Capital One hacker’s other targets; yield curve inversion slaps banks

Receiving Wide Coverage ...

Multiple hits
Paige A. Thompson, the former Amazon.com employee charged with hacking into Capital One’s data, “hit more than 30 other targets, significantly expanding the scale of what was already considered one of the largest heists of data stored in the cloud,” according to federal prosecutors. They said they “expect to add to the charges against Ms. Thompson for each additional entity hit.” The Wall Street Journal earlier reported that one of those entities was UniCredit, Italy’s largest bank, which said it is still investigating the claim. Wall Street Journal, Washington Post

Michael Nagle/Bloomberg

Wall Street Journal

Falling, falling
The bank stock rout picked up steam on Wednesday, with most of the largest banks falling 3% or more as the yield curve between the two-year and 10-year Treasury securities inverted for the first time since 2007, signaling a possible recession within two years. Collectively, the six largest U.S. banks have now lost $136.7 billion in market-capitalization value since the end of July. Four of the six traded below their forward-looking book values.

“The inversion of 10- and two-year U.S. Treasurys has been a reliable indicator of an eventual recession for the past 40 years, and analysts say investors are increasingly factoring in the likelihood banks will struggle in that kind of environment. For banks, the move down in yields lowers interest rates, compressing how much they can earn from lending. Even worse, a broader economic slowdown would likely stifle lending activity, as well as other bank services, further hitting their profits.”

Financial Times

Interest in Berkshire
Pershing Square, the hedge fund of activist investor Bill Ackman, has taken a $688 million stake in Berkshire Hathaway, which now holds more than $100 billion of bank and other financial stocks. However, Pershing’s stake amounts to only 0.25% of Berkshire’s class B shares, while most of the voting power resides in the A shares, one-third of which are controlled by Berkshire Chairman Warren Buffett. “The Pershing stake in Berkshire will be a passive investment and is unlikely to become aggressive,” the paper says.

Bitcoin bump
Chinese investors have fueled a new run-up in the price of bitcoin. “The volume of bitcoin traded by mainland Chinese … has spiked about 50% over the past 10 days. Analysts note that the latest surge in interest comes after the People’s Bank of China last week allowed the renminbi to weaken through the level of seven to the U.S. dollar for the first time since the global financial crisis, increasing the appeal of alternative assets such as bitcoin.”

Surviving digital pressures
The “desirable” level of bank profitability is often a give-and-take between regulators and investors. Fat profits could mean the bank is taking on too much risk, while not enough could mean regulators have made it too difficult to make money, turning off investors. But “the real question is whether a model of financial stability via bank profitability can survive the immense technological pressures the sector faces,” the paper says. “The risk is that banks become unprofitable legacy utilities in an age of digital payments, non-bank credit and negative rates, but still retain systemic importance via their residual, slowly eroding impact on the role and function of money.”

New York Times

Lasting legacy
The late Cordelia Scaife May, “an heiress to the Mellon banking and industrial fortune with a half-billion dollars at her disposal, helped create what would become the modern anti-immigration movement,” the paper says. “She bankrolled the founding and operation of the nation’s three largest restrictionist groups — the Federation for American Immigration Reform, NumbersUSA and the Center for Immigration Studies — as well as dozens of smaller ones, including some that have promulgated white nationalist views. Today, 14 years after Mrs. May’s death, her money remains the lifeblood of the movement, through her Colcom Foundation.” Her concern was overpopulation, the paper reports.

Washington Post

How do we apply?
Denmark’s Jyske Bank has begun offering home buyers 10-year mortgages at a negative 0.5%, meaning borrowers will pay back a little less than they borrowed, not including one-time fees. “This highly unusual condition may be good for Danish home buyers, but economists say it’s an alarming sign for the global economy. Several major governments and more than 1,000 big companies in Europe are now able to effectively borrow from global financial markets at a negative interest rate.”

Quotable

“Although not all of those intrusions involved the theft of personal identifying information, it appears likely that a number of the intrusions did.” — Federal prosecutors commenting on Paige A. Thompson, the alleged Capital One hacker, who they say also hacked into the data banks of other institutions