Receiving Wide Coverage ...
Suisse Settles: Credit Suisse has agreed to plead guilty to one count of conspiring to aid tax evasion and to pay $2.6 billion in penalties in a settlement with the Department of Justice, the Federal Reserve and the New York Department of Financial Services. Most news stories about the deal, which was announced Monday, foreground the historical significance of the Swiss lender's guilty plea. Then they acknowledge the admission of criminal wrongdoing is not that big a deal for the bank. The New York Times says the deal is "a sign that banking giants are no longer immune from criminal charges" but points out that Credit Suisse "may lose some clients but is otherwise expected to survive largely unscathed." That's all part of the Justice Department's design: the federal agency wanted to avoid putting Credit Suisse out of business. Credit Suisse expects the settlement will have "no material impact" on its operations, although it will cut $1.8 billion from its second-quarter profit, according to the Wall Street Journal. Credit Suisse's chief executive Brady Dougan appears steady at the helm despite Swiss politicians' calls for his resignation, according to a separate report in the Journal. Dougan said in a conference call Tuesday that he never considered stepping down during the settlement process. The Times suggests that the bank's "Teflon leader" may yet face scrutiny from shareholders, regulators and politicians about both his individual responsibility for the tax evasion charges and whether he could have done more to avoid a criminal conviction. Meanwhile, The Times' behind-the-scenes look at the settlement negotiations suggests that Credit Suisse was less than blasé about the effect of a criminal plea. General counsel Romeo Cerutti begged federal prosecutors "with a quiver in his voice" for a deferred prosecution agreement rather than criminal charges, according to anonymice. Credit Suisse's guilty plea "reflects a dramatic evolution in thinking within the DoJ," which had previously hesitated to bring criminal charges against large banks out of concern for the potential impact on the financial system, according to the Financial Times. But pundits are already finding fault with the settlement agreement. Objections include the fact that no top executives have been charged and that Credit Suisse was not required to give up the names of the U.S. clients who used tax shelters, according to the Journal. (The bank is coughing up information that will help the government identify individual account holders, according to Deputy Attorney General James Cole.)
Trapped and Underwater: Almost 10 million U.S. homeowners with a mortgage are underwater, the Journal reports. An additional 10 million have 20% or less equity in their homes, which leaves them with insufficient funds to pay for a move. These figures "help explain recent sluggishness in the housing recovery," according the paper. A housing crisis story in the Washington Post reports that foreclosures may have helped drive the rise in suicide rates among middle-aged people between 2005 and 2010.
Deutsche Doubts: Deutsche Bank's plan to raise $11 billion in capital may have a few holes, according to reports in the Journal and the FT. "The capital injection should only sharpen investors' questions about its business and returns targets, which are slipping," Paul J. Davies argues in "Heard on the Street." A separate Journal article raises an eyebrow at Deutsche's faith in the future of fixed-income trading, given that banks in the U.S. and Europe have seen falling revenue in that area. Investors and analysts are wondering whether an additional $11 billion in capital will be enough to keep Deutsche's Tier 1 capital ratio above 10% for long, according to the FT. They're also skeptical about the German bank's ability to hit its target of 12% return on equity by the end of 2015.
Wall Street Journal
Life at JPMorgan Chase must be good for CEO Jamie Dimon, he plans to stick around for at least five more years, anonymice told the Journal. That's in contrast to his previous intimations that he might step down if shareholders voted to split his two roles as chief executive and chairman.
"Investors have been pulling money out of exchange-traded funds backed by bank loans," the Journal reports, "once again raising concerns about the ability of lightly traded financial markets to handle a big exodus from ETFs."
U.S. authorities are in the early stages of an investigation into the ties between the online drug market Silk Road and Bitcoin exchanges, according to anonymice.
Federal Housing Finance Agency director Mel Watt said in a C-Span interview that he isn't lying awake at night worrying about the fate of Fannie Mae and Freddie Mac shareholders. "Perhaps Mr. Watt's latest comments will convince investors to start taking the companies at their word on this," the Journal suggests.
Former Federal Reserve vice chairman Alan Blinder wrote an op-ed about the tug-of-war between hawks and doves over the central bank's exit from its post-crisis policies. The Fed must execute a delicate balancing act, according to Blinder. If it holds back on raising interest rates, the U.S. could see inflation "well above 2%." On the other hand, if it exits too quickly, "the premature tightening of monetary policy could kick the still-crawling economy down the staircase again."
New York Times
Investors have 10 days to report stock buys that give them more than a 5% stake in companies. Corporations are arguing that the window "gives large investors an unfair advantage to accumulate shares without the requisite disclosure" and makes them more vulnerable to activist takeovers, according to the Times. Critics of the 10-day window also argue that it puts ordinary investors at a disadvantage. Activist takeovers often move markets, and investors can be blindsided when the disclosures are finally filed.
Joe Nocera argues that an amendment proposed by Illinois senator Dick Durbin in 2009 could have allowed many troubled borrowers to stay in their homes at no cost to taxpayers. The amendment would have let underwater homeowners modify their mortgages during bankruptcy. The financial industry opposed the idea, arguing that "a right of bankruptcy for a homeowner would increase the cost of home loans, undermine the sanctity of contracts and promote (of course!) moral hazard," Nocera writes. "Why is it that the fear of moral hazard only applies to homeowners, and not to the banks?"