The Washington Wrap is a weekly look at regulation,news and chatter from the Capitol. Send tips and ideas email@example.com.
Eight large banking companies submitted "targeted"responses to regulators' criticisms of their 2015 resolution plans. Thereleases from Oct. 5show revised efforts from JPMorganChase & Co., Bankof America Corp., Wells Fargo & Co., andState Street Corp., tocorrect plans found "notcredible" by the Federal Reserve and the FDIC. ,Morgan Stanley andCitigroup Inc. alsohad to answer to weaknesses identified in their resolution plans.
Investors were also watching banks overseas as the U.S.Department of Justice continued negotiations with over allegations ofmissold mortgage-backed securities. Reuters reported Oct. 5, citing Germanmarkets newsletter Platow Brief, thatthe settlement wouldbe between $4 billion and $5 billion. Previous reports from AgenceFrance-Presse had noted a possible $5.4 billion settlement, which is far lower than the $14billion originally sought from the bank. The DOJ reportedly wants to wrap upMBS misselling settlements with Deutsche, Barclays Plc and Credit Suisse Group AG before the next U.S. president iselected in November.
Fallout continued for Wells Fargo on the Hill as politicianscalled for tougher executivecompensation clawback rules in the wake of its cross-sellingscandal. Sen. David Vitter, R-La., also reportedly accused the company of extending unethical salespractices to small-business accounts.
Morgan Stanley's Morgan Stanley Smith Barney LLC is being dragged intocross-selling scrutiny as the state of Massachusetts with unethical salespractices in its securities-based loan practices. The complaint alleges thecompany created a conflict of interest by incentivizing financial advisers toprioritize selling the loans over the fiduciary needs of clients.
The Justice Department fined Security National Financial Corp.'s andPrimary Residential MortgageInc. $4.3 million and $5 million, respectively, over accusationsthat they violated the False Claims Act. The companies allegedly originated andunderwrote mortgage loans as Federal Housing Administration insured even ifthey did not meet FHA requirements.
A U.S. District Court dismissed a 2013 antitrust lawsuit accusing , Goldman Sachs andJPMorgan of colluding to inflate aluminum prices, according to Reuters. Thesuit alleged the companies hoarded inventory to raise the value of thecommodity, but Judge Katherine Forrest said a lack of evidence of anticompetitiveconduct made the case "irrelevant."
Indiana Republican Gov. Mike Pence and Virginia DemocraticSen. Tim Kaine took the stage Oct. 4 in the only vice presidential debate forthe 2016 election. Kaine and Pence spent time defending their running mates andchallenging Donald Trump's loose cannon rhetoric and Hillary Clinton'strustworthiness, respectively.
Clinton took advantage of her time in Toledo, Ohio, on Oct.3 to take a shot at WellsFargo for "bullying employees into committing fraud." Shethen applauded the CFPB for forcing Wells Fargo to pay back consumers in thecross-selling scandal. Meanwhile, Donald Trump cited the JPMorgan securitybreach as he unveiled hisplans for a national cybersecurity strategy that would employmilitary, civilian and private-sector experts to reform securityinfrastructure. Trump called Clinton "totally unfit" to handle theissue and referenced her email scandal as her "only experience" withcybersecurity.
The CFPB finalized prepaid account rules that would requirefinancial institutions to limit consumer losses on stolen or lost cards,resolve reported transaction errors, and give consumers free and easy access toaccount information. The rule, which takes effect Oct. 1, 2017, also requiresprepaid account issuers to provide disclosures standardized under the CFPB's"Know Before You Owe" template currently used for mortgages andstudent financial aid offers.
The CFPB closed comments Oct. 7 on its proposal of newpayday lending rules,which would impose ability-to-repay tests and principal payoff options for someshort-term loans. In the final days of public comments, advocacy groups likethe People's Action Institute and Americans for Financial Reform pushed foreven stronger rulemaking that would cap the amount of high interest rate loansoffered in a year and prevent the continuous flipping of long-term andshort-term loans. Other industry participants argue that the the credit needs ofsubprime borrowers and won't address unlicensed lenders who circumvent statelaws.