The paper takes a somewhat lengthy look at the New York Fed as the institution struggles with the fallout from secretly recorded internal conversations that show it might be too cozy with the banks it regulates. The article uses as its launching point a Nov. 18 event at the New York Fed's headquarters, which was held to celebrate the Fed's 100th anniversary, and which came a few days before Fed officials were excoriated in front of a Congressional panel. Two former Fed presidents in attendance Paul Volcker and Gerald Corrigan made negative comments at the anniversary party about another former Fed president at the event, Timothy Geithner, suggesting they had never presided over a government bailout of a private New York firm, as Geithner had with AIG. Geithner's response was every crisis is different, according to unnamed sources who attended the event. The FT article includes a helpful map, pinpointing the exact locations in lower Manhattan and Midtown Manhattan of the headquarters of the New York Fed and the largest investment banks. JPMorgan Chase and Citigroup are located just a few blocks from each other on Park Avenue in Midtown, and on the southern tip of the island, the New York Fed, Goldman and Deutsche Bank are all in close proximity. Most of the rest of the piece examines the history of the New York Fed and why it was created, and quotes several industry experts and observers about how much trouble the New York Fed is in, because of the recent embarrassing disclosures. On the same page of the FT, below the primary piece on the New York Fed, but clearly marked as a separate, non-bylined story, is another curious article, with the same url link, intended to demonstrate how close Wall Street banks and the New York Fed really are, or at least how powerful the bankers who work for the private company think they are. This article, citing unnamed sources, describes a situation in September 2008, when Goldman Sachs and Morgan Stanley were "allowed" to become bank holding companies to give them access to government liquidity. When the deal was ready to be announced, Goldman drafted its own press release about its conversion to a bank holding company. At the same time, Goldman also drafted another press release about the development, which it intended to be the Fed's own statement on the deal. Goldman sent the statement over to the Fed, thinking the New York Fed would simply slap its own name on it and send it out. But insiders at the New York Fed thought it was an example of Goldman's "overweening arrogance." Bill Dudley, a former Goldman banker who was then at the Fed (but not yet its president), was corralled into telling Goldman, thanks but no thanks, the Fed would write its own statement. In a final bit of evidence to show the revolving door between the Fed and Goldman, poked around the professional social-media site LinkedIn and found 40 profiles of people who listed both the New York Fed and Goldman in their job histories.
New York Times
Real estate developers in lower Manhattan seem to have scored a big victory on Thursday, and Dodd-Frank played a large role in the deal. Developers want federal terrorism insurance extended for six years, to help persuade the continuing redevelopment of lower Manhattan, since it's a potential target of a catastrophic terrorist attack. To get conservatives to agree to the deal, changes have been proposed to Dodd-Frank to give insurance companies more flexibility on capital standards. There's one last sticking point in the talks, also involving Dodd-Frank. Rep. Jeb Hensarling, chairman of the House Financial Services Committee, wants to make farmers, ranchers and small businesses that use financial instruments to hedge risk exempt from the capital requirements designed for hedge funds. Democrats have not yet agreed to this amendment to Dodd-Frank.
Bloomberg: Wells Fargo's decision to hold on to $39 billion of mortgage-servicing rights after its deal to sell them to Ocwen Financial collapsed is interpreted as the sign of the end of large such sales of MSR assets. "After what happened to Wells, banks see the downside risks of mega-transactions, especially when MSR valuations have declined," Guggenheim's Jaret Seiberg tells Bloomberg. Banks sold a total of $90 billion in MSRs this year to publicly traded non-bank servicing companies, down from $750 billion in 2013, Bloomberg reported, citing Compass Point Research & Trading.