-taking. The disruptive part would be if SoFi can manage to do all that without government deposit insurance and the attendant regulations.
New York Times
The paper takes a look at the underbelly of marketplace lending, wherein borrowers grow overwhelmed by unmanageable debt and automatic electronic loan payments go awry.
Companies that offer lavish stock-option pay packages appear to have bigger problems with quality control, according to Gretchen Morgenson's analysis of a new study. The study found that "C.E.O. option pay was associated with both a higher likelihood of experiencing a [product] recall as well as a higher number of recalls."