Receiving Wide Coverage ...
Time Really Flies: Five-year retrospectives of the 2008 meltdown were popular over the weekend and fed into Monday's papers. Journal economics editor David Wessel wove together a complete summary of the meltdown from the fallout over the sharp decline in housing values to policymakers' decision-making over which firms to bail out and which to let fail. In the five years of recovery since the near collapse, "Americans could justifiably celebrate victory." But it is only a partial victory. "The fundamental unresolved policy question is this: Were the fiscal and monetary stimulus the wrong medicine, or were they just too small to do the job?"
A Times investigation provides insight on how the Securities and Exchange Commission ultimately decided to abandon punitive action against executives of Lehman Brothers. "Five years after Lehman's collapse hastened a worldwide economic panic, the government faces lingering questions about the decision to spare executives like Richard S. Fuld Jr., who ran Lehman for 14 years until its demise."
A front-page Journal story over the weekend observed just how much still needs to be fixed at Fannie Mae and Freddie Mac five years after the two mortgage giants were put into conservatorship. "Fannie and Freddie remain the largest single piece of unfinished business from the financial crisis. As record profits have replaced huge losses, some now question whether cosmetic changes could substitute for the more radical overhaul of the companies envisioned five years ago."
Meanwhile, to gauge the effectiveness of the wave of recent regulations five years after the 2008 financial meltdown, the FT analyzed five factors that led to 34 important financial institutions failing during the crisis. The paper's conclusion: Regulators "can claim at least partial victory on four of them" in the reforms that have been enacted since. The authorities have made strides in raising capital requirements, discouraging risky funding practices, ensuring that "big acquisitions are a thing of the past," and reducing the use of "the kind of complex structured investments that spread the contagion of US subprime mortgage losses." But the one category "immune to regulation" is poor lending, which the paper said was the biggest factor behind the crisis. "There is little that the authorities can do directly in a market economy to curb foolish lending practices by private sector banks."
From Treasury to the Fed: The White House is said to be considering Lael Brainard, Treasury's undersecretary for international affairs to fill a vacant seat on the Federal Reserve Board. Wall Street Journal, Washington Post
Wall Street Journal
Following a court ruling that blocked its first attempt, the Commodity Futures Trading Commission is making "a second run" at writing a rule mandated under the Dodd-Frank Act that "aims to curb sharp price spikes by limiting the percentage of the market any one firm can control in certain commodities."
The Federal Housing Finance Agency is preparing to take steps that could result in a reduction of the maximum loan amount that Fannie Mae and Freddie Mac are allowed to guarantee.
The Reserve Primary Fund, which famously "broke the buck" during the crisis, is close to reaching a settlement with investors that could award them about $75 million. "The figure includes $10 million in cash to be paid by the fund's three co-managers, Bruce Bent Sr. and his sons Bruce Bent II and Arthur Bent III."
A story on Saturday profiled Rockford, Ill., which the paper labeled as the "Underwater Mortgage Capital of America." "Once a prosperous manufacturing hub that created the airbrush and electric garage-door opener, Rockford is now the nation's underwater mortgage capital. In about 32% of the metro area's mortgages, the homes are worth less than the money owed. That is the highest percentage of any U.S. metropolitan area with at least 15,000 mortgages reported by Lender Processing Services, a real-estate data firm."
Sir John Vickers, who designed Britain's post-crisis reforms, plans during a speech Monday commemorating the five-year anniversary of Lehman's failure to call for even higher capital requirements than previously recommended by a commission he led.
Former Citicorp chief executive John Reed, who led the bank into its "historic merger with Travelers Group," provided more details about why he now thinks the biggest banks should be broken up and the Glass-Steagall Act should be reinstated. He said a transaction merging banks with other institutions in a consolidated structure brings about "clashing cultures." "Trading attracted a different kind of person from commercial banking. Traders expect to be paid bonuses. 'When trading was small in proportion to everything you could have a group of high bonus professionals that you treated differently and it didn't affect the culture of the whole organisation,' said Mr Reed, who oversaw the growth of foreign exchange trading at the old Citicorp."
New York Times
Bloomberg Businessweek magazine turned to the film medium for its look back at the role played by former Treasury Secretary Henry Paulson in the government's rescue of the financial system. "Hank: 5 Years from the Brink" will premiere on Thursday.
Neil Barofsky, the former Tarp watchdog, is joining the Chicago law firm of Jenner & Block.
Bank of America has agreed to another costly settlement over employee discrimination charges, this time agreeing to pay $39 million to be shared among 4,800 current and former employees whom plaintiffs alleged were subject to gender bias in the bank's brokerage divisions, including its Merrill Lynch subsidiary. "Merrill, which has about 15,000 brokers worldwide, also agreed to change its policies to give women a better chance of succeeding."