Receiving Wide Coverage ...
Brown-Vitter TBTF Bill: Sens. Sherrod Brown and David Vitter formally unveiled their TBTF bill — or the pointedly named Terminating Bailouts for Taxpayer Fairness Act — Wednesday. Key components include a 15% capital requirement for banks with more than $500 billion in assets. Regional banks would be required to meet an 8% capital requirement while community banks would be exempt from the proposal. The bill, if passed, would also impose restrictions on a bank holding company's ability to move assets or liabilities from nonbanking to banking affiliates. (You can find a full roundup of its central elements here.) "Requiring the largest banks to finance themselves with more equity and with less debt will provide them with a simple choice," the senators explained in a New York Times op-ed. "They can either ensure they can weather the next crisis without a bailout, or they can become smaller." Reaction to the bill, thus far, appears to include some general support ("This is the appropriate direction for regulation," writes Slate blogger Matthew Yglesias), calls to give existing legislation a chance ("I'm fighting for [Dodd-Frank]," Sen. Carl Levin tells Bloomberg. "I can't at the same time give up on that and say 'break up the banks.'") and early Wall Street rallying cries. Whether the bill can actually pass is another issue entirely. "Brown and Vitter may have a difficult time getting their bill through Congress," the Washington Post notes. The bill does "not appear to have — at least so far — broad enough support in Congress to move forward," the FT echoes. "[It] was not immediately endorsed by any co-sponsors, for instance, and Mike Crapo, the top Republican on the Senate banking committee, recently disavowed the need for more stringent capital standards to be set by law."
Capital One Settlement: Capital One has agreed to pay the Securities and Exchange Commission $3.5 million to settle allegations the bank underreported millions of dollars in auto loan losses just prior to the financial crisis. Two executives also agreed to pay penalties collectively totaling $135,000 as part of the settlement. Par for the course, the bank neither admitted nor denied wrongdoing. Dealbook says the settlement "illustrates a common misdeed" of the financial crisis: "As losses mounted in 2007 and 2008, some Wall Street firms covered up the woes from the public." Washington Post, Wall Street Journal
European companies are calling out JPMorgan Chase and other U.S. banks for taking issue with the EU's decision to water down a part of Basel III, allowing its banks to charge much less for OTC derivatives.
New York Times
Some lenders and consumers advocates are arguing that strict downpayment requirements are "somewhat superfluous" and could stifle homeownership and, as such, the housing rebound. But supporters of stricter heightened requirements would represent a trade-off. "They point out that the financial sector overhaul was not just meant to protect borrowers," the author notes. "It was also intended to make banks and financial markets more resilient to shocks like housing busts."
This article pegs Fed Governor Janet Yellen as the "logical" successor to current Fed Chairman Ben Bernanke, who may or may not be departing the post when his term is up next year. (The author cites Bernanke's decision to skip the Fed's annual Jackson Hole conference as evidence a departure may be in the works.) Yellen is considered a top candidate as she has played a central role in "shaping and building support" for the Fed's stimulus campaign. But critics worry she won't be "sufficiently concerned about the possibility that inflation will accelerate as the economic recovery gains strength."
This op-ed supports regulatory capital trades. "There is nothing murky about a transaction designed to transfer unexpected losses from the banking system to pools of private capital in a manner that has been approved by the regulator," the author argues.