HSBC Sells Brazil Unit; Former Mt. Gox CEO Arrested

Receiving Wide Coverage ...

'World's Local Bank' No More: HSBC has agreed to sell its Brazilian unit to Banco Bradesco for $5.2 billion as the bank seeks to scale down and concentrate on its Asian operations. The bank pledged in June to cut 50,000 jobs and retreat from low-performing business lines, with the goal of reducing annual costs by up to $5 billion by the end of 2017. The papers note the bank's retrenchment is a big change for a firm that once called itself "the world's local bank." One lingering question: does HSBC's shift away from a sprawling global strategy suggest there are inherent problems with such ambitions for any large financial institution?

The news of the sale was announced alongside HSBC's second-quarter profits, which fell 4% to $4.54 billion. The decline was driven primarily by tax charges and higher operating costs, according to the Wall Street Journal. Wall Street Journal, Financial Times, New York Times

Mt. Gox Plot Thickens: Here's a new twist in the saga of failed Bitcoin exchange Mt. Gox. Japanese police arrested former CEO Mark Karpelès on Saturday, accusing him of altering transaction records on the company's computer system to inflate his account balance by $1 million.

Whether these allegations have any connection to the $500 million in Bitcoin Mt. Gox reported missing when it filed for bankruptcy in February 2014 is unclear. But the Financial Times says police "hope for a broad explanation from him about the company's collapse and the disappearance of the bitcoins." And the Journal cites a Japanese official who "said some of the bitcoins Mr. Karpelès described as lost may not have existed." Vague, but intriguing!

As rumors of Karpelès' impending arrest spread Friday night, he told the Journal the accusations were "false" and he planned to deny them. The New York Times reminds readers that ex-Mt. Gox employees had previously accused Karpelès of using customers' funds to cover the company's operating costs.

Wall Street Journal

Wall Street is embracing terrorist-tracking software as a tool to unearth rogue traders and other misbehaving employees, the paper reports. Many of the companies peddling this technology were seeded by In-Q-Tel, a private-equity unit of the Central Intelligence Agency, in the aftermath of the September 11 terrorist attacks.

"Heard on the Street" casts doubt on the future performance of American Express and Discover, noting tech companies including PayPal, Apple and Google may upset the credit-card companies' business models over the next couple years. "This doesn't mean the sky is falling for American Express or Discover," writes John Carney. "But it does mean expenses for marketing and technology will likely remain elevated to preserve market share against tech-savvy newcomers."

Economic conditions look good for the Federal Reserve to raise interest rates, according to Spencer Jakab. He focuses on the Institute for Supply Management's monthly survey of purchasing managers, which, in June, signaled expansion for the 30th month in a row.

Financial Times

A profile of ING chief Ralph Hamers casts the veteran banker as a mild-mannered type with a focus on technological innovation. ING is working to come up with new digitally savvy ways to get products to customers, Hamers says, including an automated credit-scoring algorithm under development in Spain and face-recognition technology in Germany that will allow customers to open accounts via online videos.

New York Times

Gretchen Morgenson's latest column accuses big banks of unfairly rejecting struggling homeowners' requests for loan modifications. She points to a report on the federal government's Home Affordable Modification Program by Christy Romero, the special inspector general for the Treasury's Troubled Asset Relief Program. According to the report, "banks participating in the program have rejected four million borrowers' requests for help, or 72% of their applications, since the process began."

The banks with the highest rejection rates were Citibank and JPMorgan Chase, which turned down 87% and 84% of loan modification requests respectively. But Citi disputed the report's analysis, telling National Mortgage News it had approved roughly 50% of completed HAMP applications. The Treasury says banks' denial rates have gone down as the agency modified documentation requirements and allowed a more flexible debt-to-income ratio, according to NMN.

French economist Thomas Piketty is following up on last year's sleeper hit Capital in the Twenty-First Century with a slightly revised version of The Economics of Inequality, a book first published in 1997. But Paul Krugman says Piketty's latest treatise on income inequality disappoints, mostly because the research and data is two decades old.

Are data breaches really such a big deal? Nathaniel Popper argues only a sliver of consumers have faced any real fallout from hackers' attacks on Target, JPMorgan Chase and the University of California-Los Angeles. That's not to dismiss the importance of cybersecurity, he says, but to highlight the fact that data-security companies may be issuing trumped-up warnings in order to persuade people to purchase their services.

The paper takes a look at how two men convicted of insider trading have fared in life behind bars.