Receiving Wide Coverage ...
Sarao's Side of the Story: The London trader accused of triggering the May 2010 stock market "flash crash" denies plotting to manipulate prices by placing and canceling large orders. Navinder Sarao says in past but newly released emails with the British conduct authority that he simply relied on cat-like reflexes to make his moves. He says he might cancel an order because of "a move in one of the other markets that I look at, a chart set up that I suddenly remember from my 11 years of trading, or simply the WAY [my order] was filled made me doubt my position, or for the large part it is just my INTUITION." But even if Sarao is innocent of the charges against him, he should cut a deal with U.S. authorities, according to David Bermingham, one of the NatWest Three embroiled in the Enron scandal. "Make your life less bad," he instructs Sarao via an interview with the New York Times. "It is a matter of cast-iron certainty that 98 percent of indictments end in plea bargains."
Strategic Stalling: Now that Deutsche Bank has agreed to pony up $2.5 billion and plead guilty to criminal charges in order to settle allegations that employees conspired to rig interest rates, it's time for the post-mortem. The papers suggest British authorities were ticked off by Deutsche's evasive maneuvers during the investigation, which wound up resulting in a higher penalty. U.K. regulators say the bank accidentally destroyed recordings of 482 phone calls in order to hide evidence, and was guilty of "repeatedly misleading us," according to the Wall Street Journal. Reuters Breakingviews columnist Dominic Elliott says this uncooperative attitude is indicative of "acute cultural flaws" within the bank. But analysis in the FT concludes that Deutsche's delay tactics may have paid off. In putting off investigators, the bank let other financial institutions involved in the scandal take the heat for it and thereby may have minimized reputational damage. A separate article in the FT suggests that while New York financial watchdog Benjamin Lawsky gets credit for taking a hard line with Wall Street, some industry insiders think he's actually kind of lazy: people complain that he "swoops into an investigation at the last minute, when all the hard work has been done by others." (That's a problem familiar to anyone who's ever been part of a high-school study group.) The Times highlights the bro culture that emerged among traders at competing banks who conspired to manipulate the Libor, with workers calling one another "amigo," "mate" and "dude."
Cheerio: HSBC is getting serious about leaving London. The bank said Friday it will initiative a formal review of whether to move its headquarters, a decision that will be based in part on the impact of Britain's increasingly steep bank taxes. HSBC chairman Douglas Flint is also expected to continue his apology tour over the bank's Swiss tax evasion scandal at the annual meeting Friday. Financial Times, New York Times
Face-Off: The Department of Justice and Quicken Loans continue to let fly a volley of lawsuits against one another, with the latest from the DOJ alleging the consumer lender misled the government about the quality of loans made through the Federal Housing Administration program. This comes a week after Quicken filed suit against the DOJ and the Department of Housing and Urban Development, claiming the government based the charges against the lender on too small a sample size. New York Times, Wall Street Journal
Financial Times
Spain won't let U.S. authorities extradite the former JPMorgan Chase banker who supervised notorious "London whale" Bruno Iksil. The banker, Javier Martín-Artajo, is a Spanish citizen, and Spain typically refuses to turn its citizens over to foreign justice systems.
Washington Post
The federal government needs to take action to help struggling student-loan borrowers keep their heads above water, according to an op-ed by former Maryland Governor Martin O'Malley. He suggests two big fixes. First, Congress should let borrowers refinance their debt at lower interest rates. ("If we were able to bail out big banks, we can figure out a way to refinance college loans," he writes.) Second, the government should automatically enroll borrowers in income-based repayment plans that would limit their monthly contributions to 10% of their income, freeing them up to pursue careers that are valuable to society (teaching, national service) but not necessarily lucrative. The comments section is basically a free-for-all of people weighing in on the causes of and potential solutions to the student loan crisis, with no real consensus about the best way to move forward.
Elsewhere ...
Reuters: Breaking up is hard to do, but more big banks are steeling themselves for it, according to a Reuters report. The article cites Deutsche Bank's expected sale of its retail Postbank unit as well as signals from Credit Suisse and Barclays that they will scale back in coming months. Of course, some bankers argue there's a downside to simplification catching on. If enough banks do it, we could be left with "just three truly global banks HSBC, JPMorgan and Citigroup." (These would presumably be the holdouts to any voluntary effort to scale back in a big way.)
Time: A new study finds that fewer North American bank clients are pleased with their customer experiences. Gen Y is particularly dissatisfied, which the report attributes to lackluster digital banking offerings.
