Receiving Wide Coverage ...
Both Sides Now: If the folks in mergers and acquisitions look discouraged today, it's probably more than a bad case of the Mondays. A Delaware judge hearing a case about the conflicts of interest that possibly arise when bankers advise both the buyer and seller in the same deal has found that RBC acted improperly when its bankers tried getting in on both sides of a 2011 merger in the health care sector. While there's been no ruling yet on damages, the Journal says the case already is a big blow to banks, while the FT more demurely warns of "far-reaching consequences." Wall Street Journal, Financial Times
Wall Street Journal
You know that $2.2 trillion or so that banks have parked at the Federal Reserve? Curiously, close to $1 trillion of it has been put there by U.S. branches of foreign banks, the paper says, citing research published Sunday by the Bank for International Settlements. The explanation for this seemingly high proportion? For foreign banks, it turns out that earning 25 basis points on reserves at the Fed is a nice, risk-free way of making a small profit. But the arrangement is considerably less lucrative for domestic banks.
The rapid rise of nonbanks in the mortgage-servicing business gets the attention of the paper, which notes that the shift has federal and state regulators worried about whether capital requirements and oversight in general are strict enough to keep the shadow-market players on the straight and narrow. You could have seen some of this coming. As American Banker has reported in recent weeks, Benjamin Lawsky, head of New York's Department of Financial Services, has been turning up the heat on Nationstar, Ocwen and other servicers he thinks are growing at alarmingly fast rates.
In a cogently argued opinion piece, a former enforcement attorney for the Consumer Financial Protection Bureau says it "seems inconceivable" that a regulator so devoted to political correctness would be discriminating against workers based on race. The more likely explanation for American Banker's findings last week of racial disparity in job evaluations for CFPB employees, hints Ronald Rubin, now a partner at Hunton & Williams, is that "disparate impact" is an imperfect theory that the agency might want to reconsider relying on when trying to root out bias in the lending industry.
Tight credit in the mortgage sector, combined with weak wage increases and heavy student debt burdens, is shutting more young Americans out of the American dream and putting major emphasis on apartment construction over new single-family home construction.
Here comes an antidote to consumers' slow acceptance of mobile payments: a new program to be unveiled today in the U.K. will let smartphone users with accounts at nine of Britain's largest banks make payments using only their mobile phone number. Paym (pronounced "Pay Em," but presumably with a British accent) is expected to be up and running by May.
All of that forward guidance that central banks are providing on interest rates could be endangering the global financial system by encouraging investors to take on risk, perhaps with the potentially false belief that they will be warned "well in advance about any rise in interest rates." That's the conclusion of new research from the Bank for International Settlements, the paper says.
The write-up of an interview with New York financial regulator Benjamin Lawsky gives the Department of Financial Services chief yet another chance to sound the warning: the people, and not just the companies, responsible for bad conduct in the industry "are going to be held accountable."
The sprawling, cross-border probe into the manipulation of Libor might very well end up looking like child's play next to the growing investigation into possible price rigging in foreign-exchange markets, the paper says.
The New York Stock Exchange is one of capitalism's most recognizable symbols, but even one of its greatest champions, NYSE Euronext CEO and ICE President Duncan Niederauer, seems to have his doubts about how much longer the historic trading floor will stay open.
Let's hear it for LTV. Strict limits on loan-to-value ratios on mortgages made in Hong Kong will likely curtail the losses that local banks are expected to sustain in the island's heady office market. But between rising interest rates, China's economic slowdown and an eventual tightening of U.S. monetary policy, even small declines in property values will probably hurt Hong Kong's banks.
New York Times
Gretchen Morgenson pored through company documents recently filed in Massachusetts state court as part of an investor lawsuit against Credit Suisse, and found some real gems (i.e., "Our diligence process is such a joke") that not only detail gaps in the firm's due diligence in the years leading up to the housing bubble, but suggest that the decision to fight these kinds of legal cases may not be as smart a strategy as settling.
And in case you missed it, Morgenson on Saturday raised some interesting questions about a potentially unforeseen twist in the government's treatment of whistle-blowers, based on the possible example offered by a federal probe into mortgages underwritten by SunTrust and sold to Fannie Mae and Freddie Mac. The case sounds similar to complaints that a whistle-blower filed in 2012 with the Securities and Exchange Commission. Only this investigation is being handled by the Justice Department. What happens to whistle-blowers promised, under the Dodd-Frank Act, an award based on recoveries when the information they provide to one agency is handed off to another? Hint: it doesn't look good for whistle-blowers.
Correction: The emailed version of Friday's Scan said the Wall Street Journal article citing pressures on Citigroup's CeCe Stewart came out earlier this year. The article came out in early 2013.