Receiving Wide Coverage ...
The Sequester: It's scheduled to take effect sometime today, with a last-minute budget deal considered unlikely. For banks, that means budget cuts at regulators, further delaying Dodd-Frank rulemakings, not to mention indirect effects on the industry from the broader economic impact, as American Banker recently explained. For big-picture coverage: Wall Street Journal, Financial Times, New York Times, Washington Post
Reviewing the Review of the Reviews: Is this a counter-leak? An anonymously sourced story in today's Journal reads like a riposte to the anonymously sourced FT story a few days ago about the findings of the OCC's now-canceled foreclosure review. That earlier story had reported that only 4.2% of the 100,000 completed files from the 10 participating banks showed borrowers were harmed. The Journal repeats this figure, but adds that "a breakdown of the information provided to the regulator shows that more than 11% of files examined for Wells Fargo and 9% of those for Bank of America … had errors that would have required compensation for homeowners." So why was the overall rate so much lower? "The OCC findings appear skewed by the outsize contribution of one bank, J.P. Morgan Chase, which reported an error rate far below rivals that oversaw a much larger universe of loans. J.P Morgan was responsible for more than half of the completed files counted in the OCC review and reported compensation-worthy errors in just 0.6% of cases." This skewing seems particularly fishy since JPMorgan services a smaller portfolio of mortgages than the other two megabanks and "had fewer borrowers who were eligible for the foreclosure review than Bank of America and roughly the same as Wells." However, JPMorgan doesn't come off smelling like roses, either. Citing two employees of the servicer's outside consultant Deloitte, the Journal reports that "workers were encouraged by supervisors to examine pools of loans they knew would be less time-consuming or error-prone as they tried to hit loan quotas. One of these employees said that at an event last year known in the Brooklyn office as 'March Madness,' Deloitte officials encouraged reviewers to avoid problematic loans originated by EMC Mortgage, a troubled mortgage lender J.P. Morgan acquired in 2008" as part of Bear Stearns. The upshot of all this, for consumer advocates, is that the $9.3 billion settlement that cut short the reviews may be inadequate. … Over the next month, 4.2 million borrowers will find out how much they will get from the settlement. It consists of $3.6 billion in cash payments and $5.7 billion in other relief, such as reduced loan payments or interest or forgiveness of deficiency judgments. The banks can use the noncash portion "to help any of their customers who need aid to prevent a foreclosure," according to a story in the Post, which provides a handy chart of the 10 main types of errors that servicers made. Sadly, No. 2 is "Servicer initiated … or completed foreclosure on borrower who was not in default." At least "we foreclosed on a borrower who didn't even have a mortgage with us" isn't common enough to make the list.
New FTC Chairman: Edith Ramirez, a law school classmate of the president, will start the new job Monday, according to the Times. She doesn't have to wait for Senate confirmation hearings because she's already an FTC commissioner, the paper says, although the Post says there will still be a hearing. Consumer privacy, tech and intellectual property issues figure prominently on the agency's agenda. New York Times, Washington Post
Wall Street Journal
Now it's official: Royal Bank of Scotland, under previously reported pressure from a big shareholder (the U.K. government, which bailed it out during the crisis), said it will try to sell about 25% of its U.S. subsidiary RBS Citizens Financial.
Prepaid card marketer Green Dot's stock, which has fallen 60% from its IPO price, could rebound, the "Heard on the Street" column argues.
"Households Return to Borrowing Ways": Quarterly data from the New York Fed.
"Washington takes over the student-loan market. Delinquencies soar." That's an editorial, if you were wondering.
"US money market funds warm to Eurozone." Not as scary as it was 18 months ago.
New York Times
And, Lastly …
Bitcoin Magazine: (Yes, there really is a Bitcoin Magazine.) Two of the most prominent companies in this techno-geek niche, CoinLab and Mt.Gox, have struck a deal that could "pav[e] a way for institutional investors and high net-worth individuals to buy and hold large amounts of the digital currency." The most interesting part: Silicon Valley Bank — an actual bank, with an FDIC sticker and everything — will play a supporting role, holding customers' U.S. dollars before conversion to and after conversion from bitcoins. American Banker's sister publication PaymentsSource has more about the implications of the bank's involvement. (Also, the exchange rate for this virtual currency has rallied recently, but to us Bitcoin is less interesting as a store of value than as a means of exchange that preserves privacy in an increasingly cashless world.)