Receiving Wide Coverage ...
The Taper: The Federal Reserve announced it will begin cutting back on bond purchases next month, sooner than many economists expected. While this is generally viewed as a vote of confidence in the economy by departing Chairman Ben Bernanke, the central bank cautioned it would keep short-term rates near zero until "well past" when unemployment falls below 6.5% (it was 7% last month). The decision to "taper" asset purchases is one less thing for Janet Yellen to worry about when she succeeds Bernanke next month, but she'll still have a full plate, according to a sidebar in the Journal (which focuses exclusively on monetary policy issues and doesn't mention bank regulation, which presents a whole other set of challenges). In an op-ed in the FT, economics professor Barry Eichengreen calls the taper announcement a "non-event": "These changes are inconsequential by the standards of the dramatic and unprecedented developments in monetary policy that we have seen since 2008; $10bn of [reductions in] monthly securities purchases are a drop in the bucket for a central bank with a $4tn balance sheet. It is a way for the Fed to signal to its detractors that it hears their criticisms of its unconventional monetary policies, and that it shares their desire to return to business as usual. But, at the same time, the central bank has also signalled that it is not prepared to return to normal monetary policy until a normal economy has returned."
Data Breach at Target: Following a report by info security maven Brian Krebs, the retailer confirmed that 40 million consumer debit and credit card accounts nationwide were compromised from Black Friday to mid-December. "Target said it alerted authorities and financial institutions immediately after it found out about the unauthorized access," notes the Journal. "Online customers were not affected by the breach, which appears to have been isolated to the point-of-sale systems in Target's retail stores," according to the Times. There's additional coverage in the Washington Post (which disclosed its own data breach).
Volcker, Revisited (Already): Well, that didn't take long. With the ink barely dry on the final version of the ban on proprietary trading by banks, anonymice tell the Journal regulators are working on guidance clarifying the rule's treatment of CDOs. Many regional banks still hold collateralized debt obligations made up of trust-preferred securities issued by other banks, the FT notes, and could suffer capital hits if required to unload them. The House Financial Services Committee, whose leaders are concerned about Volcker's unintended consequences for community banks, plans a hearing on the rule.
Bitcoin: A Chinese exchange said it would no longer allow customers to trade yuan for bitcoins, prompting another big selloff in the digital currency and a lot of smug I-told-you-sos from its haters. We maintain that the exchange-rate volatility is a boring sideshow. As payments tech consultant Dave Birch (who is by no means a Bitcoin fanboy) says in this video interview with the Journal, "It's plausible the volatility could reduce over time. It's the technology that's the exciting thing." Example? Being able to transact electronically without having to entrust personally identifiable information to a merchant (see "Data Breach at Target," above).
"JPMorgan shoots the instant messenger" No more electronic chats on the trading floor. The concern is compliance, not productivity.
New York Times
The U.K. plans to replace paper pound notes with plastic ones like those issued in more than 25 countries, including Canada and Australia. The U.S. is not expected to follow suit.
Speaking of our cousins across the pond, former Prime Minister Gordon Brown warns in an op-ed that the international financial system is "Stumbling Toward the Next Crash. Most of the problems that caused the 2008 crisis excessive borrowing, shadow banking and reckless lending have not gone away. Too-big-to-fail banks have not shrunk; they've grown bigger. Huge bonuses that encourage reckless risk-taking by bankers remain the norm." Brown blames lack of coordination among the world's governments. "Instead of retreating into our national silos, we should have seized the opportunity to fix global standards for how much capital banks must hold, how much they can lend against their equity, and how open they are about their liabilities." While the Volcker rule bans prop trading by U.S. banks, there's no such restriction in continental Europe, he notes.
Scan usually relishes poking fun at VIPs, but Time's description Wednesday of Jamie Dimon's family holiday card as "opulent" and "maddeningly tone deaf" bordered on gratuitous. More execs should, like the JPM chief, circulate images of themselves in jeans and an unbuttoned denim shirt hitting tennis balls across the living room. You want opulent? Check out the Atlanta home of Jeffrey Sprecher, the new boss of the New York Stock Exchange, in the latest Fortune. That's some tall front doorway.