Breaking News This Morning ...
Commerzbank stock plunges: Shares of Commerzbank dropped sharply Tuesday after the second largest German bank said it wouldn't be able to achieve its goal of keeping profit stable as revenues drop. Wall Street Journal, Financial Times
Wall Street Journal
Right idea but wrong slice? Republican and Democrat party platforms favor a return to the Glass-Steagall separation of commercial and investment banking, but few investors would welcome it, says the Heard on the Street column. Such a move would cut into cross-selling efficiencies at JPMorgan Chase and fail to jettison the real problems at Bank of America and Citigroup, hurting returns at these big banks.
Oil patch defaults rise: Speculative-grade corporate defaults are heading for their highest level in six years, the paper reports, citing Moody's data. Fortunately, most of the damage has been confined to the energy sector, as the price of oil has dropped to near $40 a barrel, pushing it into bear territory since early June. "The energy bust is creating knock-on credit strains for companies with exposure to the oil and gas sector; but a growing U.S. economy and the ongoing benefits of receptive capital markets over the last few years continue to prevent a broader tumbling of dominoes," Moody's said.
What we can learn from fraudsters: "Banking needs more Kweku Adobolis," Andrew Hill, the paper's management editor, writes, referring to the former UBS trader who caused $2.3 billion of losses in unauthorized trading and served half of a seven-year jail sentence for fraud. Hill says fraudsters like Adoboli can teach bankers "that the culture and the conditions that bred fraud and scandal still exist."
New York Times
Wells joins the P2P club: Wells Fargo became the latest bank to allow customers to send money to someone else's bank account using a mobile phone or through email, joining JPMorgan Chase, Bank of America and U.S. Bank.
"The banks worry that if they do not respond with their own instant payment offerings, they will be relegated to performing less-profitable back-office functions for hip new payment companies" like Apple, PayPal and Square, the story says. "Instant person-to-person payment is something that people in many other countries have been able to do for years, and the absence of the service in the United States has been a marker of the relative backwardness of American banks."
Does Dodd-Frank hamstring the Fed? The paper's economics columnist Robert J. Samuelson writes that the financial reform law, intended to rein in Wall Street excess, could thwart the Federal Reserve's ability to act in a future crisis. Harvard Law School professor Hal Scott, an expert on financial regulation, says in his recently released book the Fed relied on a section of the Federal Reserve Act that gave it wide discretion in making loans when "unusual and exigent" circumstances prevailed. But Dodd-Frank has imposes restrictions that could "create an obstacle course for crisis lending."