Receiving Wide Coverage ...
Talking Rates: More communication and more interpretation. Federal Reserve Chairman Ben Bernanke's remarks at a conference Wednesday and the release of the minutes of the central bank's June policy meeting delivered two major themes. Like other officials recently, Bernanke sought to decouple tapering of the Fed's asset purchases, which could begin later this year, from views on its policy rate, saying that "the overall message is accommodation." Meanwhile, the minutes showed divisions among the Fed's regional presidents and board members, with one block inclined to end the asset purchases by yearend and another inclined to wait for a stronger outlook for the labor market. Markets, which appear to have been trading as though the Fed's posture on asset purchases says something about its posture on the path of short-term rates, didn't move much, with the Dow ending the day about flat. According to the Journal, Bernanke said he would not have changed his previous comments. "The market volatility of the past six weeks could have been much worse if he had kept silent on their plans for winding down the program, misleading investors into thinking the bond-buying could go on forever, Mr. Bernanke said."
An earnings curtain-raiser in the Journal reviewed the ways the jump in long-term rates could help and hurt banks. "If short- and long-term rates were to go up three percentage points, it would take two to three years of interest gains from loans and investments for J.P. Morgan to make up for $15 billion in expected accounting losses on its securities portfolio, according to the company." Wall Street Journal, Financial Times, New York Times
Leverage Games: The FT discussed ways banks could deal with the proposed leverage rule for systemically important holding companies and their insured subsidiaries, including shuffling assets among units and "at worst retaining a portion of earnings over the five years before the rule comes into force. No bank said it expected to raise equity." An FT editorial endorsed the leverage ratio concept. DealBook attempted a simple explanation of what capital is.
Wall Street Journal
Liquidators for two Bear Stearns hedge funds that collapsed in 2007 "sued the three major credit-rating firms in New York State Supreme Court for allegedly misrepresenting their independence and the accuracy of their ratings, seeking $1.12 billion in damages, according to a court filing."
Credit Agricole is imposing restrictions on expense accounts for its investment bankers. For example, "when not entertaining clients, restaurant meals should cost no more than 25 a head in the French capital."
New York Times
Unnamed sources told DealBook that regulators are close to a deal that would allow them to hit the Friday deadline for a rule on overseas derivatives trading. Commodity Futures Trading Commission Chairman Gary Gensler would win "a wave of new scrutiny" for firms like Goldman, but would concede a phase-in of cross-border oversight.
