Receiving Wide Coverage ...
Bank of America's Big Blunder: The papers are abuzz with the question of who or what is to blame for the big accounting error that caused Bank of America to misreport its capital levels under the Federal Reserve's stress test. Perhaps the bank's employees need to work on their listening skills, if the Wall Street Journal's characterization of the mistake as rooted in a "communications blunder" between two internal units over how to value debt securities is any indication. Elsewhere in the Journal, Ryan Tracy suggests that regulators shoulder some of the responsibility for the snafu because they counted on Bank of America to oversee itself. While the Fed may have bitten off more than it can chew when it comes to evaluating the financial statements of complex megabanks, Tracy says, now the agency needs to step up its scrutiny. Or perhaps the problem is that the accounting rules for structured notes which banks pushed for in the early 2000s are wildly confusing, suggests the Journal's Dave Reilly. Outspoken banking analyst Mike Mayo tells the New York Times that Bank of America's miscalculation offers "signs that controls are not as tight as they need to be" at the country's second-largest bank. The Times' Floyd Norris notes it will be "interesting to know which bank officials were supposed to review the calculations, and failed to do so, year after year." Matt Levine takes an absurdist view of the mess: "Nobody knows what a bank is, or how big it is, or how much capital it has," he writes at Bloomberg View. The Financial Times plays it pretty straight, largely skirting the question of responsibility.
Seeing Double on Deutsche: How'd Deutsche Bank do in the first quarter? It depends on which news outlet you read. The Journal emphasizes the fact that the company's profits fell 34% from the same period a year ago, to 1.08 billion ($1.5 billion). The declines were driven by falling fixed-income revenue and higher regulatory costs. The Times leads with a more generous spin on the German company's performance, writing that it "returned to profit in the first quarter of the year as it avoided the huge litigation expenses that characterized the end of 2013."
Wall Street Journal
Banco Santander plans to purchase the share of its Brazilian unit that it doesn't own for up to 4.7 billion ($6.5 billion). The deal means that the Spanish bank has a sunny outlook on growth opportunities for its subsidiary "despite short-term headwinds" in Brazil, the company's chief executive told analysts.
Investors who are anxious about the stock market's recent volatility, Fed tapering and any number of other signs potentially indicative of an end to the bull market need to relax, according to RBC Capital Market strategist Jonathan Golub. Economic growth may be slowing down, but "our work suggests that rallies do not end when they get tired, they end when recessions ensue," Golub wrote in a note to clients.
There's trouble inside the Securities and Exchange Commission, the FT reports. SEC commissioner Kara Stein is protesting the agency's decision to permit Royal Bank of Scotland and UBS to raise capital before their shelf offering registrations receive regulatory review. Both RBS and UBS have admitted to rigging interest rates, and Stein says the companies ought to be punished rather than receive preferential treatment. Sen. Elizabeth Warren is on Stein's side: "When the SEC waives automatic penalties for criminal misconduct by the largest banks, it sends a dangerous signal about how weak it is in its enforcement of the law."
The failed Bitcoin exchange Mt. Gox may rise again. A group of entrepreneurs operating under the name Sunlot is trying to save the exchange from liquidation by offering to partially compensate creditors for their losses.
New York Times
Banks' foreclosure processes may be riddled with even more problems than previously believed, according to a report from the Government Accountability Office. The government cut short its review of banks' foreclosure and home loan modification practices last year in an effort to get compensation to affected borrowers faster. But the curtailed review appears to have missed key findings, including the fact that "an unidentified bank had an error rate of about 24% . suggesting that if other banks had looked over more of their records, additional errors might have been discovered," according to the Times. So much for ensuring that homeowners were fairly compensated for banks' transgressions.
The Times' editorial board calls for more regulation of the private student loan market on the back of a recent report from the Consumer Financial Protection Bureau. "Borrowers have been forced into default without warning," the op-ed says. "Borrowers with perfect credit histories can suddenly be required to pay the full amount of the loan if someone who co-signed on the loan dies."
The Fed is tip-toeing away from bond-buying, and it's likely to cut another $10 billion from its monthly purchases this week, Binyamin Appelbaum reports.