Monday, May 24, 2010

Financial Regulatory Reform – Update; Bank update from Moody's; Lincoln derivatives $XLF $GS $BAC

Financial Regulatory Reform - Update

· American Bankers Associations - ABA to Host Free Telephone Briefing Monday on Sweeping Senate Reform Bill; 3pmET (the call can be registered for on the ABA website). 

· Bank update from Moody's     hit @ 11:30amET on Fri - comments on the group following Senate bill   In the coming days, Moody's will publish an update to its March 2010 report "Dodd Bill May Reduce Systemic Support for Bank Debt."

· Bank credit rating – WSJ headline – financial reg reform puts bank ratings at risk – this is something that Moody’s and other agencies have warned about – removing the “too big to fail” umbrella from banks such as BoA and Citi could mean rating downgrades that could cost large institutions billions in higher capital costs; BoA has among the largest ratings benefit from “too big to fail” (WSJ) 

· Financial regulatory reform – Wall St expresses relief – while profits may be clipped, the industry’s size and structure will most likely remain unchanged; execs are also hopeful that some of harshest measures will be softened in the House reconciliation process – NYT

· Financial regulatory reform – relatively quiet over the weekend (although Barron’s Washington column has an article w/bullish implications for the financials – see below); there were a bunch of additional articles in the major papers discussing the major differences between the Senate and House versions (as far as financial stocks are concerned, the big differences concern Collins/capital, Durbin/interchange, Levin/Volcker, and Lincoln/derivatives). The Senate is expected to name its conferencing committee on Mon.  WSJ/NYT/Politico. 

· Financial regulatory reform – House to soften Senate bill according to Barron’s – the Lincoln derivatives language will prob. wind up be softened although trading will move increasingly towards exchanges; the Durbin amendment will prob. wind up being stripped out of the final legislation; the Collins capital amendment, esp. re TruPS not being counted as tier-1, will prob. be removed.  Barron’s

· Derivatives trading and the Sen Lincoln amendment – she faces a crucial run-off election on June 8; many expect her view on derivatives trading to soften following this event.  NYT/WSJ 

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