Receiving Wide Coverage ...
Laundering Charged: The creators of Liberty Reserve, a cross-border virtual currency exchange, have been arrested and charged with laundering $6 billion. That's "what prosecutors believe to be the largest online money-laundering case in history," the Times reports, with the word "online" being key. $6 billion is 0.9% of what HSBC allegedly failed to control the transmission of between 2006 and 2009, leading to a $1.9 billion fine.
Granted, Liberty Reserve was flagrant about its approach: the only verified information it required for money transfers was an email address. The non-bank's systems were "designed to give criminals a way to move money earned from credit-card fraud, online Ponzi schemes, child pornography and other crimes without being detected by law enforcement," the Journal reports.
A second story in the paper notes the "promises and perils of virtual currencies," which allow for dirt-cheap transaction costs but don't tend to come with much in the way of internal controls. Nonetheless, the hubbub over Bitcoin is likely to drive further interest.
The government's interest appears to be heightened, too. New York local law enforcement shut down an E-Gold exchange run by Liberty Reserve's founder in 2006, the FT reports, but U.S. authorities didn't appear to hassle him much after he moved to Costa Rica and renounced his U.S. citizenship. A bit of armchair reporting this morning suggests that Liberty Reserve was pretty open about what it was doing for the last decade... Here are some choice quotes from a purported interview with its now-arrested founder, Arthur Budovsky, in 2002. (Caveat here: it's possible to verify the interview as having been published in 2002, though it's from a somewhat obscure website, so trust or don't trust as you please.) "We are not a bank, and don't treat our clients with a suspicious or haughty attitude"; "We don't collect much in the way of personal information"; "Signing up is a cinch. All you need to do is fill out an online form"; "Because we're based in Nevis [a Caribbean island], you have to be a murderer, kidnapper, or drug kingpin for us to be forced to divulge any sensitive information."
Housing Market Rising: It's go-go time in housing (and everywhere else). The green shoots in the housing market have finally matured into a self-reinforcing frenzy of buying. The Case-Shiller housing index posted its biggest gain in 7 years, with brisk sales boosting consumer confidence and sending inventory plummeting. The strong housing data filtered into any number of markets Tuesday, prompting the biggest drop in Treasury yields in more than a year. "Builders cannot bring homes to the market as quickly as buyers want them," the Times declares.
The timing's quite lucky, the Journal notes, with gains in the housing market helping offset the effects of sequestration.
All of this good news suggests some major changes coming in the bond market and Federal Reserve policies. Ten year-Treasury yields have risen to their highest level in a year, the Journal reports, and investors are piling out of mortgage backed securities "amid speculation that the Federal Reserve could pull back on its programme of bond buying," the FT says.
A second FT story declares that the "fast-improving US economic outlook increase[s] the chances the Federal Reserve will slow its $85bn-a-month in asset purchases."
The optimism appears to be everywhere. The Journal's David Reilly notes that Citigroup and Bank of America credit default swaps have pretty much pulled evenwith those of JPMorgan, considered its stronger peer.
Another measure of the market's sunny disposition: Morgan Stanley's "trying to revive its flagship real-estate program after suffering huge losses during the financial crisis." That would make it one of the first big banks to get back to competing with private equity giants. That 74% reported loss by CALSTRS in the last fund well, who even remembers that anymore?
The Federal Housing Finance Agency has settled a mortgage-backed securities lawsuit against Citigroup on undisclosed terms, making it the second of an expected string of cases to conclude. (GE Capital already settled.)
New York Times
Switzerland is considering making peace with the U.S. over bank secrecy and tax evasion. A possible deal which could be tied to a $7 billion to $10 billion fine would resolve a long running and deepening conflict over Swiss institutions' alleged facilitation of tax dodging. Oh yeah the country would also turn over account holders' names. The article doesn't make clear who would pay the fine, leaving the odd impression that the government itself would be shelling out. "The Swiss government, which has long prized the secrecy of its banking system, now appears to be willing to cooperate with authorities," an anonymous source said.