Fed Is Split on the Depth of Underemployment

Receiving Wide Coverage ...

Fed Discusses Labor Market: Federal Reserve Board members debated whether there is slack in the U.S. labor market, which would keep wages and inflation down. The minutes from the April 29-30 Federal Open Market Committee meeting shows Janet Yellen supporting the view that there are a large number of underemployed or unutilized workers and that means going slow on raising interest rates, according to the Wall Street Journal. But some other members of the board, not identified by name, are saying the job market in their districts is tight, or some sectors are facing a shortage of workers. The low rates in U.S. are a burden to the European Central Bank, says the Financial Times. The ECB's primary goal is combating inflation, while the Fed is looking at both unemployment and inflation. Some in Europe feel the Fed is doing too much, while the view in Washington is that the ECB might not be doing enough. Europe's economy is continuing to expand, the New York Times reports. But, that might not be enough to keep ECB from starting its own quantitative easing program in June. However, the belief is that ECB will not start buying bonds. Many economists believe ECB will instead cut its main interest rate to near zero percent. Meanwhile it has been a very busy 48 hours for Fed news, with the release of the April meeting minutes, the Senate's approval of Stanley Fischer to the Board of Governors, and Janet Yellen addressing New York University's graduation ceremony, the Washington Post Wonkblog notes. Wall Street Journal, Financial Times, New York Times, Washington Post

Deutsche Shareholders Meet: Deutsche Bank AG is under investigation by regulators around the world for alleged attempts to rig interest rates and manipulate currency markets, says Co-Chief Executive Juergen Fitschen at the bank's annual general meeting. He says "a limited number of staff" was involved, but no members of the company's management. Meanwhile, shareholders took the opportunity to voice their complaints about Deutsche Bank's plans to raise capital by issuing $11 billion in stock. Wall Street Journal, New York Times, Financial Times

Wall Street Journal

U.S. regulators are considering placing a surcharge on the physical commodities businesses owned by banks. That another reason why Goldman Sachs is putting its metal-warehouse business up for sale. These surcharges may not be a bad thing for investors, because they reveal what areas regulators think are too risky for the amount of revenue they generate, the paper opines.

Financial Times

So far no bank has had to raise equity in order to pay fines issued by regulators over bad behavior, notes the Lex Team. However, BNP Paribas' stock took a hit on Wednesday, as investors fear the company faces a $5 billion fine from regulators, much greater than the $1.1 billion the bank has set aside. Credit Suisse believes it will erase the effects of its $2.8 billion fine by year-end. But there has been "fine inflation" in recent years, FT says. Standard Chartered paid a $667 million fine in 2012 and UBS paid $780 million in 2009. It could reach a point where a bank will be fined so much it will affect its capital position.

New York Times

Buying a home is once again becoming a perilous investment in some areas with the recent run-up in prices. Many markets are seeing a lack of homes for sale, which is boosting prices. At least one Los Angeles couple, who went from being renters to homeowners in 2010, has placed their home on the market and decided to be renters again, fearing another real estate bubble is starting to develop. In some markets the costs of owning a home is greater than the financial benefit, the paper claims.