Receiving Wide Coverage ...
GAO No Help on TBTF: So are certain banks "too big to fail"? The release of the Government Accountability Office's report on Thursday did little to answer that question, with both sides claiming victory, as an American Banker article noted Thursday. The Financial Times quoted Paul Saltzman of the Clearing House (the group representing JPMorgan Chase, Citi and other big Wall Street firms) saying, too big to fail "perceptions have substantially diminished." The New York Times quoted Mary Miller, under secretary of the U.S. Treasury, who said the report shows "what should now be evident Dodd-Frank ended 'too big to fail' as a matter of law." The Times article gave equal time to the opposite view, with Independent Community Bankers of America CEO Camden Fine saying, "the bottom line is that there is a subsidy today and there had been a subsidy before the crisis and the subsidy increased during the crisis." Financial Services Forum president Rob Nichols weighed in that big banks' advantage has not only "disappeared or gone away, potentially it's been reversed," the Wall Street Journal reported. Heard on the Street points out that, if big banks' subsidy has gotten smaller, it's because the price of risk has gotten smaller, as the spread between junk bonds and Treasuries currently hovers at all-time lows.
Paying for Overdraft Protection: Consumers who opted in to overdraft protection programs seem to be paying more in fees. That's clearly not what the law intended, so the Consumer Financial Protection Bureau has decided it must take a closer look, the Times and Washington Post report, echoing a lengthier, more detailed article in American Banker. The CFPB didn't say it was planning to propose new rules, but just that the agency is going to study the issue further.
Wall Street Journal
A loose coalition of regional banks has been actively lobbying Congress to remove the $50 billion asset mark that designates which banks are SIFIs. Their efforts seem to be working, the Journal reports. The paper quotes several lawmakers and policymakers who are coming around to the idea that only the biggest Wall Street banks (JPMorgan Chase, Goldman Sachs, Citi and Morgan Stanley) are truly systemically important financial institutions. "Practically all the regional banks are basically just big community banks that don't play in the risky world" of the biggest Wall Street banks, Rep. Blaine Luetkemeyer, R-Mo., said. "Why should they be penalized?" The paper even offers a helpful chart showing that if you add up the assets of the 10 largest regional banks, they still don't match the total asset holdings of JPMorgan.
Here we go again? Some of the asset managers who made boatloads of money by betting the U.S. was sitting on a housing bubble appear to be leaning in that direction again. Before the financial crisis, these managers bet against mortgage-backed securities. Now they're betting against several different categories, including European sovereign debt and U.S. junk bonds. Here's one nugget to calm your nerves, however. John Paulson, who made $15 billion by shorting the subprime mortgage market, is said to be bullish on bank loans and mortgage-backed securities.
New York Times
Federal authorities have growing concerns about fraudsters' use of Green Dot's MoneyPak prepaid card, the Times reports. The criminal activity seems to fall into two different buckets. In one, criminals are posing as debt collectors, bail bondsmen, government officials or salespeople. The other includes drug and weapons dealers who are using MoneyPak as their financial conduits. Green Dot has said that it plans to retire its MoneyPak product and replace it with a new electronic cash-transfer system. Still, consumer advocates are worried the criminals will just move to a similar product, like InComm's Vanilla Reload card.
