Wall Street Journal
Hedge funds have been placing bets on how judges will rule in lawsuits stemming from bankruptcies or crisis-era dealings. At least one of those hedge funds, Appaloosa Management, lost big when a judge ruled in favor of JPMorgan Chase this week. Hedge funds bet by acquiring deeply discounted securities, such as corporate bonds, that are likely to increase in value if the judge rules their way. That didn't happen in the JPMorgan case involving Washington Mutual. Appaloosa acquired WaMu senior bonds, which lost value after a judge ruled in favor of JPMorgan in a Deutsche Bank lawsuit over WaMu mortgage bonds.
A rise in mortgage rates may put a chill on the mortgage-refinancing market. The average rate for the 30-year, fixed-rate mortgage this week rose to 4.04% from 3.87% the previous week. That's the highest level since October. The rate rise is likely to slow mortgage-refinance activity after it picked up earlier this year. Longer term, it could discourage borrowers to move to new homes out of fear of taking on a higher rate. Quicken Loans said it hasn't see a drop in refi applications yet, but it will boost marketing if it does.
The cyberattack on the U.S. Office of Personnel Management was far worse than what the government is saying, a federal employee union said. The hackers obtained "all personnel data for every federal employee, every federal retiree, and up to one million former federal employees," the union said. The government says the hackers obtained personnel records for 2.1 million current government employees, 1.1 million former employees and an additional 1 million retired employees.
Financial Times
Zimbabwe is going to kill the Z$100 trillion note. In a nod to the fact that its currency is worthless, Zimbabwe's central bank has decided to "demonitise" is currency this month. Accounts with "balances of zero to Z$175 quadrillion will be paid a flat US$5," the central bank said.
New York Times
The fascinating tale of Timothy Blixseth and David Miller provides one example of how the roots of the financial crisis involved all sorts of players. Blixseth is an ex-billionaire who has now spent eight weeks in solitary confinement in a Montana county jail. Miller is co-head of global credit products at Credit Suisse. From 2004 to 2006, Miller and his team at Credit Suisse loaned billions of dollars to the developers of high-end real estate across the country and especially in the western U.S., including Blixseth. Miller also securitized those loans, earning a fee bonanza for himself and his colleagues. Eventually, all of the loans Miller's team made during that era imploded, including the loans to Blixseth. Blixseth is jail because he couldn't repay what he owed on one of the loans. (Blixseth had other issues as well, including a divorce and an apparent need to maintain a luxury lifestyle.) William Cohan, the article's author, juxtaposes Miller and Blixseth to illustrate the irony that a banker who lent billions for loans that later blew up remains in his job, but one of his clients is now in jail.
JPMorgan Chase has promoted Kurt Simon to global chairman of mergers and acquisitions. Simon previously led JPMorgan's technology, media and telecom team. JPMorgan also made other personnel moves within its investment banking group.
Elsewhere ...
The Economist: Are the Fed's dot plots helpful or hurtful? The Federal Open Market Committee produces a dot plot before every second meeting, showing where its members think the benchmark interest rate should be, spanning a period of several years. The dot plots are supposed to provide an idea of what bankers think the general direction should be or will be. But the dots are anonymous no one knows who is predicting where the rates will go when. Oh by the way, the FOMC also consistently overestimates future rates. So the whole dot plot needs to be taken with a grain of salt. Fed Chair Janet Yellen apparently agrees, as she recently said that folks "should not look to the dot-plot" to understand the FOMC's intentions.
