Receiving Wide Coverage ...
Hawks, Doves, Hogs, Turkeys: It hardly compares to 2008, but liquidity in the bond market is drying up fast as investors prepare for a world without stimulus. With recent economic trends punctuated by Federal Reserve Chairman Ben Bernanke's comments last Wednesday about the timetable for slowing the Fed's bond purchases, investors have pulled near-record amounts of cash from the bond markets in recent weeks, the Journal reports. Meanwhile, Dallas Fed President Richard Fisher tells the FT that the markets are full of feral hogs ("If they detect a weakness or a bad scent, they'll go after it") trying to pressure the Fed into reversing its thinking. Fisher, known for having some of the more hawkish views among Fed officials, says that while it "made sense to socialize the idea that quantitative easing is not a one-way street," he did not want "to go from Wild Turkey to 'cold turkey' overnight." The Times, meanwhile, notes that the slow sell-off in bonds that market strategists had been predicting for years quickly turned into an all-out stampede, the force of which has spilled into the stock markets and into exchange-traded funds that hold bonds. "We don't think we've seen the capitulation we need to hit bottom yet," TF Market Advisors' Peter Tchir tells the paper. And Dealbook columnist Andrew Ross Sorkin asks whether the normally reserved Bernanke is now the man who said too much. But lest we accuse the Fed chief of engaging in some financial TMI, Sorkin himself notes it's possible the markets would have acted "even more erratically" if Bernanke's communication style had been any less straightforward.
The End of Easy Money: China's central bank is getting serious about reining in loose credit no small task in an economy fueled in great part with money that has been pumped in by the central bank itself. The Times reports that the People's Bank of China is admonishing the country's banks to improve their risk controls (but not all at once and not so severely that the economy suffers) and cracking down on the repackaging of risky loans into investments where the risks can hide in plain sight. Meanwhile, after a sharp cash squeeze that alarmed the Chinese markets last week, with some rates skyrocketing to as high as 30%, the Journal reports that a PBOC official in Shanghai has pledged that the central bank will steer interbank interest rates back to "reasonable" levels.
Wall Street Journal
Big banks have a new strategy for combating a recent waves of cyber-attacks that have threatened their systems: hiring hackers. At least one large U.S. lender now has hackers in its employ. Of course not all institutions, especially small banks, can afford such a measure, arguing all the more for banks to reach a new level of cooperation in protecting the integrity of the financial system's vulnerable digital infrastructure.
How do you say underbanked en francais? A former employee of French bank Societe Generale is putting together a business that would let consumers open bank accounts and obtain credit cards from the small tobacconist shops that dot the French landscape. The startup plans to launch its services in October and expects to attract 100,000 customers in 18 months. There are more than 27,000 independent tobacconist shops in France, and 38,000 bank branches.
Mervyn King used his final official appearance before British lawmakers to lash out at U.K. banks for pressuring politicians to ease capital standards. No one has called him, but the departing Bank of England governor has it on good authority that "senior politicians" under the influence of the financial services industry has reached out to other board members at the Prudential Regulation Authority, the successor agency to the Financial Services Authority.
Fed Governor Jeremy Stein and U.K. regulator Martin Wheatley will co-chair a new steering committee of global overseers to consider reforms to the London interbank offered rate, incoming Bank of England Gov. Mark Carney confirms. The group will weigh "the ease of potential transition" to a new way of calculating LIBOR presumably one that won't allow for the type of manipulation alleged to have occurred before and during the worst of the credit crisis.
Core Tier 1 capital ratios are "fast going out of fashion" as investors and analyst begin to wonder whether it's smart to let banks use their own models to set risk weightings for the loans on their books. Now regulators are pushing banks to use standard risk weightings, as has occurred in Sweden. There also have been arguments to move to a U.S.-style of measurement, by assessing capital adequacy based on leverage ratios that compare capital to overall lending.
Five years after the financial crisis began, trust in the banking system is still dismally low, Evelyn de Rothschild writes in an opinion piece. All it will take to repair is a complete "transformation in skills and ethics from bankers, regulators and politicians." But it's also the fault of politics, which has prevented government ministers from setting a clear course for the industry and has resulted in "hugely destabilising" actions like the "ham-fisted removal of Stephen Hester" as CEO of Royal Bank of Scotland.
New York Times
While not directly linking him to that $1 billion-plus of missing customer funds, the Commodity Futures Trading Commission is prepared to file a civil case against former MF Global chief Jon Corzine. The lawsuit would allege that Corzine, who took over MF Global after stepping down as governor of New Jersey, failed "to prevent the breach at a lower rung of the firm," the paper said, citing unnamed law enforcement officials. A Corzine spokesman said the case would be "unprecedented and meritless" but "not surprising considering the political pressure to hold someone liable for the failure of MF Global."