Receiving Wide Coverage ...
SEC's Money Market Plan: The Securities and Exchange Commission has (finally) proposed rules to overhaul the money market fund industry. The rules present two alternatives. One would require prime funds to abandon their $1 fixed share price and use a floating net asset value, allowing share prices to reflect changing market-based value. The other permits stable share prices, but would impose temporary suspensions (or "gates") and 2% liquidity fees on redemptions in times of crisis. The proposals will now be subject to a 90-day comment period. "A key test will be whether they survive continued efforts by the mutual-fund industry to scale them back," says the Journal. The industry could have faced a tougher battle. "The proposal is less sweeping than the approach initiated last year by then-SEC Chairman Mary Schapiro," the Washington Post notes, and general consensus from observers seems to be that the proposed reforms don't go far enough. This Journal op-ed criticizes, among other things, the plan's failure to remove endorsements of credit-rating agencies from money-fund rules and the SEC's alternate proposal to erect gates hindering investors from selling shares during a crisis. "These [gates] look like new triggers that could inflame a panic," the op-ed notes. "Just as 'breaking the buck' added to the drama of 2008, we wonder if regulators won't be on weekend conference calls fretting over a potential 'shutting of the gate' at some large fund in the future." On the plan as a whole, one consumer advocate tells Dealbook: "It is really worse than no reform at all because it's false comfort. It's like putting in a nice shiny fire alarm system in a building that doesn't work."
U.S. Bancorp Gets Sued: The Commodity Futures Trading Commission has filed civil charges against a unit of U.S. Bancorp, alleging the arm enabled jailed Peregrine founder Russell Wasendorf Sr.'s misuse of consumer funds. The suit alleges that U.S. Bancorp "knowingly facilitated Wasendorf's transfers of millions of dollars of customers' funds out of [Peregrine's commercial checking account] to pay for Wasendorf's private jet, his restaurant and his divorce settlement, among other things." The bank denies wrongdoing and contends that it, too, was a victim of the fraud perpetuated by Wasendorf. Wall Street Journal, Financial Times
IMF Admits Greek Bailout Mistakes: The International Monetary Fund admitted in an internal report that it and the European Union took some major missteps during its first bailout of Greece. These include bending its own rules for lending to troubled countries and seriously underestimating Greece's debt problems. The report was released after its contents were published by the Journal. IMF officials told the paper "the lessons learned would lead them to take a tougher stance in future bailouts," but also said "there was little else the fund could have done at the time." The FT echoes, "the report is likely to become a textbook case for all large IMF rescues in the future."
Take Libor Out of London? The European Commission is set to propose later this summer that the Paris-based European Securities and Markets Authority take over oversight of the London interbank offered rate. People familiar with the matter tell the Journal "it is unlikely the U.K. would accept the European Commission's proposal as it now stands." The FT notes the proposal is also "likely to anger George Osborne, the U.K. chancellor, who has already overseen a wide-ranging review to restore faith in the flagship interest rate benchmark."
Wall Street Journal
The Financial Industry Regulatory Authority is ramping up its scrutiny of "dark pools" by asking operators of "lightly regulated, off-exchange trading venues" for details on how their "venues operate, what they disclose to clients and whether they adequately police trades."
Former Merrill Lynch CEO John Thain reflects on his sale of the firm to Bank of America in an interview with the paper. "I did my job, which was to protect the shareholders and to protect the employees," he said. "That was somewhat damaging to me personally, but I don't regret what I did because it was the right thing to do."
New York Times
A bankruptcy deal in Jefferson County, Ala., will cost JPMorgan Chase close to $1.6 billion. Many county residents "hold [JPMorgan] responsible for the financial collapse in the first place," the paper reports. "As a result of its dealings with the county and its ill-fated effort to finance sewer repairs," JPM will forfeit $842 million of the $1.22 billion of sewer debt it holds. Previously, JPM forgave $647 million in termination fees on derivatives contracts with the county and paid a $75 million penalty to settle a Securities and Exchange Commission complaint.