Receiving Wide Coverage ...

Occupying the Streets: Thousands of Occupy Wall Street protestors took to the streets of Manhattan, attempting to delay the opening of the New York Stock Exchange and making their presence felt among commuters on the subway trains and Brooklyn Bridge. The "National Day of Action" marked the movement's two-month anniversary and came several days after the demonstrators were evicted from Zuccotti Park. The atmosphere was tense and sometimes violent as some demonstrators clashed with police. A handful of people were injured, and several hundred were arrested. There were similar but smaller marches in other cities across the country, with similar dust-ups. New York Times, New York Post, Daily News (New York), Village Voice, Wall Street Journal, Financial Times

Rock Star: After a three-year courtship, Sir Richard Branson's Virgin Money made a deal to acquire Northern Rock, the British bank nationalized after depositors rushed to pull money out during the crisis. The U.K. government is taking a loss on the sale. Virgin Group has a history of shaking up the industries it enters, and now that Virgin Money has a full-fledged banking operation, it plans on grabbing share from the five banks that dominate the U.K. market "with better customer service and by focusing on online banking," an article in the Journal says. But the paper's "Heard on the Street" column cautions that Virgin Money has its work cut out for it. Northern Rock is losing money, and with just 75 branches the combined business is starting off with a miniscule 1% share of the local deposit and mortgage markets. (The Journal's "The Source" blog notes that the once-mighty Northern Rock became known as "Northern Crock" and opines that it still deserves that nickname.) But Jayne-Anne Gadhia, Virgin Money's CEO, tells the FT that it doesn't want any more than 75 branches - "We want to service our customers well and couldn't do that if we had hundreds of branches." (The company's apparently given up on bidding for the 630 branches that Lloyds is trying to unload under pressure from European antitrust regulators.) A separate story in the FT reports that the bulk of the money for the deal is coming not from Virgin itself, but from a name familiar to U.S. bankers: Wilbur Ross. And the FT's "Lombard" column succinctly makes most or all of the foregoing points and manages to work in a few wisecracks about Sir Richard's penchant for nudity.

Wall Street Journal

Despite the editorial page's recent admonition, "U.S. lawmakers moved to increase the maximum size of loans that can be guaranteed by the Federal Housing Administration."

"The Senate appears likely to easily confirm Former Kansas City Fed President Thomas Hoenig to a six-year term as the vice chairman of the Federal Deposit Insurance Corp." The outspoken Hoenig "is likely to become a thorn for the nation's biggest banks," the Journal says.

The Consumer Financial Protection Bureau has jurisdiction over banks with more than $10 billion of assets. But more than $10 billion as of when? To spare institutions that hover around this threshold from uncertainty, the banking agencies said they'll make a yearly determination; to fall under the CFPB's purview will require four consecutive quarters above the $10 billion mark.

"UBS said it would slash its investment-bank unit's assets by half, shed lagging businesses and return to its roots by focusing on its huge private bank."

MF Global reportedly tranferred $600 million from customer funds into its own accounts after "burning through" its capital buffer in the week before it filed for bankruptcy. Regulators are trying to determine whether the move was intentional or an error that resulted from the panic to avert bankruptcy.

Financial Times

Columnist Gillian Tett, who quite literally wrote the book on credit default swaps, provides the clearest explanation we've seen of why the plan to restructure Greek debt won't trigger payouts for the CDS holders. "When the eurozone leaders announced their plans to restructure Greek bonds they failed to meet - or, more accurately, deliberately missed - the fine print of 'default'" under the rules set by the International Swaps and Derivatives Association. The trade group itself confirms that the restructuring does not appear to meet its test for triggering payments on CDS contracts, though it's grumbled about the European leaders' gaming of the contracts ("the obsession with avoiding a credit event is, in our view, misguided"). For Tett, the bigger question is whether CDS can be relied on as a hedge against sovereign credit risk if there's potential for this kind of legalistic manipulation. If not, then there's another reason to distrust the "net" exposures banks emphasize, aside from counterparty risk.

New York Times

"Most consumers oppose various bank fees, including A.T.M. fees, a survey finds." You mean people don't like to pay for things, especially things they're accustomed to getting for free? No kidding, Columbo. (Sorry, it's been a long week, and we're kind of grumpy.)

Riddle us this: How can a lender lose more than 100 cents on the dollar on a loan? Answer: when the loan's been securitized and reimbursing servicer advances eats up whatever's left from the sale of the collateral. Investors in private-label residential mortgage-backed securities know this possibility all too well, and, as columnist Floyd Norris reports, commercial MBS holders are learning it now, too. In fact, the CMBS world has coined a verb for it, after a group of loans secured by Boscove's department stores soured. When your securitization loses more than face value on the loan, you've been Boscoved.

Elsewhere ...

Vox: If the government wants to control the resurgence of an unregulated "shadow" banking system, it should consider issuing more T-bills. That's the takeaway from a very interesting essay on this wonky website of economic commentary and policy analysis. Zoltan Pozsar, a visiting scholar at the IMF, argues that the growth of the shadow system was fueled by institutional investors who were looking for a safe place to park large amounts of cash. There weren't enough short-term Treasuries to fill demand, nor were there enough banks to store the money in amounts below the FDIC insurance limit. So the investors found their cash-storage facilities at one end of the shadow banking system's "risk-stripping" assembly line. At the other end was the by now well-known process in which pools of questionable loans were repackaged into triple-A securities (what Pozsar calls "credit transformation"). Said securities were then placed into investment vehicles funded with short-term instruments like repos and asset-backed commercial paper ("maturity transformation"). And those instruments were then placed in money market funds one could write checks against ("liquidity transformation"). The resulting "privately guaranteed instruments" ended up being the government's problem when the crisis hit, Pozsar writes; the shadow banking system's short-term obligations "were guaranteed by insured banks and hence ultimately the sovereign (whether via central bank backstops or equity injections)." So why not just accommodate the demand for a safe haven by having the government write more of its own IOUs? Pozsar acknowledges the obvious objection - that this "would increase rollover risks and the variability of interest expenses for the US Treasury." But he submits that the "externality," or cost to society, would be less than risking another crisis. Food for thought.

And, Lastly …

The ExileD: Bank of America announced this week it had hired the writer Malcolm Gladwell (of "Blink" and "Tipping Point" fame) to give talks to small business owners around the country. This underground paper (a successor to the English-language expat paper in Russia where Matt Taibbi, of "vampire squid" fame, cut his fangs) savages Gladwell for taking the gig - and B of A for, well, being B of A.


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