Rule on bank trading of derivatives eased

A rule intended to loosen the largest U.S. banks’ control over the trading of complex investments and help safeguard the financial system was weakened Thursday by regulators.

The Commodity Futures Trading Commission approved the rule 4 to 1. Commissioner Jill Sommers cast the lone dissenting vote.

Under the rule, investment firms would be required to request price quotes for a derivatives contract from only two banks this year and three beginning in 2014. An earlier proposal had called for price quotes from five banks.

Derivatives are investments whose value is based on some other investment. The market was largely unregulated before the 2008 financial crisis. The rule was mandated under the 2010 financial regulatory overhaul.

By requiring fewer price quotes, critics worry that the $700 trillion derivatives market will be less competitive. Five of the largest U.S. banks — JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Wells Fargo — account for more than 90 percent of total derivatives contracts.

Under the rule, banks and other financial institutions would be required to trade derivatives contracts on new electronic exchanges. CFTC Chairman Gary Gensler said that will create more transparency because everyone who wants to compete in the marketplace will be able to see prices before deciding to invest. Prior to the rule, they could not.

“This is a significant shift toward market transparency from the status quo,” he said.

— Associated Press

Minority leaders seek shot at executive jobs

An influential group of black and Hispanic business leaders is calling on the nation’s leading corporations to agree to interview black and Hispanic candidates before filling any top job or board position.

The group of 30 executives and corporate board members met in Washington on Wednesday at the behest of African American businessman Robert L. Johnson, who has been pushing for President Obama to address the yawning employment gap that has long separated white workers from black and Hispanic workers.

Johnson, chairman of RLJ Cos. and founder of Black Entertainment Television, said the gap could be narrowed if Obama used his bully pulpit to encourage U.S. corporations to voluntarily embrace a plan to interview at least two qualified black or Hispanic candidates for every job at the vice president level or higher. He said companies should also interview two minority-owned firms for vendor and other contracts.

The suggestion is based on the National Football League’s Rooney Rule, which requires teams to interview minority candidates seeking head-coach or general-manager jobs before making hiring decisions. That measure is credited with helping to increase the number of black NFL head coaches and front-
office executives.

— Michael A. Fletcher


l  U.S. mortgage rates rose, pushing borrowing costs for a 30-year loan to the highest level in six weeks. The average rate for a 30-year fixed mortgage climbed to 3.51 percent in the week ended Thursday, up from 3.42 percent and the highest since early April, McLean-based Freddie Mac said. The average 15-year rate increased to 2.69 percent from 2.61 percent.

l  J.C. Penney’s net loss in the first quarter widened as the department-store chain works to rebound from ousted chief executive Ron Johnson’s failed makeover. The loss expanded to $348 million in the quarter ended May 4 from a deficit of $163 million a year earlier, the Plano, Tex.-based retailer said Thursday.

l  Dell, the subject of a takeover battle between activist investor Carl Icahn and the company’s billionaire founder, reported a 79 percent slide in profit as personal computer sales continued to shrink. Net income fell to $130 million, from $635 million a year earlier.

l  Tom Wheeler, President Obama’s nominee to head the Federal Communications Commission, agreed to sell holdings of $500,001 to $1 million in AT&T and Verizon Communications to resolve possible conflicts of interest before taking office. Wheeler, a former head of wireless and cable trade groups, disclosed his holdings and willingness to divest from 78 companies in documents released Thursday by the Office of Government Ethics.

l  Warren Buffett’s Berkshire Hathaway had its credit grade lowered one level by Standard & Poor’s after the ratings firm revised its criteria for evaluating insurance holding companies. Berkshire was cut to AA from AA+, S&P said Thursday in a statement about the Omaha-based company. The ratings firm said its outlook on all of Berkshire’s ratings is negative.

— From news services


l  9:55 a.m.: Consumer sentiment index for May released.

l  10 a.m.: Leading indicators for April released.