Richmond Fed chief resigns; More Wells sales issues

Receiving Wide Coverage ...

Loose lips: Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, resigned suddenly on Tuesday after revealing his involvement in an October 2012 leak of confidential information to a securities analyst. Lacker admitted to speaking to an analyst at Medley Global Advisors, a unit of the Financial Times, the day before it published a report that contained confidential information about Fed policy deliberations. The leak, when it first came to light several years ago, "sparked a criminal investigation, prompted outrage on Capitol Hill and deeply embarrassed the Fed," the Wall Street Journal recalled.

Andrew Harrer/Bloomberg

Lacker's resignation, which appears to be unprecedented, "strikes a blow to the Fed's credibility and risks reigniting a long-simmering scandal that has dogged Fed Chairwoman Janet Yellen in her interactions with congressional Republicans," the Journal commented. Lacker had previously announced plans to retire later this year. Wall Street Journal, Financial Times, New York Times, American Banker

Easing regulation: Lacker's resignation overshadows the imminent departure of another Fed official, Daniel Tarullo, the central bank's chief bank supervisor, who is retiring on Wednesday "after eight years during which he assumed a hardline reputation overseeing the rebuilding of U.S. finance from the shattered wreckage of the crash," the FT commented.

In a speech at Princeton University on Tuesday, Tarullo said he was open to making "significant policy changes" in the Fed's regulatory regime to lower costs for large banks without threatening the economy. "There are clearly some changes that can be made without endangering financial stability," Tarullo said in his prepared remarks. However, he also said it would be "tragic" if the lessons of the financial crisis were forgotten.

JPMorgan Chase CEO Jamie Dimon struck a similar theme in his annual letter to the bank's shareholders, "calling for simpler and better coordinated rules that could help to spur more lending and in turn economic growth," according to the Journal. He said banks have too much capital, which could be used instead to finance economic growth.

"Regulations must be flexible enough to allow banks to act as a bulwark against [market panics], rather than forcing financial institutions into a defensive crouch that will only make things worse," Dimon wrote.

Not to be outdone, President Trump told a meeting of corporate executives his administration is planning to do a "major haircut" on the Dodd-Frank Act. "The regulators are running the banks," the president said.

Also in his shareholder letter, Dimon highlighted the importance of the $9.5 billion in technology investments the bank has made, both within the bank and in partnerships with financial technology firms.

Sales tactic troubles: The Journal is reporting Wells Fargo has fired "at least two dozen" employees over the past two years in its credit card processing business "after an internal probe found some employees falsely reported customers' sales and pushed small firms into costly contracts they didn't understand."

"The actions, which haven't been previously reported, illustrate how Wells Fargo's sales-tactics problems extended beyond its consumer bank," the paper says.

Before this latest issue came to light, an influential advisory group asked the bank's shareholders to vote against four longstanding members of the board's corporate responsibility committee plus another two of the bank's 15 directors in response to the bank's phony accounts scandal. "While giving credit to the actions taken by the board in response to this crisis since the settlement went public," the advisory firm Glass Lewis said, it urged investors to vote against reelection of the four directors "based on the reputational damage inflicted on the company and this committee's failure to properly fulfil its stated duties."

No room to run?: The rally in bank stocks – or at least some of them – may have peaked. On Tuesday Citigroup analyst Keith Horowitz cut his rating on Bank of America to neutral from buy following the stock's nearly 40% surge since November. The bank's stock is no longer attractive at its current price relative to its peers, he said.

Wall Street Journal

Blockchain for commodities: Commodities traders are experimenting with blockchain technology in an effort to make it easier to trade physical goods. A French bank and a commodities trading firm recently unveiled a platform to trade U.S. crude oil, while another group is looking at using blockchain in cotton trading.

Quotable ...

"I apologize to my colleagues and to the public I have been privileged to serve. I have always strived to maintain the appropriate balance between transparency and confidentiality, but I regret that in this instance I crossed the line to confirming information that should have remained confidential." – Federal Reserve Bank of Richmond President Jeffrey Lacker