Wall Street Journal
Jimmy Lee, the JPMorgan Chase vice chairman who unexpectedly died last week, will be "irreplaceable," according to CEO Jamie Dimon. Lee was responsible for being the point man to JPMorgan's top corporate clients; his duties will be farmed out to several executives. One example of Lee's importance: when General Electric earlier this year decided to sell off its GE Capital banking unit, Dimon and Lee were both summoned to a GE conference room on an upper floor of 30 Rockefeller Center to meet with GE CEO Jeff Immelt. Early on in their partnership, some predicted Lee and Dimon wouldn't work well together as their personalities seemingly clashed. But instead the partnership worked well.
Big banks may not be finished with the era of elevated costs tied to legal settlements and regulatory fines, the "Heard on the Street" column said. Recent developmentssuch as the Office of the Comptroller of the Currency's crackdown on JPMorgan Chase, Wells Fargo, U.S. Bancorp and others for failing to meet their obligations in cleaning up foreclosure practicesmay auger more financial penalties on the horizon. Plus, a new round of living wills is due July 1; if any is found to be lacking, that would force banks to spend more on compliance measures. If regulators continue to bring the heat on big banks, they'll be hard-pressed to meet their goals of improving efficiency ratios. JPMorgan, for example, has said it wants its efficiency ratio to fall to 55% from its current range of 58% to 60%.
Cyberattacks are what worry bank regulators the most right now, the "Overheard" column said. At a recent congressional hearing, an academic from the George Washington University said that unnamed bank told him it was hit by 34,000 cyberattacks within a week, amounting to an attack every 34 seconds. Furthermore, that's only the cyberattacks the bank knows about.
If the Federal Reserve raises interest rates later this year, the move could eventually make it more difficult for consumers to afford buying a home in large cities where real estate is already expensive. Home prices are already out of reach for many in San Francisco, Los Angeles and San Diego; rising rates would eventually lead to higher mortgage rates and higher monthly payments, making home ownership more difficult for even more people. The rapid increase in housing prices in these areas is likely to cool down, although most likely in a gradual manner. "It's almost like someone pouring cold water on some of these hot markets to cool them down," a Zillow economist said.
"After six-and-a-half years at the helm of Royal Bank of Scotland, Sir Philip Hampton is tired. He is particularly tired of banking."
New York Times
This headline caught our eye, but it's not actually about the Mortgage Electronic Registration Systems, which may nevertheless want to consider rebranding now, as the company formerly known as Isis did. Then again, the acronym for suspicious activity reports didn't change during that outbreak, and the card industry still uses an awkward shorthand for point of sale terminals. As for MERS, it stands for Middle East respiratory syndrome, a deadly disease that has been slowly spreading around the world.
The technology firm Broadview Partners took data from corporate-encyclopedia Hoover's and wrangled it into a map showing the largest company in each state, measured by revenue. It looks like only three banks made the cut: Bank of America in North Carolina, Regions Financial in Alabama and Hawaiian Electric Industries, the holding company for American Savings bank in Hawaii. Although, to cast a skeptical eye on Broadview's exercise, just because a company is headquartered in a certain state doesn't mean all of its revenue is generated in that state, nor does it mean the benefits of its revenue accrues to that state; and then there's the question in which state a company is domiciled for tax purposes, etc.
Bloomberg: Texas Gov. Greg Abbott wants the Federal Reserve Bank of New York to return $650 million in gold bars to the Lone Star State. Abbott wants to repatriate the gold, which technically belongs to the University of Texas Investment Management Co., not the state itself, mostly as a symbolic statement. "Texas is unique, it's stable, it's strong and we can show that by letting other states and individuals know that, yes, Texas has a billion dollars worth of gold," said the Texas state lawmaker who sponsored the bill on behalf of the governor. "Does your state have a billion dollars worth of gold?'" (Abbott has referred to the gold as being worth $1 billion, even though its value is $650 million.) Abbott signed the bill into law last week; if Texas is able to take possession of the gold, it would become the first state to have its own gold reserves kept in its own storage unit.
Forbes: Chris Kotowski, an analyst at Oppenheimer, pointed out a way that Bank of America could close its performance gap with rival JPMorgan Chase. The key are B of A's outstanding Treasury Department warrants that expire in January 2019; the warrants were issued as part of the Troubled Asset Relief Program. If CEO Brian Moynihan can convert his cost-cutting program into a boost in Bank of America's stock price, then the strike price on the Tarp warrants could drop to $11.55. That could, in turn, generate a huge return on investors willing to roll the dice now.