Receiving Wide Coverage…
The Anticipation Game: With an expected announcement from the Fed this week that it will raise interest rates, markets and observers have already begun to act in anticipation of the predicted hike.Global stocks began to rise Tuesday in a rebound from recent losses – though they were also helped along by an increase in oil prices.The price of gold also increased, despite the high probability that it will ultimately drop due to a strengthened dollar following the Fed 's decision, perhaps an indication that the market for the precious metal long ago priced in future losses. Where bigger questions remain is in what to predict in terms of inflation. Low inflation has been dogged in recent years, to the Fed 's dismay – and some have taken the pessimistic perspective that inflation will remain below 1% for the next five years, according to the Wall Street Journal. But others note that low inflation has been strongly influenced recently by the energy downturns and lower medical costs following the Affordable Care Act. Thus, a situation could arise where once-pessimistic investors start buying inflation-protected bonds over regular ones, creating a manufactured sense of higher expected inflation. The Fed would need to view this with caution when it determines how to manage a return to higher rates. In fact, looking at historical data, one could argue that low rates are in fact the norm, with the high period of inflation from 1970 to 2007 being the real aberration, according to the New York Times. Either way, the Fed may face a tough crowd regardless of what decision it makes, thanks to overall anxiety fueled by junk bonds and low commodity prices.
Wall Street Journal
Companies are having a tougher time recruiting prospective directors as audit committees face growing responsibilities. The paper traces the troubles back to the 2002 Sarbanes-Oxley Act – since then, audit committees have become responsible for issues ranging from whistleblowing to cybersecurity. Consequently, qualified candidates can be few and far between – and even then, many who are qualified may not want to take on the mounting burden. A positive result of all this, though? The lack of qualified candidates may force companies to think outside the box when considering potential candidates for their boards, meaning we could see greater diversity amongst corporate directors in the future.
Federal Reserve officials have become concerned that they may not have the power to stymie the dangerous effects of asset bubbles. The concerns are now playing against a backdrop of skyrocketing commercial real estate prices. The determination that the Fed lacks the tools or even a roadmap of regulatory responses to an asset boom came out of a recent "war game " exercise designed to simulate destabilization when an asset bubble bursts. Nonetheless, it 's unclear that commercial real estate would even be a large destabilizing force if it went into a slump, since it comprises a small portion of the economy and hasn 't caused high levels of unsustainable debt, the paper notes. Nevertheless, the Fed is also attempting to avoid unneeded risk right now as it ramps up interest rates. That makes Fed action on commercial real estate somewhat more likely – even if the form that action would take is unclear.
China has become a bigger force in fintech, threatening to unseat other players such as the U.K. Chinese online insurance group ZhongAn topped a list of the world 's 50 most successful fintech companies from KPMG – and overall, seven of those companies were Chinese. The U.K., conversely, only had six entrants on the list, the highest ranking being Funding Circle at fifth. Observers told the paper that China 's recent growth in fintech was "not guaranteed. " In particular, the rise of P2P lending in China shouldn 't represent a major threat to banks, since most of the lenders ' clients are not served by traditional banks.
Former high-profile Wall Street execs are now looking to disrupt their industry. A large number of big names on Wall Street – from Blythe Masters and John Mack to Vikram Pandit and Hans Morris – have set their sights on fintech, in some cases turning down opportunities to work at traditional banks in favor of start-ups. Morris pointed to the growing scale and "constant wave " of regulations as his reasoning behind launching Nyca Partners, a firm that advises and finances fintech start-ups. Masters even reportedly turned down a job at Barclays to hone in on her role at bitcoin-oriented firm Digital Asset Holdings. Overall, these individuals have put not only time but also great deals of funds into the fintech industry, helping it grow to the impressive levels it has.
New York Times
Calls for Freddie Mac and Fannie Mae to be resurrected as privately owned companies backed by the government are misguided, according to an op-ed from Urban Institute fellow and financial consultant Jim Parrot and Moody 's chief economic Mark Zandi. The two argue, seemingly against those who want the government-sponsored enterprises returned to their former status, that reforms to end their prominence in the mortgage industry would not also decrease competition. Nor, they say, would it create an empty space for big banks to fill, thus replacing one group of systemically important financial institutions for another. Rather, they say such reform is about making sure that there isn 't an institution with an important role in the system that takes on excessive risk. That means any banks who would want to step in to replace Fannie or Freddie as industry gatekeepers should be barred from both securitizing and originating loans. This in their view would help create a more diverse mortgage industry than the one others have proposed.
Portguese bank Banif may not be able to repay loans it received in the country 's banking bailout, creating the first big test for Portugal 's new left-leaning government. Banif has come under European Commission scrutiny as the European regulator investigates whether the funds it received in the bailout represented illegal state subsidies. And as the struggling bank 's problems mount, some have suggested a restructuring similar to its competitor Banco Espirito Santo. In that restructuring, Banco Espirito Santo 's health assets were split off into a new entity, Novo Banco, which the government then planned to sell to private investors to recoup money from its bailout. But Portugal 's sale of Novo Banco has been delayed, raising questions as to whether a similar strategy for Banif would be ill advised. Despite this, Fitch Ratings remained positive on the Portuguese banking sector, since the country was able to complete its bailout program otherwise on schedule last year.