Receiving Wide Coverage ...
More Time for Mortgage Modifications: The Obama administration's announcement Thursday that it will extend the Making Home Affordable Program for another two years comes "despite signs of revival in housing," the Times notes. The program, which gives financial incentives to lenders to modify the loans of eligible borrowers, "did not come near to fulfilling the administration's promise of relief for several million homeowners," according to the publication. As of March 31, the program had helped 1.1 million borrowers, although the administration initially had anticipated aiding three million to four million homeowners. The new deadline for the program, Dec. 31, 2015, aligns it with other mortgage relief that has been extended, including the Home Affordable Refinance Program and the Streamlined Modification Initiative, for mortgages that are guaranteed by Fannie Mae and Freddie Mac, the Times notes. New York Times, American Banker
Overdraft Rules Needed: Banks are doing a better job of informing customers of checking account fees, but more regulation is needed to clarify cost disclosures and lower the incidence of overdrafts, Pew Charitable Trusts charges in a report released Thursday. Overdraft charges rose 1.3% last year, to $32 billion, but remain far off their peak in 2009, according to the Washington Post, which notes that the fees are expected to reach an all-time high by 2016. The study, which comes as the Consumer Financial Protection Bureau is said to be readying its own report on overdraft charges, elicited pushback from the American Bankers Association: "Do we expect Apple to limit its price to the cost of producing the iPad?" the ABA's Nessa Feddis, asks rhetorically in the Post. "Businesses have to recover more than just the cost, otherwise why does the business exist?" Washington Post, American Banker
Wall Street Journal
A fall since May in bond prices has pushed interest rates on mortgages and U.S. Treasuries to their highest levels in more than a year and has investors wondering whether the drop signals the bursting of a bubble or a sign the economy is improving, according to the Journal. In one camp, according to the Journal, are those who see the drop in bond prices as confirmation of a bubble that is "bound to end badly" when the Fed loosens its grip on interest rates. In the other camp are those who "see the same trends as a welcome move toward more normal interest rates and a signal of better times ahead." However it ends, the recent drop in bond prices "is likely to prompt Fed officials to reinforce their caution and clarify their thinking in order to calm markets as much as they can," the Journal notes.
The Fed's policy is a drag on recovery. That's the opinion of David Malpass, who served as an assistant Treasury secretary in the Reagan administration. "The Fed's bond-market interventions probably helped during the 2008 crisis when markets had frozen, but after that the economy would have done much better without them," writes Malpass, who says credit the Fed has directed to the government and big companies "means less credit elsewhere in the economy, a contractionary influence since most new jobs come from small businesses."
Mt. Gox, the world's largest Bitcoin exchange, has tightened identification requirements for users who deposit or withdraw currencies, the Journal reports. The move by the Japanese company, which says it handles 80% of all Bitcoin trading, follows charges recently by American officials that it has operated an unlicensed money transmitting business in violation of U.S. law. As of Thursday, customers who want to exchange fiat money at Mt. Gox must prove they are who they claim to be, via a photo ID or proof of residence, such as a tax return or utility bill. "It is our responsibility to provide a trusted and legal exchange, and that includes making sure that we are operating within strict anti-money-laundering rules and preventing other malicious activity," Mt. Gox says in a statement on its website.
Morgan Stanley, which advised China's Shuanghui International Holdings in the company's bid for U.S. pork producer Smithfield Foods, will finance about half the $7.1 billion purchase, the Journal reports, citing a person familiar with the matter. The investment bank is expected to sell the debt to other banks, including Chinese banks.
The new head of the Institute for the Works of Religion, otherwise known as the Vatican Bank, tells the FT he's on a mission to bring the Holy See in line with international financial standards, including safeguards against money laundering. The goal: "get IOR super-compliant and a respected member of the financial system, and out of the newspapers," Ernst von Freyberg, a German lawyer and financier who took over the bank 100 days ago, tells the publication. The Bank of Italy has banned banks from doing business with the IOR until the bank addresses money-laundering lapses that led Deutsche Bank in January to remove its automated teller machines from the Vatican, the FT notes, adding that Von Freyberg will have to win over Moneyval, a European anti-money-laundering council that last year passed the IOR in only nine of 16 areas. Prayer might help, but von Freyberg is going with what he calls a "belt and suspenders" approach: he has hired Promontory Financial Group, an American consulting firm the FT describes as specializing in "whipping banks into regulatory shape."
Goldman Sachs says it has hired 350 summer interns from a pool of 17,000 applicants and claims it has no trouble attracting talent six years after the financial crisis, the FT reports. Gary Cohn, Goldman's chief operating officer, said Thursday the company receives 50,000 to 70,000 applications for full-time jobs a year, and that 80% of those offered positions for either the full-time or summer programs, accepted them. The FT cites a survey released this week that shows 15% of Harvard's graduating class heading to finance jobs, up from 9% in 2012. Roughly 23% of Harvard's class of 2008 which graduated on the eve of the financial crisis went to Wall Street.
New York Times
Lloyds Banking Group is selling a $5 billion portfolio of U.S. mortgage-backed securities to Goldman Sachs and other investors, Dealbook reports. The deal represents part of Lloyds' efforts to boost its reserves following demands by U.K. regulators that the nation's banks close a capital shortfall by the end of this year. By selling now, Lloyds benefitted from a surge in the U.S. housing market, observes Dealbook. Last week, Lloyds, which is 39% owned by British taxpayers after receiving a bailout during the financial crisis, announced the sale of its private bank in Miami to Spain's Banco Sabadell.
Specialized training courses for recent graduates who have landed jobs on Wall Street are growing in popularity, reports Dealbook. For about $1,000 a day, up-and-coming dealmakers can hone their Excel modeling skills and financial analysis. Thousands of students at top U.S. business schools and "scores of new hires" at such firms as Goldman Sachs and the Blackstone Group take the courses, which are offered by companies like Wall Street Prep and Training the Street and underscore a trend by Wall Street firms to outsource training, Dealbook notes. "I just want someone who can really use Excel and PowerPoint," a British banker who recently interviewed business school graduates in New York, tells the Times.
Americans have been able to recover about 45% of their wealth that was wiped out by the recession, according to a report released Thursday by the St. Louis Fed. That means Americans lack the spending power to fuel a strong recovery, according to the Post. In addition, most of the gains have come from the stock market, which primarily benefits wealthier families. "The study is part of a growing body of research on the role of household wealth or lack thereof in amplifying the impact of the recession and slowing the rate of recovery," the Post notes. Young Americans, including those with few skills or those who are unemployed, may have been unable to rebuild any wealth, according to William Emmons, chief economist at the St. Louis Fed's new Center for Household Financial Stability.