Breaking News This Morning ...
Hudson City Warning: The New Jersey bank expects to post a fourth-quarter loss after extinguishing costly debt.
Receiving Wide Coverage ...
I Know Nothing! During a tense Congressional hearing, Jon Corzine once again denied any knowledge of improper use of MF Global customers’ money, contradicting CME Group chief Terrence Duffy’s repeated testimony. The Journal’s story leads with Corzine’s acknowledgment that he was aware of a transfer of funds to a JPMorgan Chase account in London the last day before MF Global filed for bankruptcy protection. This transfer, he told lawmakers, was approved by the brokerage’s back office in Chicago, whose workers “explicitly confirmed to me that the funds were appropriately transferred.” Meanwhile, the Times' "DealBook" reports that CFTC commissioner Bart Chilton is calling on Congress "to ban brokerage firms from investing customer funds altogether, except for in U.S. Treasuries."Wall Street Journal, Financial Times, New York Times, Washington Post
Job Cuts at Morgan Stanley: The investment bank plans to ax 1,600 jobs, or 2.6% of its work force, by the first quarter of next year, following big layoffs at several other big securities firms. “DealBook” in the Times quotes an anonymouse as saying the layoffs will affect “all job levels in all divisions,” with the notable exception of the 17,000 financial advisers in the Morgan Stanley Smith Barney unit (where 300 underperformers were let go in March). “Heard on the Street” in the Journal says the cuts are likely to be concentrated in “parts of the firm's fixed-income business that are capital intensive or will be penalized under coming Basel capital rules,” like securitization or correlation trading. Wall Street Journal, New York Times
It’s Official: As expected, SEC said it will appeal Judge Jed Rakoff’s rejection of the agency’s settlement with Citigroup over charges the bank misled the investors with a CDO that went kablooie. New York Times, Washington Post, Wall Street Journal, Financial Times
Wall Street Journal
The question of the common European currency's future to one side, the continent’s sovereign debt crisis is already causing investors there to think more provincially about where to put their money, a lengthy front-page article says. “Many European banks and institutional investors now want to buy the bonds only of their home countries or of safe markets.”
“Citigroup's Japan units were sanctioned for the third time since 2004 by financial regulators, this time for hoisting inappropriate products on customers and trying to influence short-term interbank interest rates.” A quote in this story from the Japanese banking regulator sounds like something you normally hear coming from an analyst’s mouth: “Looking at its business model, Citibank relies too much on fee-generating business amid sluggish lending.”
Years ago, when we covered commercial real estate, someone once told us the difference between a corporate treasurer and a property mogul: the corporate type will look at a potential financing and say “250 basis points over Treasuries? I dunno” while the developer, looking at the same deal, will say, “5.4%? That’s cheap. I’ll take it.” Which way of thinking was right, we asked? “Well, how many great fortunes have been made working as a corporate treasurer?” was the response. In that light, we suspect that Jamie Dimon will be happy with the results of JPMorgan Chase’s $1.25 billion bond offering, which locked in a 5.4% rate for 30 years, even though the spread was much wider than the last time the bank issued debt of this kind. It was “the lowest coupon rate on 30-year debt in dollars sold by a US bank since at least 1995,” the FT says.
New York Times
On the retail side of JPMorgan Chase, the "Bucks" blog reports on the bank's adoption of simplified checking disclosures.
Simon Johnson writes of the proposed implementation of the Volcker Rule: "The current draft does too little to actually stop the banks' risky practices."