Category Archives: Regulations and regulators

WSJ Law Blog Takes Misguided Pot Shot at Judge Rakoff

Reader Michael C. sent me a link to a story in the Wall Street Journal’s Law Blog which bugged him, and I can see why.

Julie Williams, The Lex Luthor of Banking Regulators, Retires

I just got a press release from the Office of the Comptroller of the Currency that its general counsel Julie Williams, an institution at the regulator for 19 years, is retiring. This is potentially a very big deal, because the OCC just underwent a leadership change from bank friendly John Walsh to a more measured Tom Curry, and the question was whether Curry would consolidate his leadership and move the regulator in a different direction. It looks like that’s what could be happening.

Criminal Sanctions: How to Save Banks Without Rewarding Bankers

Yves here. This article falls in the “mirabile dictu” category: an economist arguing that putting bankers in jail is necessary to combat the deterioration in behavior.

By Giancarlo Spagnolo, Professor of Economics at University of Rome “Tor Vergata” and CEPR Research Affiliate. Cross posted from VoxEU

How to save the banks but not the bankers? This column argues that fines for criminal behaviour in banks are not enough – it may be time to start locking people up.

Will It Take Popular Pressure to Get Municipalities to Go After Libor Gaming Costs?

This Real News Network video provides an update on the Libor scandal. Tom Ferguson flags an issue that may come as a surprise to some readers.

Federal Regulators Trying to Leash and Collar Standard Chartered’s Nemesis, Benjamin Lawsky

The plot thickens! Today, the Wall Street Journal reported that, “Regulators Seek Unity in U.K. Bank Talks.”

If you read the article, a more accurate headline would be “Federal regulators desperate to get in front of Lawsky mob and call it a parade.” All the article says is the mucho unhappy and very much outflanked Federal regulators have gotten a meeting with Lawsky. Just look at the disconnect between the PR in the first paragraph and the actual state of play in the second:

Consumer Financial Protection Bureau Proposes New Safeguards for Mortgage Borrowers

The CFPB is proving to be tough minded on the mortgage front. The Wall Street Journal reports that it intends to require banks to consider a modification request before proceeding with a foreclosure:

Standard Chartered Makes Empty Threat to Sue New York Regulator Over Iran Money Laundering

I have to confess I’m really enjoying the dust up between the New York Superintendent of Financial Services, Benjamin Lawsky, and his opponents, namely, his target, Standard Chartered, and the flummoxed Federal regulators that he is showing up as so deeply captured that they genuinely can’t tell regulatory theater from the real thing.

Barofsky v. Geithner and Administration Mouthpieces (Yglesias Edition)

Neil Barofsky continues to take issue with the Administration’s efforts to depict itself as the friend of ordinary Americans when its real loyalties are to banks. In a Reuters op-ed, he took on the hypocrisy of the Administration and its allies in their “fire DeMarco” messaging. If you are late to this row, Ed DeMarco, head of Fannie’s and Freddie’s regulator, the FHFA, nixed the idea of having his wards make principal reductions on mortgages, despite the fact that top mortgage industry analyst Laurie Goodman has ascertained they are far more successful than mods that don’t lower principal balances.

As various commentators, including yours truly, have pointed out, the criticism of DeMarco is sheer scapegoating.

Where Are the Feds? NY Banking Superintendent: Standard Chartered a “Rogue Institution,” Made $250 Billion of Illegal Transfers With Iran

The New York Superintendent of banks dropped a bombshell today, filing an order against Britain’s Standard Chartered Bank. It charges the bank with having engaged in at least $250 billion of illegal transactions with Iranian banks, including its central bank, from 2001 to 2010, and of engaging in similar schemes with Libya, Myanmar and Sudan (those investigations are in progress). It threatens SCB with the loss of its New York banking license and termination of access to dollar clearing services. The latter alone is as huge deal. You are not a real international bank unless you have dollar clearing. Sumitomo Bank looked at giving up its US banking license in 1985 when it was examining deal structures for making an investment in Goldman, and ascertained that giving up access to Fedwire would cost it over $100 million a year and considerably weaken its position in Japan. SCB is certain to be a much more active dollar player than Sumitomo was and the volume of international transactions has grown hugely since then.

SCB squealed like a stuck pig, claiming that only $14 million of transactions were out of compliance. But the bank has nowhere to go.

Is Draghi’s EuroRescue Plan Coming Unglued?

No sooner had some astute Euro commentators noted that Draghi might have found a path through the Euro mess to keep it patched up long enough for to impose austerity on the periphery and drive all of Europe into a lovely depression, various elements of his plan look as if they were coming unglued.

Dubious Study Defends SEC Revolving Door

Nothing like being reminded on a regular basis that you live in the best of all possible worlds.

The New York Times tells us a new study is being presented today at the American Accounting Association which defends the revolving door.

Will Draghi Outmaneuver the Bundesbank?

Ambrose Evans-Pritchard of the Telegraph, who correctly called that ECB would not take action last week, argues in his latest article that Mario Draghi and Italy’s Mario Monti have isolated the Bundesbank and are closing in on being able to buy bonds along side the Eurozone rescue facilities once the ESM presumably goes live (the assumption is that the German constitutional court will lift its injunction on September 11). Draghi hopes to keep Mr. Market at bay till then by a combination of happy talk and threats.

Defining Strategies and Tools for Reducing Systemic Risk

Yves here. Although this VoxEU is heavier on economese than may suit the tastes of most NC readers, it’s nevertheless worth your attention. It takes issue with a popular view among economists, that one of the ways to reduce systemic risk is to reduce cyclical swings in asset prices (or more accurately, to prevent banks from all following some great new lending fad and running off a cliff tout ensemble). The wee problem with that is economists were patting themselves on the back in 2007 that they had engineered a Great Moderation and the overwhelming majority were in denial about the existence of a global credit bubble. In fairness, many are thinking about how to create automatic counter-cyclical stabilizers, since as Ian MacFarlane, the former Governor of the Reserve Bank of Australia pointed out, an asset bubble looks like increased wealth to the community, so anyone who stands in its way is going to be extremely unpopular.

This VoxEU article offers an alternate line of thinking on how to to lower systemic risk.