Banking/Financial Institutions

Completing financial regulatory reform legislation by the end of June is "a goal, not a deadline," Senate Banking Chairman Chris Dodd (D-Conn.) said Tuesday. 

Ideally, the White House would like Congress to be largely finished with a conference report on Wall Street reform by June 24, when President Barack Obama leaves for a meeting of the Group of 20 in Toronto. 

With the economic crisis brewing in Europe, a greater sense of urgency has developed around finishing the bill. 

House Financial Services Chairman Barney Frank (D-Mass.) has said White House Chief of Staff Rahm Emanuel has asked him to produce a consensus report that indicates the direction of the legislation on derivatives and other issues by June 24.

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Financial firms that act as wholesale brokers in the multitrillion-dollar derivatives market may benefit from Washington’s effort to overhaul Wall Street.

Congress is in the final stages of approving legislation that aims in part to boost oversight of the largely opaque derivatives market, which has a face value in excess of $600 trillion.

The market operates now largely “over-the-counter” (OTC), meaning between buyers and sellers in private deals that many blame for exacerbating the 2008 financial crisis. As part of the regulatory overhaul, President Barack Obama and Congress want to make the derivatives market more transparent by boosting the role of middlemen in the form of central clearinghouses, electronic exchanges and swap execution facilities.

The Financial Commission has subpoenaed Goldman Sachs for what it says are relevant documents and interviews.

Countrywide, the former mortgage giant, will pay $108 million to settle federal accusations of overcharging and deceiving borrowers before the financial crisis.

Bank of America acquired Countrywide in 2008, which was at the time the top servicer of mortgages, with a portfolio in excess of $1 trillion. The firm had expanded deep into the market for subprime and nontraditional mortgages at the heart of the housing market collapse.

The Federal Trade Commission (FTC) opened an investigation into excessive fees charged to borrowers. The FTC alleged that Countrywide ordered property inspections and other services that charged borrowers heavy fees as part of a way to drive profit to the mortgage giant. The $108 million will be used to reimburse overcharged borrowers.

"This is a major breakthrough that closes one of the ugliest chapters of the entire subprime mortgage crisis," Sen. Charles Schumer (D-N.Y.) said Monday. "This settlement should be seen as an admission by those behind Countrywide that they made a habit of profiting off the misfortune of their most troubled borrowers."

Goldman Sachs had failed to quickly hand over documents, according to the financial crisis commission.

Former Federal Reserve economist Robert Bliss cautioned lawmakers on Friday against moving too fast to complete work on the Wall Street reform bill, saying a rush could produce unintended consequences down the road.

"Some of the changes are positive, but others could create bigger problems than the one they are trying to solve," he said about the bill in prepared remarks.

A House-Senate conference is hoping to complete work on the bill by the July 4 recess. Bliss argues that that goal does not give lawmakers enough time to get additional public feedback on issues like how regulating the over-the-counter derivatives market, expanding audits of the Federal Reserve Board and creating a new consumer protection agency will affect the worldwide market.

The Securities and Exchange Commission is reviewing responses and is expected to begin phasing in its circuit-breaker proposal within the next couple of weeks. 

The SEC is looking to require national securities exchanges and the Financial Industry Regulatory Authority (FINRA) to pause trading in certain individual stocks if the price moves 10 percent or more in a five-minute period in response to a nearly 1,000 point drop in the market on May 6. 

The plan to roll out the new stock-by-stock circuit breakers was slated to start Monday. Regardless, the plan is expected to be in place by mid-June. 

Staff will present proposals to the commission sometime next week then move forward with putting the circuit-breakers in place. 

"The SEC staff is now reviewing and analyzing the comments that were received over the course of the public comment period that ended yesterday," SEC spokesman John Nester said Friday in a release. 

Speedway Convenience Stores sent an additional 1.7 million signatures to lawmakers on Thursday as part of a petition to reform credit and debit card swipe fees. 

Today's action brings the total to 5.4 million signatures, the largest number ever collected for a public policy petition. 

The Treasury Department on Thursday announced that warrants for common stock in First Financial Bancorp are priced at $6.70. The Department expects to raise approximately $2.9 million by publicly offering 465,117 warrants in the company.

U.S. and British officials are expected to urge Europe to perform bank stress tests as a way to calm concerned investors and restore confidence worldwide.

Treasury Secretary Timothy Geithner is expected, along with others, to push for a more public disclosure of strong and weak banks in Europe that could help calm worries during a meeting of finance leaders from the Group of 20 in Busan, South Korea, over the next couple of days. 

"I think the Europeans have laid out a very strong, very comprehensive program of policy reforms and financial support to help the countries of Europe manage through these tensions and pressures," Geithner told reporters Wednesday. "I do think there's a very good case for trying to bring more transparency and disclosure to these markets and to major institutions. And I think there's broad support in Europe for doing that, again, because it reflects basic reality — uncertainty has a price."

White House spokesman Bill Burton agreed earlier Wednesday, saying, "the United States is confident that European leaders have been doing the right thing by putting in place reforms that help to keep their financial institutions strong and help to shore up their own economies." 

British Financial Secretary to the Treasury Mark Hoban went as far as demanding today that eurozone banks undergo stress tests. 

"A genuine, rigorous stress-testing exercise is urgently needed to answer questions around solvency in severe market conditions," Hoban said in Brussels.