Regional banks get a boost; Kudlow considered

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Last minute changes: Sen. Bob Corker, R-Tenn., has proposed removing a passage from the Senate Dodd-Frank rollout bill that would allow some large banks to escape a special capital surcharge. Some critics charge that would increase the risk of those banks getting into trouble and creating another financial crisis. Washington Post, American Banker here and here

Another proposal would require Fannie Mae and Freddie Mac to use credit scores in addition to Fair Isaac’s FICO score when determining a mortgage applicant’s creditworthiness. “The measure, should it become law, would be a big win for VantageScore,” a credit score system developed by VantageScore Solutions, which is owned by the big three credit bureaus. Wall Street Journal, American Banker

Investors seem to believe that the bill, sponsored by Sen. Mike Crapo, R-Idaho, will mostly help smaller regional banks, as banks with less than $250 billion in assets would no longer be required to go through stricter oversight, including annual stress tests. The Dow Jones mid-cap banks index has climbed 14% since the beginning of the year, more than double the 6% gain in the large-cap index.

One regional bank, Regions Financial, “has suddenly found itself in the middle of the debate over the bill, held up as an example of all that is right and wrong about redrawing the lines for how to regulate banks that many say are too big to fail,” the Washington Post reports. “Supporters and banking lobbyists say the current regulatory regime unfairly punishes regional banks such as Regions with rules aimed at reining in global behemoths such as JPMorgan Chase. But this deregulatory push comes at an inconvenient time: Unlike coal mines or steel mills, Regions and the banking industry in general are doing well.”

The right stuff: President Trump said he is “very strongly” thinking about naming CNBC commentator Lawrence Kudlow to replace Gary Cohn as his chief economic adviser. “We don’t agree on everything but in this case I think that’s good,” the president said. “I want to have a divergent opinion. We agree on most.”

Kudlow “is as standard a Wall Street Republican as you’ll find,” the Post comments. “He believes in the Reaganite Holy Trinity of low taxes, low inflation and free trade. He believes in them so much that he’s spent the better part of the last 20 years proclaiming them on TV and radio. If that — minus the whole media personality part — sounds a lot like Cohn, that's because it is. The two of them have spent the past year and a half saying almost exactly the same things.” Kudlow has remained silent on the possibility that he would be Cohn's successor.

Wall Street Journal

Unhappy anniversary: Wednesday is the 10th anniversary of the Federal Reserve’s shotgun marriage of the failing Bear Stearns to JPMorgan Chase. “Today, those involved with the unprecedented Bear bailout agree it only temporarily staved off a broader meltdown. Its fall was one of the first dominoes in a downturn that months later engulfed all of Wall Street.”

Financial Times

AML woes: The Federal Reserve has ordered Industrial & Commercial Bank of China, the world’s largest bank by assets, to overhaul its anti-money laundering operations after finding “serious deficiencies.” The bank must offer a written plan within 60 days showing what it plans to do to report suspicious transactions.

Breaking ranks: Coinbase, the digital wallet provider and owner of GDAX, a top 10 exchange by volume, said its U.K. subsidiary had secured a banking relationship with Barclays. The move, which the paper says is the first of its kind with a major British bank, “marks a break in the ranks of U.K. lenders who have been shunning the cryptocurrency industry as it comes under growing scrutiny from regulators.”


“It is somewhat disappointing having spent the better part of three decades in financial services to move to technology and find things are even worse there. It was a bit of a downer to be honest with you. My familiarity with the statistics, at least in the banking world, very much shows there is an advancement problem.” — Blythe Masters, a former JPMorgan Chase executive and founder of a company that applies blockchain technology to the financial industry.

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