Warren calls for Sloan's head; bank groups pan Volcker 2.0
Receiving Wide Coverage ...
Line in the sand
Sen. Elizabeth Warren, D-Mass., called on the Federal Reserve to maintain its asset growth cap on Wells Fargo until the bank replaces CEO Tim Sloan. In a letter to Fed chair Jerome Powell, Warren said Sloan is "deeply implicated in the bank's repeated and egregious misconduct. The Wells Fargo board of directors cannot plausibly claim that it is 'ensuring senior management's ongoing effectiveness in managing the firm's activities' while retaining a CEO that helped oversee this much misconduct." CNBC, Reuters
American Express said its third quarter earnings rose 22% to $1.62 billion while revenue rose 9% to $10.1 billion. The credit card company also raised its full-year guidance. Wall Street Journal, Financial Times
Wall Street Journal
CFPB internal probe
Consumer Financial Protection Bureau acting director Mick Mulvaney has asked the agency's inspector general to look into past writings by Eric Blankenstein, an associate supervision director at the agency who has been under fire from consumer groups for writing what they say are racially insensitive blog posts more than 10 years ago. Blankenstein has said he regrets writing the blogs, saying they "reflected poor judgment."
James Bullard, the president of the St. Louis Federal Reserve Bank, long an opponent of the Fed's monetary tightening, said the economy's recent "unexpectedly strong" performance justified the central bank's recent series of interest rate increases. "I've been willing to go along" with the rate increases, he said in a speech in Memphis. However, that doesn't mean the Fed should be telegraphing more rate hikes in case the economy falters, he said.
Separately, Randal Quarles, the Fed's vice chairman for supervision, endorsed the Fed's policy of gradual monetary tightening. "The more the economy's potential growth increases, the more gradual we can be in our removal of monetary-policy accommodation," he told the Economic Club of New York.
Another leg up?
American banks have been handed "a big competitive advantage" over their European counterparts in securities trading. "The biggest U.S. players already had an advantage. But the new European rules, known as the second Market in Financial Instruments Directive, or Mifid II, have had the unintended consequence of giving U.S. banks another leg up."
Bellwether rings up a strong quarter
Travelers Cos. said its core operating earnings in the third quarter jumped to $687 million, or $2.54 a share, from $253 million, or 91 cents, in the year-earlier period. Pretax catastrophe losses, net of reinsurance, fell to $264 million from $700 million a year earlier, which was skewed by hurricanes Harvey and Irma. Travelers "is one of the first big property-casualty insurers to report quarterly earnings, and its results are watched closely as a bellwether for others that follow."
To those who have, more shall be given
Third quarter results at some of the largest U.S. banks showed a large increase in lending to high net worth customers, much more so than to average consumers. "Where lending to consumers and companies is now moderating, credit to the financial elite remains strong," the FT said. "JPMorgan reported 12% year-on-year loan growth for its wealth and asset management division, while the comparable division at Morgan Stanley reported a 7% gain. Thanks to the rapid growth in private client lending, JPMorgan has now lent out almost as much to a small number of its elite customers as it has to its millions of cardholders."
Making his mark
Deutsche Bank named Stefan Hoops, "a close confidant of chief executive Christian Sewing," to replace John Gibbons as its top transaction banker, effective immediately. The move "demonstrates [Sewing's] tightening grip over the lender's struggling investment bank," which "plays a core role in Mr. Sewing's strategy to turn Deutsche Bank around." Gibbons joined Deutsche in 2016 from JPMorgan Chase.
Not backing down
The European Union pushed back against American threats to close U.S. futures markets to European banks if the EU insists on regulating derivatives trading. It is "the prerogative of the EU legislator to set the general supervisory framework" for clearing houses in the bloc, the EU said. "We would expect third country authorities to respect that, just as we respect the rules and legislative procedures in other countries." On Wednesday J. Christopher Giancarlo, the chairman of the U.S. Commodity Futures Trading Commission, called the EU's proposals "wholly unacceptable" and threatened to bar European banks from using the Chicago Mercantile Exchange.
New York Times
Don't look now ...
The paper looks at the similarities between collateralized debt obligations (CLOs), which contributed to the financial crisis a decade ago, and collateralized loan obligations (CLOs), which have experienced a boom and are prompting wariness among some observers. "If there turns out to be an issue, this is where the unfinished business of the post-crisis financial reform efforts is going to be revealed," said Daniel Tarullo, the former oversight governor for bank regulation at the Fed who's now a professor at Harvard Law School.
Back to the drawing board?
Bank industry groups called on federal banking regulators to "seriously reconsider or scrap major portions" of their proposal to simplify the Volcker Rule on proprietary trading. In particular, the Financial Services Forum and the Bank Policy Institute said the regulators "should toss out a proposed new test for assessing whether trades are speculative that would focus on the accounting treatment of the instruments traded." That could "delay efforts to wrap up the overhaul in the coming months," Reuters said. The public comment period for the proposals ended Wednesday.
"The idea we have to pencil in a lot of rate increases, that's what I'm objecting to." St. Louis Fed President James Bullard, about the Fed's practice of telegraphing future interest rate hikes.