Category: Banks

AIG repayment plan

September 30th, 2010 in Banks 0 comments

American International Group announced they have finalized a repayment plan with the Treasury Department. Mark Williams, a former Federal Reserve Bank examiner who now teaches finance in the School of Management and author of “Uncontrolled Risk” about the fall of Lehman Brothers, offers the following view.

“The Treasury would be jumping the gun by cashing out of AIG and leaving money on the table. The government should sit tight, be patient and not sell its shares in AIG. This is not about government timing the market, but about insuring a fair return for taxpayers.

“The Treasury is making the same mistake it did with Citigroup – getting out too early. Could the November election cycle be clouding what should be a purely financial decision?”

Contact Mark Williams, 617-358-2789, williams@bu.edu

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Obama to name Warren to new post

September 17th, 2010 in Banks 0 comments

President Obama will name Elizabeth Warren as a White House advisor to oversee creation of the new Consumer Financial Protection Bureau. Law professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, expresses his opinion on the appointment.

“It is regrettable that President Obama has chosen to launch the new Consumer Financial Protection Bureau, a law enforcement agency, by end-running the U.S. Senate and the very law that created the agency. This is not an auspicious beginning.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu, or on Twitter @ckhurley

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New Basel III rules decided

September 13th, 2010 in Banks, Financial crisis 0 comments

The Basel Committee on Banking Supervision announced new rules in hopes of making the global banking industry safer. Will the new rules work? LAW professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and former counsel to the Fed Board of Governors, gives his view on the impact of the new agreement.

“The Basel agreement reflects two troubling phenomena: first, international acquiescence to the continued existence of ‘t00 big to fail’ banks; and second, the exultation of capital over risk management as the primary supervisory tool.”

Contact Cornelius Hurley at ckhurley@bu.edu, 617-353,5427 or on Twitter @ckhurley

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Mortgage industry fees considered

August 24th, 2010 in Banks 0 comments

foreclosure sign 2A consensus reportedly is emerging within the Obama administration that some type of government guarantee will be needed to keep the struggling mortgage market humming.  Even before dealing with the future of Fannie Mae and Freddie Mac, the administration may propose that any federal backing of mortgages be financed by fees charged the lending industry.  School of Management finance lecturer Mark Roberts, a former executive vice president at Fleet Bank, says the trick is is figuring what types of loans or mortgage-backed securities should be guaranteed — and how the industry should be charged for government backing.

“I believe we have two issues to deal with here — discovery of the market value of a government guarantee plus discovery of the perceived risk of underlying mortgage debt without guarantees.  Until there is a functioning market for unguaranteed mortgage debt, we will not know how to price guarantees.”

Contact  Mark Roberts, 617-353-4403, robertsm@bu.edu

No more "sh***y deals" at Goldman

July 29th, 2010 in Banks 0 comments

email logoOn the heels of Congressional hearings in which e-mails from Goldman Sachs traders told of “sh***y deals” being offered to customers, the Wall Street bank has now banned profanity in company e-mail correspondence.  School of Management master lecturer Mark Williams, a former Federal Reserve Bank examiner and author of “Uncontrolled Risk” about the fall of Lehman Brothers, says profanity was never the problem at Goldman — it was excessive risk taking with other people’s money.

“Wall Street has been built on the backs of aggressive traders that talk tough and take sizable bets.  Addressing swearing but ignoring excessive risk taking is simply a legal maneuver devised to protect Goldman Sachs, and leaves our economy exposed to its risky practices.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

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Citigroup pays to settle subprime claims

July 29th, 2010 in Banks 0 comments

Citigroup logoWithout admitting guilt, Citigroup will pay $75 million to settle federal civil claims that it failed to disclose vast holdings of subprime mortgage investments that crippled the bank during the financial crisis.  Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Federal Reserve Board of Governors, says it’s pretty thin gruel for the government to take back $75 million from a bank in which it alaready owns a controlling interest since bailing it out.

“More meaningful from a policy perspective would be the clawing back of the obscene sums paid to the likes of Robert Rubin for his negligent oversight of the institution.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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The consumer "watchdog" fight

July 20th, 2010 in Banks 0 comments

walletA battle is brewing over who President Obama should nominate as the new consumer “watchdog” under the new financial regulatory reform law after he signs it.  Consumer advocates and activist groups are pressing him to tap outspoken Harvard Law Professor Elizabeth Warren, who now chairs the congressional panel overseeing the federal bailout of the nation’s banks.  Others feel she may not be able to get confirmed by the Senate.  BU Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Federal Reserve Board of Governors, notes that the new Bureau of Consumer Financial Protection will be a massive managerial undertaking with a $500 million budget and hundreds of employees.

“Its head should be someone who, in addition to sound policy instincts, has a proven record of managerial accomplishment.  A polarizing choice will dim the chances of the bureau carrying out its mission effectively.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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FDIC gets more authority over banks

July 12th, 2010 in Banks 0 comments

FDIC sealDuring the Crash of 2008, the Federal Deposit Insurance Corporation said it lacked access to need information to evaluate the risk being taken by banks which later either collapsed or needed taxpayer bailouts to stay afloat.  Now regulators at the Federal Reserve and Treasury Department have given the FDIC specific, unlimited authority to examine banks.  Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and a former counsel to the Fed Board of Governors, says the agreement is an improvement in interagency cooperation, but sound bank regulation ought not be something negotiated among sometimes competing federal agencies.

“Coming on the eve of financial reform legislation passing the Senate, it serves principally to highlight the opportunity that Congress and the administration missed by their failure to make part of the new reform law a rationalization of our chaotic bank regulatory apparatus.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

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To bank regulator stepping down

July 9th, 2010 in Banks 0 comments

John DuganIn a surprise announcement, Comptroller of the Currency John Dugan (r.) says he will step down next month as the top U.S. bank regulator.  Appointed by President George Bush, Dugan was instrumental in shaping the “stress tests” for the largest financial institutions, but often sparred with FDIC Chairwoman Sheila Bair about consumer matters.  Former Federal Reserve Bank examiner Mark Williams, who teaches finance at the School of Management, say choosing Dugan’s successor is an opportunity for the Obama administration to send a signal that our banks will be held to a higher accountability and scrutiny.

“It is important to not repeat the error of the past and appoint a former lobbyist, as was Dugan, who is banker friendly.  As an important industry watchdog, the head of the OCC needs to set the tone that banks will be regulated — not coddled.”

Contact Mark Williams, 617-358-2789, williams@bu.edu

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The weak link in bank reform

July 8th, 2010 in Banks 0 comments

federal-reserve-400The financial regulatory reform legislation likely to be sent soon to President Obama calls for the biggest banks and hedge funds to put up some $20 billion in fees to pay the costs of additional oversight by regulators.  But even that won’t help regulators don’t quickly upgrade the training and standards of rank-and-file examiners, says Mark Williams, a former Fed examiner who now teaches finance in the School of Management.  In a Boston Globe op-ed, Williams — author of “Uncontrolled Risk” about the fall of Lehman Brothers — says if bank examiner performance over the last decade is an indicator, oversight may prove grossly inadequate unless the regulators become as financial sophisticated as those they’re supposed to regulate.

“Our entire financial system is dependent on strengthening regulator oversight and closing this sophistication gap.”

Contact Mark Williams 617-358-2789, williams@bu.edu

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