Wall Street Journal

Edwin Hale Sr., the founder and former chief executive of First Mariner Bancorp in Baltimore, confessed that he covertly worked for the Central Intelligence Agency for about 10 years in the 1990s and 2000s. Hale made the confession in his recently published biography, "Hale Storm." The CIA used agents posing as employees of Hale's bank (the article doesn't specify whether they were employees of First Mariner, or of Bank of Baltimore, Hale's previous bank) to track Osama bin Laden's whereabouts. The CIA also created a fake company and included it under Hale's corporate umbrella. Another nugget from the Journal's article, which is not elaborated on, is that Hale claims to have survived three plane crashes.

The Federal Reserve Bank of New York and other regulators are pressing banks to track warning signs of excessive risk-taking, as it seeks to prevent future problems at banks. Put in much more vague, difficult-to-understand language, regulators are trying to crack the code of corporate "culture." "I confess that proof is hard to come by … Yet I am not alone in the fundamental belief that a strong ethical culture will lead to better behavior," New York Fed general counsel Thomas Baxter said in a speech last month. In an October speech, New York Fed President William Dudley, discussing the potential for breaking up banks that don't do enough to crack down on internal wrongdoing, said the word "culture" 44 times. (BB&T CEO Kelly King recently said that "culture" is "the new rabbit" that Washington is chasing.) The result of all this hand wringing on culture? Banks like Wells Fargo and JPMorgan Chase have created things like a happy-to-grumpy ratio. The consulting firm Promontory Financial Group is doing something that would seem to make a lot more sense, or at least provide an assessment of something tangible: the firm is measuring the response time of a bank's management team to audit challenges, in order to gauge the level of tension among internal departments.

The Justice Department is laying the groundwork for an investigation of Moody's Investors Service, as it looks into the credit-rating firm's role in the subprime-mortgage meltdown. The DOJ is trying to determine if Moody's compromised its ratings in order to win business. The probe is centered primarily on the AAA ratings Moody's gave to residential-mortgage deals between 2004 and 2007.

President Obama's proposal to levy a new tax on banks won't stop banks from engaging in risky debt finance, Mark Roe and Michael Tröge write in an op-ed. A better way to create an environment for less-risky debt is to make equity more attractive to banks, the columnists pronounce.

New York Times

Gretchen Morgenson takes a look at two lawsuits involving Wells Fargo and residential mortgage borrowers, and praises the two judges involved, both of whom ruled in favor of the borrowers. In both cases, the judges determined the bank abused its power by foreclosing on the homes, when the borrowers in one case did everything the bank had asked them to do, and the other Wells Fargo fabricated evidence. A lawyer who represented a borrower in one of the cases said the behavior was "business as usual [for all banks], not just at Wells Fargo." A bank spokesman disputed the findings in both cases.

Elsewhere ...

The Economist: Going back to at least the 1970s, banks have slowed their lending to businesses, and at the same time increased their lending for residential mortgages, an unsigned editorial in The Economist says. This is much more risky, and also works to cancel out the preferred macroeconomic effect of banks recycling private savings into business loans. The columnist blames several factors, including government subsidies for residential mortgages and private mortgage insurance. Another reason for the shift: changes to bank capital requirements since the 1970s. The Basel I capital rules deemed residential mortgages to be half-as-risky as corporate loans, with banks receiving higher rates of return on mortgages than commercial loans.

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