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Breaking News This Morning ...
Charges Filed: The U.K.'s Serious Fraud Office has charged former UBS and Citibank trader Tom Hayes with eight counts of fraud in connection with the London interbank offered rate-rigging scandal. The charges represent the first time U.K. authorities have pursued criminal penalties against someone allegedly involved in the manipulation of Libor, says the Journal. Per the FT, the move sets up "a potential conflict" between the U.S. and the U.K. since Hayes is already facing charges from the Department of Justice and, generally, "criminal matters are resolved in a defendant's home country before any extradition request is considered." Dealbook notes Hayes "figured prominently" in the $1.5 billion UBS Libor settlement this December. The news outlets don't indicate whether other individuals will find themselves facing similar allegations, but the Journal previously reported that sometime this summer U.K. and U.S. authorities are expected to file criminal charges against former Barclays employees for their alleged roles in the Libor scandal.
Receiving Wide Coverage ...
Fed Watch: Stocks and bond markets remain volatile as investors wait for the Federal Reserve's policy meeting and clarification of whether the central bank will continue its economic stimulus program. The Washington Post points out the confusion is being caused by a series of crossed signals. The Fed tried to tie its policy efforts directly to the strength of the economy, but "there are many ways to parse the numbers," the article notes. "For example, the unemployment rate could fall to the Fed's threshold of 6.5% because more workers are finding jobs. Or, it could fall because more people are leaving the labor force altogether. Those two scenarios would probably prompt very different responses from the central bank." The FT also points out markets generally aren't acknowledging the economic improvement the Fed seems to see and predicts Chairman Ben Bernanke will try to counteract that perception by "combining an upbeat message on how the strength of the economy will soon justify a taper," while signaling that "further tapering depends on further improvement in the economy and in no way brings forward?an?interest?rate?rise."
Wall Street Journal
In other Fed news, President Barack Obama "subtly suggested" during an interview with Charlie Rose he will let chairman Ben Bernanke step down when his term ends in January. Cue a fresh round of speculation as to who will be Bernanke's successor. The article lists Fed Vice Chair Janet Yellen as a "leading contender," but also name drops Timothy Geithner, Lawrence Summers and Christina Romer.
Germany's Commerzbank and its labor representatives are nearing a deal to cut more than 5,000 full-time jobs as part of the bank's restructuring program.
China's big banks are pushing its central bank "to free up funds to ease an unusual cash squeeze" into the nation's economy. The central bank declined to comment on whether it will actually do so.
The lower house of Swiss parliament voted against a plan "to hand information about their dealings with suspected American tax evaders to U.S. authorities." The measure will now go back to the upper house for further debate.
This op-ed takes on the SEC's money market fund reform efforts: "The SEC should adopt its first proposal to require a floating NAV for institutional prime money-market funds," but "rethink its second proposal because it could inadvertently increase not decrease redemption waves from retail money-market funds in times of financial stress."
Here's one plan to improve liquidity in the bond market, courtesy of BlackRock: companies should "put bond issuance on a regular schedule and standardize corporate bonds The idea is that, the more comparable these investments are, the more willing people will be to trade them in the secondary market." Another alternative being pushed by some is a multi-dealer electronic trading platform.
New York Times
New York financial regulator Benjamin Lawsky is planning to use obscure banking laws to rein in banking consultants. People briefed on the matter say Lawsky is "weighing whether to ban temporarily at least one firm with a poor track record from advising banks chartered in New York" and "also considering a new code of conduct for consultants." American Banker readers will be familiar with the reasons why banks' use of consultants may have caught the regulator's attention, the botched foreclosure review which saw consultants being paid $4 for each $1 given to homeowners, likely being among them.
This Dealbook column takes issue with Fannie Mae and Freddie Mac shareholders using the Fifth Amendment to argue that the government takeover of the two firms was illegal in their lawsuit against the U.S. "While the Supreme Court has held that laws enacted under the Bankruptcy Clause are subject to the limits of the Fifth Amendment, it has done so only in cases involving secured creditors," author Stephen J. Lubben notes. "Our plaintiffs here are not even unsecured creditors; they are shareholders, meaning that they are at the bottom of the capital structure in the event of a bankruptcy."