Receiving Wide Coverage ...
European Banks Face U.S. Legal Woes: European lenders BNP Paribas and Credit Suisse are both being probed by the Justice Department, and everyone's wondering what the inquiries may bring. French lender BNP Paribas may have to shell out penalties higher than the $1.1 billion it already set aside for a Justice Department investigation into whether it processed payments for countries under U.S. sanctions, including Iran, according to the New York Times. BNP Paribas may also be banned from processing dollar transactions through its New York office, according to the Wall Street Journal. This "would be a hammer blow," journalist Rob Mackenzie Smith tweeted, noting that French banks are dependent on liquidity in U.S. dollars. "Lack of it almost knocked over SG during euro debt crisis." The Financial Times points out that BNP could pay double the expected amount of $1.1 billion without a hiccup. "What's more concerning is that generating new capital from the group's operations is going to be tough," the FT says. The WSJ is most preoccupied with the fact that both BNP Paribas and Credit Suisse could face criminal charges. (Credit Suisse is accused of helping clients duck U.S. taxes.) "It isn't clear whether a bank could survive a criminal prosecution even if it were allowed to keep its licenses," the Journal says. Meanwhile, the Financial Times reports Credit Suisse executives clashed over how to handle the Justice Department probe. The former head of Credit Suisse's private bank for the Americas, Anthony DeChellis, apparently found documents that showed "the alleged tax evasion efforts spread beyond a small group of former bankers whom Credit Suisse blamed for the misdeeds." The same day DeChellis discussed those documents with Credit Suisse's global head of litigation, he was told that he was being reassigned. What a strange coincidence!
Wall Street Journal
The first quarter's minimal GDP growth may have been the product of an unusually punishing winter, but Justin Lahart's "Heard on the Street" column points out that "an economy that sees growth nearly stall because of temporary factors isn't a healthy economy." The Fed was pretty blasé about first-quarter GDP, but the economic data suggests it's unlikely to raise interest rates anytime soon, according to Lahart. Meanwhile, the Journal's editorial board worries over the rate of economic growth throughout the "Not So Great Recovery," though it finds a bright spot in the marked uptick in banks' commercial and industrial lending. The op-ed argues that Americans care more about faster growth for everyone than wealth redistribution, and suggests that Republicans run on that platform.
Former Citigroup CEO Vikram Pandit has been named chairman of consulting group TGG Group, which was co-founded by Freakonomics guru Steven Levitt.
New York Times
It's a big week for government reports on banks' foreclosure and mortgage refinancing practices. A few days ago, the Government Accountability Office announced that banks may have made far more errors during the housing crisis than a previous foreclosure review suggested. Now the Office of the Comptroller of the Currency has released a post-mortem of the foreclosure review that led 15 banks to agree to pay $3.9 billion to homeowners last year. In light of the GAO report, that payout seems to be looking low to the Times, which called the review "costly but ultimately limited" and noted that "the decision to cut short the review left regulators with limited information about actual harm to borrowers when they negotiated the $10 billion settlement."
Senators Charles Schumer and Barbara Boxer want the Department of Urban Housing and Development to clarify reverse-mortgage rules. Some middle-aged children who inherit homes from their parents have found themselves "facing foreclosure on their homes after receiving inaccurate and confusing information on their options following a reverse mortgage borrower's death," the senators wrote in a letter to HUD secretary Shaun Donovan.
BankThink contributor Mayra Rodríguez Valladares tells Times readers what the market can learn from Bank of America's accounting error. Other big banks may be overlooking similar problems, she writes, which in turn suggests that their living wills which explain banks' resolution plans in the event of failure may not be using reliable data.
A long read in the Times magazine takes a look at ex-Credit Suisse exec Kareem Serageldin the only top banker sentenced to jail time for his or her role in the financial crisis. (The Times points out that Serageldin isn't even that high-level: he "happened to be several rungs from the corporate suite at a second-tier financial institution.") Why didn't more bankers get thrown behind bars? They got lucky, according to the Times: the federal prosecutors were focused on settlements and individuals who did face charges denied wrongdoing and got away with it.