Receiving Wide Coverage ...
Long Time Coming: It's been a long and bloody road to a $1.37 billion settlement between Standard & Poor's and the U.S. Justice Department. The deal, announced Tuesday, resolves accusations that S&P misled investors about the credit quality of mortgage-backed securities in the run-up to the financial crisis. But the media coverage is far more focused on what happened during the two years it took the parties to reach an agreement. S&P initially responded to the DOJ lawsuit by claiming in a legal filing that the charges were retaliation for the credit ratings agency's decision to downgrade U.S. debt back in August 2011. The DOJ fired back by raising its demands from an early "$1 billion plus" settlement to $3.2 billion in February of last year. The eventual deal required both parties to make concessions, according to the papers. S&P reportedly agreed to retract its assertion the lawsuit was motivated by revenge, while the DOJ withdrew demands the firm admit wrongdoing. The Wall Street Journal's take on these events is fairly straightforward. The New York Times leans more toward analysis, including the takeaway that S&P's payout, "a penalty large enough to wipe out the rating agency's entire operating profit for a year, underscores the risks of not settling in the first place." The firm could have saved "tens of millions of dollars" in legal fees by taking the DOJ's first offer, the paper reports.
New Lending Club Alliance: What do you get when two much-discussed disruptors to the financial industry team up with each other? A lot of very excited news coverage, for one thing. The papers report online marketplace lender Lending Club will offer small business financing through Chinese e-commerce giant Alibaba. U.S. manufacturers will be able to take out loans ranging from $5,000 to $300,000 through Lending Club to order products and supplies on Alibaba's website. The Times' report takes on a somewhat gee-whiz tone as it notes the venture offers "lower interest rates than what others can provide," starting at a monthly rate of 0.5%. The FT focuses on how the partnership fits in with Lending Club's overall growth strategy, noting the company announced a similar deal with Google last month. Lending Club chief Renaud Laplanche tells the FT more partnerships "on the personal loan side" will be announced in the next few weeks.
A Bar Too High? Four Wall Street trade groups are pushing back against the Financial Stability Board's recent proposal to increase banks' loss-absorbing capacity. The groups say the FSB has gone overboard with a proposed requirement that banks hold equity and long-term debt worth16-20% of their risk-weighted assets. The Journal reports U.S. banks have "wholeheartedly embraced the concept behind the FSB proposal" but believe a lower threshold would offer sufficient protection. The Financial Times notes U.S. banks are also worried Chinese lenders will gain an edge because they would be exempted from the FSB's loss-absorbing standards.
Meet the New Boss: Ally Financial chief executive Michael Carpenter has stepped down in a move that appears to have caught the press off guard. The Journal's lede notes the decision comes "just days after the auto lender announced strong earnings and reacted angrily to the loss of key business from longtime partner General Motors," but further down cites a source who says the two events were unrelated. The Times says analysts and investors were less surprised by the change, since "Carpenter had achieved many of the goals he had set out to accomplish." He will be replaced by Jeffrey J. Brown, who previously served as the head of Ally's dealer financial services business.
Wall Street Journal
Royal Bank of Canada is shuttering "many, if not all" of its wealth management businesses in Latin America in response to "scrutiny of potential money-laundering activities in its accounts in at least three countries," according to anonymice. The bank is also closing its wealth-management units in the Caribbean.
Small banks' efforts to win regulatory relief are paying off, the paper reports. Their biggest priorities now include "legislation to ease international capital rules, additional mortgage lending relief for banks with up to $10 billion in assets and a broad exemption from enforcement by the CFPB."
Banks are reporting weaker demand for home loans backed by Fannie Mae and Freddie Mac, according to the Fed's quarterly survey of senior loan officers. John Carney of "Heard on the Street" says it's "hard to see how the market can live up to the growth expectations of mortgage lenders."
Marketplace lender SoFi has raised $200 million in financing in advance of its forthcoming initial public offering. The company, which specializes in student loan refinancing, is now valued at $1.3 billion. SoFi will use the new funds to "strengthen its balance sheet and help it expand into new lending products," according to the paper.