Bitcoin tops $20,000 for first time; JPMorgan’s failed bid for Eaton Vance

Receiving Wide Coverage ...

No end in sight

The Federal Reserve is likely to continue its massive asset purchase program and low interest policies for another three years, based on the results of its last monetary policy meeting of 2020 on Wednesday.

“Following their two-day meeting, Fed officials released a policy statement that was virtually unchanged from November’s meeting, except for one crucial difference,” the Wall Street Journal reported. “While at that [earlier] meeting they continued their pledge to keep buying $80 billion in Treasurys and $40 billion in mortgage bonds ‘over coming months,’ on Wednesday they said they would sustain those asset purchases ‘until substantial further progress’ has been made toward their goals of full employment and 2% inflation.”

“That suggests the Fed will be buying assets for a long time. Projections released alongside Wednesday’s statement show that officials’ median projection for the unemployment rate over the long run—essentially, their assessment of where it would be under full employment—is 4.1%. They don’t expect it to reach that level until some time in 2023. They don’t think that inflation will reach 2% until 2023, either.”

More Fed coverage in the Journal, Financial Times, New York Times and Washington Post.

Bitcoin breaks out

“Bitcoin surged above $20,000 on Wednesday for the first time in its 12-year history, part of a furious rally that has seen the digital currency nearly triple this year,” the Journal reported. “The digital currency rose 9.3% to $21,240 after hitting an intraday high of $21,448.”

“The move above $20,000 is the latest bullish sign for cryptocurrencies, which after years of operating in the fringe are beginning to be taken more seriously by professional investors. The record came after the U.K. investment firm Ruffer Investment Management disclosed that it was holding about $744 million of bitcoin.”

More on bitcoin in the Washington Post.

Wall Street Journal

Falling short?

The European Union announced plans to help member countries set up national “bad banks” to “help cope with a possible avalanche of defaulted loans triggered by the pandemic. The European Central Bank has warned banks could be facing $1.7 trillion in bad loans under an extreme, yet possible, economic scenario.”

“The proposal for the bad banks announced Wednesday by the European Commission, the EU’s executive arm, underscores its limits in trying to create EU-wide solutions that all member states can agree on. The effort would rely on individual governments to sponsor the bad banks, falling short of more ambitious proposals for a continent-wide bad bank. As part of the package, the commission is also trying to develop a secondary market for bad loans and to unify insolvency rules across the continent, both key to helping banks find buyers for their nonperforming assets.”

“The plan stops far short of creating an EU-wide bad bank, as some had hoped,” the Journal noted. “The lack of ambition is lamentable but understandable. Commission proposals require signoff not just from the European parliament but also from Europe’s national leaders, who are often loath to approve anything that shares financial risk among them. The glacial pace of recent reform on the banking and capital market unions attests to the challenge. Unfortunately, that leaves Europe’s subscale banks struggling for profits among a patchwork of national and EU rules while competing with larger U.S. rivals.”

More Journal coverage of the "bad bank" proposal.

Financial Times

Bidding war

JPMorgan Chase “lost out to Morgan Stanley in the $7 billion bidding war to buy U.S. investment manager Eaton Vance, a revelation that highlights the fierce competition among Wall Street powerhouses to beef up their asset management arms.” The disclosure “was detailed in a securities filing made earlier this month by Morgan Stanley,” which showed that an unidentified “Party A” — said to be JPMorgan —
“kicked off the battle in April with an unsolicited approach to buy Eaton Vance and subsequently made three proposals to buy the company.”

In fact, after Morgan Stanley’s cash and stock offer of $56.50 was accepted, “JPMorgan returned the next day with another bid of $62.06, but “Thomas Faust, Eaton Vance chairman and chief executive, declined to re-enter talks with JPMorgan because of an ‘oral agreement’ with Morgan Stanley ‘not to pursue competing transactions.’ ”

Quotable

“Together these measures will ensure that monetary policy will continue to deliver powerful support for the economy until the recovery is complete.” — Fed Chair Jerome Powell, announcing that the Fed intends to continue its asset purchases for likely several more years.