Receiving Wide Coverage ...
Three-Card Monte: European nations are preparing for life after the European Union and the return to individual currencies, the Wall Street Journal reports, and those outside the EU are looking for defensive measures in case of an unraveling of the coalition. Meanwhile, on the sunny side of the Street, Treasury Secretary Timothy Geithner continued his confidence-building tour of Europe, and Germany sold $5.5 billion, of five-year securities. The Times said Geithner noted the "progress" the French and Germans were making in developing ideas for strengthening Europe. The plan calls for further central supervision of each nation's budget. But dark clouds loom: the Washington Post quoted a senior German official as saying he was not convinced that other nations would back the plan and that he was "pessimistic" there would be a deal by the end of the bellwether summit on Friday. If the euro zone collapses, it would be followed by Europe's banking system, triggering "global economic misery," an article in the Journal based on a JPMorgan Chase report noted. JPMorgan advises hedging exposure to the euro. Another Journal story looked at Poland, which still uses the zloty as its currency and has no troubles. And as far as the banks go, it's all just one more work-around: the Times reports at length on how European banks are playing Three-Card Monte with their bond holdings in a "complex maneuver" to bolster capital levels -- without actually raising additional money. The euphemism for this stunt is 'liability management.' Nice optics on that one, fellas. At least it's legal. It is legal, right? (Notice that in this entire 200-plus word discussion of Europe we haven't once mentioned Britain. There's a reason for that, as the Times suggests.)
Ackermann Targeted: Security is tight at "Deutsche Bank's offices in Manhattan after a letter bomb was sent to the bank's chief executive in Frankfurt." An X-ray of the letter, addressed to Josef Ackermann, with a return address of the president of the European Central Bank, found explosives and shrapnel inside it. An FBI spokesman says, "there is no specific threat to New York associated with the incident at this time." New York Times, Wall Street Journal
Today's Special? Deep-Fried Corzine: Former Central Illinois farm boy Jon Corzine faces the House Agricultural Committee today. Dealbook writers have 10 questions they'd like to ask the former head of MF Global (and Goldman Sachs, not to mention the state of New Jersey and quite possibly a parent-teacher association somewhere)….if he doesn't plead the Fifth. Stay tuned. Wall Street Journal
Wall Street Journal
The role of rating agencies in bankers' lives would be reduced by rules proposed by regulators Wednesday. "Under the credit-rating proposal, banks would be required to replace ratings by calculating the riskiness of numerous forms of debt, with the riskiest debt carrying the largest capital charge."
A law capping debit-card fees has backfired, causing merchants and consumers to pay more to use the cards.
"Ahead of the Tape" previewed today's Fed release of third-quarter flow of funds.
JPMorgan Chase's loans to "Spain, Italy, Greece, Portugal and Ireland have jumped 9 per cent since September 30." Meanwhile Bank of American and Citigroup "have cut their exposure to the five countries."
New York Times
It's not a good time to be a European bond trader. As an economist at London broker-dealer put it: "You are there to make a market and instead you just sit there." The question is: how much longer will European banks "stick with their overstaffed bond divisions"?
Do they serve Happy Meals on Rikers Island? A "modern version of a check-kiting scheme" landed 94 indictments as Manhattan prosecutors cracked down on electronic crime. In this particular caper, dozens of people were hired to write bad checks on closed or non-TD Bank accounts, put the funds into fresh TD Bank savings accounts, transfer the funds immediately to their new related checking accounts, from which they then used ATMs at Western Union branches or at casinos to withdraw cash that was never theirs in the first place. In return, the scheme's masterminds gave the runners a few hundred dollars and food from McDonald's.