Mnuchin adds to anti-Libra chorus; Fed’s Williams touts SOFR

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Bigger issues
Treasury Secretary Steven Mnuchin said Facebook’s plan to launch its own cryptocurrency raises national security issues. “Many players have attempted to use cryptocurrencies to fund their malign behavior. This is indeed a national security issue,” he said.

“To the extent that Facebook can do this correctly, and can have a payment system correctly with proper AML [anti-money laundering measures], that’s fine,” Mnuchin said. “They’ve got a lot of work to do to convince us to get to that place.”

Mnuchin’s comments came one day before David Marcus, the head of Facebook’s blockchain division, “is set to take the hot seat in a Senate Banking Committee hearing.” In his prepared remarks, Marcus saidFacebook “won’t move forward with its Libra cryptocurrency without full approval and regulation.”

“The time between now and launch is designed to be an open process and subject to regulatory oversight and review,” he said. “And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”

“We need to create an environment in which the benefits of this technology can be reaped while minimizing the risks,” David Lipton, the International Monetary Fund’s acting managing director, writes in a Financial Times op-ed. “This will require cooperation — across countries, but also across sectors. Central bankers, regulators, ministries of finance, antitrust authorities, currency issuers and technology experts will need to speak a common language for a common purpose.”

Facebook's cryptocurrency plan is the “new flashpoint” in the “protracted fight to enact data security and privacy reform.”

Swing factors
Citigroup’s better-than-expected second quarter results “reflected the conventional wisdom about the current state of the global economy: U.S. consumers are going strong while corporate sentiment—particularly in Asia—is weakening due to trade tensions. But there is another message in the results: the threat of lower interest rates that hangs over Citi and all of its U.S. peers. Citigroup’s results are a timely reminder that risks to global growth will be the biggest swing factor in bank earnings for the foreseeable future.” Wall Street Journal, Financial Times

Wall Street Journal

Engage now
Federal Reserve Bank of New York President John Williams told financial firms “to stop dragging their collective feet” and transition to the Fed’s Secured Overnight Financing Rate to replace the scandal-scarred Libor.

“Don’t wait for term rates to get your house in order. Engage with this issue now and understand what it means for your operations,” Williams said in a speech at a financial conference.

Cutting class
Judy Shelton, one of President Trump’s latest picks for the Federal Reserve, “has amassed a spotty attendance record” as the U.S. representative on the European Bank for Reconstruction and Development, missing 11 of 26 board meetings in her first year. “That is a greater share than her predecessor and all but two of the bank’s 23 current directors.”

“While Ms. Shelton was easily confirmed for her current role, her performance as an EBRD board director could raise questions in addition to the typical queries about the economy and financial regulation she would likely face during confirmation hearings if Mr. Trump formally nominates her for the Fed job.”

Won’t go away
European banks have managed to sell “nearly half of the toxic loans off their balance sheets since emerging from a debilitating debt crisis earlier this decade.” But “some banks are still exposed to the loans they are meant to cleanse. In some cases, they lend to the purchaser of the bad loan or directly to the company that defaulted on the loan. The banks are also repurchasing parts of the bad loans through complex securitizations.”

Blast from the past
The grandchildren of the founders of a Cuban bank that was nationalized by the Communist government in 1960 are suing Société Générale for $792 million, claiming that the French bank benefited by dealing with the government-run bank that took it over. The lawsuit is being done “under a newly revived provision of a U.S. law that permits legal action by U.S. citizens or entities against companies doing business on property confiscated by the Cuban government.”

Financial Times

Get it in writing
Santander offered to pay Andrea Orcel up to €52 million to become the Spanish bank’s CEO last year before it rescinded the offer, “according to a formal offer letter seen by the Financial Times.” The offer included a “cash sign-on bonus of €17 million as well as up to €35 million of Santander shares to compensate him for deferred pay he risked forfeiting by quitting his job as head of UBS’s investment bank. The letter, dated September 24, appeared to throw doubt on the official reason that Santander gave for rescinding the job offer in January,” when it said couldn’t afford to cover any deferred compensation he was owed by UBS. Orcel is suing Santander, demanding that he be named CEO or be paid €100 million in damages.

Come and get your rewards
Banks around the world are adding rewards and points programs to their other retail banking products besides credit cards as a way to lure in new customers in an era of low interest rates.

Washington Post

Just following the plan
Despite criticism from some Democrats that the Trump Administration is dragging its feet on rolling out the Harriet Tubman $20 bill, “three current or former high-ranking government officials appointed by President Obama, and involved in the design and release of currency,” said the White House “has followed a timeline set under the Obama administration for the introduction of the new $20 bill.”

Quotable

“We will not allow digital asset service providers to operate in the shadows and will not tolerate the use of the cryptocurrencies in support of illicit activities.” — Treasury Secretary Steven Mnuchin, calling Facebook’s plan to launch a digital currency a “national security issue.”