Wall Street Journal
Online lender Prosper has paused its relationships with loan-referral websites LendingTree and Credit Karma as it works to get investors to buy more loans. Marketplace lenders have been facing a slowdown and waning investor confidence, especially since events at rival Lending Club led to the ousting of its chief executive. Prosper's lending volume is expected to fall in the second quarter. It fell 12% in the first quarter from the fourth quarter of 2015. Prosper, Lending Club and other marketplace lenders have leaned on sites like LendingTree and Credit Karma to grow volume.
Wall Street firms have been filing Freedom of Information Act requests seeking information pertinent to investment decisions. Now, the Consumer Financial Protection Bureau is skirting some requests with "Glomar responses," in which it says it can "neither confirm nor deny" the existence of the requested record. Lawyers and academics say the Glomar response should be reserved for cases in which even acknowledging a document could compromise national security or damage someone's privacy. The CFPB's use of Glomar has incited a battle with John Gavin, the publisher of financial newsletter Probes Reporter, who fought the Securities and Exchange Commission in court over its Glomar responses and now intends to do the same with the CFPB. "The CFPB is supposed to be a consumers' advocate," he said. "To have 10…requests in and not have one page of record is really unsettling."
Morgan Stanley has agreed to pay $1 million to settle charges that it didn't properly protect customer data after former employee Galen Marsh illegally tapped its computer system and took home client information from about 730,000 customer accounts between 2011 and 2014. Morgan Stanley neither admitted nor denied the Securities and Exchange Commission's findings – that the system was "ineffective" in limiting certain access and that an audit would "likely have revealed the deficiencies." Morgan Stanley has not conducted an audit since the system was created 10 years ago, the paper says. The bank said in a statement that no fraud took place as a result of the breach and that it changed account numbers and offered credit monitoring services to the affected clients. The SEC Wednesday suspended Marsh from working in the securities industry for at least five years. In December he was sentenced to three years of probation.
Regulators said they will give the U.S. units of Barclays, Credit Suisse, UBS, Deutsche Bank an additional year to revise and file their "living wills" explaining how they would handle potential bankruptcy without taking bailouts from taxpayers. The Federal Reserve and Federal Deposit Insurance Corp. said the four companies have until July 2017 to submit new plans. The previous deadline was July 1 this year. The agencies said a requirement that foreign-owned banks create single holding companies for their U.S. operations by next month would probably affect the firms' resolution plans and strategies.
With presidential battle lines now more clearly drawn, bank investors are turning their attention to who will lead the "regulatory charge" at the Federal Reserve. The paper looks at Fed Governor Daniel Tarullo, who has been that guy for seven years. He hasn't tried to break up big banks and has made stress tests tougher. Although he has expressed a desire to resign, he's stayed to see certain regulatory initiatives through. Donald Trump as president would likely appoint a vice chair of supervision at the Fed who would have supervisory authority over Tarullo. However, Tarullo an official in President Bill Clinton's administration, may be asked to stay of if Hillary Clinton is elected.
Bloomberg: Republican Congressman Jeb Hensarling's Financial Choice Act, which would effectively undo Dodd-Frank, includes "plenty of bad ideas," writes the Bloomberg View editorial board but he's right about one thing: regulatory oversight should be more relaxed for banks with greater financial strength. "The more banks rely on capital rather than deposits or other debt, the more they can safely lend even in bad times, and the less regulators need worry that a bank's mistakes might tank the economy," it said.
Charlotte Observer: Wells Fargo is laying off 55 commercial mortgage employees in Oakland, Calif. and shifting their roles to Charlotte, N.C. Similar functions in both cities will be consolidated. Jobs moving to Charlotte involve operations and loan administration functions in its commercial mortgage servicing department but the bank has said it plans to retain some of these functions in Oakland.