Wall Street Journal

As Columbia Law School professor Robert Jackson noted in an op-ed on Thursday, there needs to be a source of real competition for the credit-card pushers, namely online marketplace lenders, so consumers with below-average credit scores can have access to credit at somewhat reasonable rates.

Because there's clearly demand. Credit card balances in the U.S. could hit $1 trillion this year. That would be near the $1.02 trillion peak posted in July 2008. The balance is rising because Banks are raising credit limits and giving out more cards. Returns on assets for credit cards could rise to between 4.25% and 4.5% this year, up from 4% last year, according to consulting firm R.K. Hammer. That compares to overall ROA for banks of 1%.

An improving job market and steady economic conditions (but no wage growth) have made U.S. consumers more willing to take on credit card debt. Lenders have also added more subprime borrowers. Credit cards give banks a source of income amid rock-bottom interest rates. And delinquency rates are manageable for the time being.

"We'll continue to take this opportunity as far as it will take us," said Richard Fairbank, CEO of Capital One Financial, one of the biggest credit card issuers. American Express is known for targeting consumers who pay off their balance each month, but even Amex is branching out to customers who keep a balance and pay monthly interest fees.

Citigroup and Discover Financial Services have expanded to subprime borrowers, requiring them to make a deposit that equals the credit limit of their card.

Wells Fargo has been accused of ignoring the "red flags" of hackers before thieves stole about $12 million from the Ecuadorean bank Banco del Austro in 2015, according to a lawsuit filed in New York this year. Banco del Austro was able to recover about $3 million, making the total loss around $9 million.

The hackers obtained codes to access the Ecuadorean bank through Swift, according to the lawsuit. Swift claims it was never told about earlier hacks in Vietnam and Bangladesh, so it could inform other banks of potential data breaches. Wells Fargo argues that it would be impossible for banks to meet the expectations that Banco del Austro is asking for, in terms of monitoring accounts for fraud.

Banks would be required to "contact their customers multiple times whenever a payment order is received…and it would eviscerate the efficiencies that wire transfers and Swift payment orders were designed to promote," Wells said.

With the scourge of cyberattacks around the world, officials are scrambling to upgrade their defense mechanisms and establish a common security standard. Finance officials from the Group of Seven are meeting in Japan to figure out how to better coordinate a strengthening of their improvements to cybersecurity.

"There are many institutions and many countries who think they can just wait for the perfect technology, a silver bullet to make these issues go away. But they're not going away," said Deputy Treasury Secretary Sarah Bloom Raskin. She's leading the U.S. effort for the G-7.

New York Times

The White House was intimately involved in the decision to divert all profits from Fannie Mae and Freddie Mac to the Treasury Department, Gretchen Morgenson writes in her "Fair Game" column. The two government-sponsored enterprises were required to divert their profits, to block them from repaying their debt and escaping, a White House official said in an email, according to unsealed court documents.

At the time, it was said Fannie and Freddie must sweep all profits to Treasury because they were in a death spiral and taxpayers needed protection from future losses. The move effectively made Fannie and Freddie wards of the state, and Congress and the Federal Housing Finance Agency are still struggling with the ultimate fate of GSE reform. Fannie and Freddie have thus far returned more than $50 billion to Treasury than they received during the bailout.

The Times looks at Federal Reserve Bank of Minneapolis President Neel Kashkari and asks why he changed his mind and decided big banks should be broken up. Read American Banker's question-and-answer session with Kashkari here.

Elsewhere ...

Bloomberg: Morgan Stanley is set to be one of the biggest losers in the fall of Lending Club, as the third-largest holder of its stock, after Chairman Emeritus John Mack played a behind-the-scenes role in building up the online marketplace lender. Morgan Stanley collected millions of dollars in fees by making loans to Lending Club and advising it on its initial public offering. Morgan Stanley also bought more than 34 million shares of Lending Club.

Mack, who is no longer an employee of Morgan Stanley, was the go-between for the investment bank and Lending Club. Mack also personally invested about $2.5 million in it, and he joined the company's board, along with former Morgan Stanley dot-com analyst Mary Meeker.

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