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Cordray Tapped for CFPB: President Obama will nominate former Ohio attorney general Richard Cordray to lead the new Consumer Financial Protection Bureau, sidestepping Harvard professor Elizabeth Warren, who envisioned the agency and spent the past year setting it up, the White House said Sunday. The Post said a formal announcement was expected Monday. The Journal said that as Ohio Attorney General Cordray butted heads with banks over mortgage foreclosure. Wall Street Journal, New York Times, Washington Post
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Stress Test Results: Recent stress tests provided greater detail on the extent to which Europe' banks are dependent on the government debt of Greece, Portugal, Spain and Italy, the Times reported. Still only eight small banks in Spain, Greece and Austria were told they need more reserves. The Journal noted that 20 banks were expected to fail the tests. In another article, the Journal answers critics who claim that if only eight banks failed, the tests wasn't strong enough. "But officials with the European Banking Authority, the regulator that conducted the tests, argue that the real value of the exercise is the mountains of data — about 3,200 pieces — each bank was required to reveal about its balance sheet. That includes detailed, country-by-country breakdowns of the types of loans and securities on their books."
Wall Street Journal
When Timothy Geithner announced in early 2009 the U.S. would conduct stress tests on banks, markets tanked. In retrospect, the paper says, the stress tests brought transparency, which helped ease the financial crisis. Europe's stress tests success depends on being honest about the capital shortages and forcing banks to meet the requirements.
Credit Suisse said it is being investigated by the U.S. Justice Department related to its alleged involvement in aiding U.S. citizens avoid paying income taxes. The case against the bank is reportedly being discussed by a grand jury. The paper said the government is turning up the heat could accelerate settlement talks.
Citigroup reported that earnings increased 24% in the second quarter, as overseas operations grew and loan losses declined, but the report also said executives expected expenses to be higher than originally anticipated the rest of the year.
The jumbo mortgage loan market is booming as rates have dropped. Jumbo mortgages now make up about one-sixth of the overall market.
Bank of America Merrill Lynch and Citigroup were the top two bidders in the Federal Reserve Bank of New York's auction of toxic holdings from AIG's portfolio, the paper said. The sales have led to a debate about the real value of the holdings.
Citigroup's discount to tangible book value is the same as Bank of America's, a situation "Heard on the Street" deems unfair since Citi has much better numbers.
Greenhill reported a 22% rise in profit on a 38% surge in advisory fees. The investment bank, which specializes in mergers and acquisitions released the results three days early in an effort to ease investor fears as its stock dropped.
Regulators have barred some law firms from performing independent reviews of foreclosures because of their connections to the mortgage industry. The reviews are mandated by consent orders against the top servicers.
Regulators shuttered four banks: High Trust Bank of Stockbridge, of Georgia; One Georgia Bank of Atlanta; First Peoples Bank of Port St. Lucie; and Summit Bank of Prescott.
New York Times
For banks that engaged in abusive mortgage practices, letting them off the hook does not serve the interests of the economy as a whole, columnist Paul Krugman writes. The failure to seek real mortgage relief is one reason the U.S. still has 9% unemployment he says.
Washington Post
Time is running out for Washington to raise the country's borrowing limit and avoid a default. Wall Street isn't panicking yet. But if the unthinkable happens, a default could strike financial markets like an earthquake.
