GE to Spin Off Card Unit; DOJ Scolded; Target Breach Preventable?

Receiving Wide Coverage ...

Credit Card Revival: General Electric is planning an initial public offering for its credit card unit, demonstrating the "renewed investor enthusiasm for the card business after some issuers were hit hard by defaults following the 2008 financial crisis," according to the Wall Street Journal. The planned IPO is in line with GE's desire to curb its involvement in the banking sector. The unit, which could be valued up to $20 billion, is the largest U.S. issuer of credit cards in the name of retailers, such as JCPenney and Wal-Mart. Delinquencies on these credit cards have dropped since 2009 while profits have soared. Wall Street Journal, Financial Times

Mortgage Fraud Cases Exaggerated: The Department of Justice received an unfavorable audit for failing to prioritize and aggressively investigate mortgage fraud. The report, completed by the department's inspector general, found that the DOJ overstated the results of a 2011 program focused on fraud against distressed homeowners. Attorney General Eric Holder claimed in October 2012 that 530 individuals were charged in cases related to mortgage fraud that cost homeowners over $1 billion. However, the review found that only 107 people were charged with frauds totaling $95 million. Additionally, the FBI received $196 million from the fiscal years of 2009 to 2011 to look into mortgage fraud but the number of pending cases declined in 2011. The report "undercuts [President Obama's] contentions that the government is holding people responsible for the collapse of the financial and housing markets," according to the New York Times. Financial Times, New York Times

Data Breach Stoppable?: There are now questions about whether Target could have headed off its recent security breach — one of the biggest cases of stolen credit card data in U.S. history, affecting up to 70 million customers. The company was warned by its computer security system, FireEye, about the breach yet did not follow up. The retailer said it is investigating. Wall Street Journal, New York Times

That Was Easy: The Thursday confirmation hearing for three Federal Reserve Board nominees was short, making it likely they will be confirmed soon. Stanley Fischer, vice chairman nominee; Lael Brainard, who was previously the Treasury under secretary for international affairs; and Jerome Powell, a current Fed governor recommended for another term, were endorsed by the Democrats on the Senate Banking Committee with little opposition from Republicans. During the hearing, Fischer stated that his time at Citigroup was "the most important element in my education that enabled me to be an effective supervisor of banks," though he agreed there are potential concerns about the revolving door between the government and private businesses, according to American Banker coverage. New York Times, Washington Post, Wall Street Journal

Potential for Greater Clawbacks: The Bank of England is looking to expand clawbacks from bankers who engage in misconduct. The measure is directed at preventing rate manipulation scandals that have recently plagued the industry. Under the plan, bankers could have to return pay up to six years after the wrongdoing. The clawback would kick in if the bank uncovers misconduct or material errors, suffers from a dramatic downturn in its financial performance or experiences a risk-management failure. Financial Times, New York Times

Speaking of Rate Manipulation...: The Hong Kong Monetary Authority has found that UBS tried unsuccessfully to manipulate the Hong Kong interbank offered rate. The regulator also investigated several other banks including HSBC Holdings, Citibank and Royal Bank of Scotland, but found no evidence of misconduct by those institutions. UBS now must develop new oversight and discipline its staff for not reporting the wrongdoing. Wall Street Journal, Financial Times, New York Times

Shaking Things Up: Barclays is looking to revamp its investment banking unit as pressure mounts from investors and analysts to make changes in response to new regulation. The plan is likely to involve exiting some business lines and cutting thousands of employees, according to an unnamed source in the Wall Street Journal. Barclays CEO Antony Jenkins has previously said that certain units of Barclays, including the investment bank, would need to get smaller because of tougher regulations. However, major changes to the company's trading activities haven't materialized yet. The new strategy for the investment bank should be revealed before the summer. Wall Street Journal, Financial Times

Raking It In: Andrea Orcel, the head of UBS's investment bank, was the company's highest paid executive last year. He earned about $13 million, the bulk of which was in company stock. This topped Chief Executive Sergio Ermotti's pay of roughly $12 million. Financial Times, New York Times

Wall Street Journal

Security concerns over the digital currency bitcoin have led to technology startups developing secret bank vaults "deep in the earth" that would store valuable bitcoin code on computer drives. One of these companies, Xapo, which has raised $20 million in venture capital funding, is offering to fully insure all deposits in case of a robbery. Security measures would include armed guards, biometric scanners and a video surveillance system.

Banks are still struggling to figure out how to properly use social media, according to the paper. The cautious tone banks take on social media can be a turnoff to customers. Additionally, social media exposes the bank to reputational risk since the interaction between the company and the customer is not private. The article highlights JPMorgan Chase's recent efforts to handle customer complaints over new cash deposit rules. Under a new policy attempting to stamp out money laundering, an individual making a cash deposit in a personal account must be listed on the account and show identification. The bank has been busy on Twitter trying to explain the new policy to annoyed customers and provide suggestions to help complete the transactions. In November, JPMorgan suffered a social media implosion when a planned Q&A with an executive was hijacked by angry customers and others venting their frustration at the bank.

Washington Post

The Department of Justice isn't likely to back down on investigating discrimination in auto lending, according to the paper. Ally Financial paid $98 million in December to settle claims that it allowed car dealers to charge minorities more for car loans than their white counterparts. More actions like this are expected, a DOJ official said during a panel discussion at the National Community Reinvestment Coalition conference this week.

A Senate plan revealed this week to wind down Fannie Mae and Freddie Mac leaves a major question unanswered — what happens to private investors who own shares in the GSEs? The fight could pit taxpayers against the shareholders, the article states. Litigation may ultimately determine which group reaps the profits from the mortgage giants, sources say.