Receiving Wide Coverage ...
Regulators Defend Basel III: The Bank for International Settlements issued a report attempting to debunk bankers' arguments that requiring big global institutions to hold extra capital would squelch economic growth. Wall Street Journal, Financial Times.
China Bails Out Its Banks: The country's sovereign wealth fund announced plans to buy shares in its four largest institutions to restore investor confidence, which has been undermined by the European debt crisis and fears of a double-dip recession in the U.S. Financial Times, Wall Street Journal, New York Times.
Bailed Out, Broken Up and Nationalized: That's the fate of Franco-Belgian bank Dexia, which the Journal has designated "the first banking victim of the euro-zone sovereign-debt crisis." Wall Street Journal, Financial Times, Washington Post.
Earnings Previews: Third-quarter reporting for the financial sector is set to kick off Thursday with JPMorgan Chase's release. A story on the front page of the Journal's "Money & Investing" section Monday surveyed the key issues investors will be looking at in banks' results, foremost among them exposure to Europe. The predominant feeling, the story says, is the jitters. Indeed, the "Heard on the Street" column notes that Citi, Goldman Sachs, and Morgan Stanley are all trading at steep discounts to tangible book value. "Those are going-out-of business valuations. If the global financial system isn't headed for meltdown, they aren't warranted." For Citi and other commercial banks to earn richer valuations, the column says, they must show "signs of meaningful loan growth, which will drive revenue higher." Cost cuts and reversals of loan-loss reserves, while good for the bottom line, won't impress much this time around. The Journal agrees that CEOs must address jittery investors by being open about their exposure to troubled European countries, and "details of their funding situations, reliance on 'hot money' from hedge funds and equity- and debt-raising plans."
Occupy Wall Street: Lloyd Blankfein, Goldman Sachs' CEO, canceled an appearance at Barnard College in New York; though the official reason for the cancellation was "scheduling conflicts," he likely would have encountered protestors inspired by the Occupy Wall Street movement had he shown up, the Times says. Meanwhile, demonstrators are planning to pay visits this week to the homes of some wealthy New Yorkers, including JPMorgan Chase CEO Jamie Dimon, Crain's New York Business reports. Over the weekend, the Times' editorial page rebutted those critics who say the protestors are short on specific demands. "It is not the job of the protesters to draft legislation," the editorial says. "That's the job of the nation's leaders, and if they had been doing it all along there might not be a need for these marches and rallies." Dodd-Frank doesn't count, apparently. Lastly (for now), the "Errata Security" blog asked a question that no one in the media apparently had thought to ask before: how does Brookfield Properties, which owns Zuccotti Park (epicenter of the now nearly month-long original protest), feel about Occupy Wall Street? The company, it turns out, is irked by rule-breaking and worried about sanitation, though with regard to clean-up, the blog itself says that "the protesters themselves are taking care of this. They are exhorting people to not litter, they are making sure the trash cans have fresh bags and patrol the park picking up litter. They make sure the trash bags are set out in the right place to be picked up by the city's garbage service." The takeaway: despite the "smelly hippy" stereotype that prevailed a few weeks ago, this is a well-organized group.
Nobel Prizes: Ellen Johnson Sirleaf, the president of Liberia (who once worked at Citibank), was one of three women awarded this year's Nobel Peace Prize "for their non-violent struggle for the safety of women and for women's rights." An economist, Sirleaf was a vice president in Citi's regional Africa office in Nairobi in the 1980s. She's now running for reelection - against a soccer star. The Nobel in economics, meanwhile, was awarded to two American professors "for their research on the cause and effect of government policies on the broader economy, a major concern of countries still struggling to address the aftermath of the recent financial crisis," the Times says. Wall Street Journal, Financial Times, the Guardian, BBC News, Washington Post.
Wall Street Journal
Banks once considered Western Union an "archrival," but now they're warming to partnerships with the money transmitter. U.S. Bancorp, Regions and Key are among those that have signed up to market the company's services.
East-West Bancorp, in Pasadena, Calif., is thriving while most U.S. banks are treading water at best, by focusing on its niche: Chinese-American clients, as well as U.S. companies that do business in China and vice versa.
"Securities and Exchange Commission Chairman Mary Schapiro intends to stay at the securities regulator for at least another year … despite a series of stumbles for the agency in recent months, including an ethics scandal involving its former general counsel and a stream of critical court decisions and reports from an internal watchdog."
New York Times
"Reuters BreakingViews" considers the pros and cons for Wells Fargo of expanding the "fledgling" investment bank it inherited from Wachovia, which it could do a number of ways - including a hypothetical takeover of Morgan Stanley.
A law professor writes in "DealBook" that the federal and New York suits against Bank of New York Mellon, alleging it defrauded foreign-exchange clients, "raise sticky questions about when marketing claims cross the imperceptible line from puffery to fraud." At issue is the bank's use of buzzwords like "best execution" and "most competitive rates" in marketing materials. "When words like 'best' and 'lowest' are used to promote a product or service, the law is unclear about how much a customer should take those with a grain of salt, or whether they can provide a basis for finding a fraud. Should a potential used-car buyer believe the signs at a dealership touting its prices as the 'lowest' around and that the cars on its lot are the 'best' available?"
Douglas Kass of Seabreeze Partners Management tells "DealBook" editor Andrew Ross Sorkin that leveraged exchange-traded funds are to blame for the sharp swings in the stock market that often occur late in the trading session.
"Blackstone and Carlyle have teamed up to look at Morgan Keegan and are competing with Thomas H Lee, the private equity group, to buy the brokerage unit put up for sale by Regions Financial in June."
Capital One's deal to acquire ING Direct is briefly mentioned in this story, which takes a hard look at the claims of companies in various industries that allowing them to do what they want will create jobs. The alleged multiplier effects of oil and gas drilling, pipeline construction, corporate tax cuts and megamergers all get put under the microscope.
Slate: Bank of America's much-maligned $5 debit card fee shows "why more Americans should be banking at smaller banks," writes Annie Lowrey. That intro would make you think this is a story community bankers would love, but it turns out the "smaller banks" she recommends they turn to are online banks like ING Direct and Ally and - gulp - credit unions. Even so, small-town bankers who compete with credit unions will likely appreciate this comment posted by a Slate reader: "I love all the hoighty toighty [sic] snobbery of the people gloating of their years of painless credit union banking. Please, give me more reasons why your genius actions [that] give you $60 more than me at the end of the year makes [sic] me a loser. Dodd Frank is in your pants too..."
Editor's Note: We forgot to warn readers we'd be off on Columbus Day. Apologies to anyone who waited in vain for a Monday Scan.