He Ain't No Roosevelt

The administration's planned overhaul of the financial regulatory system gets top billing across the board, but the public's muted support for the proposals casts a shadow over the (not so) grand scheme, unveiled yesterday by President Obama. The New York Times calls the plan "little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself," and Reuters says it "only partially tackles a task once seen as vital—a top-to-bottom revamp of financial regulatory agencies." However, the financial industry is arguing the potential changes are drastic enough that they "could stifle innovation and make loans more expensive," the Wall Street Journal writes. Next up, the bill will head to Congress, where more than a dozen committee hearings on the plan are scheduled between now and mid-July, Reuters reports. In that time, it can be expected that banks will lobby hard against the bill, particularly the tenet that would vest the Federal Reserve with increased powers.

Among the proposed changes is increased scrutiny of executive compensation, hedge funds, and over-the-counter derivatives as well as other securitized instruments and institutions deemed (all together now) too big to fail. It would also require that banks hold more capital and create a regulatory agency that would oversee financial products for consumers, including mortgages. Finally, it would ensure that consumers are offered more "plain vanilla" financial products.

Reacting to the bill, banks have surprisingly rallied around the Office of Thrift Supervision, a branch of the Treasury established two decades ago to supervise savings-and-loans, which under than plan would be merged with the Office of the Comptroller of the Currency, according to CNNMoney. OTS was the regulator for many of the "high-profile financial casualties of the past year"—namely IndyMac, Countrywide, Washington Mutual, and AIG (AIG)—and its acting director was put on leave in March amid a probe by the Treasury into the agency's actions in an accounting scandal at IndyMac. Given that, "you wouldn't think the proposal would stir much interest, let alone opposition," the site says. But "bankers say eliminating OTS would wipe out a culture that understands the needs of small thrifts, which are obliged to channel most of their lending to housing-related activities." However, in keeping the agency as a stand-alone entity, it would allow banks to participate in "regulatory arbitrage," a practice in which they shop for the most lenient overseer.

Topping the WSJ's Marketplace section is word that Eddie Bauer (EBHI), your mom's favorite clothing store, has filed for Chapter 11 bankruptcy protection, burdened with a heavy debt load it says it incurred during its split with parent Spiegel. The Bellvue, Wash., retailer has already received an offer from New York private-equity firm CCMP Capital Advisors, which has said it will pay $202 million in cash for the company's assets. According to the Seattle Times, CCMP has said it wants to take over the struggling retailer within 45 days and "continue a 2-year-old turnaround effort to remake it into a serious outdoor-gear and -apparel brand." Jonathan Lynch, a managing director at CCMP, said the plan is to operate Eddie Bauer with little or no long-term debt and that Eddie Bauer CEO Neil Fiske will stick around. He added that the firm has no plans for layoffs or moving the company's headquarters. "Bankruptcy rumors had been swirling as Eddie Bauer struggled with slumping sales amid the recession. It reported a loss for the first quarter of $44.5 million as sales fell 16 percent to $179.8 million. The publicly held company had $476.1 million in assets and $426.7 million in debt at the time of the filing Wednesday," the Seattle Times writes. Other buyers may also still bid while the company is under bankruptcy protection.

It's official: Ten banks have now repaid $68 billion in government loans, "as they race to extract themselves from government restrictions on pay for top executives," Reuters reports. JPMorgan Chase (JPM) said it repaid $25 billion to TARP, while Goldman Sachs Group (GS) and Morgan Stanley (MS) said they repaid $10 billion each. U.S. Bancorp (USB) said it repaid $6.6 billion, Capital One Financial Corp. (COF) $3.6 billion, American Express Co. (AXP) $3.4 billion, BB&T Corp. (BBT) $3.1 billion, Bank of New York Mellon Corp. (BK) $3 billion, State Street Corp. (STT) $2 billion, and Northern Trust Corp. (NTRS) $1.57 billion. All but Northern Trust underwent government stress tests, and each was given permission to repay the funds last week.

And more from Reuters: Bing, Microsoft's (MSFT) new search engine, won increasing market share last week, nabbing 12.1 percent of U.S. Internet searches. The week prior, Bing's launch week, the engine caught 11.3 percent of all searches. The week before that, it was 9.1 percent. "For comparison," Reuters writes, "Google (GOOG) got 65 percent of U.S. searches in May, the last full month for which figures are available, followed by Yahoo (YHOO) with 20.1 percent and Microsoft with 8 percent."