Breaking News This Morning ...
JPM Earnings: JPMorgan Chase's profit rose by 31% in the second quarter, thanks, in part, to gains in its investment banking business. Wall Street Journal, New York Times, Bloomberg
Wells Fargo Earnings: Wells Fargo's profit rose by 19% in the second quarter, despite rising interest rates in the mortgage market. Wall Street Journal, New York Times
Receiving Wide Coverage ...
A Return to Glass-Steagall? Four senators, including Elizabeth Warren, D-Mass., and John McCain, R-Ariz., have introduced a bill that would separate traditional banking from riskier investment activities, or effectively reinstate the Glass-Steagall Act. The effort has already garnered support from some pundits. Economist and columnist Simon Johnson writes (this time on Bloomberg) the bill "has potential to protect us from the worst problems in the banking industry while making it a better engine of prosperity," while Forbes blogger Halah Touryalai notes that, in introducing the legislation, "Senator Warren is doing what many elected her to do in November; take on Wall Street in a post-crisis era." Opponents of big bank breakups, however, shouldn't lose too much sleep; the bill isn't likely to pass. "Lawmakers have found it difficult to pass even uncontroversial measures, and the banking industry still retains many champions on Capitol Hill," the Journal notes. And, should "the 21st Century Glass-Steagall Act" gain traction, "critics have a full arsenal of arguments to deploy against reintroducing it," Dealbook says. "One is that Glass-Steagall would not have stopped the 2008 crisis. The act, for instance, would not have prohibited the growth of Lehman Brothers, which collapsed and spread panic through the financial system."
GOP's Plan for Fannie, Freddie: Also not likely to pass Congress a forthcoming bill from House Republicans that would ultimately eliminate Fannie Mae and Freddie Mac and virtually remove the government from the housing market. "The measure will face stiff opposition from Democrats and isn't likely to be considered by the Senate, even if it can pass the House of Representatives," the Journal notes. However, (much like the bipartisan Corker-Warner bill introduced in the Senate), the measure "would advance discussions on Capitol Hill about how to redesign the nation's mortgage market," says the Washington Post.
More 'Fabulous Fab': It looks like former Goldman Sachs executive Fabrice Tourre, whose civil trial over allegedly misleading investors in a mortgage deal is set to start on Monday, has lost his bid to exclude a colorful email that references the nickname "Fabulous Fab." According to Dealbook, "Judge Katherine B. Forrest of Federal District Court in Manhattan filed a preliminary decision on the e-mail on Wednesday, indicating that she overruled his request to keep it away from jurors' eyes." Meanwhile, the Journal's curtain-raiser on the trial notes that proceedings will "cast a shadow" over Goldman Sachs. "Goldman's actions during the mortgage boom will be rehashed, in vivid detail, during what is expected to be a three-week trial," the paper reports. "Goldman is hoping for a win by Mr. Tourre to close one of the darkest chapters in its history and score a victory in one of numerous lawsuits over its actions during the crisis."
Derivatives Deal Update: As predicted, the Commodity Futures Trading Commission has struck a deal that will enable it to meet today's deadline for a rule on overseas derivatives trading. The deal, subject to a vote later Friday, prevents U.S. swap rules from immediately going into effect overseas. New York Times, Wall Street Journal
Wall Street Journal
Swiss banks are nearing a deal to turn over key information to U.S. authorities investigating tax evasion.
New York Times
Payroll cards continue to draw scrutiny. Sixteen Democratic senators have written a letter to Consumer Financial Protection Bureau Director Richard Cordray and Acting Secretary of the Labor Department Seth Harris, urging them to examine the use of the cards to pay employees.
Economist Simon Johnson is urging those "concerned with financial stability" to lobby for an even higher leverage ratio while the Federal Deposit Insurance Corp.'s proposal on the matter is open for comments. "The FDIC has made some progress but now needs help," he writes. "With encouragement from their constituents, Congressional representatives might be persuaded to push for tougher limits on the leverage at big banks."
Columnist Floyd Norris notes, while weighing in on banks' complaints on the higher leverage ratio: "Having lower capital requirements can be a competitive advantage, but only if it turns out that the capital a bank has is adequate."
