Receiving Wide Coverage ...
Life and Debt: In this week's New Yorker, columnist James Surowiecki questions the meme that consumer deleveraging is the main reason the economic recovery's been so weak. For one thing, he notes, consumer spending has been rising for much of this year, albeit sluggishly, and nonmortgage borrowing has been climbing the last two years. Moreover, returning to the "unnaturally high" consumption levels of the bubble years is neither realistic nor desirable. The problem, Surowiecki argues, is not so much Americans' indebtedness - or their efforts to work off those debts - as they're feeling less wealthy after home prices and other investments cratered; incomes are scarcely rising fast enough to help in this regard. The upshot is that "dealing with the debt problem, or the housing crisis, is not the panacea for the economy that many have made it out to be. … We can't look to [consumers] to jump-start this recovery." While you're reconsidering widely held assumptions about personal indebtedness, check out anthropologist David Graeber's book "Debt: The First 5,000 Years." We can't claim to have read all 500 pages, so we're hardly in a position to "review" this sweeping history or evaluate Graeber's thesis, which challenges the idea that a monetary debt is a moral obligation rather than a mere negotiable promise. (Just so you know where he's coming from, Graeber has been active in the Occupy Wall Street movement and is credited with coining the "We are the 99 Percent" slogan.) But just by skipping around the chapters, we've learned some fascinating things. For example, we already knew from reading Chris Skinner's Financial Services Club blog that the Knights Templar pioneered modern banking. But from Graeber we learned that the Holy Grail itself was a symbol of the "purely abstract forms of value" that were emerging with checks and credit during the Middle Ages. (Or, rather, re-emerging; one of Graeber's central points is that virtual money and credit have been around for millennia, long predating coins or cash, and that the stuff about ancient bartering systems we all read in Econ 101 was baloney.) This gave us a new perspective on the use of "holy grail" as shorthand for "widely sought business goal" (a long-exhausted cliché that, we're a little embarrassed to report, has appeared in American Banker 11 times this year). Unfortunately, the copy of "Debt" on our desk is due back at the library Wednesday. This is one borrowing we do feel morally obliged to return to the lender - and one book we might actually buy.
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Reboot for ResCap? Speaking of financial debts not quite rising to the same morally unbreakable level of marriage vows or the Pledge of Allegiance… The Journal reports that Ally Financial (the former GMAC) is considering a "strategic bankruptcy" filing for its ailing mortgage unit, ResCap. The same story says Bank of America considered, but ultimately rejected, an internal proposal to put Countrywide into bankruptcy. The paper's "DealJournal" blog has two related posts. One gives a Harper's Index-style "by the numbers" rundown of ResCap. The other focuses on B of A's flirtation with a bankruptcy filing for Countrywide. The idea was rejected partly because it could hurt other subsidiaries (Merrill Lynch's counterparties might have demanded B of A cosign the brokerage's debts, for instance) and also because some lawyers imagined it was possible that, well, B of A might have ended up liable for Countrywide's debts anyway. As an ingénue in the opening anecdote of Graeber's book says, "surely one has to pay one's debts."
Should Have Gone to the Caymans: "Credit Suisse informs American clients with offshore private banking accounts that their names are to be revealed to US authorities," the FT reports. Wall Street Journal, Financial Times
Don't Raise Funds Without 'Em: "American Express Co., looking to transform beyond a company that mainly lends to consumers via its credit cards and processes transactions into a major player in e-commerce, plans to invest $100 million in early-stage start-ups in the digital commerce industry," the Journal says. The BankInnovation blog says the move will put Amex "more in direct competition with players like PayPal and Square" and shows that this "formerly stodgy credit card company" is "willing to reinvent itself to make sure it's relevant in the digital age." Wall Street Journal, BankInnovation
Back to the Well: "Fannie Mae said it would seek $7.8 billion more in U.S. government assistance after posting a wider loss in the third quarter as the housing market's troubles continued," the Journal says. Wall Street Journal, Financial Times
Wall Street Journal
"Wells Fargo reached a civil settlement of at least $37 million with municipalities that were suing the bank over the way the banking industry conducted auctions for municipal bonds."
The paper profiled the unconventional and provocative Judge Jed Rakoff ahead of today's hearing on the SEC's proposed $285 million settlement with Citigroup on fraud charges related to a mortgage bond deal.
New York Times
For the third year in a row, Goldman Sachs has literally dominated headlines, garnering the biggest share (nearly 16%) of media mentions among investment banks, according to a story in "DealBook," which calls the firm "the Main Street synecdoche for all that is controversial on Wall Street." This forced us to look up "synecdoche" (it means "a figure of speech by which a part is put for the whole [or] the whole for a part" and it sounds like "Schenectady"). Funny, we didn't have to consult a dictionary while reading Graeber, and he's an academic (at a British college, no less). … Anyway, where were we? Oh yes, headline rankings - or in this case we should say headline risk rankings. "Media mentions for banks, like golf scores, are generally good news when low, since they so often coincide with negative publicity," the "DealBook" story says.
And, Lastly …
"Master Charge": Admittedly, this one isn't "news" by any stretch of the term, but it seems apt to mention in the context of today's Scan. Goofing off on YouTube recently (not on company time, boss), we discovered that the late, great bluesman Albert Collins wrote a song about the hazards of running up a credit card balance. This blistering performance was recorded in 1986 but the tune must have been written much earlier, since Collins calls MasterCard by its original name and refers to "BankAmericard," the precursor to Visa. Whether or not you enjoy the music, you've got to love lyrics like "that 20% is killing me, baby!"
