Wall Street Journal
The Fed's giant stash of assets is the equivalent of a semipermanent sovereign wealth fund, argues David Malpass, a deputy assistant Treasury secretary in the Reagan administration, in a Journal op-ed. It's one of the "world's largest and most leveraged bond portfolios, taking massive interest-rate risks." Malpass says the Fed should be coerced into establishing a "clear portfolio wind-down process" to allow it to concentrate on monetary and regulatory policy.
Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and 10 other Wall Street, European and Asian banks have been sued by an Alaskan pension fund for colluding to manipulate a benchmark interest rate, the Isdafix rate used for derivative contracts. The process for setting Isdafix rates has already been under investigation by the U.S. Commodity Futures Trading Commission, as well as British and German regulators. The lawsuit was filed in federal district court in Manhattan.
Union Bank's Japanese parent company, Mitsubishi UFJ Financial Group, is looking to spend $8 billion on acquisitions in the U.S. and in Asia, a bank executive told the FT. Masaaki Tanaka, the executive, didn't name specific banks or geographic markets as potential targets. MUFJ is eyeballing the deal market as its own internal assessments show it with plenty of capital under Basel III requirements. With all that dry powder, MUFJ is apparently looking to make deals to help achieve its goal of becoming one of the 10 largest U.S banks. The paper makes the observation that MUFJ finances much of its lending in the U.S. through exported yen deposits.
Consensus is building among the Fed's Open Market Committee to adjust the wording of forward guidance on future interest rates. One element of the Fed's previous guidance that's coming under scrutiny is that it will keep rates low for a "considerable time" after it stops buying assets next month. One example of the growing jittery feelings among FOMC members: "It is ... time for the Committee to reformulate its forward guidance," Cleveland Fed President Loretta Mester said on Thursday.
New York Times
Here's another way Goldman Sachs is different from its Wall Street bank brethren: It's much more vague on which executives' legal bills it's obligated to pay, Gretchen Morgenson writes.
HUD's program of selling severely delinquent mortgages that are guaranteed by the Federal Housing Administration has come under fire from a community advocacy group. The Center for American Progress says nonprofits should be given an equal chance with private investors to bid on the delinquent loans. If more nonprofits were able to buy the loans, it might create a situation in which more troubled mortgages are refinanced or renegotiated to prevent delinquent homeowners from being evicted from their homes, the Center argues.
Bankers are frustrated and angry about the mixed messages they're getting from Washington on access to credit. On the one hand, regulators and policymakers want banks to make more loans, especially to lower-income borrowers, to buy homes. On the other hand, Fannie Mae and Freddie Mac are forcing banks to buy back loans that go bad, saying they didn't meet their exacting lending standards. The story comes in advance of a Sept. 17 meeting on the issue between President Obama and bankers.
Bloomberg: If you spent the past few years bad-mouthing the Federal Reserve's monetary policy of near-zero interest rates and debt purchases, then you lost out on the chance to participate in the $1 trillion worth of returns produced by buying and holding U.S. Treasuries.
Bloomberg: Compensation paid to the chairman of Industrial & Commercial Bank of China last year represents less than 2% of what JPMorgan Chase CEO Jamie Dimon was paid.