Wall Street Journal
Arbitration rule comments: The CFPB received nearly 13,000 comments on its proposed rule that would restrict the use of mandatory arbitration clauses and make it easier for consumers to sue banks. The rule would prohibit financial services companies from using the clauses to block class-action suits, although consumers would still be required to use arbitration to resolve individual disputes. The agency is expected to issue a final rule next year after it reviews the comments.
Reform the Fed: Led by a top adviser to former Fed Chair Ben Bernanke, a group of activists released a paper that calls for specific measures to reform the Federal Reserve. Among its most notable proposals is bringing the 12 semi-private regional Fed banks into the government and removing private-sector bankers from their boards of directors. The paper also advocates annual audits by the Government Accountability Office and quarterly detailed monetary policy reports from Fed officials.
"The Fed's structure is simply outdated, and that makes it harder for its decisions to serve the public," one of the authors said.
AIG unloading Lloyd's?: American International Group is in early talks to sell its Lloyd's of London insurance operations to Canada Pension Plan Investment Board, that country's biggest pension fund, which is trying to establish itself as a player in the insurance industry. AIG is looking to focus on core businesses and return more than $25 billion in capital to shareholders.
Betting on the fine print: Two former Goldman Sachs traders have come up with a new play on mortgage bonds that went south after the housing market collapse. They're betting on the outcome of a court case dealing with about $600 million left from an $8.5 billion settlement in which Bank of America agreed to pay mortgage-bond holders five years ago. The two are betting that the fine print in junior-lien bonds they own dictates that the cash from loan recoveries should be distributed to them, not to holders of more senior securities.
Banks embrace blockchain: Four of the world's largest banks — UBS, Deutsche Bank, Santander and BNY Mellon — have joined forces to create a new digital currency using blockchain, the technology behind bitcoin, which they believe will become an industry standard to clear and settle financial transactions. The banks have overcome their skepticism about the technology and now plan to use it to speed up settlements and reduce costs that now amount to as much as $80 billion a year.
"Today trading between banks and institutions is difficult, time-consuming and costly, which is why we all have big back offices," a Santander official said. "This is about streamlining it and making it more efficient."
Auditors beware: Steven Thomas has become the "go-to guy in the emerging world of auditor liability, wringing settlements out of some of the world's biggest professional services firms." The former Sullivan & Cromwell attorney represents the trustee of Taylor, Bean & Whitaker, the defunct mortgage company that failed after putting up phony assets as collateral for loans. Thomas is suing PwC for $5.5 billion, alleging that it negligently provided six years of clean audits for Colonial Bank, which supplied TBW with most of its credit and later failed itself.
"This audit system is broken and real people are getting hurt all the time, scandal after scandal after scandal," Thomas says. "We think we're getting real close to making it a different world for auditors."
BMO reports: Bank of Montreal reported better-than-expected third-quarter results despite a 60% jump in credit loss provisions, largely in its oil and gas portfolio. Net income rose about 5% for the quarter ended July31.