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UBS Profits Tumble: The Swiss bank’s “wealth management unit failed to make up for a loss in investment banking” in the fourth quarter, according to the Times. Wall Street Journal, Financial Times, New York Times
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Wall Street Journal
A big fight is looming between the SEC and money market funds. The Journal, citing anonymous sources, reports that the agency is finalizing a proposal to tighten regulation of these investments. The intent is to prevent the runs and bailouts that occurred in late 2008 from happening again. Money fund sponsors would have to set aside capital. Investors in the funds would be permitted to withdraw only 95% of their money on demand, and would have to wait 30 days for the rest. And the redemption value for money funds would no longer be fixed at $1 a share, but would fluctuate like regular mutual funds under the SEC’s plan. The chief executive of Federated Investors, a big sponsor of money funds, vows to the Journal that "we're going to do everything in our power to attack it." Actually, Federated already has a preemptive campaign underway — outside counsel Jerry Hawke has been beating the drum for the last few months, and the company’s taken out hard-to-miss newspaper ads. For a preview of the arguments likely to be marshaled in this debate, we recommend this lecture given last year by former Fed chairman Paul Volcker, and this rebuttal by Hawke, a regulatory veteran, on our BankThink blog.
Another update on Liborgate: the worldwide investigations are zooming in on a handful of traders “suspected of trying to influence other bank employees to manipulate the rates.” The London Interbank Offered Rate and similar indexes in Tokyo are calculated by surveying banks about their hypothetical borrowing costs and aggregating the results, and initial suspicions a few years ago focused on the possibility that banks were understating what they theoretically would have to pay for money, to avoid looking weak and setting off a panic. But the involvement of traders implies a different motivation: “By allegedly influencing those quotes, the traders could hope to increase their profits on derivatives linked to the rates, according to regulators,” the Journal says. For more on this theory (warning: another BankThink plug coming), click here.
The New York Fed is conducting another auction of subprime mortgage paper inherited from the AIG bailout. Five dealers were invited to submit bids by midweek for the $6 billion of bonds, about half of what remains in the Maiden Lane II portfolio.
New York Times
A grand jury in Missouri indicted DocX, a now-shuttered unit of Lender Processing Services, for forgery in the preparation of documents to support foreclosure actions. It’s a rare case of criminal charges being leveled for robo-signing. DocX’s founder and former president was indicted as well, and if convicted she could face up to seven years in prison for each of the 136 counts of forgery, the Times says.
Washington Post
In case you missed it yesterday: the long-running talks between state and federal officials and mortgage servicers over robosigning and other foreclosure shortcuts could produce a settlement this week. And in case you weren’t paying attention the last few weeks, some consumer advocates say the deal doesn’t go far enough to help borrowers or punish banks.
