Breaking News This Morning ...
Earnings: JPM, Citigroup, Wells Fargo
Receiving Wide Coverage ...
Early Bird Gets the Earnings Attention: JPMorgan Chase showed a $5.57 billion profit in its third quarter, but whether that's a victory or a disappointment depends on your preferred news source. The Journal's upbeat report emphasizes the bank's return to profitability after "a year-earlier period weighed down by massive legal charges." The Financial Times, on the other hand, leads by noting JPMorgan's net income was "below analysts' expectations
amid a drop in profits at its corporate and investment banking arm." JPMorgan's earnings made the Internet rounds hours before a scheduled 7 a.m. release because of a third-party website blunder, the Journal reports.
Nobel Goes to Regulation Expert: French economist Jean Tirole has won the 2014 Nobel Prize in Economics for work that has helped shape international regulations on monopolies, credit card interchange fees and banks' liquidity requirements. The Times notes this is the second year in a row an economist specializing in the study of imperfect markets has scored the prize; Tirole analyzes "the many industries where competition does not fulfill the textbook promise that prices will be low and quality will be high." The Washington Post's Wonkblog offers a helpful rundown of Tirole's influential findings on asymmetric information, game theory and contract theory. The Journal reports that Tirole has recently written papers on "the optimal bailout policy for banks in crisis" and how central banks can "help commercial banks in a dried-up market for their assets."
Wall Street Journal
The forecast for banks' third-quarter earnings season is looking brighter than it has for a while, the paper reports. "The great trading slump, now a year old, will likely be less of a drag on the third-quarter earnings that the biggest U.S. banks will report this week. And those results should reflect the benefit of accelerating loan growth over the quarter." Analysts are particularly optimistic about the prospects of Goldman Sachs and Citigroup.
The tax evasion trial of former UBS wealth management head Raoul Weil may feature videoconference testimony from witnesses afraid they too would face criminal charges if they set foot on U.S. territory. Weil is accused of helping his group to assist American clients in hiding their assets from the Internal Revenue Service. He is the biggest executive yet to be prosecuted in the U.S. government's ongoing tax shelter probe.
Financial Times
The Financial Stability Board has published new short-term lending standards that aim to reduce risk in shadow banking and the repurchase market. The rules impose "minimum requirements on the collateral needed when [nonbanks] borrow money from banks through short-term loans secured by stocks or bonds," the paper reports. A separate article says the FSB's standards tilt "a skewed regulatory framework a few inches back in favor of conventional banks."
Online wealth management whippersnappers are looking to take a bite out of banks' business in the United Kingdom, a trend that's already well underway here in the states. The threat of new competition is "a wake-up call for the 400-year-old industry to innovate digitally," according to the paper.
We need to reconsider the justifications for bailing out banks in times of crisis, according to House of Debt author Amir Sufi. Automation and flawed credit scoring models are hobbling banks' ability to distinguish between creditworthy and risky borrowers, Sufi writes, thereby damaging former fed chair Ben Bernanke's argument that banks have a "unique ability to intermediate credit." Moreover, Sufi says banks are failing to lend sufficiently to businesses, thereby neglecting another activity that gives the industry its presumed economic value. "We must stop providing support based on models that do not accurately describe the world in which we live," he writes.
New York Times
Cleveland Fed president Loretta Mester discusses her optimistic outlook for economic growth in the U.S. and views on monetary policy in a Q&A with Binyamin Appelbaum.
Delaware courts are going after investment banks that have a conflict of interest in advising mergers and acquisitions deals, but "it isn't clear that the message is reaching Wall Street," according to Reuters Breakingviews columnist Reynolds Holding.
Bitcoin start-up Coinbase has hired former Senate adviser John Collins to "work with lawmakers and public officials on policy decisions related to virtual money." Collins' former employer was Thomas R. Carper, chairman of the Senate Homeland Security and Governmental Affairs Committee.
