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Yellen Holds on Low Rates: The Federal Reserve should not raise interest rates in order to battle financial bubbles, according to a speech delivered by the central bank's chairwoman Janet Yellen Wednesday. Her remarks suggest that the Fed is "more interested in having a resilient financial system that can cope when asset bubbles burst than it is in popping them through rate rises," the Financial Times reports. While monetary policy is an efficient means of fighting volatile prices and unemployment, Yellen said, it "faces significant limitations as a tool to promote financial stability." Both the FT and the Wall Street Journal describe her speech as "forceful." Meanwhile, the New York Times' Neil Irwin highlights the historical evidence offered by Yellen as proof that financial stability is better guided by regulation than by interest rate policy. Yellen argued that higher interest rates in the run-up to the housing crisis would not have averted it, nor would higher rates have addressed the problem of overleveraged big banks.
Dimon Praised for Health Disclosure: The consensus seems to be that JPMorgan chief executive and chairman Jamie Dimon has done a good job in taking the news of his throat cancer diagnosis public. Warren Buffett told the FT that Dimon "handled it exactly right" by offering a fast, accurate account of his illness. The Times takes a look at how Dimon's health disclosure compares to those of other influential executives in recent years, including Steve Jobs. The Journal focuses on the question of JPMorgan's short- and long-term succession plans, noting that "retail head Gordon Smith and asset-management chief Mary Callahan Erdoes are two of the top candidates to take on bigger roles if an immediate change in leadership is necessary" while Dimon undergoes treatment.
Bitcoin Mystery Buyer Unveiled: Venture capitalist Tim Draper was the winning bidder in the U.S. government's auction of 29,656 bitcoins worth roughly $18 million. Draper plans to "use his stash of the virtual currency to back a venture selling Bitcoin to emerging markets," according to the FT. The plan is a joint scheme with Bitcoin exchange Vaurum, according to the Times. "We want to enable people to hold and trade Bitcoin to secure themselves against weakening currencies," Draper said in a statement.
Wall Street Journal
The U.S. government's anti-trust lawsuit against American Express is heading to trial in New York. The civil suit accuses American Express of placing unfair restrictions on businesses' ability to encourage customers to use cards with lower merchant fees. The trial begins Monday. Its verdict "could have important implications for AmEx, which uses the fees it charges merchants to fund its rewards program and other customer perks."
President Obama says there's more work to be done in reforming the banking industry, including the possibility of "restructuring the banks themselves." Obama didn't go into specifics during his remarks on Marketplace radio, but he said that more changes are needed to prevent banks from taking on excessive risk "because the profit incentive and the bonus incentive is there for them."
"A 'place of rest and contemplation' featuring a 42-inch waterfall and a tree-shaded reflecting pool and seating area has become ground zero in a long-running Republican-led fight over a new federal consumer watchdog." In other words, Republican legislators say the CFPB's planned renovation of its building is practically the new Versailles. Estimates of the cost of renovations range from up to $216 million (the inspector general) to $139 million (the CFPB's own ballpark figure). "Other federal renovations haven't received similar scrutiny," the Journal notes. "A March inspector general's report about the Federal Reserve's plan to spend $280 million on a building project went largely unnoticed."
The Federal Reserve's reverse repo program could help it regulate the shadow banks, according to a report from the Treasury's Office of Financial Research. The report suggests that "the Fed could set minimum haircuts charges for trades on its [reverse repos], a move that would resemble the reserve requirements imposed on banks to help implement monetary policy. Raising or lowering the haircuts would act like a lever that could influence the behaviour of money market funds in the repo market."
"Security researchers have uncovered what they believe is a significant cybercrime operation in Brazil that took aim at $3.75 billion in transactions by Brazilians," the Times reports. Hackers used malware to reroute Boletos a Brazilian payment method to criminal accounts. No word yet on how much of the attempted thievery was successful.
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Corrected July 3, 2014 at 8:52AM: Morning Scan will not publish on Friday, July 4, in observance of the Independence Day holiday. We'll be back on Monday, July 7.