Receiving Wide Coverage ...
Beating Back Bailouts: The Financial Stability Board has taken a fresh stab at ending too big to fail with a newly proposed set of rules for the world's largest banks. Banks would be obliged to hold capital equal to 16-20% of their risk-weighted assets and to meet a capital leverage ratio twice the size of the Basel III requirement under the proposal. The New York Times notes the rules would have a bigger impact on European lenders, such as Deutsche Bank and BNP Paribas than on U.S. banks, which are already gearing up to meet stiffer domestic capital requirements. The Financial Times emphasizes that the requirements could force banks to cut back on shareholder payouts and bank employee bonuses, while the Wall Street Journal offers a more detailed look at the proposal. The Times also points out that big banks won't go down without a fight: "the proposals are certain to face stiff opposition from the banking industry, which is likely to argue that the rules would force banks to curb lending, hurting economic growth." The FSB plans to conduct a study to determine the rules' potential effect on credit availability. The comment period will be open through February 2015; the final rules would be presented at the G-20 meeting that year and would go into effect in 2019 at the earliest.
Cybercrimes and Misdemeanors: Big banks, credit unions and community banks aren't normally found singing kumbaya around the campfire together, but their trade groups are presenting a united front in an effort to get retailers to foot the bill for costs stemming from cyberattacks. The industry groups "are banding together to urge lawmakers to introduce legislation that would force retailers to pay for the clean-up themselves during the new session of Congress next year," according to the FT. Retailers say they already pay plenty. Meanwhile, the Times offers a portrait of cybersecurity guru and international man of mystery Lawrence Baldwin, who for the past seven years "has immersed himself in the so-called dark web, using what most describe as unorthodox methods to gather intelligence about online financial crime." Baldwin specializes in tracking down hackers for banks and prefers to stay out of the spotlight, which makes for a profile that's somewhat sparse on details about his storied approach to sleuthing. But two anonymice tell the Times his company "infects tools used by criminals, like underground botnetsnetworks of infected computersto see what criminals are collecting and where they are collecting it from."
Wall Street Journal
Millennial savings rates have turned negative, slipping to negative 2% after a climb in the aftermath of the Great Recession. The paper interviews a couple of young people who are spending most of their paychecks on travel and other nonessentials, but the experts in the article seem to suggest the underlying issue is many people under 35 don't earn much money to begin with. The article notes a lack of savings can have lasting effects for millennials, "leaving many without a financial cushion for unexpected expenses, raising the difficulty of job transitions and leaving them further away from goals like eventual homeownershiplet alone retirement."
MetLife may sue the U.S. government for slapping it with the systemically important label, according to the paper. The insurer has already hired two prominent corporate lawyers in case it decides to go forward with a lawsuit: Eugene Scalia (son of the Supreme Court Justice) and H. Rodgin Cohen of Sullivan & Cromwell.
"Federal investigators last year traced an alleged money-laundering scheme that ran through the New York branch of Argentina's largest bank, whose compliance program previously had passed scrutiny from the Federal Reserve," the paper reports. The news comes at a less-than-ideal time for the Fed, which is already facing questions about whether its oversight of Wall Street banks is sufficiently rigorous.
Fannie Mae shares would be basically worthless even without the government's profit sweep, according to some number-crunching by John Carney of "Heard on the Street." "Common stockholders couldn't really expect to have any value flow to them for about 50 years," given the original terms of the agency's bailout and the presumed need for it to rebuild its capital base.
Financial Times
Bank of New York Mellon has opened an innovation lab in Silicon Valley in an effort to stay on top of emerging technologies. "We can't wait for someone to disrupt us and then react," the bank's chief investment officer Suresh Kumar told the paper. "We need to be in offensive mode here."
New York Times
The Securities and Exchange Commission is taking its sweet time writing a rule that would make it easier to recover improperly earned executive compensation, according to columnist Gretchen Morgenson. The rule, mandated under the Dodd-Frank Act, was "supposed to direct the stock exchanges to bar securities from trading if they were issued by companies with no clawback policies." Industry pushback probably has something to do with the hold up, the column suggests.
Speaking of compensation, Wall Street bankers may want to trim their Christmas shopping lists. Bonuses at trading desks and hedge funds could fall by as much as 10% this year, according to the paper. Investment bankers and private equity types involved in M&A should see more robust payouts, along with asset managers.
Elsewhere ...
Bloomberg: Attorney General nominee Loretta Lynch has gone toe-to-toe with big banks during her time as a New York federal prosecutor. Her office "negotiated a $1.92 billion money-laundering settlement with HSBC in 2012 and is investigating whether banks violated anti-bribery laws by hiring the children of government officials in China to win business," according to Bloomberg. Lynch was also involved in Citigroup's $7 billion mortgage-backed securities settlement in July as well as Bank of America's record-setting $16.7 billion deal in August.
