Receiving Wide Coverage ...
CIT Goes Big: CIT Group's plan to buy OneWest Bank for $3.4 billion is a big deal in more ways than one. Not only is it the industry's biggest purchase since 2012, CIT would become "the world's first intentionally created SIFI" with $67 billion in assets, as noted by the Journal's John Carney. Investors are cheering CIT chief John Thain's decision to leap over the $50 billion asset threshold because the deal would double CIT's deposit base and save it from being over-capitalized. Crossing over into SIFI territory will also help CIT grow in the future, Carney writes, suggesting that the company had been holding back in order to avoid SIFI designation. Another Journal article positions the deal as a win for the investment group that bought the failed OneWest Bank, formerly IndyMac, for $1.55 billion in 2009. The Times takes a similar approach, writing that "the deal illustrates how casualties of the financial crisis have moved on, and even prospered." (CIT Group filed for Chapter 11 bankruptcy in 2009 and recovered under a turnaround effort led by Thain.) The FT's Lex team wonders if regulators would consider raising the SIFI threshold to $100 billion in order to ward off similarly major deals and prevent banks from getting too big.
Fed Up with Deutsche Bank: The German giant is in hot water with the New York Fed. A senior Fed official penned a letter to the Deutsche Bank in December reprimanding the bank for failing to fix myriad financial reporting problems within its U.S. operations, according to multiple news reports. Many of the reports "are of low quality, inaccurate and unreliable," according to the letter reviewed by the Journal. "The size and breadth of errors strongly suggest that the firm's entire U.S. regulatory reporting structure requires wide-ranging remedial action." Adding to the New York Fed's aggravation is the fact that it has been telling Deutsche Bank to deal with these issues since 2002, according to a separate article in the Journal. Among the reporting problems identified by the Fed are coding errors, lack of proper documentation, insufficient oversight by internal compliance and audit employees and Deutsche's practice of entering much of its data manually rather than automatically. "Analysts said the leaking of the letter would add to pressure on Anshu Jain, [Deutsche Bank's] co-chief executive, who had responsibility for much of the U.S. operations in his former role as head of the investment bank when the 'errors' are reported to have happened," the FT reports. The Times links the Fed's letter to a whistle-blower complaint brought by former Deutsche Bank risk analyst Eric Ben-Artzi in 2011. Ben-Artzi told the Securities and Exchange Commission that "he had evidence that Deutsche Bank had hidden billions of dollars in losses to avoid a potential bailout during the financial crisis," the Times reports. Similar charges have been made by another former Deutsche staffer, Matthew Simpson; the Times says that the SEC is believed to be actively investigating the allegations.
Holes in Suisse Plan: Credit Suisse's efforts to reduce costs and pull back on its underperforming fixed income business aren't cutting it with investors, according to the Journal and the FT. Analysts say that the cuts to the bank's fixed income business "will simply be too small and lopsided to cope with cyclical swings and structural challenges such as higher capital charges," the FT reports.
Wall Street Journal
"JPMorgan Chase is nearing a deal to sell half its stake in the portfolio of its buyout arm, One Equity Partners as the bank pares down to focus on core businesses," the Journal reports. JPMorgan announced last summer plans to spin off One Equity.
Dodd-Frank reforms have stabilized the banking industry but limited consumers' access to affordable mortgages and small business loans, according to a new report from the Goldman Sachs Global Markets Institute. "There is some trade off between the costs it takes to achieve safety and stability and the cost of products," Promontory chief Gene Ludwig told the FT. "To some degree, banks may well be passing on some of the cost of increased capital and regulation to their customers. Certainly some regulators would say that increased costs are justified to have a safer system."
New York Times
Financial behemoths like Bank of America and JPMorgan Chase have debuted checking accounts and prepaid cards that cater to low-income people in an effort to get on regulators' good side and form connections with customers who may become more profitable as their finances improve, according to the Times. It's "hard not to be skeptical," the Times writes, "particularly because the banks, most recently in the subprime housing crisis, have traditionally wrung vast profits from some of these same customers, who paid steep rates for loans and high fees on basic checking accounts. And the new accounts still have their share of fees JPMorgan's prepaid card, for example, costs $4.95 a month although they tend to be smaller than in the past." One commenter argues that such fees are preferable to the costs associated with alternative financial services like check cashers. A woman interviewed in the article regularly pays $13 to cash a check. "For $4.95 a month," the commenter writes, "she could deposit as many checks as she wanted in Chase ATMs, and have next-day funds availability Even with two or three checks a month, she would be way ahead."