Receiving Wide Coverage ...

Volcker Rule: A flurry of comment letters, both for and against the ban of proprietary trading by insured commercial banks, were filed by the midnight deadline — including one by the old lion who conceived the rule, rebutting critics’ “futile stonewalling.” Paul Volcker also wrote an op-ed in the FT responding specifically to foreign governments that have complained the rule will hurt liquidity for sovereign debt. Noting that the regulation will allow market making and underwriting of securities, the former Fed chairman writes that banks also “can continue to purchase foreign sovereign debt for their investment portfolios — should I say à la MF Global? What would be prohibited would be proprietary trading, usually labelled as ‘speculative.’ How often have we heard complaints by European governments about speculative trading in their securities, particularly when markets are under pressure?” In the Times, “DealBook” columnist Andrew Ross Sorkin reiterates the industry argument that the line between acting as a middleman and acting as a principal is sometimes hazy: “Historically, [a] bank could buy, say, 1,000 bonds and hand over the 889 that its client had requested. The 111 other bonds would sit on the firm’s balance sheet until it could parcel them out to other clients who wanted to buy them. Now, such trades may become impossible — or at least, impossibly expensive.” In a Fox Business interview, a casually dressed Jamie Dimon makes this same point, likening his bank’s securities operations to “these stores down the street — when they buy a lot of polka dot dresses, they hope they’re gonna sell. They’re making a judgment call. They may be wrong.” The JPMorgan chief is also reliably irreverent: “Paul Volcker, by his own admission, says he doesn’t understand capital markets. Honestly, he’s proven that to me.” Dimon’s bank submitted a 67-page comment letter that said the regulation “appears to take the view that banking entities, their customers, and the economy must pay almost any price in order to ensure absolute certainty that there can never be an instance of prohibited proprietary trading,” and that the Volcker rule could "chill legitimate market making and impose needless costs." The pension giant CalPERS was one of the rule’s notable defenders, calling the costs of the rule “acceptable” in light of the reduced risk to the financial system. Wall Street Journal, Financial Times, New York Times.

FHA and the Phantom Settlement: Budget projections released Monday show that the Federal Housing Administration’s reserves could run out this year. However, $1 billion in fines from last week’s $25 billion mortgage servicing settlement are supposed to go to FHA, which could plug the hole and spare the agency from getting a taxpayer bailout for the first time in its 78-history. Assuming the settlement exists, that is. We should have mentioned in yesterday’s Scan that late last week our American Banker colleagues pointed out that amid all the press conferences and endless discussion of what the settlement means, there was no public legal document. As of 8:45 a.m. Eastern Tuesday, there still isn’t — “coming soon”! In the meantime, the Journal has posted some nearly month-old draft documents, which may or may not resemble the final settlement. If there is one. You can find coverage of FHA’s budget woes in the Wall Street Journal and Washington Post.

Wall Street Journal

The big banks appear to be capturing most of “what business-lending growth there is” right now, according to the “Heard on the Street” column, which calls this a symptom of broader consolidation in the sector.

New York Times

The Times profiles California Attorney General Kamala Harris, who almost derailed the servicing settlement talks by walking out for a time, but eventually won her constituents “the largest share of the benefits in the deal.” Assuming it exists.


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