Receiving Wide Coverage ...
Morgan Stanley Strikes Deal with DOJ: Morgan Stanley has agreed to pay $2.6 billion to settle charges that it misled investors about the quality of mortgage-backed securities during the run-up to the financial crisis. The deal will make a significant dent in the bank's 2014 earnings, lowering net income by $2.7 billion, or more than a third. The amount of the penalty was higher than analysts expected, according to the Wall Street Journal. The New York Times concurs: "The size of the settlement is something of a blow for Morgan Stanley, which has been struggling to improve profitability since the financial crisis and has lagged behind some of its biggest competitors." An analyst tells the Financial Times that since Morgan Stanley knew the deal was coming, "it is surprising that the company did not adequately reserve for it." Now that the bank has settled, Goldman Sachs is the last of the six big banks charged with misrepresenting mortgage bonds yet to reach an agreement with the Justice Department.
Standard Shakeup: Standard Chartered's embattled chief executive Peter Sands and chairman John Peace are stepping down along with three veteran board members. Former JPMorgan Chase executive Bill Winters will replace Sands, taking on the responsibility of turning around a bank that has sputtered in the wake of economic slowdowns in Asia, Africa and the Middle East as well as higher regulatory costs. The Journal suggests Winters is a surprising pick to lead Standard Chartered: "He has little direct experience in Standard Chartered's core emerging markets or in commercial or retail lending." An analyst quoted in the Times sounds more positive: "With the appointment of a highly regarded new C.E.O., and other senior changes ahead, investors can begin looking ahead to a material recovery opportunity." The FT seems to have the inside scoop on the shakeup, quoting an anonymous source close to the board as saying that 10 major shareholders "had spoken up in recent days to say they wanted Mr. Sands to go quickly and that had accelerated the bank's succession plan."
Yellen Under Fire: Federal Reserve chairwoman Janet Yellen faced what the Journal calls "her most acrimonious congressional hearing" yet Wednesday as Republican legislators accused her of political partisanship. The papers seem to agree the Republican lawmakers' goal was to demonstrate the need for the audit the Fed bill, which would empower Congress to review the central bank's policy decisions, and another bill that would require the Fed to make monetary policy decisions based on a hard-and-fast mechanical rule. "I think Republicans see how a populist message to the left has resonated with the base of the Democratic party, and I think this is in some ways a Republican response in trying to drum up populist energy on the conservative side," a KBW analyst tells the Journal. The Times notes Republican lawmakers seemed particularly upset about Yellen's October speech on income inequality, arguing it revealed her political leanings. "'I am not making political statements,'" Yellen reportedly responded. "'I am discussing a significant problem that faces America.'"
Define 'Fat Cat': HSBC's leadership appears to be walking a tricky line in the wake of the bank's Swiss tax-evasion scandal: executives want to be apologetic while convincing critics that its problems are all in the past. The bank's chairman Douglas Flint and chief executive Stuart Gulliver continued this balancing act before the British Parliament Wednesday. "The practices that we've seen taking place at the Swiss private bank, which we absolutely do not support in any way, shape, or form, were in the period in the mid-2000s," Gulliver said. Flint admitted the bank has experienced "horrible reputational damage" as the result of recent regulatory probes into a range of other alleged misdeeds, including manipulating the foreign exchange market and rate-rigging. In perhaps the strangest moment of the session, a Parliament member asked Gulliver whether he and Flint considered themselves "fat cats." "You would have to define fat cat for me to comment on that," Gulliver said. New York Times, Financial Times, Wall Street Journal
Wall Street Journal
The Securities and Exchange Commission wants to know whether companies are attempting to silence potential whistleblowers with nondisclosure agreements, employment documents and other binding papers. Of particular concern: "clauses that impede employees from telling the government about wrongdoing at the company or other potential securities-law violations."
Citigroup announced Wednesday the Treasury Department and California regulators are investigating potential violations of anti-money-laundering rules at its Banamex unit.
CIT Group chief executive John Thain will make a rare appearance at a public meeting Thursday to discuss the bank's pending $3.4 billion acquisition of OneWest Bank. "The session could put the high-profile Wall Street leader in some tough spots, putting him in the line of questions on everything from OneWest's foreclosure practices to Mr. Thain's time presiding over Merrill Lynch during the financial crisis," the paper predicts.
John Carney warns that Lending Club's investment potential may be overrated. The bank doubled operating revenue year-over-year in the fourth quarter, but its expenses are rising even more quickly. While higher expenses are normal for a young company, Carney points out "Lending Club's selling point is that its technology would allow it to provide credit to borrowers more cheaply than traditional lenders ... Rapidly expanding expenses undercut this thesis."
New York Times
Auto-financing firm Santander Consumer has agreed to pay $9.35 million to settle charges the company illegally repossessed vehicles from active-duty members of the military. Santander Consumer allegedly failed to get court orders before confiscating the vehicles in violation of the Servicemembers Civil Relief Act.