An influx of deposits and shortage of lending opportunities have made the investment portfolio's performance more important to a bank's success. Banks can get bigger returns from these portfolios.
Most shareholders are not activists. Relatively few voice displeasure over executive pay, or other issues such as reappointment of ineffective audit firms. About the only thing they do wake up for is to complain about poor dividends.
Is it fair to give a 30% haircut to borrowers who put zero down, and not to their neighbors who put 30% down? Or to distribute taxpayer funds to five states with half the country's negative equity?
Citigroup's shareholders have latched onto what was formerly a radical idea. Namely, that CEOs like Vikram Pandit should receive gigantic pay packages tied to performance only after they've actually performed. Wall Street bosses beware.
Credit bidding enables secured lenders to protect the value of their collateral by bidding up to the full amount of their claims at the sale auction. This right is now at stake.
The agencies can use their discretion to act without discretion: treat all banks alike, big or small, and declare that no nonbanks are "systemically important," i.e. too big to fail.
The evidence presented so far for such claims is questionable, but the complainant has a track record of aggressive actions against financial services companies.
In June the G20 will be figuring out the nuts and bolts of a standard global identification system for financial transactions: who administers it, how it is defined and how it is implemented.
