Receiving Wide Coverage ...
No End to AIG Case: In answer to yesterday's Morning Scan question about whether former AIG chief Maurice Greenberg would be appeased by a federal court ruling that validated his case against the federal government but awarded AIG shareholders zero dollars: nope. Greenberg plans to appeal the decision by Judge Thomas Wheeler, the papers report. Wheeler found that the government had reached beyond its legal authority in the 2008 bailout of insurer AIG, but argued that shareholders hadn't exactly been denied vast riches since AIG would have been forced to file for bankruptcy without the government rescue. At least Judge Wheeler has a fan in Journal op-ed columnist Holman W. Jenkins, Jr.: he says "the ruling serves to underline once more the primacy of the rule of law in American life, however much it may have been mussed up and dirtied in the exigencies of the moment in 2008." Meanwhile, a separate article in the Times notes that the government may have erred in putting lawyers from Davis Polk on the stand during the trial "because it opened the door to the plaintiffs to require the firm to produce internal communications that otherwise would have remained private." The lawyers' testimony led to the reveal of an email in which a Davis Polk lawyer implied that the government was aware its bailout had a shaky legal foundation; the email said the government "is on thin ice and they know it." Wall Street Journal, New York Times.
Stress Tests in Session: Stress-test season is upon us once again, and Federal Reserve governor Daniel Tarullo is celebrating by meeting with top bankers about the changes they'd like to see in the examination process, according to the Journal. Tarullo has reportedly held sit-downs with executives from large regional banks like PNC Financial, BB&T Corp. and U.S. Bancorp as well as with big-bank chief financial officers. This year's round of tests are particularly noteworthy because it is midsized banks' first bout with them, as the Financial Times notes. Hopefully they won't encounter the kind of problems that Bank of America has experienced: the Journal's anonymice say the Fed told the bank earlier this year that "it doesn't believe its management is forward-looking enough and instead merely reacts to problems after they are raised by regulators."
Flagged Fifa Transactions: Swiss authorities have turned up 53 potential instances of money laundering in their probe into bidding for the 2018 and 2022 World Cups, according to the papers. "Some of the cases were reported by Swiss banks under the country's anti-money laundering procedures," according to the FT.
Wall Street Journal
The man accused of kicking off the 2010 flash crash has been linked with the man under investigation for his network of offshore investment funds, the paper reports. British trader Navinder Singh Sarao reportedly set up an offshore fund via Irish businessman David Cosgrove. The ties between the two men "casts a light on a murky, offshore marketplace connecting unsophisticated investors with lightly-regulated offshore funds," according to the paper. "It also illuminates the far-flung business activities of Mr. Sarao, who has taken on folk hero status among supporters who view him as a scapegoat for the 2010 crash." In other words, the association isn't doing Sarao's case any favors.
Falling overdraft revenue is taking a toll on banks' bottom line, according to the paper. The article notes that more large banks have made changes to their overdraft practices that benefit consumers but result in lower earnings. It also suggests that some of these moves may be happening in anticipation of the Consumer Financial Protection Bureau's forthcoming overdraft rules, expected within the next year.
New York Times
Goldman Sachs' venture into consumer lending may help mend the firm's tarnished public image, but there are tradeoffs, according to Breakingviews' Antony Currie. Chief among them: the firm will be opening itself up to the oversight of the Consumer Financial Protection Bureau.
For all the glamour and whiz-bang spirit of fintech startups, The Economist says it's unlikely they'll topple traditional banks. For one thing, banks have the market cornered on deposit accounts; for another, they're still a lot bigger than even the most successful startups. That said, the publication argues that fintech firms could certainly skim the cream off the most profitable banking services and leave financial institutions stuck handling low-margin activities, which is plenty of reason for banks to start thinking about buying out the competition.