Receiving Wide Coverage ...
Ratings Review: Moody’s has put Bank of America, Citigroup, JPMorgan and other big financials on review for possible downgrade, citing the headwinds facing the investment banking business. Wall Street Journal, New York Times
Zoellick Leaving World Bank: Robert Zoellick, president of the World Bank since 2007, announced he’ll step down when his current term ends in June. Hillary Clinton and Larry Summers are rumored candidates for the plum job. Wall Street Journal, Financial Times, New York Times, Washington Post, Bloomberg.
Fed Minutes: Is a third round of quantitative easing coming soon? No, says the FT. Doubtful, says the Times. Maybe, says the Journal. Could well be, says the Post. All four papers are interpreting the minutes released Wednesday of the central bank’s policy meeting last month.
Wall Street Journal
Some individual investors dislike the SEC’s proposed regulations for money market funds, particularly the part about not getting to withdraw all your money at once and having to wait 30 days for the last 3% to 5%. And could the money fund lobby have asked for a better poster boy than the retired Navy admiral quoted in this story, who appears in the accompanying photograph, standing tall next to a U.S. flag, under a sign that says “don’t give up the ship”? “Boy do I ever have an issue with someone holding my money,” says this investor, who keeps a quarter of his wealth in a money fund. Take it away, comment thread: “There is always someone who'll complain about anything. The [money market] fund can't do both — keep the buck and be 100% liquid; it just can't. The rational alternative is to allow a constant ‘break the buck’ and call it a very-short-term-fund; but nobody wants to go out on that limb and accept the realities of a very low interest rate market.”
How much further can housing prices fall? Not much, in the view of investors who are bidding up the prices of subprime mortgage bonds that were issued during the go-go mid-aughts. “Since the start of the housing downturn, U.S. home prices have slumped nearly 33%, and many economists expect declines of as much as 5% more.” So even if defaults turn out to be as high as the current 7% to 9% yields imply, investors think the worst is over at least as far as collateral is concerned. Oddly, there’s no mention of “foreclosure” or that phantom settlement in this story.
“Citigroup has agreed to pay $158m to resolve an investigation into its mortgage practices after admitting it defrauded” the FHA. Yes, admitting. Citi said it “admits, acknowledges, and accepts responsibility” for breaking FHA rules and falsely attesting the loans it submitted met FHA guidelines. Judge Rakoff would be proud.
The New York Fed pledged to push for further reforms of the arcane tri-party repo market after an industry task force failed to make a dent in the problem of excessive reliance on “intraday credit.” This interim funding is provided by two big clearing banks, JPMorgan and BNY Mellon, and the market’s dependence on just two players is seen as a source of systemic risk.
New York Times
If you haven’t had enough of the Volcker rule this week, some surprising parties have come out against the proposed ban on proprietary trading by banks: nonfinancial companies like Macy’s and Red Lobster. They’re worried about the potential effect on market liquidity.
“An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation.” And according to the audit, the national mortgage settlement “does not resolve most of the issues this report identifies nor immunizes lenders and servicers from a host of potential liabilities.” (And that’s assuming the settlement exists. As of 9 a.m. Eastern today, actual legal documents are still “coming soon,” and it’s almost a week since the press conference.) The Times’ Gretchen Morgenson writes that it’s a felony “to knowingly file false documents with any public office in California.” Oboy.