Wall Street Journal
The source of the so-called “bombshell that blew up Bear Stearns” has finally come to light. Emails obtained by the Financial Crisis Inquiry Commission have answered the question of who tipped off CNBC reporter David Faber as to the ill health of Bear Stearns. On March 12, 2008, Faber famously asked Bear Stearns chief Alan Schwartz in an interview broadcast by the network to respond regarding reports that Goldman Sachs had refused to accept Bear Stearns’ counterparty risk. Schwartz said the bank was still trading with its counterparties. The following weekend, Bear Stearns sold itself to JPMorgan Chase. Faber never identified who tipped him off, which led to much speculation and criticism. The source of Faber’s information was revealed as former Bear Stearns executive Kyle Bass, who is known for building his fortune on bets against subprime mortgages. The information was found in a memo detailing an interview the panel held with former Bear Stearns mortgage head Thomas Marano, who described Bass as being shocked that Faber had broadcast the info. Also worth noting: Bass has made another big bet – this time against the Chinese yuan and the Hong Kong dollar.
American Express faces a tough choice whether to make its cardholders or its shareholders happy. Citigroup unveiled details about the terms for its new Costco card, which observers have said are better than what Amex had previously offered. Citi’s card will offer more cash back for gas, travel and dining than Amex’s. And now the company is coming under pressure to step up its rewards game as competitors boost their loyalty programs. Amex already does cash back and other rewards, and those rewards have cost 70% to 80% more than the average, according to Credit Suisse analysts. Adding to the problem is that many Amex cards require holders to pay their balance every month, while other issuers can rely on interest payments to offset the cost of rewards programs. So if Amex does decide to boost its rewards to remain competitive, then it may draw the ire of shareholders who could have to bear the cost.
Private student lenders have begun rolling out loans for parents, aimed at helping them handle the rising costs associated with college. These “parent loans” let borrowers get funding to pay for their children’s schooling and students aren’t the ones responsible for paying it back once they graduate. Citizens Financial Group and Social Finance began offering the loans in 2015 and 2014, respectively. This year, Sallie Mae will roll out its own parent loan product. Schools themselves are driving the push for these loans. It was a request from Stanford University that led Social Finance to create its first parent loan product. Other schools, like Boston College and Carnegie Mellon University, also encourage parents to take out these loans. And it appears to be a good deal: Parents typically get lower interest rates if they’re creditworthy and the market for parent loans has helped lenders deal with an otherwise listless lending environment.
France’s fifth-largest bank is attracting unusual amounts of attention for solving one of the biggest problems facing the banking industry today: interest margin. Credit Mutuel has begun charging customers for managing their current accounts. While the bank just began doing this in October, it has already produced significant results. The bank’s net income rose 4% in 2015 from the year before to roughly $2.8 billion, as an 11% jump in fee income offset a 1% decrease in interest margin. Credit Mutuel’s move bucked French tradition – like some other countries, banks in France typically provide free account services to most customers. That worked fine in “normal times” when banks could use the funds deposited to finance loans. But now that France is in a negative rate environment, changes had to be made. And Credit Mutuel appears to have cracked the code of how to remain notably profitable in these strange times, the paper said.
Deutsche Bank is looking to technology to cut its costs – and it seems that the plan is working. Deutsche’s head of operations Kim Hammonds hinted that the bank has begun simplifying its IT systems, which has allowed it to streamline significantly. Prior to the overhaul, the bank had more than 4,400 applications that were often incompatible with one another. Hammonds has already decreased that amount by 500, which let the bank cut hundreds of jobs related to reconciling data between the different systems. Hammonds has also led a one-third reduction in the number of third-party service providers, with plans to cut it again by half by 2017.