Morning Scan

Friday, May 13, 2011

Receiving Wide Coverage ...

Who's Too Big to Fail? Federal Reserve Chairman Ben Bernanke and other top regulators, including Deputy Treasury Secretary Neal Wolin and Federal Deposit Insurance Corp. Chairman Sheila Bair, argued that allowing the government to shut down large, interconnected companies that are in serious trouble is necessary in the wake of the financial crisis. Meanwhile, "Heard on the Street" said "the key question is whether regulators plan to treat these institutions like financial utilities." Wall Street Journal, Washington Post

Also, the Journal reported that regulators agreed to look at the $50 billion-asset cut-off set by Dodd-Frank, which lumps banks just over the limit — including Huntington Bancshares, Comerica, and Zions Bancorp — in the same vital-to-the-economy category as behemoths JPMorgan and Citigroup.

Deadline? We Don't Need No Stinkin' Deadline: Bernanke also "warned lawmakers Thursday that they are risking grave consequences by continuing their game of chicken over the nation's legal limit on government borrowing," the Post reported. But the Journal said the August 2 deadline set by Treasury for the raising of the debt limit doesn't scare House Republicans, who say money shifts and some reductions in debt can be made to avoid dire consequences. This attitude, the paper said, "sharply" raises "the political and economic stakes." Wall Street Journal, Washington Post

Wall Street Journal

Thieves used skimmers to steal information from shoppers who used debit cards at Michaels Stores from Massachusetts to Washington, and then hit up their bank accounts via ATM, $500 at a time, according to the chain. The chain learned of the scheme early this month and found about 90 "improperly altered debit-card processing devices called PIN pads." Michaels is replacing all of its 7,200 card-processing terminals as a precaution.

Now it's getting personal. The paper reported that the SEC is targeting individuals connected to firms charged with fraud in mortgage-bond deals and hitting them with civil charges after the regulator was ripped for previous settlements that held no executives accountable. Currently being investigated: JPMorgan Chase, Citigroup, Morgan Stanley, Bank of America's Merrill unit and UBS.

Goldman Sachs and Morgan Stanley became the most recent firms to launch private-equity funds denominated in China's yuan. The banks hope that by having yuan-denominated funds, there will be fewer restrictions on trading.

New York Times

The International Monetary Fund warned that Europe's debt crisis could move beyond Greece and Portugal. "The warning came as government sources in Athens said that international inspectors checking on Greece's compliance with its rescue package from the European Union and the International Monetary Fund had found problems and were pressing for deeper spending cuts to cover a likely revenue shortfall."

Washington Post

Preet Bharara, the U.S. attorney in Manhattan, has been hailed by some in the financial media as the "sheriff of Wall Street." His office has ramped up white-collar enforcement, charging nearly 50 people in an insider trading crackdown that led to Wednesday's conviction of Rajaratnam, founder of the Galleon hedge fund, on 14 counts of fraud and conspiracy.

From Capitol Hill to academia and the SEC inspector general's office, observers of the SEC have voiced concern that the revolving door at the agency can makes it a docile protector of the public interest. A study to be released Friday by the Project on Government Oversight (POGO), based on hundreds of SEC documents obtained through the Freedom of Information Act, sheds new light on the relationship between the regulators and the regulated.

An editorial warns that the federal government should limit the size of loans eligible for securitization by Fannie Mae and Freddie Mac. According to the Post, the nation's finances can't truly stabilize until upper-middle-class Americans kick their dependency on federal mortgage aid.

, with contributions from Sean Sposito and Alex Ulam.