Receiving Wide Coverage ...
Analyzing the AIG Ruling: Is former AIG chief Maurice "Hank" Greenberg a happy man? A federal judge partially validated Greenberg's four-year legal battle with the government Monday by ruling that the Federal Reserve overstepped its authority in the 2008 bailout of the insurance giant. But Judge Wheeler also declined to award Greenberg and other AIG shareholders any of the $40 billion in damages they had requested, arguing that AIG would have filed for bankruptcy without the government's interventionrendering the shares worthless. The Wall Street Journal calls this ruling a "moral victory" for Greenberg, but the Financial Times says it's more of a pyrrhic one. Regardless, the papers generally agree that the ruling could dissuade the government from attempting to rescue private companies in future crises. The main difference arises in their opinions of whether this is an outcome worth celebrating. The Journal's op-ed section is totally on board: "the judicial branch of the government has forcefully reminded the executive of its legal limits, even in a crisis," the paper declares in an unsigned editorial. But over at the New York Times, Andrew Ross Sorkin is worried that the judge's decision will deter bailouts "even if an intervention was warranted" in the future. (Sorkin is particularly critical of Judge Wheeler, arguing that he seemed to have more sympathy for AIG than for taxpayers.) The Times' news analysis casts the AIG decision as more even-handed, while the Financial Times adds that it lends credence to allegations that AIG's rescue was really a "backdoor bailout" for the banks that ultimately received much of the funds. As for the implications of the surprise decision for another long-shot legal battle, John Carney of "Heard on the Street" warns Fannie and Freddie shareholders to temper their expectations. Since Judge Wheeler found that shareholders hadn't lost any money because of the bailout, a court following his logic would likely determine the same of GSE investors, according to Carney.
Goldman and the Battle for Borrowers: Goldman Sachs wants to give online lenders like Kabbage and Lending Club a run for their money. The investment bank plans to start lending to consumers and small businesses as early as next year, the papers report. The basic gist is that Goldman will launch an all-digital operation and pass the savings from foregoing brick-and-mortar branches onto customers in the form of lower interest rates. The Journal says that Goldman is following the money but suggests the bank may have trouble distinguishing itself in an already-crowded market. The Times warns that Goldman is also taking on the risk of a future public trouncing if its business is perceived as taking advantage of consumers. (Goldman's reputation has already suffered as a result of the financial crisis; the company was memorably described by Rolling Stone writer Matt Taibbi as a "great vampire squid wrapped around the face of humanity.") The FT strikes a more generally chipper tone but quotes a "senior figure within the online lending industry" who says that Goldman may have a tough time breaking into the market despite its size. Meanwhile, American Banker's Kevin Wack writes that Goldman's entry into online consumer and business lending shows its faith in "the hypothesis that technology and the use of data analytics will fundamentally reshape the lending business."
Wall Street Journal
The paper has a quirky story about the British regulator charged with overseeing the financial system of tropical island St. Helena, population 4,600. The island 1,200 miles off the African coast is home to only one bank (along with Napoleon's tomb and a giant tortoise named Jonathan). But it's set to open its first airport next yeara change that could bring in money launderers along with eager tourists.
If the U.K. were to leave the European Union, it really wouldn't be such a big deal, according to Financial Conduct Authority chief Martin Wheatley. The paper notes that British banks may take issue with Wheatley's comments, since many of them are concerned about the destabilizing effect a Brexit would have on the financial sector.
An article on the plight of community banks overburdened by regulations suggests that Congress has left small institutions hanging. "If both parties are in agreement that there needs to be regulatory relief, why can't we just go ahead and get a bill passed that provides some relief?" asks Rick Whaley, head of Citizens Bank of Americus in Georgia.
Today's bank rebranding trends exemplify "globalization going into reverse," according to the paper's Peter Jenkins. He's talking specifically about HSBC, which is considering changing the name of its British operations back to Midland Bank, which it acquired in the early 1990s.
Privacy advocates in the U.S. have been trying to negotiate with the tech industry over a voluntary code of conduct aimed at restricting the use of facial recognition technology. Now groups including the American Civil Liberties Union and Consumer Federation have backed out of the talksand they say the tech industry isn't interested in protecting people's rights. "At a base minimum, people should be able to walk down a public street without fear that companies they've never heard of are tracking their every movementand identifying them by nameusing facial recognition technology," the groups said in a statement.
New York Times
California was wrong to take $331 million in funds designated to help homeowners avert foreclosure and use the money to address state budget issues, according to a court ruling late Friday. A state court judge ordered California to return the sum to the homeowner fund, which was created as part of the $25 billion National Mortgage Settlement in 2012.
The Securities and Exchange Commission frequently tries cases in-house rather than bringing them to federal district courts. Now the SEC's reliance on administrative judges may be on the rocks. A federal district judge has found that "the agency's use of an administrative judge to hear an insider trading case is unconstitutional," the paper reports.