Receiving Wide Coverage ...
Nonbank Lenders: They're filling voids left by the more heavily regulated and lately risk-averse banking sector in commercial real estate (Wall Street Journal) and leveraged corporate lending (Financial Times). A real estate finance professor explains to the Journal: "You regulate one sector and the risk merely transfers to another."
GSE Reform: The Senate Banking Committee delayed a scheduled vote on the Johnson-Crapo housing finance reform bill. The sponsors say they have enough votes to clear the committee, but they want to secure enough support to get to the Senate floor. (New York Times, Washington Post) Our American Banker colleague Victoria Finkle called it two weeks ago.
Wall Street Journal
The Federal Open Market Committee's two-day policy meeting ends today, and according to the "Ahead of the Tape" column, "officials almost certainly will stay the course on reducing monetary stimulus" despite the struggles in the housing market.
"CIT Group Earnings Tumble" Deep in this story about Wall Street veteran John Thain's challenges turning around the commercial lender, an interesting statistic for the Scan audience: Deposits at the finance company's online bank "now represent more than 40% of CIT's funding."
After a "painful" integration, the 2009 acquisition of Smith Barney from Citigroup "appears to be paying off" for Morgan Stanley. Its CEO, James Gorman, reveals in this profile that before he made that transformational deal, Morgan Stanley tried for two years to buy PaineWebber from UBS. "They thought it was worth more than we thought it was worth. We were enamored about consolidation but we weren't stupid."
New York Times
Anonymice tell the Times the feds are preparing criminal charges against BNP Paribas and Credit Suisse for sanctions violations and tax shelters, respectively. Prosecutors "have met with regulators about how to criminally punish banks without putting them out of business and damaging the economy" you know, the whole "too big to jail" thing. There's an interesting backstory in here about how the DOJ and OCC deliberated about the potential consequences if JPMorgan entered a guilty plea in the Madoff case (which instead resulted in a $2 billion settlement in January).
"Top Officer of Barclays in America Is Leaving" Hugh McGee, of Lehman lineage.
Wired: "'Dark Wallet' Is About to Make Bitcoin Money Laundering Easier Than Ever." Don't judge. Not yet
Mashable: "How One Woman Hid Her Pregnancy From Big Data." Relevant passage for bankers, payments professionals and financial regulators: "By dodging advertising and traditional forms of consumerism, her activity raised a lot of red flags. When her husband tried to buy $500 worth of Amazon gift cards with cash in order to get a stroller, a notice at the Rite Aid counter said the company had a legal obligation to report excessive transactions to the authorities. 'Those kinds of activities, when you take them in the aggregate ... are exactly the kinds of things that tag you as likely engaging in criminal activity, as opposed to just having a baby,' she said." Now you may pass judgment on the self-described developers of "money laundering software." See? Not so black and white.
Electronic Frontier Foundation: The civil liberties group has posted a helpful roundup of recent news stories about Chase closing the accounts of adult entertainers. These are personal accounts, not business or payment processing, so the high chargebacks that plague porn sites can't be the motivation. "It's unclear whether this is an example of government pressure, an internal corporate decision, or some combination," the foundation notes. Operation Choke Point is mentioned in many of these stories but not conclusively linked to Chase's moves. We'd add that it's possible these account closures were coincidental one-offs that only appear to be systematic because they all happened at the same vast, siloed megabank. (As EFF also notes, Chase has offered no public explanation, so for now outsiders can only speculate.) The repeated claim that the bank recently dropped "hundreds" of performers also invites some skepticism, as only a handful of examples have been detailed in the press so far. One film director told the New York Daily News that different Chase representatives gave him different explanations for closing his account and that of his actress wife. One of them was "because we did business with a convicted felon" suggesting Chase's ongoing AML/KYC overhaul played a role in that situation. And of course, it's Chase's right to decide whom it will bank. All of that being said, the EFF's concern is salient: "Just as ISPs and search engines can become weak links for digital speech, too often financial service providers are pressured by the government to shut down speech or punish speakers who would otherwise be protected by the First Amendment. We already have plenty of morality police in the world; we don't need to add banks to the list." Unfortunately, that ship may already have sailed.