Wall Street jobs in jeopardy; Marcus going international

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Fed sticks to script
As expected, the Federal Reserve voted unanimously to raise its benchmark short-term interest rate by another 25 basis points Wednesday to a range between 2% and 2.25%, the first time it has reached that level since 2008. The Fed also signaled it expects to raise the rate “again later this year and through 2019 to keep a strong economy on an even keel.”

“The increase, which drew a rebuke from President Trump, is the third this year and the eighth since the Fed began to lift rates in late 2015 after keeping them pinned close to zero after the 2008 financial crisis. It also is the first time in a decade the fed-funds rate will rise above inflation,” according to the Wall Street Journal.

“For the first time in recent years, the Fed did not describe monetary policy as ‘accommodative,’ indicating that its benchmark interest rate is rising back toward a level the Fed regards as neutral, meaning that monetary policy is neither stimulating nor restraining economic growth.” Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker

While the Fed is raising rates, a lawsuit against the New York Fed “could complicate the central bank’s effort to control short-term interest rates at a time when investor scrutiny of those markets is intensifying.” As reported earlier this month, a bank called TNB USA is suing the New York Fed for failing to approve its application to set up a deposit account that would allow it to earn high rates of interest and then pass them on to its own customers.

“Analysts say that if TNB won approval to offer deposit accounts to clients and other banks copied its model, the development could pose a threat to how the Fed has controlled short-term rates since the 2008 crisis.”

Separately, Pamela Dyson, the Securities and Exchange Commission’s chief information officer for the past three years, is joining the New York Fed as CIO and executive vice president of technology. Charles Riddle, the SEC’s chief technology officer, will become acting CIO.

Both sides now
Stripe, the financial technology firm that enables other startups and tech companies to accept online and mobile payments, raised $245 million in a new funding round Wednesday that values the company at about $20 billion, “vaulting it into the ranks of the world’s most valuable private companies.” Wall Street Journal, Financial Times

But not everything is rosy in fintech land. Funding Circle, the first peer-to-peer lender planning to go public in the U.K., has lowered the value it expects to receive in its upcoming IPO. The offering “is viewed as a test for U.K. investors’ appetite to back alternative lending vehicles.”

Should Square “be valued on par with, or even at a premium to, some of the most successful companies of our time?” the Journal asks. Or is it “frothy” and due for a “return to reality”?

British bankers beware
Goldman Sachs is opening its Marcus consumer bank in the U.K., its first international outpost, with a 1.5% rate on savings accounts, the highest on instant-access savings accounts. “We’re going out with a strong offer, we know we’ll attract a lot of savers,” said Des McDaid, a Goldman managing director. “Our goal is not to compete with the small players, the goal is to move people away from the high street banks that control 80% of the market.” Wall Street Journal, Financial Times

Change in Spain
Francisco González, the longtime executive chairman of BBVA, is stepping down at the end of the year, “a planned succession heralding the end of the career of one of Spain’s highest-profile bankers.” He is expected to be replaced by Carlos Torres, the bank’s number two executive.

González “is one of Europe’s longest-serving bank leaders and has won global plaudits for making financial technology a central part of BBVA’s strategy long before most executives awoke to its potential.” His retirement “is the second major shakeup in Spain’s banking leadership in just two days,” following Banco Santander’s naming Andrea Orcel as its next CEO.

Wall Street Journal

Going public
Bitmain Technologies, the world’s largest cryptocurrency mining company, is planning to go public in Hong Kong, “one of the first major instances where the traditional capital markets and the newer cryptocurrency world will collide.” Bitmain, founded in China five years ago, said it had $2.8 billion in revenue in the first half of 2018, nearly 10 times what it took in a year ago despite the fall in cryptocurrency prices. Profit rose to $742.7 million from $83 million.

Financial Times

Danske whistleblower revealed
Howard Wilkinson, a British executive who was head of markets in Danske Bank’s Estonian branch, warned the bank nearly five years ago that something rotten was going on. The bank has since admitted the branch laundered as much as $230 billion of mostly Russian money. Wilkinson was unmasked by a Danish newspaper as the whistleblower in the scandal.

New York Times

Losing money
“Cost-cutting is failing to keep pace with the declines in [trading] revenue” at Wall Street investment banks, which “spells a new wave of job cuts on dealing floors.” According to analytics company Tricumen, the combined cost of trading at the 13 biggest global investment banks equals just three-quarters of the revenue they bring in. “The trend is unlikely to reverse because there is no sign of a return to the higher interest rate volatility environment that is the most lucrative. Certainly, not this year.”

Quotable

“That’s who we are. That’s what we do. And that’s just the way it’s always going to be for us.” — Fed Chair Jerome Powell, defending the Fed’s independence in setting interest rate policy.

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