Receiving Wide Coverage ...
Europe: An IMF report gave “a clean bill of health” to Spain’s two largest banks, BBVA and Santander (which both have significant operations here in the U.S.), according to the FT. That, combined with about $124 billion of emergency loans to Spain’s otherwise ailing banking sector, calmed nerves in the industry, the paper says, although markets remain jittery, as shown by a widening of Spanish and Italian government bond yields, a development the Journal calls “ominous.” (Yes, Italy is the new focus of economic agita, according to the Times.) Germany’s Bundesbank warned that the proposed integration of the European Union’s banking systems, through cross-border supervision and deposit insurance, could indirectly subsidize the borrowing costs of weaker countries, curtailing “market discipline” for those governments. (The French central banker, however, favors such a union, and lays out the case for it in a Journal op-ed.) In the Times, “DealBook” prodigy Andrew Ross Sorkin argues that the Spanish bailout won’t work. One more FT story says the continent’s securitization industry is trying to rebrand itself with a Good Housekeeping-style seal of approval. Asset-backed bonds would have to meet certain criteria for “quality, transparency, simplicity and standardization” in order to rate as “Prime Collateralized Securities.” This project is funded by two financial trade groups in Europe and managed by a “PCS Secretariat,” whose name sounds like something out of a right-wing dystopian fantasy. But then one could argue that Europe today is such a fantasy, come true. …
Wall Street Journal
This front-page headline gave us déjà vu: “J.P. Morgan Knew of Risks: Warning Flags Raised Two Years Ago About Trading Desk That Lost $2 Billion.” Indeed, the story describes the same long-running London-versus-New York feud within JPMorgan’s Chief Investment Office that the Times reported on a month ago. But the Journal adds some new details and (named) characters to the narrative. And it’s a fine time to brush up on the story, since Jamie Dimon will be testifying tomorrow in a Senate hearing on the trading debacle.
The real estate slump (now in its sixth year), combined with the weakness of the dollar, is driving foreign buyers to snap up residential properties in the U.S.
“Heard on the Street” considers a proposal, backed by former FDIC chairman Sheila Bair and prominent academics, to make large, highly interconnected banks issue more long-term debt as a way of protecting taxpayers and depositors from losses.
Some corporate loans allow a bank to seize intellectual property (like patents, trademarks logos and recipes) in the event of a default. Certain U.S. banks are thinking about subtracting the value of such collateral from their estimates of losses in the event of default, in order to reduce the loans’ risk-weighting and hence the capital required under Basel III. (The banks aren’t identified.) How would the collateral be valued? By striking a deal with an insurance company that agrees to buy the IP at a fixed price if a default occurs. The comment thread on this story is lively (“May I use bubble gum wrappers as Tier 1 Capital? I promise to value them at market...”). Our two cents: the copyright for “Ishtar” or formula for New Coke should bring zero capital relief.
New York Times
“The recent downturn left the median American family in 2010 with no more wealth than in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said.”
Fast Company: The magazine’s annual “100 Most Creative People in Business” list includes Leslie Berland, the senior vice president of digital partnerships and development at American Express. She’s not only made innovative use of social media tools like Facebook, Twitter and Foursquare to promote Amex’s rewards and events, but also, and importantly, sold management on unorthodox approaches. (We’d only question one of the cardholder “rewards” that Amex promoted on Twitter: “Exclusive access to Bon Jovi tickets.” Is that a reward, or a punishment?) Another “most creative” honoree is Adam Brotman, Starbucks’ chief digital officer, whom Fast Company credits with creating the coffee chain’s pay-by-smartphone system “without a convoluted new technology (cough, MasterCard PayPass, cough) or unproven system (cough, using PayPal in the real world, cough).”