It’s on. The Consumer Financial Protection Bureau is going after the way banks charge overdraft fees. The New York Times reports that Richard Cordray, head of the bureau, wants to know how the banks determine such fees, including whether they process bank transactions in a way to maximize such fees.

Bank overdraft fees occur when a customer does not have enough money in his or her account to cover the transaction. The fees can go as high as $35 per transaction. And all it takes is one check or ATM withdrawal where there wasn’t even in the account to cover it for the fees to start. Then, every other item presented could face that fee. So just a few dollars missing could end up to be a big headache potentially costing hundreds of dollars. And, as Cordray was scheduled to say in a speech Wednesday to the Roosevelt House Public Policy Institute at  New York City’s Hunter College , those “overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it.” He is also scheduled to say in the speech that his agency wants to “learn how consumers are affected and how well they are able to anticipate and avoid paying late fees.”

A year and a half ago, there was supposed to be a big reform on overdraft protection regulations, with customers having the ability to opt-in to protection, but the CFPB said that it has received complaints about banks’ marketing, which may have misled consumers. In addition, different banks charge different fees for such overdraft protection.

The Wall Street Journal says that a 2008 study by the Federal Deposit Insurance showed that while overdraft fees were not widespread, they did hit people significantly. The report showed that 9% of customers with checking accounts got around 84% of the overdraft fees involved. In addition, those customers who had 20 or more overdrafts in a year paid an average of an incredible $1,610 in fees involving the overdraft. Yikes!

The CFPB also wants a “penalty fee box,” where checking account statements would specifically show which fees customers had to pay involving overdrafts.

Lisa Swan is a Feature Writer for the Compliance Exchange and the Wall Street Job Report. She is also a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in the New York Daily News, Yahoo Sports, Huffington Post and the books Graphical Player 2011 and Graphical Player 2010.

For Irving H. Picard, the Bernie Madoff trustee suing Mets owners Fred Wilpon and Saul Katz, the use by Katz of the gambling term “vig” shows how the Mets built their business model around what appeared to be consistently reliable returns from their Madoff investments, the New York Times reports.

Vig is short for vigorish. It refers to money a bookie collects every time a bet is made, win or lose. Katz’s reference to the Madoff vig suggests a similar guaranteed fee.

Picard alleges that Wilpon and Katz borrowed money from banks and gave that money to Madoff to invest, confident that Madoff’s returns would supersede the interest on the loans. The Met owners also invested excess mortgage proceeds from their real estate holdings with Madoff, since his returns were greater than the mortgage payments.

Picard also alleges that Wilpon and Katz drew up players contracts with delayed payments so they could invest more with Madoff and pay off the contract down the road with profits from Madoff.  And rather than paying disability insurance premiums for the team’s most important players, Picard says that Wilpn and Katz deposited that money into an account that they called “Saul’s Cookie Jar” to pay players who were injured.

All of the above shows the effects of the Madoff vig, according to Picard.

In the final legal papers filed for his upcoming civil case against the Met owners, Picard says that Wilpon and Katz had “become hooked on Madoff’s returns” by the early 2000s, adding, “They were so expectant of those steady, 10 to 14 percent returns that they began to budget them into their business plans.”

Picard claims that the Mets would not always have been able to meet payroll without the Madoff “vig.”

Mets controller Len Labita said that what he referred to as the “Madoff effect,” was part of budgets. The Madoff effect took care of Mets cash crunches.

In 2010 testimony, David Katz, one of Saul’s sons, was asked about how Sterling Equities, the family company, made money investing with Madoff.

“You borrow money at 5 percent and you’d make 10 percent,” David Katz said. “You’d make a ‘vig,’ as my father would say, on the Bernie investment.”

Picard suffered the latest in a string of court setbacks Tuesday when a federal judge rejected some claims against  Italian bank UniCredit SpA and three other defendants, the Wall Street Journal reports. Picard had hoped to use the Racketeer Influenced and Corrupt Organizations Act to enable plaintiffs to seek triple damages, but the judge ruled that the RICO statute does not apply in situations involving securities fraud.

Whether or not Picard is overreaching in some instances, his methods are paying off. Picard  estimates that $17.3 billion in principal was lost to Madoff and he had gotten back about $11 billion. Soon we’ll find out which side scores in the suit against the Met owners, and which side strikes out.

Jon Lewin is a Feature Writer for the Compliance Exchange and Wall Street Job Report. He is also a columnist for the Faster Times and a blogger for Subway Squawkers. Lewin’s work has appeared in the New York Daily News, Huffington Post and Digital Innovation Gazette as well as the “Cambridge Companion to Baseball” and the Daily News history essay collection “Big Town Big Time.”

Critics and supporters of the Volcker rule share one sentiment in common: Both are questioning exactly how far reaching the rule is and what can be done to resolve the unintended consequences arise from the regulation.

Although the rule is intended to limit proprietary trading activities among banks, the rule has some traditional investment firms that are now part of bank holding companies questioned the viability of that label as revenues from their trading activities continue to shrink.

Goldman Sachs, for example, earned $31.2 billion from trading operations back in 2007. Last year, revenue from the same operations dipped to $17.3 billion.

To top it all, investment firms who are now part of bank holding companies may end up being treated as commercial banks instead of investment banks, thanks to the capital injections they took from large commercial banks during the 2008 financial crisis. The status will barred them from taking part in proprietary trading activities, the same business that generated the majority of revenues to these firms.

And the danger is the Volcker rule does not apply to private equity funds, hedge funds, and smaller investment banks that do not own banks themselves. Per the New York Times report, financial services entities that are not subject to the rule may try to fill the void left by traditional investment banks that can no longer perform the trading activities.

If there is a profitable business opportunity out there, you can bet 100 percent someone will be there to snatch it.

Volcker Hits the Public Sector

Not only will the rule affect the private sector, some public agencies that rely on the municipal bond market for financing, fear that their ability to borrow will be crippled by the rule. The way municipal bonds are sold and traded, will result in banks risking their own capital – the very practice prohibited by the Volcker rule.

Although the rule did highlight that bonds issued by states, counties, and cities will be excluded from the ban, however, debt issued by public agencies or authorities would be subject to the restriction, per the Reuters report.

State and local authorities are now worried that the rule will inhibit banks from underwriting their bonds and trading, driving up water and sewer bills, delaying public transportation projects, and reducing the number of affordable housing resources.

The highly illiquid $3.7 trillion municipal market dealers are usually risking their own capital just to facilitate trades, said the Municipal Securities Rulemaking Board in a letter to federal regulators last month.

“It could have a very detrimental effect on trying to make the investments in public infrastructure that many of us have felt could be and should be the core of economic recovery,” said Washington State Treasurer James McIntire, who otherwise supports the Volcker Rule.

Reese Darragh is a contributing writer for CompliancEX and Wall Street Job Report. She is an experienced business news writer with expertise in macroeconomics topic, the financial industry, rules and regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act as well as rules from other federal regulators. She has a Master Degree in International Economics and Finance from Brandeis University.

In what seems to be a kick in the gut, ratings agency Fitch downgrades Greece’s long-term debt ratings to its lowest rating, above a default, becoming the first ratings agency to make the widely expected downgrade after the bond exchange plan announcement was made yesterday.

The agency said Greece would be designated as having technically defaulted after the bond exchange is formalized, but the new bonds would be given a new rating, per the Reuters report. All three main ratings agencies – Fitch, Moody’s, and Standard & Poor’s- downgraded Greece in July when an initial debt swap plan was unveiled and have warned that losses for private creditors would trigger a temporary default.

Fitch downgraded Greece to a “C” rating from “CCC” earlier, and would follow with further downgrade to a “restricted default” when the bond swap is completed. It would then reassess the country’s ratings when new bonds are issued as part of the debt exchange.

The firm’s analyst, Paul Rawkins told the news agency that the newly issued bonds “would come out to a low, speculative grade rating.” He added that the current process to downgrade Greece’s debt standing was largely procedural, following the path laid out by the agency in June.

Euro zone finance ministers agreed to the 130 billion euros bailout package on Tuesday to avoid a messy default. As part of the agreement, a bond swap has to be implemented to trim 100 billion euros off Greece’s debt. Bondholders will take 53.5 percent losses on the nominal value of their Greek debts, with actual losses estimated around 74 percent in real terms.

The European Central Bank (ECB) has agreed to a complex plan to ensure Greek bonds can still be used as collateral in its lending operations while it is in the swap process. Greece will take a loan from the European Financial Stability Facility (EFSF) in the form of ESFS bonds that will be passed to ECB and place in a special account to cover any collateral losses during the bond swap period.

Reese Darragh is a contributing writer for CompliancEX and Wall Street Job Report. She is an experienced business news writer with expertise in macroeconomics topic, the financial industry, rules and regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act as well as rules from other federal regulators. She has a Master Degree in International Economics and Finance from Brandeis University.

President Obama and Vice President Biden

In a bid for a second term re-election, President Obama will ask Congress to reduce the maximum corporate tax rate to 28 percent from the current 35 percent, through a series of loopholes and subsidies elimination in the tax code. Simultaneously, manufacturers will be given preferences that would set their maximum effective rate at 25 percent, said a senior administration official yesterday.

The President would also establish a minimum tax on multinational corporations’ foreign earnings to discourage accounting games to shift profits abroad or actual relocation of production overseas, said the official in The New York Times report. Treasury Secretary, Timothy Geithner will outline the framework for changes today.

The tax code revision will be part of the topics presented by President Obama as he enters the election-year debate with Republicans in Congress and in the presidential race where other political candidates, including Mitt Romney, are expected to propose their own version of tax proposals, calling for reduction in corporate income tax.

Geithner told a Congressional committee last week that the proposed overhaul “will help level the playing field for businesses and allow the government to collect needed revenue while promoting economic growth.” No details were shared at the meeting.

Republicans and business groups complain that the 35 percent corporate tax rate is among the highest in the world, leaving American companies at a competitive disadvantage. Generally, they seek to keep the tax rate at 25 percent while many of them have said that the current tax breaks should be kept in place as well.

With tax breaks and loopholes, tax analysts find that U.S. corporations pay on average just slightly more than their competitors in other developed countries. One analysis concluded that of the 500 companies in the Standard and Poor’s index, 115 of them paid less than 20 percent in corporate tax over a five-year observation period. A study by the Government Accountability Office back in 2008 found that 55 percent of American companies paid no federal income taxes at least one year in a seven-year period it studied.

President Obama will also focus his attention on federal policies to help manufacturers as he seeks re-election in battleground states like those in the Midwest where manufacturing is a mainstay.

Although details were vague, an official said the President’s tax framework would “refocus the manufacturing deduction and use the savings to reduce the effective rate on manufacturing to no more than 25 percent, while encouraging greater research and development and the production of clean energy.”

Reese Darragh is a contributing writer for CompliancEX and Wall Street Job Report. She is an experienced business news writer with expertise in macroeconomics topic, the financial industry, rules and regulations including the Dodd-Frank Act and the Sarbanes-Oxley Act as well as rules from other federal regulators. She has a Master Degree in International Economics and Finance from Brandeis University.

Would a commodity merchant by any other name smell as, um, sweet? Reuters reports that commodity merchants such as Cargill and energy companies such as Shell and BP are going out of their way not to be known as swap dealers, so that they are unaffected by new federal regulation. Yet even though they are quick to point out that they are not banks, and should not be regulated like banks, Reuters notes, in one crucial way, they do act like a bank

Here’s the scoop.  The Commodity Futures Trading Commission and the Securities and Exchange Commission are working on rules to regulate the $700 trillion derivatives market. While the CFTC recently delayed a vote on defining things including “swap dealer” and ”major swap participant,” they are working on regulation on regulating swap dealers. And one of the biggest issues surrounding it is defining who is a swap dealer.

Companies like BP and Shell say that while the technically be trading all sorts of swaps – in some cases, it’s in the billions per year, depending upon the company – they shouldn’t be called swap dealers because, as Reuters notes, “they use the market principally to shield themselves from risks associated with the physical assets they own — be it an oil well, refinery, or power plant.”

However, they can be involved in hedging, and in third-party sales. Chris Thorpe, who manages energy derivatives at a broker called INTL FC Stone, says that “for the bigger, more credit-intensive customers we pitch to, we’ll see these guys as competitors about 25 to 50 percent of the time.” Hmmm.

What the proposed regulations, which are authorized by Congress’ Dodd-Frank financial reform legislation, would do is require those classified as swap dealers to use swap execution facilities to make their trades, with clearinghouses and collateral involved to lower the risk. So the difference as to whether someone is a swap dealer or a major participant can be huge.

Energy companies are banding together to lobby to stop being considered as swap dealers. “We’re not swap dealers. We don’t take either side of any transaction,” Mark Menezes, an attorney who is working with energy businesses who are lobbying on the issue tells Reuters. “One shouldn’t be deemed to be a swap dealer if swaps are used to mitigate commercial risk.”

There is opposition to that stance. MIT professor John Parsons says that “if Shell is dealing in derivatives in direct competition with Goldman Sachs, they shouldn’t be held to a different standard than Goldman Sachs.” BP has $7.2 billion in derivatives, around 20% of the value of Goldman’s derivatives.

So what will happen if the CFTC labels these firms as swaps dealers? Experts think they will get out of that sort of business, ceasing the swaps trading.

Lisa Swan is a Feature Writer for the Compliance Exchange and the Wall Street Job Report. She is also a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in the New York Daily News, Yahoo Sports, Huffington Post and the books Graphical Player 2011 and Graphical Player 2010.

The Independent Community Bankers Association has been up in arms over the new regulatory environment imposed by the Dodd-Frank Act, in what they are calling a broad regulatory attack that will cause the “sweeping [of] the innocent along with guilty.”

The ICBA is worried that although the Dodd-Frank is meant to target the biggest offending financial institutions like Citigroup and Bank of America, the “slew of new regulations” has the capacity to adversely affect smaller firms and “unfairly punish community banks”.

Cam Fine, CEO, has been adamant that the bill is a regulatory overreach, “The ICBA is very concerned that many of the new proposed mortgage rules will actually cause community banks in particular to experience high costs with very little benefit to the customer.”

While the ICBA has maintained that community banks are “generally less risky mortgage-lenders than non-banks,” others have pointed to historically significant mistakes from the sector leading up to the financial crisis. On general it is assumed that commercial banks “stay very close to the loans” because of their accountability to local communities, thus, have very little incentive to carve up and repackage loans into securities like the larger institutions have been accused of.

The Consumer Financial Protections Bureau’s (CFPB) new policies are not targeted at community lenders—they apply to all mortgage lenders as they should. The ICBA has been complaining of possible tougher restrictions on lending for first time home buyers. Yet, the consensus of policy makers has been exactly that—the market needs to be more constricted. More risky mortgages are a net detriment to lenders and the economy at large.

The ICBA may have a valid argument. Their contribution to the disastrous mortgage environment leading up to the Financial Crisis may have been marginal and if present at all, would be generally contained to their region of activity. Larger financial institutions formerly mentioned maintained the institutional capacity to parcel out systemic risk not limited to the area in which they conducted their business.

Regardless of any company’s net contribution to the 2008 Financial Crisis, regulatory reforms must be made without exceptions if the economy is to produce an iron-clad platform moving forward.

Cameron Stockman is a contributing writer for ComplianceX and the WallStreetJobReport. He is a graduating student at McGill University in Montreal, Canada, specializing in Economics and International Relations. Previously he was contributor and business editor at the Prince Arthur Herald, and currently acts on the Editorial Board of the McGill Journal of Economics. He hopes to dive into the world of finance—either in quantitative risk assessment, or wealth management. He maintains a personal blog—an economic and political critique of the world at large, at http://theroddickwriter.tumblr.com/

As Garret Bauer, convicted insider trader, awaits sentencing, he has been busy in the community attempting to deter students and colleagues from practices which got him implicated and convicted. Bauer traded on inside information for 17 years, in a ‘triad’ conspiracy involving two other defendants, Ken Robinson, and Matthew Kluger who is a Washington lawyer.

The trio worked cooperatively, splitting the 17 year cumulative profits of over $32 million three ways. Matthew Kluger would steal “confidential, non-public information about mergers and acquisitions from his firm’s email servers” and provide the information to Robinson. Robinson, as the middle-man, did not conduct in any trades—but sent the tips to Bauer to be traded.

Bauer started to become unreliable, deciding not to act on all trade tips– Robinson took a portion of the trading into his own hands. It was at this point, Bauer says “where I assume the FBI and SEC investigated him.” Robinson did not last long before turning his accomplice Bauer in.

Bauer is realistic and understands the ramifications of his actions. He has also taken on rare responsibility, stating “Ken didn’t force me to do anything, your do always know what you’re getting into. You do know the information is illegal, but just like I though, most people think they’re not gonna get caught, and I’m trying to let people know that people do get caught.”

Both Bauer and Kluger have pleaded guilty to “securities fraud, conspiracy to commit money laundering, and obstructing justice.” Both could have to face 20 year prison sentences at a maximum. Robinson has also pleaded guilty, to two counts of securities fraud and one count of conspiracy. However, he “could get a more lenient sentence, possibly avoiding prison time.”

The FBI has kept fairly quiet over the prosecution, but has made a clear statement on its new focus to target securities fraud as a “top investigative priority”.

Cameron Stockman is a contributing writer for ComplianceX and the WallStreetJobReport. He is a graduating student at McGill University in Montreal, Canada, specializing in Economics and International Relations. Previously he was contributor and business editor at the Prince Arthur Herald, and currently acts on the Editorial Board of the McGill Journal of Economics. He hopes to dive into the world of finance—either in quantitative risk assessment, or wealth management. He maintains a personal blog—an economic and political critique of the world at large, at http://theroddickwriter.tumblr.com/

The Foreign Corrupt Practices Act prohibits U.S. officials from bribing foreign officials. Sounds simple enough, right? Turns out the regulations are vague enough that dozens of trade groups, including the Chamber of Commerce, have written the Justice Department and the Securities and Exchange Commission asking for more guidance on how to comply with the law, Reuters reports.

In 2010, the U.S. government collected $1.8 billion in sanctions from 23 companies as a result of increased FCPA enforcement.  But the government has also had some court setbacks recently with rgard to FCPA cases.

One issue that needs clarification is what constitutes a foreign official. If a sovereign wealth fund controls a company, is an employee at that company considered a foreign official?

Bribing employees of any “instrumentality” of a foreign government  is banned. But the law does not offer a clear definition of “instrumentality.”

Other issues involve donating to charities that foreign government support and accepting business trip costs for air travel. Are these considered bribes?

Another big issue is what another company might have done before your company acquired it.

“The threat of successor liability even if a thorough investigation is undertaken prior to a transaction has had a significant chilling effect on mergers and acquisitions,” the trade groups said in their letter to Justice and the SEC.

The SEC is investigating Wynn Resorts’ gaming licenses in Macau and its donations of $135 million to the University of Macau. Law enforcement officials are also looking into whether Avon Products won the first-ever license that China has given to a Western company  allowing them to sell products door-to-door.

But Tuesday was also the day that Justice moved to dismiss charges in a bribery case in the military equipment business against over a dozen defendants. Prosecutors could not convince two juries that the defendants did anything illegal.

So it would seem to be in law enforcement officials interest as well to make sure that the FCPA is easier to understand.

Jon Lewin is a Feature Writer for the Compliance Exchange and Wall Street Job Report. He is also a columnist for the Faster Times and a blogger for Subway Squawkers. Lewin’s work has appeared in the New York Daily News, Huffington Post and Digital Innovation Gazette as well as the “Cambridge Companion to Baseball” and the Daily News history essay collection “Big Town Big Time.”

Moody’s Investors Service is taking a closer look at municipal bonds and other such debt incurred by the nation’s cities and states. Reuters reports that the credit rating agency is looking into the ratings of such debt, specifically the ones that are backed by one of the 26 banks which could be getting a credit downgrade.

In addition, Moody’s is also set to look at short-term obligations, as well as potentially downgrading tender option bonds.

There is a $3.7 trillion market in this country for municipal bonds, so Moody’s announcement could cause a little trepidation. Much of the municipal debt is backed by letters of credit from banks – so much so, that Reuters says a “bubble” in such letters has developed.

Specifically, among other reviews, Moody’s is going to put under its microscope around 500 such monetary obligations backed by Bank of America, one of the banks whose credit rating it is considering downgrading. Such muni bonds in question include ones from New York City, as well as the District of Columbia. Moody’s will also look at around 500 tender option bonds that the bank has backed.

JPMorgan Chase will also be under the magnifying glass, with around 350 muni debt obligations it backed being examined. These include various educational, housing, finance, and health agencies in cities and states, including New York and Illinois.

In other news, Moody’s recently warned 114 European banks that their credit ratings could sink due to the European debt crisis.

Lisa Swan is a Feature Writer for the Compliance Exchange and the Wall Street Job Report. She is also a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in the New York Daily News, Yahoo Sports, Huffington Post and the books Graphical Player 2011 and Graphical Player 2010.