Receiving Wide Coverage ...
Fortress Fed: Ahead of the central bank's policy meeting today, the Journal has a lengthy feature taking stock of Ben Bernanke's six years as chairman. Among his current goals, the story says, Bernanke "wants to transform the Fed by making its murky decision making more transparent." He's already taken steps in this direction by initiating quarterly press conferences; potential strategies include disclosing the Fed's forecasts for short-term rates and adopting a formal inflation target. (There's also a sidebar with details on Bernanke's home mortgage.) Yet the Fed remains secretive in other ways. On the FT's "Money Supply" blog, Robin Harding writes that he made a Freedom of Information Act request for the Federal Reserve Board's reviews and examinations of the 12 regional Fed banks since 2000. The board rejected his request, arguing that the regional banks are "financial institutions" and thus information about them is confidential and exempt from FOIA. "This is a ludicrous catch-22 because the regional Fed banks are themselves financial supervisors of hundreds and hundreds of other banks," Harding writes. "Their performance in that role is a matter of public interest." Well said, and we might add that while confidentiality on bank-supervision matters may be necessary to avoid panics, it's hard to imagine a run on the New York Fed. We hope Harding appeals. On the other hand, Reuters' blogger Felix Salmon points out that other countries' central banks are even more opaque than ours. He cites a Bloomberg News story on the Fed's currency swap program, in which it has loaned dollars to foreign central banks to relend to local commercial banks. The Fed disclosed all the transactions with its counterparts, but even it may not know the identities of the ultimate borrowers; a Fed spokeswoman tells Bloomberg there's "no formal reporting channel" for it to get this information. And of course the foreign central banks don't publish it. At least the Fed is now bound by law - Dodd-Frank, to be exact - to identify borrowers from its discount window (after a lag of two years, to avoid stigmatizing them). God bless America, and good luck to Bernanke and Harding alike in their efforts to open more curtains at the Fed and let in that glorious sunlight.
Slap on the Wrist? "Three ex-Washington Mutual executives agreed to settle a civil lawsuit stemming from the biggest-ever U.S. bank failure for less than 10% of the $900 million that was sought by regulators," the Journal reports. And most of the money would come from D&O liability insurance and the bankruptcy estate of Wamu's holding company, rather than from former Wamu CEO Kerry Killinger, former president Steve Rotella or mortgage exec David Schneider. The three defendants would pay "a minimal amount of cash," though they might have to turn over their severance payments to the FDIC, the Journal says. The story quotes an insurance broker surmising that the puny $75 million settlement amount reflects the depletion of the D&O policy after the settlement of a shareholder suit. The piece also notes that the FDIC didn't suffer any losses from seizing Wamu in 2008, and the regulator plans to use proceeds from its settlement to defray costs of other failures. Judging from the comment thread on the Journal piece, the outcome of this suit has won Occupy Wall Street a few more recruits. "Civil case?" asks one Journal reader incredulously. "How is this not a criminal case?" On that score, a broader piece by the Times' "White Collar Watch" columnist Peter J. Henning says that despite recent statements by President Obama and proposals from SEC Chairwoman Mary Schapiro, the challenge of financial crimes is not one of penalties so much as proof: "The paucity of criminal prosecutions from the financial crisis shows that the real difficulty lies in gathering evidence to prove a crime took place." Wall Street Journal, Financial Times, New York Times
The Twitter Run: A Swedish bank says false rumors on Twitter prompted throngs of depositors to withdraw money from its branches in Latvia over the weekend. The withdrawals have tapered off and some customers have put their money back in the bank. But the episode underscores the power of social media. TheStreet.com, Wall Street Journal
Wall Street Journal
The long-running talks between mortgage servicers and state and federal officials may finally culminate in a deal this week. The top five servicers could make concessions (including principal reductions) worth $19 billion to $25 billion, depending on whether California Attorney General Kamala Harris rejoins the parties. Among the remaining issues is who will be hired to monitor compliance. Joseph A. Smith, Jr., the North Carolina banking commissioner, is a contender for that job, the Journal says, but despite recent rumors former FDIC head Sheila Bair is not interested.
In addition to George Soros, JPMorgan Chase and "at least one large hedge fund" have purchased European bonds formerly held by the bankrupt MF Global.
We missed this one yesterday: a profile of Steve Linick, the inspector general of the Federal Housing Finance Agency, who's set to brief Congress today on his oversight of the overseer for Fannie and Freddie.
More banks, including U.S. ones, are using "extendable repo" transactions (which unlike regular repurchase agreements can be continuously renewed) to meet regulatory demands that they lock in longer-term funding. The problem is that these trades, also known as "evergreen" repos, are "long-term" only as long as the parties extending the financing keep agreeing to renew them. "The worry is that funding obtained through some extendable repo trades could be cancelled and quickly pulled away in the event of market turmoil, leaving banks vulnerable."
New York Times
The owners of the New York Mets, hurting for cash, have obtained a bridge loan. An unnamed source says it's from Bank of America. The baseball team's owners are also going to have to testify this spring regarding their past investments with Madoff. Insert your Mets jokes here.
And, Lastly ...
"Fight of the Century": This satirical video, in which nerdy actors portraying John Maynard Keynes and F.A. Hayek wage a hip-hop "battle," was apparently funded in part by the famously right-wing George Mason University. But the writers, while perhaps biased toward Hayek, display a respect for the Keynesian worldview. And you don't need to be an Austrian economist or a libertarian to enjoy lines like "where you at, Mises? Shout out to Malthus!" Also, check out the cigar-smoking Bernanke lookalike.