Receiving Wide Coverage ...
FHFA Fanfare: Federal Housing Finance Agency director Mel Watt made waves Tuesday with a speech indicating that Fannie Mae and Freddie Mac should help make more credit available to homeowners. While the move is intended to bolster the housing market recovery, the Wall Street Journal reports that "some economists and lenders worry that regulators could be opening the way for another boom and bust." the New York Times and the Washington Post lead by highlighting a different aspect of Watt's Brookings Institution speech: his plans to uphold Fannie and Freddie's role in mortgage finance for the time being. "I don't think it's FHFA's role to contract the footprint of Fannie and Freddie," Watt said, according to the Post. "Our role is to maintain an efficient credit market, and as private capital demonstrates that it will come into this market, it will be clear that Fannie and Freddie will step back." The Times and the Post both suggest that Watt's plan to maintain Fannie and Freddie's presence marks a significant policy shift for the agency. Remarks made by former FHFA director Edward DeMarco in a separate speech Tuesday lend further credence to that reading. "Rather than striving to preserve a system that failed so spectacularly and in so many ways, we need to find our courage and our creativity to build a new system," DeMarco said, according to the Journal. Investors in the two government-sponsored entities appeared cheered by Watt's announcements, according to the Journal's John Carney. But he suggests they may want to hold back on the celebrations for now: Watt appears less concerned with the GSEs' profitability than with policies intended to stimulate the housing market.
Citizens Spin: The Royal Bank of Scotland filed an initial public offering for its U.S. subsidiary Citizens Financial Group Monday, and second-day analysis emphasizes the difficulties the Scottish lender may have in selling off the business. The Financial Times points out that regulations targeting too-big-to-fail institutions have formed a stumbling block for major financial deals. Citizens is too big for regional banks to buy, and "the biggest US lenders, such as Wells Fargo and JPMorgan Chase, would be prevented from doing so by the 10 per cent cap on national deposits." A column by the FT's Lex team calls Citizens a "plain vanilla domestic bank" of the sort championed by U.K. regulators and says it's ironic that RBS will have to get rid it. The Times also takes a look at the challenges RBS will face in spinning off Citizens, noting that the American subsidiary recently failed a part of the Federal Reserve's stress test and has been fighting to boost profits.
Sallie Mae Pays Up: Private student lender Sallie Mae and its former loan servicing subsidiary Navient have agreed to pay $97 million over charges that they violated protections for members of the U.S. military. The companies maximized late fees on student loans and failed to observe the 6% interest rate cap to which military members are legally entitled, according to federal prosecutors. New York Times, Wall Street Journal, Washington Post
Wall Street Journal
Americans are taking on more debt, but they're still wary of credit cards and new mortgages. This caution could help prevent another credit bubble, according to the Journal, but it may also restrain consumer spending and slow down the economic recovery.
The European Union in April approved a measure that will require E.U. firms to change auditors every 10 years. Now JPMorgan Chase and other big American companies that operate in the EU are trying to figure out how to deal with the new rule. (No easy answers here.)
The Federal Reserve is speaking out about banks' failure to comply with measures intended to harness their funding of corporate takeovers.
BNP Paribas could pay more than $3.5 billion in penalties as part of a U.S. settlement over its alleged violations of sanctions.
New York Times
BankThink contributor Mayra Rodríguez Valladares writes that global derivatives markets are 20% larger than they were in 2007 and suggests the risk posed by those markets has also continued to grow.
Newly installed Small Business Administration head Maria Contreras-Sweet plans to move ahead with a competition that will award $2.5 million to 50 business accelerators and incubators. The competition has been criticized for lying outside the bounds of the SBA's core mission, according to the paper.
The Fiscal Times: The going rate for lunch with former Federal Reserve Board chairman Ben Bernanke is $70,500, according to results of an auction to benefit the Robert F. Kennedy Center for Justice and Human Rights. If that price seems too steep, a meal with former Treasury Secretary Timothy Geithner can be had for just $50,000.