financial regulation

Gretchen Morgenson, a columnist for The New York Times, writes that the approval of a $8.5 billion settlement between Bank of American and 22 investors in mortgage-backed securities could set the standard for what duty trustees have to protect investors. Morgenson writes: "Trustees for asset-backed securities have a duty to ensure that the companies administering them, known as servicers, do right by the investors who own them. But testimony in the case, known as an Article 77 proceeding, indicates that during months of settlement talks, Bank of New York Mellon did not do all it could to ensure that all investors holding the Countrywide securities got the best deal possible from Bank of America. If the settlement is blessed by the justice, Barbara R. Kapnick, the standard for acceptable behavior by a trustee on behalf of investors will be low indeed. Her ruling will undoubtedly be cited as a precedent for other similar mortgage matters waiting to be heard."

The New York Times commentator Floyd Norris reports on a study that found that a federal law called the 2009 Credit Card Accountability Responsibility and Disclosure Act--which requires more transparency on the fees credit card companies collect from their customers--actually worked. The researchers expected to find that, if credit card companies couldn't charge those fees anymore, they would start charging customers more interest  or  reduce consumers' access to credit. But what the study found: "It cut down the costs of credit cards, particularly for borrowers with poor credit."

The New York Times reported that the U.S. Department of Justice is contemplating entering a deferred-prosecution agreement with JPMorgan for the Wall Street bank allegedly turning a blind eye to Bernie Madoff's Ponzi scheme. There is no record of any other investment bank entering such an agreement to resolve criminal charges, The Times also reported.

The consequences of bringing criminal charges against JPMorgan is potential harm to the financial markets. Is JPMorgan not just too big to fail but too big to indict? But U.S. Attorney Preet Bharara argues '"I don’t think anyone is too big to indict — no one is too big to jail,”' The Times also reported.

JPMorgan was Madoff's primary bank.

The federal insurance exchange for consumers to shop for health-care insurance policies might be extremely problematic but an exchange for financial instruments started off well, according to The Washington Post's Q&A with  the chairman of the Commodity Futures Trading Commision. Derivatives now must be traded on the exchange.

Chairman Gary Gensler explained: "'A swap execution facility is where buyers and sellers of a special derivative called a swap can meet to enter into contracts. Think of an exchange, like the New York Stock Exchange for stocks or exchanges for futures. These kinds of exchanges have been regulated by the federal government since the 1930s. But swap execution facilities had not been under any oversight. [As part of Dodd-Frank,] Congress decided to repeal these exemptions, with the public benefiting from greater transparency in these markets."'

JPMorgan has struck a tentative $13 billion deal to resolve civil claims related to various alleged financial wrongdoings, including paying for homeowner mortgage relief, Bloomberg reports. U.S. Attorney General Eric Holder refuses to release the investment bank for any criminal liability. "The settlement would amount to more than half of JPMorgan’s record $21.3 billion profit last year, or 1.5 times what the firm’s corporate and investment bank set aside to pay employees during this year’s first nine months," Bloomberg also reports.

Bloomberg's data shows America's six largest banks have spent $100 billion in legal costs since the 2008 financial crisis.

As JPMorgan's legal costs mount from several governmental investigations, the investment firm has set aside a $23 billion reserve fund for litigation costs, The New York Times reports. But all the bank's legal woes will be good for law firms: "Even as defense lawyers publicly complain that government regulators are being too aggressive, they privately celebrate the windfall. Law firms in New York and Washington are collectively earning many hundreds of millions of dollars representing JPMorgan in cases ranging from weak controls against money laundering to commodities trading, according to interviews with senior partners at several of top firms," The Times also reports.

Even though JP Morgan agreed to pay nearly $1 billion in fines for its conduct in the 'London Whale' incident in which the bank’s chief investment officer lost more than $6 billion and then regulators were misled about the losses, the investment bank's legal troubles appear to be far from over. The New York Times' DealB%k Blog reports there is "an unusual wave of scrutiny for JPMorgan, which is now facing investigations from at least seven federal agencies, several state regulators and two foreign nations. The investigations span across the bank. Its mortgage business, debt collection practices and its hiring of the children of well-connected Chinese officials are all under fire in Washington."

The New York Times has this interesting profile of JPMorgan's general counsel, Stephen M. Cutler, who has talked tough in the past on the importance of compliance with financial rules and regulations but on whose watch "JPMorgan had agreed to admit wrongdoing and pay nearly $1 billion in fines for its conduct in the 'London Whale' matter, in which the bank’s chief investment office lost more than $6 billion and bank officials misled regulators about the losses."

The Washington Post reports the Securities and Exchange Commission split 3-2 along party lines to require publicly traded corporations with more than $1 billion in revenues or $75 million in publicly traded securities to disclose the rate of their chief executives' pay in relation to the pay of a valid statistical sample of their workforce around the globe. Proponents say the measure will give stockholders and investors more information to make informed decisions, while opponents said the measure will have too much regulatory costs for American businesses. The regulation fulfills a measure of the Dodd-Frank bill enacted over outrage over high executive pay.