And this is good!  While no big U.S. bank failed the test, some of Wall Street’s marquee names were shocked by the disparity between their expectations and the Fed’s, such as projections for how banks’ assets and net income would fare in a severe economic downturn, said people close to the banks.

“We all ended up having a wake-up call on what [the Fed] thought our losses could be,” said a person close to the process.

Matt Levine estimates that discussions about how unpredictable these tests should be suggests: enough to keep the banks on their toes and make them think seriously about their crisis modeling, but not so much as to be a random outcome that makes modeling pointless.

How much the three revise-and-resubmitters took out of their revised capital plans: Morgan Stanley cut out a $4.9 billion preferred-stock buyback, JPMorgan cut out about $6 billion of capital return, and Goldman probably cut out about $3 billion.

Willaim Pesek writes:  The Bank of Korea has no shortage of diplomatic ways to explain yesterday’s surprise rate cut, including weak domestic demand, sluggish business investment and anemic exports. But it’s worth being clear what this move was really about: Japan.

Barry Eichengreen writes: The Federal Reserve is under attack. Bills subjecting the United States’ central bank to “auditing” by the Government Accountability Office are likely to be passed by both houses of Congress. Legislation that would tie how the Fed sets interest rates to a predetermined formula is also being considered.

Anyone unaware of the incoming fire only had to listen to the grilling Fed Chair Janet Yellen received recently on Capitol Hill. Members of Congress criticized Yellen for meeting privately with the president and treasury secretary, and denounced her for weighing in on issues tangential to monetary policy.

Still others, like Richard Fisher, the outgoing president of the Dallas Fed, have inveighed against the special role of the Federal Reserve Bank of New York. Reflecting the New York Fed’s heavy regulatory responsibilities, owing to its proximity to the seat of finance, its president has a permanent seat on the Federal Open Market Committee, the body that sets the Fed’s benchmark interest rate. This, its detractors warn, privileges Wall Street in the operation of the Federal Reserve System.

Finally, some object that bankers dominate the boards of directors of the regional Reserve Banks, making it seem that the foxes are guarding the henhouse.

This criticism reflects the fact that the United States has just been through a major financial crisis, in the course of which the Fed took a series of extraordinary steps. It helped bail out Bear Stearns, the government-backed mortgage lenders Freddie Mac and Fannie Mae, and the insurance giant AIG. It extended dollar swap lines not just to the Bank of England and the European Central Bank but also to the central banks of Mexico, Brazil, Korea, and Singapore. And it embarked on an unprecedented expansion of its balance sheet under the guise of quantitative easing.

These decisions were controversial, and their advisability has been questioned – as it should be in a democracy. In turn, Fed officials have sought to justify their actions, which is also the way a democracy should function.

There is ample precedent for a Congressional response. When the US last experienced a crisis of this magnitude, in the 1930s, the Federal Reserve System similarly came under Congressional scrutiny. The result was the Glass-Steagall Act of 1932 and 1933, which gave the Fed more leeway in lending, and the Gold Reserve Act of 1934, which allowed it to disregard earlier gold-standard rules.

The Banking Act of 1935, as amended in 1942, then shifted power from the Reserve Banks to the Board in Washington, DC, and confirmed the special role of the Federal Reserve Bank of New York.

These reforms reflected an overwhelming consensus that the Fed had been derelict in fulfilling its duties. It had failed to prevent the money supply from contracting in the early stages of the Great Depression. Heedless of its responsibilities as an emergency lender, it had allowed the banking system to collapse. When financial stability hung in the balance in 1933, the Reserve Banks’ failure to cooperate prevented effective action.

Given such incompetence, it is not surprising that subsequent reforms were far-reaching. But these reforms went in precisely the opposite direction from today’s proposed changes: fewer limits on policy makers’ discretion, more power to the Board, and a larger role for the New York Fed, all to enable the Federal Reserve System to react more quickly and robustly in a crisis. It is far from clear, in other words, that the right response to the latest crisis is an abrupt about-face.

Ultimately, whether significant changes are warranted should depend on whether the central bank’s interventions in fact aggravated the recent crisis, as they aggravated the crisis of the 1930s. But the Fed’s critics have been curiously nonspecific about what they regard as the Fed’s mistakes. And where they have been specific, as with the accusation that the Fed was fomenting inflation, they have been entirely wrong.

Fed officials, for their part, must better justify their actions. While they would prefer not to re-litigate endlessly the events of 2008, continued criticism suggests that their decisions are still not well understood and that officials must do more to explain them.

In addition, Fed officials should avoid weighing in on issues that are only obliquely related to monetary policy. Their mandate is to maintain price and financial stability, as well as maximum employment. The more intently Fed governors focus on their core responsibilities, the more inclined politicians will be to respect their independence.

Finally, Fed officials should acknowledge that at least some of the critics’ suggestions have merit. For example, eliminating commercial banks’ right to select a majority of each Reserve Bank’s board would be a useful step in the direction of greater openness and diversity.

William Hubbard, head of the American Bar Association, writes: A recent decision of the Supreme Court of Canada protects the integrity of the attorney-client privilege and the confidential lawyer-client relationship in connection with Canada’s federal anti-money laundering, anti-terror law.

The court’s Feb. 13 landmark decision in Attorney General of Canada v. Federation of Law Societies of Canada acknowledges the critical importance of the attorney-client privilege—known in Canada as the solicitor-client privilege— and strikes down portions of Canada’s Proceeds of Crime (money laundering) and Terrorist Financing Act and regulations that would intrude on the privilege.

The opinion reinforces the principles that lawyers are not agents of the state and that the government may not search lawyers’ records without a warrant. The decision also affords constitutional protection to the privilege and to a lawyer’s broader “commitment to the client’s cause,” meaning that the government cannot impose obligations on lawyers that undermine either principle.

Although the opinion is from the Canadian Supreme Court, it also has resonance for the United States. The attorney-client privilege is a bedrock legal principle of our free society. It enables both individual and organizational clients to communicate with their lawyers in confidence, which is essential to preserving all clients’ fundamental rights to effective counsel. The Canadian decision should serve as an important reminder to U.S. legislators and regulators that federal regulation of the legal profession has limits, including limits on measures that intrude on the privilege or on the broader confidential lawyer-client relationship.

Those who know of the U.S. government’s attempts to impose anti-money laundering and counter-terrorist financing mandates on U.S. lawyers will identify with the history behind the Canadian ruling.  Fifteen years ago, the Canadian Parliament enacted a sweeping anti-money laundering law requiring financial intermediaries—including lawyers—to collect, record and retain material. The law created a new agency to oversee compliance, and it allowed that agency to search for and seize material. Non-compliance subjected the offender to fines and imprisonment. Regulations adopted in 2002 subjected lawyers to the law’s recordkeeping and client-verification requirements and allowed the government to search and seize records, subject to a limited exception for the privilege.

The Federation of Law Societies of Canada challenged the constitutionality of these measures as they applied to lawyers and prevailed at every step of the litigation that spanned more than a decade. The court’s recent decision struck down those portions of the law allowing warrantless searches and seizures of lawyers’ offices and those requiring lawyers to monitor and report their clients’ financial activities to the government. The court reasoned that each of these actions would undermine both the privilege and the lawyer’s duty to the client.

ABA adopted voluntary good practices guidance in 2010 designed to help lawyers to detect and prevent money laundering in their practices. Last year, the ABA also collaborated with the International Bar Association and the Council of Bars and Law Societies of Europe to produce a lawyer’s guide with practical tips for detecting and preventing money laundering, highlighting the ABA’s commitment—both domestically and internationally—to educating the profession in this area.

The decision by Canada’s highest court eloquently recognizes the critical role that the attorney-client privilege and the confidential lawyer-client relationship play in our justice system. Although we are heartened by the opinion that will protect the Canadian legal profession from intrusive regulation, legislative and regulatory efforts that could imperil the same values remain in the United States.

Dougan took over Credit Suisse in 2007, just in time to catch the worst global financial crisis in decades.

Last year Swiss lawmakers started pressuring him to resign after the bank plead guilty to helping clients evade taxes. The $2.6 billion fine the bank had to pay resulted in its first quarterly loss since 2008.

Pressure was mounting on Dougan from inside the bank too. After he testified on Capitol Hill about the tax evasion matter, a staff group representing Swiss bankers at Credit Suisse and other Swiss banks demanded that he apologize. They said Dougan’s testimony simply served to “vilify lots of employees that had nothing to do with offshore U.S. banking.”

Who knew what and when has been a continuig question in the investigation of banks, money laundering and aiding and abetting income tax evasion.  It is probable that the Department of Justice, the SEC, IRS and White House did not want to force an American banking CEO to plead guilty to criminal activities.

The Senate Committee on Investigations and a posse of legislators in the House and Senate kept insisting that top brass be brought to justice..  It is probable that a foreign bank was picked to take the rap.

Brady Dugan has claimed to have no knowledge of the schemes to aid and abet tax evasion.

When Maxine Waters insisted that the Department of Labor hold hearings on a Credit Suisse exemption from their criminal plea, evidence was submitted that Dougan did in fact know all about these schemes.  Pressure brought by the Labor Department hearing, the outcome of which has not yet been announced, may well have forced his resignation.

Credit Suisse wants the 2 billion US pension business it has been handling.  Proof that Credit Suisse had put aside its “culture of corruption” may have forced Dougan to step down.

It will be interesting to see if the exemption is now granted to Credit Suisse, and the reasons for which it is granted.  Clearly talk has been flying from the DOJ to the White House to the SEC.