Receiving Wide Coverage ...
Who Knows What Dangers Lurk in the Heart of the Financial System? The FT knows. The paper has a package of stories today on the global shadow banking system, which it says "has recovered more rapidly" than the regulated banks "and is poised to usurp banks in a variety of ways." (If you don't have time to read all the stories, there's also a handy cheat sheet.) Banks have been selling assets to shadow institutions to meet new heightened regulatory capital requirements, for example. In Europe nonfinancial companies, including manufacturers like Siemens and retailers, have begun funding their suppliers and other smaller firms. A poster child for the resurgence in shadow banking is GSO, a unit of the private equity firm Blackstone, which "has emerged as one of the biggest providers of capital to companies with sub-investment grade ratings in Europe and the US as well as a significant financier of high-profile acquisitions." However, the FT says old-school broker-dealers are unlikely to stage a comeback and that hedge funds, while recruiting star proprietary traders from banks soon to be subject to the Volcker rule, are keeping a lid on leverage. Yet another story recaps the SEC's proposed new regulations of money market funds, though we ought to duly note that former bank regulator and current money fund advocate Jerry Hawke disputes any characterization of his client's industry as "shadow banks." Most interesting to us is a very brief story in the FT package about how financial institutions like Goldman Sachs and Deutsche Bank are acquiring insurance businesses in Europe for a stable source of funding — even more reliable, perhaps, than deposits. "Life insurers and pension schemes make very long-term promises to pay out money to people, but only when certain things happen — for example, retirement or death. So they are extremely unlikely to suffer a run." And to think that a few years ago insurance companies here were applying for banking charters. The grass is always greener … Finally, the FT’s banking editor, Patrick Jenkins, cautions in an op-ed that bankers who complain about the growth of shadow banking ought to keep an eye on their own houses. He warns that the seemingly low-risk business of M&A advisory, where banks like UBS have been placing more of their chips, has its share of hazards, not least of which is that the more firms are trying to win business, the less profitable it will be.
Processing Content
Wall Street Journal
Donald Layton, the former CEO of E-Trade, is the front-runner to be the next CEO of Freddie Mac, anonymous sources tell the Journal.
The Consumer Financial Protection Bureau plans to propose new rules for the mortgage servicing industry by the summer and finalize them by January. Will the regulations contradict, duplicate or complement those being written by the Federal Housing Finance Agency and the banking agencies — not to mention the new servicing standards in the national mortgage settlement?
New York Times
Why is M&T, a healthy bank, holding on to its Tarp funds? Columnist Peter Eavis speculates it has something to do with the lender’s Tier 1 ratio and getting through the stress tests.
If only Willy Loman had an iPhone. Trade-show exhibitors and other traveling salespeople are taking to Square, the smartphone accessory that enables them to accept debit and credit card payments without having to schlep around bulky machines and reams of paper. And taking cards, whether by mobile device or knuckle-buster, is increasingly a necessity for these merchants. "Sorry, I only take cash, but there's an ATM at the other end of the exhibition hall, past all the other tables where people are selling stuff just like mine" is no way to clinch a sale.
