Wall Street Journal
In a review of former Rep. Barney Frank's new autobiography, "Frank: A Life in Politics From the Great Society to Same-Sex Marriage," the Wall Street Journal recounts what former House Speaker Tip O'Neill told his colleague: Frank could have been the first Jewish Speaker of the House of Representatives, had he not been gay. James Kirchick's review says little about Frank's work on banking matters, and doesn't mention the Dodd-Frank Act. "Many readers' eyes will nonetheless glaze over at his recounting of the crises that struck the housing and financial markets, in which he was intimately involved as chairman of the Financial Services Committee," Kirchick wrote.
When a manufacturer of mattresses for dairy cows got turned down for a loan at a big bank, he turned to a "Gelt Chappie" to get the money he needed. The anecdote shows how local community banks are still in demand in certain parts of the U.S. In this case, it's the Bank of Bird-in-Hand, the first de novo bank to open in the U.S. since 2010. Bank of Bird-in-Hand was founded by a group of investors that include Amish farmers in the agricultural communities near Lancaster, Pa. The phrase "Gelt Chappie" is Pennsylvania Dutch for "money man" and was being applied to William O'Brien, the chief loan officer at Bank of Bird-in-Hand. Since opening, the bank has found huge loan demand in its community, giving rise to O'Brien's nickname. Only a "Gelt Chappie" at a community bank in Amish country would understand that mattresses for dairy cows actually are common in barns in the area. O'Brien argued more broadly that big banks simply aren't interested in making loans of less than $1 million, which creates an opening for community banks.
An unexpected rise in mortgages for home purchases may give a kick start to banks' earnings in the first and second quarters, according to the "Heard on the Street" column. The party won't last long, however, as interest rates could rise this summer.
Financial Times
Is Bank of New York Mellon looking for a new chief executive to replace Gerald Hassell? It depends on who you ask. According to a Friday night report from Reuters, the headhunter firm Spencer Stuart has compiled a list of potential candidates for the job and also contacted a Morgan Stanley executive, Greg Fleming, to gauge his interest. Later on Friday, the Financial Times cited unnamed sources who said BNY Mellon's directors were asked if they had "initiated a hunt" for a new CEO, and were told that a "unilateral" search to replace Hassell would be a breach of their fiduciary duty. Finally, the company itself denied that a CEO search is underway.
An op-ed columnist in the FT makes another call to break up the big banks, largely based on the argument that their shares trade at a discount to peers. The megabanks argue there is efficiency in scale, but the FT's columnist, Oliver Ralph, uses the cost-to-income ratio measurement to argue otherwise. It's also questionable whether the megabanks are safer, because of the increased complexity of running the companies. Ralph goes on to propose several ways the banks could start chopping themselves up into smaller parts.
New York Times
Thousands of Americans who stopped making mortgage payments years ago, but continued to live in their homes, may soon see their foreclosure cases come to an end without them having to pay anything. Lawyers for some of these homeowners have argued the statute of limitations is about to expire. The number of homeowners in this situation may be in the tens of thousands, although an exact number is not known. Bank of America has started the foreclosure process on about 20,000 mortgages for which the borrower hasn't made a payment in five years and about 90% of those homes remain occupied. The New York Times cites multiple reasons for why the cases have dragged out for so long without reaching resolution: they have moved slowly through the court system; the federal government has made dozens of modifications to mortgage programs that banks have been required to implement; and the banks themselves have slowed the process through shoddy paperwork and other mismanagement.
The Consumer Financial Protection Bureau should close the loophole in its payday-loan proposal that would let lenders skip the ability-to-pay analysis, an unsigned editorial on the Times' op-ed page says. The ability-to-pay requirement is the "bedrock of fair lending," the paper says, and not requiring it is the plan's weak link. Otherwise, the Times praised the CFPB's payday-loan plan, calling it the "most important step" in the bureau's history.
Elsewhere ...
Barron's: If the share price is what you're worried about, forget breaking up the big banks, or at least JPMorgan Chase. This week's feature story in Barron's argues JPMorgan's shares could rise 30% over the next year, based on the strengths that Jamie Dimon has cultivated and because of the stock's low price. Mike Mayo, an analyst at CLSA, is cited as an analyst who formerly called for JPMorgan's breakup, but now prefers the company be kept intact.
Fortune: Mayo is not, however, so bullish on Bank of America. Mayo says splitting off B of A's businesses into separate companies would unlock shareholder value.
