Goldman Settles Massachusetts Trading Investigation
On Thursday, the Massachusetts Securities Division announced that Goldman Sachs agreed to a consent order to pay $10 million and to ban so-called “trading huddles.” The Massachusetts Securities Division had been investigating Goldman for the past two years to determine whether the trading ideas that analysts had shared with traders during these huddles “favored the interests of certain priority clients.” Goldman settled the matter without admitting or denying the state regulator’s allegations and agreed to disclose to future research clients that they would not all be treated equally. In its consent order, the Massachusetts regulator said it found no instances of fraud.
Senate Defeats Bill to Delay Interchange Fee Caps
On Wednesday, after a long and divisive lobbying fight, retailers defeated the banking industry in the Senate on a vote to delay new caps on debit-card swipe fees. The legislation was offered by Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) and failed on a 54-45 vote, falling just six votes shy of the 60 needed for passage and clearing the way for a provision in last year’s Dodd-Frank Wall Street reform law to take effect July 21. The provision, often referred to as the “Durbin Interchange Amendment,” required the Federal Reserve to establish fair and reasonable interchange fees for many debit and prepaid card transactions. Last fall, the Federal Reserve proposed new rules which (among other things) would limit to 12 cents per transaction the fee that large banks (with more than $10 billion in assets) can charge merchants every time a consumer uses a debit card or a prepaid gift card. These proposed rules garnered significant criticism and final rules, which are now overdue from the Federal Reserve, are expected shortly. Senators Tester and Corker initially proposed legislation to delay the Durbin amendment from taking effect for 24 months. The final version of the Tester-Corker bill cut the delay in half to 12 months and called for a six-month study of the costs associated with debit transactions and their impact on consumers and community banks.
Bernanke Signals End to Fed’s Monetary Stimulus
On Tuesday, in a speech at the International Monetary Conference in Atlanta, Fed Chairman Ben Bernanke signaled that the central bank plans to end its “quantitative easing” program on schedule this month. Bernanke’s announcement comes seven months after the central bank began a historic round of monetary stimulus. In his speech, Bernanke acknowledged the recovery has fallen short of the central bank’s expectations because of the high unemployment rate and falling home prices.
Goolsbee Leaving Council of Economic Advisors
On Monday, Austan Goolsbee, chairman of the White House Council of Economic Advisers, announced that he plans to leave the White House and return to teaching economics at the University of Chicago this fall. Goolsbee has been on leave for four years from the University’s Booth School of Business where he was a professor for 14 years before joining the Administration.
Diamond Withdraws Fed Nomination
On Sunday, MIT professor Peter A. Diamond announced he was withdrawing his nomination to the Federal Reserve Board from consideration before the Senate. Diamond’s nomination had been blocked by Senate Republicans for over a year because of Senate Banking Committee Ranking Member Richard Shelby’s (R-AL) contention that Diamond lacked the proper qualifications. President Obama first nominated Diamond in April 2010.