Breaking News This Morning ...
'Whale' Settlement: JPMorgan Chase has agreed to pay regulators $920 million to settle allegations related to its $6 billion 'London Whale' trading loss. Earlier estimates of the widely expected settlement pegged the penalties to total around $750 million to $800 million, but anony-mice were heralding the higher total to various news outlets late yesterday. The bank did admit wrongdoing related to poor internal controls as part of the settlement. Wall Street Journal, New York Times, Financial Times
Receiving Wide Coverage ...
No Tapering! The Federal Reserve announced on Wednesday that surprise! it will hold off on winding down its $85-billion-a-month bond-buying program. Why? Because Congress is terrible, explains the Washington Post's Neil Irwin. "It's not just the tax increases and budget cuts that have slowed growth all year," he writes. "It's also the possibility that the looming fiscal standoff could endanger the U.S. economy in the same way the July 2011 debt ceiling standoff did." How did everyone get their Fed prognostications so wrong? One economist tells Dealbook the central bank may have misled investors in order to get interest rates to go up. Others say "the disconnect between the Fed and Wall Street was more likely a result of unintentional flaws in the Fed's analysis and communications." Either way, speculation has already resumed as to when the Fed will finally start to taper. "Next meeting: Oct 29-30. No press conf. Then Dec 17-18 w/ Bernanke's final presser. Ruin Christmas?" CNBC's Kelly Evans tweeted. Ben Bernanke, however, remained non-committal about the taper's eventual due date (maybe sometime this year, maybe not, depending on how the economy is doing) as well as his anticipated exit from the chairman position. His refusal to answer questions about his future comes alongside new reports that President Obama is close to nominating Janet Yellen to be the next head of the Federal Reserve. "Congressional aides say that if Obama wants the Senate banking committee to act on the confirmation before the Senate takes a weeklong break on Oct. 14, he would have to announce his nomination sometime next week," the Post reports. Meanwhile, markets spiked to record highs following the central bank's no-taper announcement, but the rally may be short-lived. "If Fed officials are right in their decision to reduce forecasts for U.S. economic growth, some investors fear that could presage disappointments in third-quarter corporate profit reports, which are due out next month," the Journal reports "That would be less positive for stocks."
SEC Approves Pay-Ratio Plan: The Securities and Exchange Commission narrowly approved a "controversial" plan that will require publicly-traded companies to disclose median worker pay and how it compares to its CEO's compensation. Firms can use "any reasonable method" to calculate this median, though they must explain the formula used to regulators. "Proponents of the new rules praise the move as progress toward more transparency and increased information for investors," Dealbook summarizes. "Critics complain that the method for determining median income is too complex, time-consuming and costly." The agency is soliciting comments on its proposal, a mandate of Dodd-Frank, for 60 days.
In Case You Were Wondering About Cyprus: Turns out the country's banking crisis has left it exposed to deep economic pitfalls, reports the Journal. "Confidence in Cyprus's banks has plunged after the bail-in of depositors, culminating in the gradual flight of deposits despite the government's imposition of capital controls to stem the outflow," a new report from the International Monetary Fund says. As for those capital controls, the FT reports President Nicos Anastasiades is looking to lift them completely come January, though the country's finance minister and economists, perhaps understandably, remain skeptical of the timeline.
MF Global News: An amended civil complaint from a MF Global trustee alleges a "scheme" masterminded by former CEO John Corzine "to buy billions of dollars in European sovereign debt with borrowed money while artificially inflating the company's revenue drove the company into Chapter 11." Meanwhile, Dealbook reports that about 140 brokerage companies and other MF Global vendors have received threatening letters from James Giddens, the court-appointed trustee liquidating the brokerage unit, who is considering whether to recoup some of the payments made out to them as he oversees the firm's bankruptcy. "Ms. Karlin, a widow who runs Managed Capital from her Westchester County home overlooking a horse farm, figured that MF Global was unlikely to pay her," Dealbook reports regarding one of the vendors in question. "But she did not anticipate that MF Global's brokerage unit might threaten to sue her company two years later." A spokesman for the trustee says the letters are routine and were not meant to be threatening.
Wall Street Journal
Refinancing drove mortgage lending to a five-year high last year, says a new report from the Federal Reserve.
A new report commissioned by bank lobby group SIFMA found financial firms are "'essential' to commodity markets, in a public sign that the industry is mobilizing to defend its ability to move raw materials."
New York Times
American Banker Magazine Editor in Chief Heather Landy talks to Dealbook about the 2013 Most Powerful Women in Banking rankings, which were unveiled yesterday. "There are many women on our rankings who are very close to [the CEO] role and work closely with the CEO's of their institutions, but I would have thought by now that there would be more women in actual CEO roles to put on this list," she says.
The National Credit Union Administration is drafting a proposal that would require big credit unions to undergo stress tests. This proposal is expected to be released "in the next month or two."