Receiving Wide Coverage ...
The World's Local Bank, but Smaller: HSBC announced a plan to cut 25,000 to 50,000 jobs worldwide, in an effort to save about $5 billion yearly. How many of those job cuts will hit its U.S. operations wasn't reported. But the Wall Street Journal said HSBC plans to have its U.S. bank focus on international operations and less on domestic operations. "We will obviously need to turn the U.S. business around," CEO Stuart Gulliver said. HSBC said it will continue to need access to U.S. dollar funding; and it will also need to retain a U.S. presence because of the large number of multinational corporations located here. It's the second time in four years that Gulliver has leaned on job cuts to make HSBC more efficient; the last time, in 2011, the job cuts didn't produce the desired effects. The latest cost-cutting initiative includes plans to exit markets like Brazil and Turkey (or at least significantly downsize there), and refocus on higher growth markets in Asia.
Wall Street Journal
The Obama administration's latest proposal to tackle the student-debt problem is to forgive federal student loans for those borrowers who can show they were "lured to colleges by fraudulent recruiting." The proposal is intended specifically to help former students of Corinthian Colleges, a for-profit college chain that filed for bankruptcy. Corinthian has been accused by federal officials of lying to prospective students about their chances of landing a job after graduating. Obama's plan would also be extended beyond the for-profit sector to any college in which borrowers can prove the college violated state laws. Some criticized Obama's plan as having the potential to create huge liabilities for taxpayers, as well as changing the role of many Department of Education staffers to become "full-time adjudicators of loan forgiveness claims."
Is the long-predicted wave of HELOC rate-resets finally hitting the shore? Now that interest-only payments have reset to include principal-and-interest payments, many borrowers are becoming delinquent, according to Equifax data. Citizens Financial Group in Providence, R.I., provides one example of what banks are facing: the number of HELOCs that were 30 to 89 days past due was 16% higher at the end of the first quarter, compared to a year earlier. The rate-reset problem is concentrated on home-equity lines of credit issued between 2004 and 2007; many of those loans are now switching to higher monthly payments. Banks are primarily on the hook for any defaults, as banks tend to hold HELOCs on their books rather than sell them off.
GE confirmed Tuesday it will sell its private-equity lending unit to Canada's largest pension fund. Word of the deal had leaked out Monday. While the deal helps GE achieve its ultimate goal of largely exiting the banking business, GE has proven to be flexible in how it measures its GE Capital unit. Last month, for example, GE told the Federal Reserve that GE Capital had total assets of $501 billion at the end of 2014. That would make GE Capital the seventh-largest U.S. bank. Weeks earlier, however, GE told analysts and investors that GE Capital had just $363 billion in assets. The $138 billion difference is what GE calls the "ending net investment," a metric that GE says helps investors understand how GE Capital is becoming a "small, more focused finance company." Critics, however, say the metric is nothing more than an accounting trick to make the business look like it's performing better than it actually is.
Financial Times
States need to do a better job of managing their budgets, and start making "hard choices on spending priorities and revenue practices," former Fed Chairman Paul Volcker said in a report released by his think tank. Specifically, states should stop using tricks to balance their budgets. States are using "accounting practices that obscure their true financial position" to counter the pressure they are feeling from the slow recovery in tax revenues. New Jersey is one of the worst offenders, relying heavily on borrowing and shifting money intended for specific programs into its general fund, the report says.
New York Times
Lee Siegel, an author of five books, discusses the thinking behind his decision to default on his student loans. The result has been a relentless pursuit by collection agencies hired by the U.S. Department of Education, although the default also gave Siegel the ability to choose the career and life path he wanted. The response to Siegel's decision has been savage, with Slate calling for the Times to apologize for running the op-ed; as well as criticism from the likes of CNBC hosts.
Elsewhere ...
Charlotte Observer: In response to Wells Fargo running ads that feature a same-sex couple, Franklin Graham, son of evangelist Billy Graham, is pulling money from his ministry's accounts out of the bank.
