Square gets into lending business; Costs of money laundering

Editor's note: Morning Scan will not publish on Monday, Oct. 8, in observance of Columbus Day. We’ll be back on Tuesday, Oct. 9.

Receiving Wide Coverage ...

Courts rule
A federal judge ruled that a black former Morgan Stanley broker who sued the bank over racial bias claims must pursue his case in private arbitration, as required by company policy. “We are pleased with the court’s decision in this case,” the bank said. “The firm is strongly committed to non-discrimination and looks forward to addressing this dispute on the merits.”

In London, a senior compliance officer at Commerzbank who claims she was “marginalized” when she returned from maternity leave has won a sex and maternity discrimination claim against the bank. The woman said “substantial elements of her job had been transferred to another employee when she returned from maternity leave” and that she “was sidelined when she came back to work in September 2016.”

Wall Street Journal

Drip, drip, drip
Danske Bank’s disclosure that the U.S. Justice Department has launched a criminal investigation may not be the final chapter. “What remains worrying for investors is that the bank is only taking decisions when forced to do so. It is hard to have faith that all the bad news is out. The way this story keeps unraveling, it is hard to be sure there won’t be more terrible revelations.”

Separately, the Treasury Department warned U.S. banks about potential money laundering attempts by members of Nicaraguan President Daniel Ortega’s government or people acting on their behalf.

The growing number of money laundering scandals may have an impact on bank earnings, even on those institutions not accused of wrongdoing. "Investors are wrong to ignore the long-term impact," the paper notes. "Governments have made banks the front-line defense against a range of crimes. Combined with the weight of post-financial crisis regulations, the pressure to spot wrongdoing among clients adds costs and acts as a brake on the entrepreneurial spirits of business-winning bankers. The result is lower returns to investors."

Financial Times

Funny moneyman
Andrew Sheets, head of cross-asset strategy at Morgan Stanley, originally attracted the attention of the investment bank from his work as a cartoonist for the student newspaper at Brown University in 2004. Since then “the cartoons have continued to flow, and together form a light-hearted, vivid history of a turbulent period for markets and the global economy.”

New York Times

More hits than homers
While “advising on huge corporate mergers may be exhilarating,” bankers “may find that a focus on smaller deals offers more dependable success. There’s a lot to be said for the ability to think up a smart deal and get it over the line — and for that, size isn’t what counts,” the paper says.

Washington Post

Warning signal
Sen. Bernie Sanders’ proposed bill to “break up the biggest banks won’t be speeding into law. But it should put Wall Street giants on notice that the calendar is shifting into a political season that will bring the industry more hostile attention.”

Home, sweet home
The American housing market has changed since the crash, the paper notes in a look back at the financial crisis. “Now that a decade has passed, industry insiders look back at where we were, what we learned and where we go from here to ensure that the trauma of the housing boom-and-bust and the Great Recession are not repeated." One big change is buyers "today look at a home as place to live, not as an investment.”

Elsewhere

Square installments

Jacqueline D. Reses

Square will let businesses that use its payment network offer short-term installment loans from Square to their customers. The loans will come in three-, six- or 12-month installments with interest rates ranging from zero to about 24%. “It's a seamless and transparent way to offer installment payments to customers who might otherwise walk away, or might not be able to buy something in that particular moment,” Square Capital CEO Jacqueline Reses told CNBC. Square has recorded 36 million transactions of more than $250 in the past year, according to Reses.

Seamless banking
Bank of America rolled out new functions on its mobile app that will make it easier for customers to move between their banking and investing accounts. “Users of the banking app can jump quickly to the Merrill Lynch app” with “one tap, eliminating the need to open and log into the Merrill app. The firm also rolled out a new dashboard that shows users in one place how they are racking up points, cash rewards and discounts across various banking, credit card and brokerage products and a new cash flow analysis tool that spans banking and investing.”

Coming to America
N26, the German app-only bank that is backed by Chinese tech giant Tencent, German insurer Allianz and PayPal co-founder Peter Thiel, launched its service on a limited basis in the U.K. on Thursday and expects to expand into the U.S. early next year.

Quotable

“The Federal Reserve is independent.” — White House Economic Adviser Lawrence Kudlow reiterating again that President Trump is not trying to pressure the Fed or Chair Jerome Powell to keep interest rates low.

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