Wall Street Journal
It's hard out there for a U.S. bank, the Journal reports. Plunging mortgage revenue and lower trading activity propelled a 7.6% decline in banks' year-over-year first-quarter profits, according to newly released data from the Federal Deposit Insurance Corp. Year-over-year profits had only fallen once in the past 19 quarters, according to the FDIC. The declines in revenue make layoffs and other cost-cutting measures more likely in the months to follow. The paper's "Heard on the Street" column picks up on another interesting bit of data from the FDIC's quarterly report: banks collectively increased their Treasury holdings by 23% in the first quarter. This suggests that banks, much like their trading clients, are operating with "an abundance of caution," according to John Carney.
The best way to prevent another mortgage crisis is to compel lenders to take on more of the risk of falling home prices, according to a new book by economic and finance professors Atif Mian and Amir Sufi. House of Debt's proposal is met favorably by reviewer Daniel Akst, who says the idea "avoids transferring risks to taxpayers and would discourage reckless borrowing by making lenders share in unrealized losses." Akst's review acknowledges that many lenders manipulated homeowners into taking out dangerous loans in the run-up to the housing crisis but argues that borrowers share some responsibility for going on "a truly manic borrowing binge." Some commenters took issue with Akst's latter point. "I believe the great majority of homeowners just fell for a scam set up by the government when they loosened lending rules," writes Xavier L. Simon. Another reader, John Boebinger, says "homeowners who were assured that an Alt/A mortgage was their best option (when the brokers were passing around emails talking about how badly they just fleeced a retired couple) have every reason to be angry."
Deutsche Bank is fixing to ramp up its investment in the fixed-income marketsbut with dwindling activity in that area, Paul J. Davies warns that investors "might not be content to wait for a slice of a smaller pie."
A sluggish global economy has played more of a role in depressing banks' trading revenue than regulation or policy, according to remarks by Goldman Sachs president Gary Cohn at a Sanford Bernstein conference Wednesday. "We're not just waiting for things to get better," Cohn promised, highlighting growth in the bank's wealth management business, which serves ultra-rich clientele. The FT points out Goldman's overall strategy is "still very much the same" despite its efforts to adapt in certain areas.
New York Times
The city of Providence, R.I., plans to file a lawsuit against Santander Bank Thursday alleging bias has led the bank to reduce mortgage lending in predominantly African-American and Hispanic neighborhoods. Santander previously operated as Sovereign Bank and was bought by Banco Santander of Spain in 2009. After the purchase, the lawsuit alleges Santander "began to increase mortgage lending in predominantly white neighborhoods and decrease lending in predominantly black and Hispanic neighborhoods to a much larger degree than its peers." Providence Mayor Angel Taveras told the Times that he believes old-fashioned redlining has made a comeback. Between 2009 and 2012, according to the lawsuit, the number of new mortgages in Providence's minority neighborhoods fell by 63%.
Former Wachovia chief executive Robert K. Steel has a new gig as head of the "boutique investment bank" Perella Weinberg Partners. Steel most recently served as deputy mayor to New York City's Michael Bloomberg. The Dealbook write-up opts not to dwell on Steel's tenure at Wachovia, simply noting that he took the helm of the lender in 2008 and "oversaw the troubled bank's sale to Wells Fargo during the depths of the financial crisis that year." But a commenter weighs in with criticism of Steel's leadership. "Steel came to Wachovia too late to save it, and it deserved saving or restructuring instead of near bankruptcy and an emergency savior in Wells Fargo which bought it very cheap," writes Mark of Palm Harbor.