Receiving Wide Coverage ...
A Farewell to Banking: For General Electric, the banking business has lost its allure. The company plans to sell or spin off the bulk of its finance unit, GE Capital, over the next two years, returning to a focus on its industrial manufacturing business. Although the $500 billion-asset GE Capital brought in roughly half its parent company's earnings, it also came with a slew of regulations and risks that apparently weren't worth the trouble. "We're not sentimentalists," GE head Jeffrey Immelt tells the Times. The Journal notes that GE is holding onto a few "smaller lending lines that support its core industrial operations": aircraft leasing and financing for the energy and health-care industries.
Deutsche Bank Nears Deal: Deutsche Bank looks likely to receive a harsher smackdown for alleged rate-rigging than the five other banks that have already settled Libor cases with U.S. authorities. The Times reports that the German bank is expected to pay more than $1.5 billion in penalties and plead guilty to criminal charges, an outcome that would "show the perils of going last." The Financial Times highlights one bright spot for Deutsche: New York's Department of Financial Services will probably sign onto to the settlement, allowing the bank to avoid a separate deal with the agency led by Benjamin Lawsky. On the other hand, anonymice tell the Wall Street Journal that the DFS is responsible for driving up the penalty sum and complicating negotiations for the other authorities. "The other authorities are struggling to determine whether they can force the bank to pay a larger total set of penalties than other banks did, relative to the conduct," the paper reports. The agencies could also try to offset the higher DFS penalty by asking for lower sums themselves, but they might catch flak for looking soft.
Citi Shakeup: Citigroup's head of franchise risk and strategy Brian Leach is stepping down after nine years with the bank. The FT has the most interesting take on his departure, noting that it ends a "two-year experiment in combining the oversight of risk, audit and compliance." Rather than replace Leach, the bank is opting to have his three direct reportsthe heads of audit, compliance and riskreport directly to Citigroup chief executive Michael Corbat. Analyst Mike Mayo cheers the move: "If you have three direct reports instead of one, by definition that means you are more involved. I'd rather a CEO get his hands dirty than not." The Journal delves more deeply into Leach's career history, including his mandate to improve risk management at the Citi during the dark days of the financial crisis. The Times plays it straight.
More Trouble for HSBC: French authorities have launched a criminal investigation against HSBC as part of a probe into whether the bank's Swiss private banking unit helped rich clients dodge taxes. The Swiss unit was already under investigation. HSBC "has been asked to deposit a bond of 1 billion euros ($1.1 billion) to cover potential penalties," the Journal reports. HSBC doesn't sound too crazy about that request. "The bank said the magistrates' decision was 'without legal basis' and the bail was 'unwarranted and excessive,'" according to both the Journal and the Times.
Wall Street Journal
Post-crisis regulation has forced risk out of banks and into less-regulated shadow banking territory, according to a column by Greg Ip. While the argument isn't new, Ip's version is wide-ranging.
Nomura and Royal Bank of Scotland are going up against the Federal Housing Finance Agency in a trial over whether the banks are to blame for selling Fannie Mae and Freddie Mac toxic mortgage-backed securities. Internal emails between employees discussing the loans packaged into securities aren't doing the banks any favors: "'Danger Batman!' wrote one Nomura employee. Another said loans included in a security were 'crap.'"
New York Times
Libertarian-ish Senator Rand Paul knows his base: his presidential campaign will accept donations in bitcoins. The paper notes that the move will appeal to young and tech-savvy voters as well as those wary of centralized authority, but that it "raises questions about whether illegal contributions could make their way into campaigns more easily." In an effort to ward off illegal donations, the Federal Election Commission last year capped the amount of money that people can contribute in bitcoins at $100the same ceiling applied to cash.
The revolving door between Wall Street and Washington has taken a toll on financial reform, according to a Reuters special report. "Banks and their advocates have managed to preserve many of the industry's pre-crisis practices by focusing lobbying efforts on obscure corners of the regulatory world, far from the glare of congressional debate or public scrutiny," writes Charles Levinson. "Many of these agencies are staffed by appointees from the industry they regulate and return to it when their stints are over." The article argues that banks' influence has minimized the influence of rule-writing at the Securities and Exchange Commission's Division of Corporation Finance and the Financial Accounting Standards Board in particular.