Receiving Wide Coverage ...
The Rate Hike Waiting Game: The Federal Reserve may push its timeline for raising interest rates back from mid-2015 if wage growth fails to improve, according to articles in both the Wall Street Journal and the New York Times. The fact that more people are quitting their jobs suggests the labor market may be tightening, according to the Journal, but there are other signs that strong pay increases may be a ways off. The Times op-ed says the Fed would be right to delay rate hikes as long as wage growth continues to come in dribs and drabs. The paper also notes the falling unemployment rate is driven in part by people who have given up looking for work and dropped out of the job market, and that part-time employees who would prefer to have full-time jobs make up 4.5% of the workforce.
Wall Street Journal
Ocwen Financial and Wells Fargo have called off a long-delayed deal in which the bank was to sell $39 billion in mortgage servicing rights to the embattled firm. New York financial watchdog Benjamin Lawsky suspended the deal soon after it was announced in January, citing "concerns about Ocwen's ability to handle additional loan volume." His office ramped up its probe into Ocwen's business practices as the year went on. In October, Lawsky accused the company of backdating thousands of letters to troubled mortgage borrowers so that they had missed deadlines to address problems with their loans by the time they received the notices.
Activist investors are becoming corporate king-makers. "Activists joined the boards of 39 companies in 2013, and 44% of those companies changed CEOs within the following 18 months, according to FactSet SharkWatch," the paper reports. Activist investor Carl Icahn alone has played a key role in CEO changes at Hertz, Navistar, Motorola, Chesapeake Energy Corp. and Forest Laboratories, but he's not the only figure behind the trend.
Community bank National Penn Bancshares is at the center of a fight between two credit ratings agencies. Kroll Bond Rating Agency was hired by the bank to grade a new bond; a few weeks later, Moody's issued an unsolicited rating of the bond that was significantly lower than its competitor's. "Kroll contends Moody's deliberately lowballed its ratinga move that could have ripple effects through the market for National Penn's bondsto scare other small banks into hiring it for future deals," the paper reports. Moody's denies the accusation, arguing that it offered the rating because the $125 million bond deal was relatively big for a bank of National Penn's size.
The head of the Financial Action Task Force is warning banks against needlessly severing ties with entire lines of business in the face of regulators' anti-money laundering crackdowns. "This so-called de-risking, it is not so much a function of our standards as a fig leaf for the banks doing what they need to do and are going to do anyway by taking people off their balance sheets," Roger Wilkins, president of the international policymaking body, tells the paper. His comments echo statements from the Treasury Department and the Financial Crimes Enforcement Network released earlier this week.
In a related story, the paper looks at how de-risking in the U.S. has hampered the flow of remittances to developing countries. Banks are cutting off money services businesses that serve clients in those countries in order to avoid the threat of hefty fines for facilitating money laundering or terrorist financing, producing "an unintended humanitarian cost by adding charities and non-governmental organizations to the ranks of the 'de-banked.'"
Government authorities need to bemore transparent about what they do with the money collected in bank settlements, according to the paper's Gillian Tett. "[A]fter all, one lesson from the financial crisis is that opacity has a nasty habit of breeding abuse," she writes.
New York Times
If Goldman Sachs wants young tech whizzes to choose Wall Street over Silicon Valley, maybe the bank should start investing in kegerators. That's not among the options discussed in a Times article about the company's efforts to recruit top computer engineering students; instead, Goldman is emphasizing that it offers "more challenging, diverse and, yes, lucrative jobs working on some of the world's most difficult technical problems."
Mortgage refinancings were behind the subprime lending boom and bust and continue to pose a danger to the safety of the housing market, according to author Bethany McLean. "If we want homes to be a vehicle for saving and building wealth, as they used to be, why are we instead encouraging people to increase their indebtedness?" she writes, suggesting a number of reforms that would aim to curb excessive growth of refis.