Receiving Wide Coverage ...
More Bad News for B of A: "Bank of America's board has been told that the company could face a public enforcement action if regulators aren't satisfied with steps taken to strengthen the bank," the Journal reports, citing anonymous sources. Meanwhile, the FT notes that a federal judge's ruling will allow the attorneys general of New York and Delaware to intervene in Bank of America's controversial $8.5 billion mortgage bond settlement. "The action concerns far more than the financial interests of a few sophisticated investors" that agreed to the deal, the judge ruled.
Not So Super: News of the Congressional "Supercomittee's" failure to reach an agreement on cutting the deficit caused stocks to tank. Wall Street Journal, Financial Times, New York Times, Washington Post
That's Not the Half of It: You know the $600 million of MF Global customers' money that's been unaccounted for? Actually, the amount may be double that. Yes, $1.2 billion of client funds may be missing, the brokerage's bankruptcy trustee said. Wall Street Journal, Financial Times, New York Times
Don't Tread on AIG: Hank Greenberg, the former head of AIG, is suing the government for $25 billion, alleging Washington wrongly - and unconstitutionally - seized the insurer in 2008. Greenberg had been gone from the executive suite for several years by the time of the bailout but still held a large stake in the company. His suit makes much of the fact that foreign institutions which had entered into swap transactions with AIG were made whole after the U.S. takeover. Greenberg's counsel is high-profile lawyer David Boies. "The government is not empowered to trample shareholder and property rights even in the midst of a financial emergency," the lawsuit said. Financial Times, New York Times
Bye Bye Baum: As foreshadowed in his recent indignant letter to the Times, Stephen J. Baum shut down his Buffalo law firm, one of New York's largest "foreclosure mills," after the GSEs told mortgage servicers to stop sending his office work. Bank of America and Ally Financial had also cut Baum loose, Bloomberg reported. Baum achieved notoriety after the Times published photographs of a Halloween party at his office where employees dressed up as homeless people. The firm also recently agreed to pay $2 million to settle federal charges of mishandling mortgage filings. Buffalo News, Bloomberg BusinessWeek, New York Times
Remembering Theodore Forstmann: An editorial in the Journal considers Forstmann's life and career in light of current events. "We live in a time when public officials and many in the media, for their own political purposes, rail against the successful '1%,'" the piece says. Forstmann, a private equity pioneer and philanthropist who passed away over the weekend, "lived a life of purpose that showed how entrepreneurs who succeed both create wealth and spread it around in ways that enrich us all." In the Times, "BreakingViews" notes that Forstmann "displayed a certain restraint absent from much of the financial domain he inhabited. Though he didn't mind leverage, he wasn't keen on too much of it, and he disliked overuse of high-yield bonds with few investor protections." Unlike some buyout artists, he "re-engineered companies, not just their balance sheets."
Wall Street Journal
The "wholesale funding" investment banks used to do may be gone forever, according to Francesco Guerrera. He explains that going to the capital markets to borrow and using that money for "lucrative activities such as trading" helped investment banks' bottom line. But post-crisis and with more regulation, banks choose not to borrow and to keep lots of reserves, which hurts the banks, their shareholders and the economy.
Tom Braithwaite, the FT's U.S. banking editor, takes a look at banks' preparations for the third round of stress tests, set to begin this week. Results are due to the Fed in January, and bankers are quite busy (for the first time, any institution with $50 billion or more in assets must submit to the tests), as are the regulators. SunTrust, for example, "has warned the Fed that because it is not receiving timely replies to emailed questions on the stress tests the "requested time frame [is] exceedingly difficult if not impossible" to meet. Workload and deadlines aside, banks are in the dark about how much they'll be allowed to pay in dividends this time around.
As U.S. bankers lobby regulators to water down the final version of the Volcker rule, they're trotting out an old argument: "think of the starving children in Europe." Well, not quite. But the bankers are suggesting that a restrictive rule would hurt liquidity for the eurozone government bond markets just when those markets need buyers the most to make it through the current crisis.
New York Times
Jamie Dimon makes a cameo appearance at the end of a story casting a critical eye on companies that spend some of their hoarded cash on share buybacks. "JPMorgan Chase … spent $4.4 billion repurchasing shares in the third quarter even as its stock fell more than 25 percent," the article says, noting that CEO Dimon has publicly apologized to shareholders for not waiting.
Fortune: The magazine has a long, exhaustively researched and smartly paced feature article that explains how exactly Bob Kelly got pushed out as CEO of BNY Mellon. In short, Kelly's on-again, off-again flirtations with Bank of America - where he interviewed for the CEO post that eventually went to Brian Moynihan - started a "downward spiral of distrust" among BNY Mellon board members. But the underlying problem was "a total mismatch between the personality and skills of a CEO and the challenges, and culture, of the company he was running." Kelly comes off as brilliant, charming, but a little too brusque and colorful and too sure of himself to fit as the leader of a back-office processor bank.
The Nation: The left-wing newsmagazine picks apart a poll by the U.S. Chamber of Commerce that purportedly showed Americans distrust the Consumer Financial Protection Bureau. The lobbying group claimed consumers are "wary" of the agency's "broad powers, unaccountability to Congress, and direct funding outside the budget process." On the face of it, this seems suspect, since you've got to wonder how much the unemployed or those working but struggling to get by are really thinking about a regulatory agency in Washington that's only been operating for a few months (and deals, so far, mainly with large financial institutions). In fact, most of the people polled hadn't even heard of the CFPB. The Nation takes a close look at the questions asked and reports that "participants were basically asked how they felt about unnecessarily bureaucratic federal agencies with unaccountable leadership and the power to spend a lot of taxpayer money, and they responded accordingly."
Some readers were understandably upset by a line in yesterday's Scan in which we casually remarked that a lobbyist's use of b-school gobbledygook in a leaked memo made us want to distribute arms to Occupy Wall Street. It was all an unfortunate misunderstanding; we meant to type "water guns" but forgot the "water" part. Anyone who debases the English language surely deserves a good old fashioned soaking (a literal one, that is - the Morning Scan takes no position on tax policy). But to be clear: we would never wish bodily harm on anyone. Have a safe, peaceful and productive day.