Obama Plan Catches Corporate Flak

The Obama administration's new financial system overhaul is drawing fire from both the private sector and politicians, the business press report today. According to the Wall Street Journal, corporate lenders would feel the pinch from the new plan as they would be required to register with the Federal Reserve if they are in the practice of issuing their customers credit cards, making loans, and providing other financial transactions. That would put retailers like Target (TGT) and firms like Harley-Davidson (HOG) and Pitney Bowes (PBI) "in the same regulatory category" as Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM), thus "subjecting the non-banks to much greater government oversight," the newspaper writes. The WSJ predicts that the added oversight and red tape may force the companies to simply ditch these financial offerings, "potentially shutting off another source of credit for consumers."

Another potential obstacle to the plan can be found on Capitol Hill. Treasury Secretary Timothy Geithner was on the Hill yesterday defending the plan to skeptical senators. If the chilly reception at the Senate banking committee is anything to go by, this could be a tough sell. The New York Times writes that senators "signaled an unwillingness to accept the White House recommendations intact, particularly the idea of expanding the powers of the Federal Reserve to enable it to regulate risk across the financial system." Geithner tried to play down the new Fed powers as "quite modest," but the senators weren't buying it. His next stop is the House financial services committee, where another hostile audience awaits.

Today's white-collar-crime beat leads off with the arrest of billionaire financier R. Allen Stanford outside his girlfriend's home in Fredericksburg, Va., Bloomberg reports. The 59-year-old is accused of masterminding a complicated $8 billion investment fraud through his Antigua-based bank. Stanford's attorney Dick DeGuerin told Bloomberg the bust went down like this on Thursday: "Federal agents in black SUVs surrounded his girlfriend's house this afternoon, and just sat there. I told him to walk out and introduce himself. So he did, and he asked them, 'If you've got a warrant, take me into custody. If you don't, I'm going to Houston.' And they did, so they arrested him." It was a bad day for former HealthSouth (HLS) CEO Richard Scrushy, too. On Thursday, Scrushy was hit with a "staggering" $2.88 billion civil suit judgement for his part in an accounting scam that unraveled in 2003. "But after six years of legal wrangling over the fraud at the rehabilitation chain, the question is, does Mr. Scrushy have any money left to pay the judgment?" the WSJ wonders.

The pace of job losses across the nation seems to be slowing according to new figures from the Labor Department, the AP reports via the NYT. The total number of people on the unemployment-insurance rolls fell by 148,000, to 6.69 million—the first decrease since early '09 and the largest monthly drop in seven years, notes the Christian Science Monitor. However, before we all get too excited, nearly half of the unemployment recipients had exhausted the 26 weeks of benefits provided under the regular state-level programs without finding new work. That suggests while the mass culling of jobs has eased, employers still see little reason to start hiring again. And just to temper optimism further, the number of new people signing up for benefits for the first time rose 3,000 to 608,000.

Hedge funds may be taking a bit of a kicking in the United States and Europe, but China seems pretty gung-ho on the sector. Sovereign-wealth fund China Investment Corp. (CIC) is set to invest $500 million in a Blackstone Group hedge-fund unit, the WSJ reports, just "part of a broad effort to put cash to work while global markets are rallying but remain below earlier peaks." CIC, underwritten by the Chinese government, is one of the world's largest sovereign-wealth funds and controls some $200 billion. The WSJ reports that CIC Chairman Lou Jiwei is considering a number of hedge-fund plays as he grows concerned that "his fund may miss opportunities near the bottom of the market."

And finally, CEOs of bailed-out companies continue to keep the corporate jet in operation, even for questionable purposes despite vows by Washington to crack down on the perk. According to the WSJ, "flight records show numerous occasions when banks receiving federal money have flown their planes to destinations near resorts or executives' vacation homes, including spots in Europe, Mexico, the Caribbean, south Florida and Aspen, Colo. In some cases, it's clear that bank executives were traveling for personal reasons; for other flights, many of which were over weekends or holidays, the passengers and purpose couldn't be established."