Receiving Wide Coverage ...
A Win for the CFTC: A federal judge has given the Commodity Futures Trading Commission a green light to regulate overseas swaps trading. Citing the CFTC's mandate under the Dodd-Frank Act, the judge "dismissed arguments by three Wall Street trade groups that the CFTC overstepped its authority in issuing new rules and guidance related to overseas swaps transactions," the Wall Street Journal reports. The New York Times suggests the ruling signals a change in judges' sympathies in the battle between corporations and regulators: "After years of Wall Street unwinding regulations through court battles in Washington . the trading commission has won three recent cases there." Reactions to the ruling on Twitter ran the gamut. BankThink contributor Mayra Rodriguez Valladares, who wrote about the CFTC's cross-border oversight last year, called the decision "a major victory for derivatives reforms' advocates." Another regulator BankThink writer, Hester Peirce, opined it was "sad to see the CFTC's [Administrative Procedure Act] avoidance games get a judicial blessing," referring to the law that governs how federal agencies propose and set new regulations.
Critiquing Credit Rating Agencies: Moody's Investors Service has proposed revamping its credit ratings system by including analysis of "the likelihood of support from other group entities; the potential loss to different debt classes in the event of failure; and the probability of government support for the bank." The FT's Lex team approves of the idea in theory but warns Moody's may not be able to accurately predict responses in the event of a crisis. The proposal is unlikely to appease critics like Wonkblog's Matt O'Brien, who warns "we haven't gotten rid of the credit rating agencies' perverse incentives to rate bonds better than they deserve just to drum up business." O'Brien also takes a few shots at rating agency employees, suggesting they are "the people who couldn't get jobs on Wall Street, and they can be a bit too credulous of the people who did."
Wall Street Journal
Credit Suisse is in hot water with U.S. regulators once again, this time for the bank's predilection for making and selling leveraged loans. The Federal Reserve sent the Swiss bank a letter ordering it to scale back on the loans and comply with guidance "warning banks to avoid deals that included too much debt or too few protections for the lenders in case of a default."
Regulators are investigating the dealings between the Florida unit of failed Portuguese lender Banco Espírito Santo and an Espírito Santo bank in Panama. "The manner in which wealth managers at the Miami bankincluding Jorge Leite Espírito Santo Silva, the Espírito Santo family's top representative in the U.S.conducted business with clients of the Panamanian bank violated the Miami bank's internal rules and might have breached state and federal banking and securities laws," according to bank officials.
The Consumer Financial Protection Bureau will propose Thursday gaining supervisory power over nonbank auto lenders in an effort to investigate whether certain car-lending practices take advantage of borrowers. The agency's likely areas of focus will include "whether consumers are being steered into overly expensive loans they're unable to repay or being placed in longer-term loans that reduce monthly payments but drive up the total cost of the loan," as well as transparency surrounding add-on products. Unsurprisingly, auto lenders are none too happy about the prospect of tangling with the CFPB; they warn added compliance costs are likely to be passed on to consumers in the form of more expensive loans.
Citigroup will join Bank of America in funding 15-year fixed-rate mortgages aimed at low-income and subprime borrowers. The loans, which are originated and distributed by affordable homeownership nonprofit Neighborhood Assistance Corp. of America, offer borrowers discounted interest rates. The banks hold the loans on their books after NACA originates them and take the losses if borrowers default.
New York Times
The paper recounts the tale of a few unintentional advocates for victims of prepaid card fraud schemes, including a lawyer whose name was randomly bandied about by swindlers trying to establish their authenticity and a theology professor whose 86-year-old grandmother was tricked into sending $38,000 to fraudsters.
Virginia Attorney General Mark Herring is seeking $1.15 billion in a mortgage securities lawsuit against 13 banks including JPMorgan Chase, Citigroup and Credit Suisse. The banks allegedly deceived Virginia's state pension fund about the quality of the securities they sold in the run-up to the financial crisis.
Housing and Urban Development Secretary Julian Castro's top goals include persuading mortgage lenders to ease credit standards and increasing the availability of affordable rental housing, according to his Tuesday speech. Castro also voiced his support for the stalled Johnson-Crapo bill, which proposes to end Fannie Mae and Freddie Mac and would direct funds to affordable housing programs.