Wednesday, May 12, 2010

Washington News- Feds Lacker, Swap Lines, MS ass in the frying pan


· MS – Washington steps up investigation into Wall St – the WSJ says Federal prosecutors are looking into whether MS misled investors about mortgage derivative deals it helped create and in some cases bet against.  The inquiry stems out of an investigation launched in ’09 by the SEC, which is looking into the mortgage-related activities of several Wall St firms.  The Manhattan Attorney’s office is now investigation some of those firms in a criminal probe.  WSJ    

· GS lobbying against Congressional proposal to force market makers to act as fiduciaries on behalf of clients; GS warns that such a measure would hurt markets and force them to stop functioning.  “What would a market maker do if he had a buyer and seller simultaneously approach him? How would he act as a fiduciary?....He can’t be a fiduciary to one and not the other. He can’t be a fiduciary to both.”   FT     

· Fed - The U.S. Federal Reserve soon plans to reveal just how much the European Central Bank is using a new currency swap line (WSJ) 

· Fed’s Lacker said that the Fed may consider “sterilizing” the FX swap lines re-opened this Sun

· Swap Lines - Federal Reserve releases agreements with foreign central banks to reestablish temporary dollar swap facilities (this hit after the close on Tues);

· Market Plunge of last Thurs - The heads of the SEC and CFTC both said Tues afternoon that there was no clear catalyst behind last Thurs’ market plunge and that they are continuing to investigate the event; Schapiro says the uptick rule likely wouldn’t have made a difference on Thurs.  DJ/Reuters   

· Market Plunge of last Thurs – Congressional officials discuss potential actions: 1) Rep Sherman says HFTs should be subject to a tax to discourage their "recklessness"; 2) Rep Paul Kanjorski said the decision to rescind some trades may have ultimately benefited those who aided and abetted the plunge. This is wrong."; 3) B Frank says wants to know if people should be compensated for broken trades (DJ) 

· Uniform circuit breaks a possibility – SEC head Schapiro suggested that she might favor stock-by-stock circuit breakers that kick in uniformly across different exchanges (FT) 

· Fed audits - there were votes held Tues on Fed audits in the Senate (votes were on amendments to the Dodd overhaul bill) and the outcome was inline w/expectations – the Fed’s practices during the financial crisis will be subject to a Congressional review but it will be spared ongoing audits of its monetary policy.  The fact that the more onerous ongoing audit was killed was viewed as a positive. 

· Financial regulatory overhaul - Reid Concedes Bill Might Not Be Finished This Week; Reid insisted Tuesday that he hopes to pass financial regulatory reform by the end of the week but left open the possibility that the deadline could slip.  Roll Call. 

· Obama wants federal agencies to ramp up hiring - Obama plans to instruct federal agencies to radically overhaul the process now used to hire government workers. The change is expected to cut in half the time it takes to fill vacancies – Washington Post 

· Washington spending - Budget office estimates health-care law could cost more than $1 trillion - could potentially add at least $115 billion more to government health care spending over the next 10 years, if Congress approves all the additional spending called for in the legislation, congressional budget referees said Tuesday (Washington Post).   

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