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HSBC Earnings: The British global bank’s profits, excluding that nettlesome debt valuation adjustment, rose 26% year-over-year in the first quarter, aided by the investment banking and emerging markets divisions. None of the early news takes we’ve seen go into much detail on HSBC’s U.S. operations, but you can find the quarterly SEC filing from the empire’s main outpost in the colonies right here. The FT story has some interesting comments from HSBC chief executive Stuart Gulliver about the recent political developments in Greece and France — he says he’s “quite sanguine.” Wall Street Journal, Financial Times, New York Times.
Wall Street Journal
Worried the SEC won’t finalize new rules for money market funds because of internal and external resistance, some regulators are looking into whether the Financial Stability Oversight Council could take up the effort, anonymice tell the Journal. If this news gives you déjà vu, it could be because Jerry Hawke raised the possibility of the council getting involved in a BankThink op-ed back in December. (This was an unwelcome prospect for Hawke, a former Comptroller of the Currency, who now practices law and represents a big money fund sponsor, Federated Investors.) The comment thread for today’s Journal story is rich — readers share interesting thoughts on the FSOC’s chances of succeeding where the SEC couldn’t, as well as on the underlying questions (the veracity of money funds’ fixed net asset values, the necessity of capital buffers, etc.).
A Journal editorial urges House Republicans to vote against the reauthorization and expansion of the Export-Import Bank. The paper’s editorialists see this institution as a typically perverse government intervention in the markets, as it “extends taxpayer-backed loans, loan guarantees and insurance to the clients of some of America's largest corporations, all of which have access to private financing.” Most Journal readers in the comment thread share the editorial’s sentiment, save a banker who’s worked at Australia’s equivalent of the Ex-Im Bank and at JPMorgan Chase’s various predecessors. “The facts are that most private sector banks don't like financing trade and services into funny countries or to foreign companies with limited track records and don't have the time or inclination to do the necessary work to properly structure a deal for those markets,” this banker writes. “It's fine to single out GE, Boeing or Caterpillar (all major beneficiaries of Ex-Im's support) but it's naive to think that even these companies can get financial support or lay off risk through products such as Political Risk Insurance in the private market particularly in countries where there is significant political uncertainty.”
When she was getting the CFPB up and running, Elizabeth Warren learned that Washington is one tough town. Now that she’s running for Senate in Massachusetts, she must see that local politics are no college seminar either. State Republicans have asked Harvard to investigate whether Warren, a Democrat challenging GOP incumbent Senator Scott Brown, “misled the university by claiming Native American ancestry, which might have allowed her to take advantage of hiring policies that favor racial and ethnic minorities.”
Without mentioning any specific banks or the financial sector, “Heard on the Street” urges corporate boards to show they are listening to shareholders who have voiced their discontent with large and complicated executive pay packages. The column recommends simplification, e.g. making base salaries a bigger portion of overall compensation (and paying much of those salaries with stock rather than cash). For a much deeper dive into pay trends in banking, read American Banker’s recent special report on executive compensation.
Morgan Stanley warned that if it gets downgraded by the rating agencies it may have to post $7.2 billion of collateral to counterparties, more than 50% higher than its previous estimate.
Wonga, an online payday lender in the U.K., is now offering credit for small businesses with cash flow problems. It claims it can fund these loans as quickly as 15 minutes after a firm submits an application. The initiative was announced on a bank holiday, when traditional lenders are closed. Wonga has come under fire in the U.K. due to the quadruple-digit annual percentage rates on its consumer loans, though one could argue that APR is an imperfect way to judge the cost of short-term credit.
New York Times
“Bank of America has started sending letters to thousands of homeowners in the United States, offering to forgive a portion of the principal balance on their mortgages by an average of $150,000 each,” pursuant to the industry-wide $25 billion robo-signing settlement.