Receiving Wide Coverage ...
Fed Hesitates Over Rate Hike: Minutes from the latest Federal Reserve meeting suggest officials are torn over when to go ahead with a rate increase. Some are worried about the slow pace of inflation, which remains well below the central bank's 2% target. China's stock-market declines and the effects of a strong U.S. dollar are also of concern. On the other hand, a substantial number of Fed officials think a rate hike would "convey confidence to the world about the economic outlook" and signal "the economy's progress toward full health," as the Wall Street Journal reports. In other words, should the Fed wait to confirm the economy is strong enough for a rate hike, or act as if the economy is strong enough and in so doing, potentially make it so? The Financial Times says the markets interpreted the minutes as dovish, as did the chief economist for RBS Securities. The New York Times interviews some observers who are more optimistic about the likelihood of a rate hike.
Wall Street Journal
Marketplace lender Social Finance has raised about $1 billion from investors, bringing its valuation to $4 billion. This means SoFi has enough capital to rank among the top 30 U.S. banks, according to the paper, but of course, it's not a bank at all and faces none of the attendant capital requirements and other regulations specific to financial institutions.
Some people just can't resist the lurid glitter of the accounting game. The paper reports embezzler and mob informant Stephen P. Corso allegedly continued to practice as a licensed accountant after the Securities and Exchange Commission ordered him to stop following a conviction for wire fraud and attempted tax evasion in 2009. Corso allegedly violated the order right under the SEC's nose, changing the spelling of his first name and swapping in a new middle one.
Down with quarterly reports, cries law firm Wachtell, Lipton, Rosen & Katz. The argument against quarterly reports is they prompt "companies to focus on gimmicks that provide short-term stock gains at the expense of long-term health," the paper summarizes. On the other hand, shareholders rely on quarterly reports to make investing decisions, and governance advocates say financial transparency helps keep companies' top brass in line.
Bank of America's board of directors decided they deserved a raise in June, upping their own pay with restricted stock worth approximately $36,000, the paper reports. The paper suggests the move may raise eyebrows among the bank's shareholders, some of whom were unhappy with the board's decision to add to chief executive Brian Moynihan the post of chairman last year. But one reader sees no reason to kick up a fuss about the salary bump: "The shareholders should be pleased by the increased pay for lack of performance," writes the tongue-in-cheek Frank Anderson.
John Carney of "Heard on the Street" suggests it may be time to reevaluate market assumptions about banks' cost of equity. "The returns investors would need to see to indicate banks are creating rather than destroying value may not be as high as some assume," he writes, noting banks are pushing for new ways to measure returns and their cost of capital may be lower thanks to post-crisis regulations.
New York Times
The Federal Housing Finance Agency announced new low-income housing goals for Fannie Mae and Freddie Mac Wednesday, though some housing advocates wish the agency had aimed higher. "The agency said 24% of mortgages should be bought by Freddie or Fannie for homes for low-income borrowers, or those with incomes no greater than 80% of an area's median income," the paper reports. "That goal is one percentage point higher than the goal for 2014."
The paper's editorial board is disappointed Promontory Financial Group and the New York Department of Financial Services have reached a settlement that will allow them to avoid hashing out their differences in court. That's because a legal battle could have brought to light the problems inherent in having banks pay consulting firms hired to investigate their suspected misdeeds, according to the paper.
Columnist Peter J. Henning considers whether the Securities and Exchange Commission went too far by applying a foreign-bribery law to Bank of New York Mellon's questionable intern hiring practices. The bank has agreed to pay $14.8 million to resolve allegations it violated the Foreign Corrupt Practices Act by taking on three unqualified interns all relatives of officials at a Middle Eastern sovereign wealth fund in order to keep the client happy. Henning suggests while trading favors is nothing new on Wall Street, it's reasonable to be concerned about bribery when clients are connected to government officials.
