Receiving Wide Coverage ...
Flight from Europe, to Safety: The stats in this morning's papers speak volumes: Three-month LIBOR hit its highest level since July 2009. (And if history is any guide, we gather some banks' actual borrowing costs could be worse than the index suggests.) The exchange rate for the euro fell below $1.30 for the first time since January. And cash on deposit at foreign-owned banks in the U.S. has fallen for six straight months, the first time this has happened in nearly a decade. The upshot of all this: confidence in Europe and in the global banking sector remains fragile, last week's accord among the continent's leaders notwithstanding.
The Settlement Extraction Commission: The SEC’s staff intends to recommend to its governing commission that the agency appeal Judge Jed Rakoff’s rejection of the Citigroup CDO settlement, the Journal reports, citing anonymous sources. As faithful Scan readers will recall, Rakoff, known affectionately in some circles as “Judge Dread,” took issue not only with the $285 million settlement amount (“pocket change”) but with the longstanding SEC tactic of allowing companies to settle fraud charges without admitting or denying wrongdoing. An appeal would be unusual, and risky. If the SEC loses and Rakoff’s ruling stands, it would set a precedent for courts nationwide to join him in blocking neither-admit-nor-deny settlements. But the SEC may feel it has more to lose by not appealing; according to the Journal story, the ruling is already affecting the agency’s negotiations with other companies accused of misconduct. “Everything’s come to a halt because the SEC doesn't know what to ask for anymore in the settlements,” one anonymouse tells the paper. In the Times’ “DealBook,” Jesse Eisinger chides the “timid” SEC for shying away from “hauling in the big boys” – the major investment banks – to trial. Interestingly, Eisinger reports that there may soon be trials for IndyMac, Stifel Nicolaus or Reserve Primary fund executives, but none of those are “the big game.” To extend the metaphor, the public wants to see a vampire squid harpooned.
MF Global Inquest: A third Congressional hearing on the brokerage’s demise and the mysterious disappearance of $1.2 billion of customer money is scheduled for today. The Times’ “DealBook” suggests eight questions for lawmakers to ask one of the witnesses, Terrence Duffy of the CME Group, who dropped a bombshell at the last hearing when he suggested that John Corzine knew the company had been misusing client funds, contrary to the former CEO’s own testimony. (Great minds think alike: our friend Francine McKenna recommends questions to ask the other witnesses in her latest BankThink column). Tom Baxter, the New York Fed’s general counsel, is expected to tell the House Financial Services committee that the regulator was concerned about “control issues” at MF Global as far back as 2009, the FT reports. And another New York Times story says the committee will reveal that MF Global emasculated its chief risk officer. Sadly, that is a familiar story.
Wall Street Journal
“The big question mark hanging over the farm economy is whether a bubble is building in Midwest cropland. Prices have doubled over the past five years in states such as Nebraska and Indiana.” People must have really taken Meredith Whitney’s predictions to heart.
Consumer complaints about debt collectors filed with the FTC have set a record at 164,361 this year. The story questions why the number of enforcement actions has been so low by comparison – four this year, and an average of two a year over the previous five years – but the agency tells the paper it’s conducting "an inquiry of the debt buying industry" that includes the completeness and accuracy of information collectors use as evidence in court to prove what borrowers owe.
To comply with Basel III, U.S. banks will collectively have to raise slightly less than 70 billion euros (which is about $90 billion at current exchange rates), according to a study by Boston Consulting Group. The story focuses on the much larger shortfall for European banks.
New York Times
“Credit Suisse staff members were briefly evacuated from their Manhattan offices on Wednesday morning after the Swiss bank received two suspicious packages in the mail.” After that letter bomb sent to Deutsche Bank, no one’s taking chances.
“WonkBlog” profiles Thomas Hoenig, the former president of the Kansas City Fed and outspoken critic of “too big to fail” who’s widely expected to be confirmed by the Senate as FDIC vice chairman. The piece contrasts his popularity among Republicans with their filibustering of Richard Cordray, the administration’s nominee to lead the Consumer Financial Protection Bureau. While Hoenig is no doctrinaire conservative – he says Dodd-Frank didn’t go far enough – GOP lawmakers say they like his stance against the Federal Reserve Board’s quantitative easing and his general independence of thought.