Big bank failure would mean crisis; JPM, Amex to share

Receiving Wide Coverage ...
Not convinced: The chairman and CEO of the company that owns the New York Stock Exchange said he is prepared to look “stupid” if bitcoin turns out to be for real. But Jeffrey Sprecher said he was happy to have Cboe Global Markets and CME Group be the first to offer futures on the digital currency.

Separately, Revolut, a British digital payments company backed by Lloyds Banking Group and MasterCard, said it will allow its customers to trade bitcoin and other cryptocurrencies using 25 traditional currencies on their mobile phones starting this week.

To demonstrate how volatile the currency can be, the Wall Street Journal had one of its reporters withdraw $10 worth of the virtual currency from five bitcoin ATMs located in New York City, and posted video. “Bitcoin ATMs allow you to convert dollars into the virtual currency, but even during the time it takes to travel between ATMs, the exchange rate can change dramatically,” the paper notes.

Wall Street Journal
Still too big to fail?: The Office of Financial Research, an independent unit of the Treasury Department, said the failure of a large financial institution could still ignite or worsen a crisis, according to its annual report submitted to Congress on Tuesday. “Even with post-crisis rules aimed at laying out a plan to deal with the potential collapse of a large institution, the financial system could be shaken if one or more big banks fail,” the paper says paraphrasing the report. “Of particular concern is whether insolvent banks would be able to deal with their derivatives portfolios, an issue that helped exacerbate the 2008 financial crisis.” Still, the OFR rated the risks of such an event happening in the “medium range.”

The OFR may have even more important things to worry about first, like its own survival. The Trump administration told employees of the agency to expect “deep budget and staffing cuts,” according to the paper. The House Financial Services Committee is scheduled to hold a hearing about the matter on Thursday.

As good as a win: JPMorgan Chase and American Express will both continue to issue cobranded rewards credit cards for Marriott International, the hotel chain said. That relationship was thrown into doubt after Marriott, JPM’s card partner, bought Starwood Hotels & Resorts, Amex’s issuer. Combining the program, which generates $60 billion in annual spending, under one issuer had been considered.

“Maintaining the status quo is a win for Amex in particular, where the Starwood program is the card issuer’s second-largest co-brand program,” the paper says, noting that some Amex investors were nervous after the company lost its relationship with Costco last year.

Like-minded: Thomas Barkin’s appointment as president of the Federal Reserve Bank of Richmond is the latest example of a “gradual and subtle shift among central bank officials away from dissenters and toward consensus,” the paper reports.

Another weak quarter: Bank of America CEO Brian Moynihan and JPM’s CFO Marianne Lake both said they expected trading revenue at their respective banks to fall about 15% in the fourth quarter.

Chris Keane/Bloomberg

Inside the vault: The paper got a peek at David Rockefeller’s “legendary Rolodex.” The banker and philanthropist, who died earlier this year at the age of 101, recorded contact information on white 3-by-5-inch index cards on every meeting he had during his life, eventually amassing about 200,000 of the cards, which filled a custom-built Rolodex machine. “In the annals of CEO history, the breadth and depth of this record of contacts stand out,’’ said Nancy Koehn, a Harvard business professor and historian.

New York Times
A new direction: A decision last week by the Consumer Financial Protection Bureau may signal the “defanging” of the agency under the Trump administration. Following a three-year legal battle, the paper reports, the agency was about to emerge victorious against Nationwide Biweekly Administration, with the judge ready to slap $8 million in penalties against the mortgage lender for misleading borrowers.

“All that was left was to collect the cash,” the paper says. “Then Mick Mulvaney was named the consumer bureau’s acting director” by President Trump, and the CFPB withdrew its earlier demand to force the company to post an $8 million bond. “It was a subtle but unmistakable sign that the consumer bureau under Mr. Mulvaney is headed in a new direction — one that takes a lighter touch to regulating the financial industry.”

Separately, there will be a hearing on the agency's leadership case on Dec. 22.

Quotable
“The [banking] system is far more resilient than it was when the financial crisis loomed a decade ago, but new vulnerabilities have emerged, including in the last fiscal year.” — The U.S. Treasury’s Office of Financial Research in a report to Congress released Tuesday.