Receiving Wide Coverage ...
Parsing the New Liquidity Rule: The newspapers had very different takes on a new liquidity rule requiring large banks to hold enough safe assets to survive at least 30 days in the event of a crisis. The Wall Street Journal says regulators "provided some relief to large U.S. banks" by allowing those with assets between $50 billion and $250 billion to calculate compliance with the rule on a monthly rather than daily basis. It also notes that banks face a combined shortfall of only $100 billion to meet the requirement, rather than the previously expected $200 billion. The Journal's "Heard on the Street" column has a similarly upbeat view, noting "the worst fears" about unintended consequences of the rule "appear to be overstated". Banks' earnings may take a hit, John Carney writes, but "the longer-term effect on lending is unlikely to be as strong as some of the rule's critics have warned." The Financial Times' headline and lead, on the other hand, highlight the fact that banks have a shortfall without noting that it's smaller than expected. The FT's Lex team is more worried than Carney about the possibility that banks will take on more risk to compensate for the higher levels of low-return assets they'll be required to hold. "Excessively strict standards, like intransigent parenting, often lead to perverse outcomes," the team writes. Meanwhile, the New York Times focuses not on the liquidity rule but on the proposed margin rule aimed at reforming the derivatives market. It notes that both rules "could force banks to acquire more high-quality assets for regulatory reasons and having to hold more of them could erode profits at banks."
More on That Revolving Door: More top federal prosecutors who have led big cases against the financial industry are leaving their government jobs behind. "Tony West, the Justice Department's point man on its high-stakes talks with big banks over mortgage-backed securities, is set to step down Sept. 15," the Journal reports. The papers don't know what West's next move will be, but Dealbook says that West has hired lawyer Robert Barnett, "who acts as a career counselor of sorts to political and media elite," such as President Clinton. The general sentiment seems to be that any number of law firms that defend banks would be eager to snap up West, although one anonymouse tells the FT that West "had such a testy relationship with the financial industry that that destination might be impossible." Meanwhile, Antonia Apps, who helped spearhead the crackdown on insider trading at the U.S. attorney's office in Manhattan, is switching sides and heading to law firm Milbank, Tweed, Hadley & McCloy.
Wall Street Journal
Harvard Law professor Hal Scott criticizes regulators for providing big banks with little information about what they're looking for in living wills. "Until regulators clearly define the criteria for a living-will passing grade and focus on their mission of sorting out critical from noncritical functions, bank by bank, they risk undermining the process and their own credibility," he writes.
A pair of economists has invented a "shadow fed funds rate" that aims to "show what the fed funds rate would look like if investors didn't have recourse to cash, and could therefore slip meaningfully below zero."
The recession created a "new orthodoxy" that is "merely a chastened version of the old," FT columnist Martin Wolf argues in a lengthy article linked to his new book on the financial crisis. He suggests policymakers consider more dramatic overhauls, including a full-reserve banking system, more flexible loan terms and significantly higher capital requirements.
"The U.S. Federal Reserve is stepping up efforts to corral market participants to agree to alternatives to the U.S. dollar Libor benchmark," the paper reports. The Fed is meeting with representatives from JPMorgan Chase, HSBC, Standard Chartered and other organizations starting this month to discuss possible reforms.
New York Times
The paper takes a look at a different side of the turmoil in Ferguson, Mo., in the aftermath of the police shooting of African-American teenager Michael Brown. Housing advocates argue that conversations about Ferguson should examine "how towns like Ferguson are still reeling from the financial crisis and how that also has contributed to heightened tensions." Many Ferguson residents rent their homes from institutional investors that bought troubled mortgages in the aftermath of the crisis. "The institutional money has meant a decline in the number of vacant homes and an increase in rental properties, but it has also raised concerns about the long-term intentions of these mainly out-of-town landlords and whether they will upgrade Ferguson's aging housing stock," the paper reports.
The paper's editorial board criticizes the Securities and Exchange Commission for being too lax in its attempts to reform credit ratings. One new rule requires firms that sell asset-backed securities to provide buyers with information about quality of the loans backing them, with one major exception: sellers "do not have to provide detailed loan-level data in many deals where the buyers are big institutional investors." Another rule seeks to address the conflict of interest inherent in the model in which credit rating agencies are paid by the same banks whose products they are rating, but the Times worries the new requirements won't be properly enforced and don't go far enough.
Wall Street banks offer employees a better work-life balance than they did a year ago, according to a survey of 3,600 people in the industry. "Work-life balance scores this year increased about 3% to an average of 7.09 points, from 6.90 last year," the paper reports.
It's looking increasingly likely that Home Depot was hit by a major data breach, according to the paper. The article describes the process by which bank employees, law enforcement officials and computer security workers trace stolen credit card information back to "a common point of purchase."