Receiving Wide Coverage ...
Revolving Door?: More evidence has emerged of conflicts of interest involving the New York Fed and Goldman Sachs. This time it's an indication of a revolving door between the two institutions, in which an employee leaves one and quickly joins the other, bringing sensitive market information along for the ride. Goldman fired two workers after the bank learned that one had shared confidential information with his colleagues about the New York Fed's supervision of another bank (the Financial Times identified the institution only as "a small New York bank"). The two former Goldman workers were a junior-level investment banker who shared the information and a more-senior banker who didn't report the incident to his bosses. The junior banker, Rohit Bansal, who had only been working for Goldman for about 10 weeks after spending seven years at the New York Fed, worked in the financial institutions group and specifically covered regional banks. The other is Joseph Jiampietro, who previously worked as an adviser to Sheila Bair at the Federal Deposit Insurance Corp. Jiampietro's lawyer said his client did nothing wrong and shouldn't have been fired. Bansal may have received the information from a former colleague who still worked at the Fed. All the relevant authorities are jumping in to investigate possible criminal violations: the FBI, the U.S. Attorney's office in Manhattan, he FDIC and New York State Banking Chief Benjamin Lawsky. New York Fed President William Dudley is scheduled to testify before a Senate panel Friday about the accusation that it's far too cozy with the banks that it regulates.
Hazardous Holdings?: A confidential New York Fed report from 2012 says banks could lose up to $15 billion (in excess of insurance coverage) in the event of a catastrophic event involving commodities. That would be one unfortunate result of banks like JPMorgan Chase, Goldman Sachs and Morgan holding physical commodities. A Wall Street Journal story reports a Senate investigation found the banks held so much power they were able to influence the prices of the commodities they owned, and put the broader financial system at risk. The Fed report came out during a Senate investigation. Some lawmakers support the Fed's plan to restrict banks owning commodities.
RBS Fined: British regulators fined Royal Bank of Scotland about $88 million for a technology failure that in 2012 prevented millions of customers from accessing their accounts for weeks, the Financial Times, Wall Street Journal and New York Times all report.
Wall Street Journal
Potential good news for borrowers who are struggling to pay back student loans. Wells Fargo will lower interest rates for all eligible student loan borrowers starting this month. It's the first time Wells has made such a move. Discover Financial Services is considering doing the same starting next year and it may also forgive some of the balances for those borrowers who are having the most trouble making payments. PNC Financial Services Group earlier this year began lowering rates for some borrowers.
The Journal's "Heard on the Street" column weighs in on Federal Housing Finance Agency Director Mel Watt's appearance on Wednesday before the Senate Banking Committee. Watt seemed to indicate he has no intention of bringing Fannie Mae and Freddie Mac out of their conservatorship status. Watt said Congress needs to tell the FHFA what GSE reform should look like, but there's no consensus on Capitol Hill about reform. That's going to leave the two GSEs in a state of limbo, much to the chagrin of investors who want the FHFA to act now.
Some banks have decided it's OK to get involved in risky leveraged loan deals, while others have concluded it's better to sit out until clearer regulatory guidance emerges. The divergence of opinion is highlighted by the recent deal involving a potential private-equity takeover of Swiss packaging company SIG Combibloc.