Morning Scan

Friday, May 7, 2010

Receiving Wide Coverage ...

Parsing Reform Amendments: Democrats blocked a GOP effort to curb the size and scope of a consumer financial regulator. The Post said the vote "cleared a key hurdle" in the effort to overhaul financial regulations, as the vote included support from two Republicans — Chuck Grassley of Iowa and Olympia Snowe of Maine — Democrats hope will support the overall bill. Another Post story said key Democratic senators hope to restore a provision that was included in a House-passed financial overhaul bill that would require broker-dealers to act in the best interest of their clients — an issue at the heart of the case against Goldman Sachs. The Times looked at the Senate's defeat of an amendment that would have imposed limits on the size and scope of big banks and the approval of another amendment to give the CFTC "more authority to crack down on manipulation of the commodities and derivatives markets." Another Times story said former Treasury Secretary Henry Paulson and his successor, Tim Geithner, backed calls for tougher regulation of financial markets on Thursday in testimony before the Financial Crisis Inquiry Commission.

The Journal's coverage of Capital Hill focused on the Federal Reserve; the paper said "last-minute maneuvering" allowed the Fed to "sidestep legislation that would have exposed its interest-rate decision-making to congressional auditors." A second story said the New York Fed has come under pressure from Fed officials in Washington to improve the performance of its supervisors overseeing the nation's biggest banks. A third story said Fed officials have been unable to reach a firm consensus on how soon or how aggressively to unload the central bank's holdings of mortgage securities.

Goldman In Settlement Talks: The Journal, citing unnamed sources, said Goldman's lawyers met with SEC representatives this week "in a first step toward a potential settlement of the agency's fraud lawsuit against the securities firm." Although "the two sides remain far apart," the paper said "Goldman's willingness to even meet with the SEC is a sign that executives are scaling back their combative stance." The Times said AIG has replaced Goldman with Citigroup and B of A as its main corporate advisers. "The move is the first in what some analysts warn could be a series of defections among Goldman's clients after accusations — vigorously denied by Goldman — that it defrauded customers in a complex mortgage investment." Wall Street Journal, New York Times

$10B Deal: The papers, citing unnamed sources, said a group of private-equity firms led by Blackstone Group are in talks to acquire financial-data-processing company Fidelity National Information Services. The Journal said the deal would be "the largest leveraged buyout since the credit crisis struck nearly three years ago." The Times said it "may test market tolerance for increasingly larger private equity deals." Wall Street Journal, New York Times

Dow's Wild Ride: Stocks market plummeted, then bounced, in a selloff that appeared to be triggered by a breakdown of trading systems. The Post said, the "dramatic gyrations added fuel to the biggest policy debate in Washington: how to regulate Wall Street. That billions of dollars in stock-market value could be wiped out so abruptly, with such a lack of certainty about the cause, is a reminder of the high stakes involved in a system that is little understood by average investors." Wall Street Journal, New York Times, Washington Post

A separate story in the Journal said a number of high-frequency firms stopped trading Thursday in the midst of the market plunge, possibly adding to the market's unprecedented selloff.

Wall Street Journal

An article said Morgan Stanley's joint venture with Mitsubishi UFJ Financial Group gives the Wall Street firm "deep access into the difficult-to-crack Japanese market and a chance to put a U.S. stamp on the hidebound Tokyo institution."

In "Potomac Watch," Kimberly A. Strassel wrote that Democrats spent the past year "threatening to unleash hell and all its furies on the financial sector, and in response a petrified Wall Street rushed to buy protection with millions of dollars in Democratic campaign tithes. The party in power then produced legislation that — while bad in many, many ways — is something the biggest players can live with."

An editorial about Greece said "There is no good reason that sovereign debt problems in a country that represents only 2% of the EU economy should send the world into another financial crisis and recession — if our political classes keep their heads. The world banking system is far stronger than it was two years ago, and U.S. banks in particular have improved their balance sheets."

New York Times

An article profiled an agent, Joseph Laubinger, hired by big lenders to help coax homeowners who have lost their homes in foreclosure out of their houses. "The end game of foreclosure is typically neither smooth nor quick. Some people have nowhere to go, and others see no reason to go. The lenders need someone on the scene who can resolve the situation without escalating it, which is why Mr. Laubinger is getting an abundance of assignments from the country's largest lenders as well as Fannie Mae, the government's mortgage holding company."

Columnist Paul Krugman said "Greece's problems are deeper than Europe's leaders are willing to acknowledge, even now —and they're shared, to a lesser degree, by other European countries. Many observers now expect the Greek tragedy to end in default; I'm increasingly convinced that they're too optimistic, that default will be accompanied or followed by departure from the euro."

In "High & Low Finance," Floyd Norris said "it appears [from the stock market gyrations] that investors are again growing more hesitant to own assets like stocks and bonds, particularly since many now cost far more than they did only a few months ago. Another sharp retrenchment by investors, consumers and businesses could threaten the current global recovery by choking off financing and new orders for companies."

Breakingviews said "the bailout of America's failed housing finance giants is taking on Greek proportions. … The tragedy, as far as taxpayers in the United States are concerned, is that Fannie and Freddie will most likely need much more capital in coming years."

Washington Post

Columnist Steven Pearlstein said the fundamental problem underlying Europe's financial crisis is that the EU is only a "halfway house" to genuine political and economic integration. "While capital and goods and tourists can move relatively freely across borders, workers and services cannot, and national governments continue to jealously protect their regulatory and fiscal prerogatives."


, with contributions from Kate Davidson and Sara Lepro.