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Employment Report: Unexpectedly Strong Hiring and Unemployment Report Boosts Chance of Rate Hike

Wall Street Journal

The new tech giants are the companies that control the Internet economy through their dominance in virtual computing: online search, messaging, advertising, applications, computing and storage on demand. The kings of the cloud (as it were): Amazon, Apple, Facebook, Google and Microsoft.

Financial services was thought to be one of the industries to which the old guard of the computing kingdom could still affix their business model. Banks, as the theory goes, must keep most of their operations in house, managed at their own data centers, because of strict government regulations on how they handle transactions and government data.

But maybe even that barrier will fall. The chief information officer at Capital One Financial, Rob Alexander, said the security safeguards developed by Amazon's AWS unit (Amazon Web Services, which sells data storage to corporations), are good enough for his bank to use, if not even more secure than its own computers.

So the biggest U.S. banks don't want your deposits? Fine, there are plenty of foreign banks that will gladly take them. Japan's Mizuho Bank and Mitsubishi UFJ Financial Group, France's BNP Paribas and Spain's BBVA are all outbidding their U.S. rivals for large corporate deposits. Some are outpaying U.S. banks by two or three times.

Several factors are at play. Foreign banks need new sources of U.S. funding. Then there are the new rules from the Securities and Exchange Commission on money-market funds, incentivizing them to buy government debt instead of using short-term debt. Regulators want to prevent a run on deposits, creating a funding a crisis. Fidelity Investments' Cash Reserves fund, the world's biggest money fund, will shift its entire portfolio to U.S. government debt by Dec. 1.

Pilot Travel Centers in Knoxville, Tenn., has parked $50 million of deposits with Mizuho, where it earns 0.69% for three months; and another $50 million that earns 0.72% for four months. That's twice as much as the competition, its treasurer said.

Some U.S. banks really don't want to hold large corporate deposits. JPMorgan Chase and State Street have said they'll charge fees to hold large corporate deposits.

Square wants to raise as much as $403.7 million in its IPO, according to its registration papers. The money-losing payments disruptor will sell 27 million shares between $11 and $13 each. The Journal notes it's still a questionable market for IPOs; if Square can pull off its IPO, it may be seen as a good sign for other tech companies.

Fannie Mae and Freddie Mac showed this week why they can't be recapitalized and taken off the government dole any time soon: They aren't strong enough to generate adequate earnings power, "Heard on the Street" opined. Freddie Mac lost $475 million in the third quarter. Fannie Mae did post a third-quarter profit of $1.96 billion. But even that isn't enough to allow it to recapitalize itself with accumulated earnings. The two GSEs' original dividend was a 10% payment to the U.S. Treasury. Their recent earnings reports prove they simply don't have the wherewithal to make that dividend payment, if it were to be restored under a recapitalization plan.

The market for home sales to first-time buyers has worsened. First-time buyers fell to 32% of all homebuyers in 2015, down from 33% last year, according to the National Association of Realtors. It's the third-straight annual decline and the lowest level since 1987, the Realtors said.

A jury in New York convicted two former Rabobank traders of conspiring to rig the Libor market.

Financial Times

The paper looks at the Shared National Credits reviews' warning on oil prices and leveraged loans, which was covered comprehensively by American Banker.

New York Times

Barclays should seriously consider moving its headquarters to the U.S., according to an op-ed column. Their reasons: The U.S. regulatory scheme is more friendly to banks than that of the U.K. The Republican-led Congress is more bank-friendly than a Democrat-led Congress. The incoming Barclays CEO is American.

Bankers must clean up the culture of their firms, in order to avoid the type of scandals that have recently sullied Wall Street banks, New York Fed President William Dudley said at an ethical culture conference on Thursday.

Elsewhere ...

Quartz: Bitcoin isn't going to work because governments won't put up with it, JPMorgan Chairman and CEO Jamie Dimon said at a conference Thursday. The blockchain technology could stick around, however, "if it's cheaper, effective, works and secure."

Charlotte Observer: John Stumpf doesn't care that Wells Fargo is about to pass Citigroup in the ranking of banks by total assets. "Of all things I think about, that wouldn't even enter the picture," Stumpf said in an interview. "I know our asset (size). I don't know their asset size."

Marketwatch: The security images that banks use to filter out scammers when you log on to your online account are worthless and should be ditched, according to a new Carnegie-Mellon University report. Barclaycard is about to ditch its security images. Bank of America ditched its images this summer. But U.S. Bank is keeping its pictures of cute kittens.

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