Receiving Wide Coverage ...
Bailout Redux: While the European bailout plan "set off celebrations" in markets throughout the world, many analysts warned that the plan "remains a work in progress," the Post reported. "Key details are uncertain, they say, and a slowing European economy could throw the program off course." The Journal, like a lot of other media, went full tilt on the European bailout agreement even though - or maybe because - a lot of folks are skeptical it will hold up. Yes, Americans are happy everywhere that their 401(k)s shot up with the market Thursday, but it could take "weeks" for negotiators in Europe to tell us the details of (and to figure out themselves) what they have wrought, the Journal said. Not promising was the warning by a European Central Bank official that the deal's "leverage instruments are similar to those which were among the origins of the crisis, because they temporarily masked the risks." The deal relies on "Byzantine financial engineering," another Journal story said. (A note to Scan's Greek friends: that's not a compliment.) A big push is expected. European officials are going to have to sell sovereign markets on the plan, as sovereign bond markets and others reacted cautiously. Some say the European banks got off too easy, yet others speculated the plan might work despite initial shortcomings if it boosts confidence. The Times said German Chancellor Angela Merkel called bankers' bluff, telling them to take the offer on the table of a 50% write-down in the face value of their Greek bond holdings, or bear the consequences of a default. She was willing to risk a credit event that would have thrown world markets into turmoil, and if that happened, she would blame the banks. Critics say the plan may not deliver as much relief to Greece as promised, and that it may not be sufficient to help troubled banks. "It's another patchwork effort," said Richard Cookson, global chief investment officer of Citi Private Bank. The FT looked at China's role in the rescue, and its demands that other countries be involved and its investment be guaranteed. The article quotes French President Nicolas Sarkozy: "Why would we not accept that the Chinese had confidence in the eurozone and place a part of their surpluses in our funds or our banks. Would you rather they placed it with the US?" Ouch!
Good News, Bad News: The bailout deal, coupled with a 2.5% increase in U.S. gross domestic product, eased recession fears and sent stock markets around the world higher, the Post reported. The Journal noted that while the GDP report erased thoughts of recession, the growth isn't enough to accelerate recovery.
Fannie, Freddie Bailout Costs Down: The GSEs are a never-ending source of debate. … The "Potomac Watch" column in the Journal predicts President Obama and the Democrats will make Federal Housing Finance Agency acting director Edward Demarco a whipping boy this election year to deflect any blame for the continued housing woes. They'll blast him for refusing to "embrace the biggie of housing bailouts: principal write-downs," the column said. Meanwhile, the FHFA on Thursday cut its projection for the cost of rescuing Fannie Mae and Freddie Mac to $124 billion through 2014, an improvement from last year's estimate of $154 billion. But they are "unlikely to return to profitability in the foreseeable future" because of dividend payments owed to Treasury. The Post says, while Fannie Mae and Freddie Mac "are unlikely to repay all the money" from their bailout, their need for additional taxpayer support will likely end soon as they generate more profit and begin paying back the funds they received from the government takeover.
Unsettled? After Citi executives probably breathed a sigh of relief last week over settling allegations about misleading investors, "Judge Jed Rakoff issued an order calling SEC and Citigroup lawyers to court on November 9 to defend terms of the deal." The FT story says Rakoff, who rejected a settlement between Bank of America and the SEC in 2009, wants to know, among other things, "why the settlement should include the SEC's longstanding practice of allowing companies to settle without admitting or denying wrongdoing." Washington Post, Wall Street Journal
Wall Street Journal
JPMorgan Chase & Co., after eight months of study in two states, has decided to not to charge customers for using their debit cards to make purchases, the paper reports. The news was part of broader story about how a number of big banks - U.S. Bancorp, Citigroup, PNC and KeyCorp among them - are swearing off the fees. No one admitted it was because of the flack Bank of America has caught, but a Citi official said the fees would be "a massive source of irritation" for its customers. You'll like the chart breaking down market share among debit-card issuers.
Bond market conditions are so tight right now that the Treasury Department is asking some banks to buy short-term bills with subzero yields … and they are doing it.
The Financial Industry Regulatory Authority agreed Thursday to settle civil charges it violated securities laws. The SEC charged that a Finra regional director altered documents requested by SEC inspectors. SEC Chairman Mary Schapiro led Finra at the time of the alleged wrongdoing.
Ltd.'s MF Global Holdings Ltd.'s challenges mounted Thursday as Fitch Ratings downgraded the broker-dealer's credit to junk status and, according to people familiar with the matter, at least one major broker ceased some trading activities with the firm.
Banco Santander reported a 10% rise in third-quarter net profit, as smaller loan-loss provisions in Spain and a boost from a recent Polish purchase offset weaker profits in Brazil.
The paper offered two stories on the resignation of John Duffy as chief executive of KBW after a tough quarter for the investment banking firm and the disclosure he has prostate cancer. KBW, which operates as Keefe, Bruyette & Woods, posted a nearly $16 million third-quarter loss, plans to cut 13% of its work force and will be praying for more bank M&A. The paper profiled his successor, Thomas Michaud, 47, and the tough task he has ahead to turn the company around in the face of "regulatory changes, rocky markets, and a slow mergers-and-acquisition business." Interestingly, Michaud's whole career has been spent at KBW. One analyst said the company's layoff plans are premature.
Most of us know the Dodd-Frank Act is long. Columnist Gillian Tett wants to make sure we realize how this multiplies out with "the formation of 100-odd committees, each of which is now spewing out consultation documents, which typically run to several hundred pages." She gives an example of how officials from the Commodity Futures Trading Commission, "say that they have now received no fewer than 25,000 - yes, thousand - comments on the proposed rule reforms."