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from The Great Debate:

Servicing the underbanked

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A new report from the United States Postal Service inspector general proposes that the agency offer non-bank financial services, including payday loans. Opinion pieces and blog posts praised this idea as a way for the post office to solve its fiscal woes while reaching a portion of Americans outside the traditional banking system. A Reuters “Great Debate” piece, “Transforming Post Offices into banks”), called the proposal a “win-win.”

These pieces overlook some practical problems, however, and leave numerous questions unanswered about implementation. While government and charitable-sponsored financial services should play a role in consumer lending, they cannot replace market-based solutions.

Notably, the USPS proposal underestimates the challenge of offering consumer financial services in an increasingly competitive marketplace regulated by complex federal and state laws. Without a sizable government subsidy, the report’s suggested interest rate for small-dollar loans would not even cover basic operating expenses.

A number of credit unions, community banks and nonprofit organizations have started similar, artificially low-priced, small-dollar loan programs only to struggle to sustain operations, much less make a profit. This has led many institutions -- credit unions in particular -- to conclude they cannot viably provide short-term credit, according to research by University of California, Davis Professor Victor Stango.

from MacroScope:

Raskin’s warning: ‘Shouldn’t pretend’ Fed capital rules are a panacea

Post corrected to show Brooksley Born is a former head of the Commodity Futures Trading Commission (CFTC) not a former Fed board governor.

Underlying the Federal Reserve recent announcement on new capital rules was a general sense of “mission accomplished.” The U.S. central bank, also a key financial regulator, has finally implemented requirements that it says could help prevent a repeat of the 2008 banking meltdown by forcing Wall Street firms to rely less heavily on debt, thereby making them less vulnerable during times of stress.

from MacroScope:

Mystery of the missing Fed regulator

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It's one of those touchy subjects that Federal Reserve officials don't really want to talk about, thank you very much.

For nearly three years now, no one has been tapped to serve as the U.S. central bank's Vice Chairman for Supervision. According to the landmark 2010 Dodd-Frank bill, which created the position to show that the Fed means business as it cracks down on Wall Street, President Obama was to appoint a Vice Chair to spearhead bank oversight and to regularly answer to Congress as Chairman Ben Bernanke's right hand man.

from MacroScope:

Sen. Warren flags double-standard for criminal prosecutions of banks

Massachusetts' rookie Senator Elizabeth Warren was out making waves again at a Senate Banking Committee hearing on Capitol Hill today. The former Harvard law professor contrasted the legal code affecting drug prosecutions with what she depicted as cushy settlements for large Wall Street firms that committed egregious crimes.

Take Standard Chartered. They were fined $667 million by U.S. regulators for breaching sanctions related to Iran and three other countries. Yet the bank posted a tenth straight year of record profits.

from Chrystia Freeland:

Interview with Christine Lagarde at the IMF

Managing Director of the IMF Christine Lagarde sat down for an interview with Chrystia Freeland yesterday, January 17th, following the IMF's New Year Press Briefing.

http://www.youtube.com/watch?v=1OM12HY3Js4&feature=player_embedded#!

CHRYSTIA FREELAND:

Thank you for joining me, Madame Lagarde.

CHRISTINE LAGARDE:

My pleasure.

CHRYSTIA FREELAND:

One of your themes as we enter 2013 is that financial reform must continue.  And you have just said that you're concerned, you see a waning commitment to financial reform.  What do you see going on?

from Breakingviews:

Other banks may take most of the UBS Libor pain

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By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own

UBS is next up in the Libor stocks, and the Swiss bank’s investors will be nervous. When Barclays became the first bank to admit fiddling the London interbank offered rate back in June, the ensuing reputational firestorm forced out both its chairman and chief executive. But even though UBS’s fine is expected to be more than double Barclays’ $450 million hit, the fallout could still be worse for other banks.

from Breakingviews:

EU shows it can bank on its union after all

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By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Even as late as last week, people close to the negotiations on the fledgling banking union thought a viable compromise was still way off. The differences between France and Germany seemed almost insurmountable, the Brits were kicking up a fuss as usual and the legal questions appeared fiendishly complex.

from Breakingviews:

Banking union will revive pan-EU bank M&A

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By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own

Europe's banking union could reignite cross-border bank mergers. Spooked by financial and euro zone crises, national regulators have pressed their charges to retrench to domestic markets. But the arrival of a single supervisor and central bailout fund could revive the M&A frenzy seen earlier in the decade.

from MacroScope:

Too big to exist? Fed’s regulation czar backs limits on bank size

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Regional Federal Reserve Bank presidents who oppose quantitative easing have made little way in convincing the central bank’s dovish core. Apparently, not so on the cause célèbre of policymakers like Richard Fisher at the Dallas Fed, who have called for too big to fail banks to be broken up.

In a speech this week, Fed board governor and regulation czar Daniel Tarullo stopped short of calling for outright break-ups. But he did take the unprecedented step of backing size limitations on banks that would be linked to overall U.S. economic output.

from Breakingviews:

UK interest in hybrid Libor is on the right track

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By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Martin Wheatley is on the right track. The chief executive-designate of the UK’s new anti-market abuse regulator, the Financial Conduct Authority, has published a discussion paper on how to reform Libor. As befits the start of a consultation, Wheatley does not try to give definitive answers. But he is asking the correct questions.

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