Receiving Wide Coverage ...
PwC's $25M Penalty: Bank auditor PricewaterhouseCoopers has agreed to pay $25 million over charges it watered down a report on sanctions violations by Bank of Tokyo-Mitsubishi UFJ, according to the New York Times. The settlement with the New York State Department of Financial Services would also impose a two-year ban on PwC's ability to do some kinds of consulting work for banks under New York regulation. Bank of Tokyo hired PwC in 2007 to review incidents of improper transactions with sanctioned countries, according to the Times. Documents reviewed by the paper show that PwC softened its findings in a report submitted to regulators in order to put its client in a better light. "Conflicts are inherent to its business model," the Times notes. "Consultants are handpicked and paid by the same banks they are supposed to examine." Some critics have argued the same conflict of interest led credit ratings agencies to overestimate the quality of banks' mortgage-backed securities in the run-up to the financial crisis. The Wall Street Journal has a streamlined version of the story.
Wall Street Journal
Some economists are worried that the Federal Reserve will be slow to increase short-term interest rates, according to the Journal. The paper's survey found that "30 private economists said they feared the Federal Reserve would wait too long while only three said they feared the Fed would move too early." It's unclear whether any economists included in the survey took the Goldilocks position that the Fed's timing will be just right. The article, which comes in advance of the Fed symposium in Jackson Hole, Wyo., this week, includes some unusually colorful quotes from concerned economists. "You don't throw a football at a person. You throw it in front of the person because the person is moving," Allen Sinai said, explaining why he believes the Fed should hike rates before inflation starts creeping upward.
Small business lending remains lackluster throughout the U.S. in general and in Carrollton, Ga., in particular, according to the Journal. Since banks tightened their credit qualifying standards in the aftermath of the financial crisis, "relationship lending is gone," according to Todd Anduze of the Small Business Development Center in Carrollton. "The failure of so many small banks [in Georgia] has created a credit desert," says Biz2Credit co-founder Rohit Arora. Some small business owners are turning to alternative lenders as a solution, while others are tapping friends, family and their own savings accounts for financing.
Activist fund manager William Ackman has added to the flurry of lawsuits against the U.S. government over charges that its support of Fannie Mae and Freddie Mac is eating into investor returns. "Don't get too excited," warns John Carney of "Heard on the Street." "Assume Mr. Ackman or other managers prevail. Even then, under the bailout agreements, Fannie and Freddie can't force redemption of the government's preferred shares as long as it is committed to backstopping the companies."
Anti-money laundering experts are a hot commodity in the U.K., according to the Financial Times. New AML jobs at British banks are up 54% from the previous year, while salaries have risen by as much as 17%. The hiring spree comes in the wake of the U.S. government's expected enforcement action against Standard Chartered and its 2012 action against HSBC.
U.S. regulators want banks to formulate their living wills under the assumption that they will not have access to the Fed's discount lending window, according to the FT. The point of the prohibition is to ensure that banks have a way of winding down without any help from the government, but critics say regulators are creating an unrealistic scenario. "How are you supposed to write these living wills if the assumptions regulators are making are false and inaccurate?" one anonymouse asked.
Big banks including Bank of America and Citigroup have eyes for the Emerald Isle. They're considering moving some of their European operations from London to Ireland if the U.K. decides to sever ties with the European Union. Frankfurt and Paris are also popular contenders for U.S. banks' business, but Dublin has the advantage of a "low corporate tax rate, English speaking population, English-style legal system and eurozone membership," according to the FT.
New York Times
Bank of America's expected $16 billion-plus mortgage settlement should include cash earmarked for the "demolition and repurposing of abandoned homes," according to columnist Gretchen Morgenson. "Vacant properties are still imperiling real estate values and attracting crime," she writes.
An oft-ignored problem with big data is that it requires a lot of manual cleanup. "Data scientists, according to interviews and expert estimates, spend from 50% to 80% of their time mired in this more mundane labor of collecting and preparing unruly digital data, before it can be explored for useful nuggets," the Times reports. Some start-ups are trying to address the issue by automating data preparationa development that could do for data what the dishwasher did for housework.
The federal government's crackdown on violations of anti-money laundering rules has led a number of banks to stop offering remittance services for fear of exposing themselves to enforcement actions. The World Bank can fix the predicament by acting as a remittance center, according to a Times editorial. "The World Bank could pool deposits from banks and nonbank money transfer agents and parcel them to recipient banks, using its formidable certification protocols to verify that the money is coming from and going to legitimate parties," the editorial board proposes. "Such pooling could also reduce exchange fees, a big cost to migrants. Equally important, the World Bank could use its relationships with regulators around the world to enhance the remittance system's integrity."