Receiving Wide Coverage ...
Europe, Again: On Sunday, Greece will hold elections that may determine whether the troubled country stays in the Eurozone. European governments are fearful that the election results could spark another round of financial market turmoil. The U.K. said it plans to flood its banks with cheap money to protect the British financial system from the continent’s worsening problems. The European Central Bank’s president, Mario Draghi, said it stands ready to intervene if needed. Amid all of this, we were amazed by a Tweet this morning from the doomsday-trader blog ZeroHedge pointing out that the London Interbank Offered Rate had not changed for 21 days straight. Granted, this morning’s three-month LIBOR was nearly double the year-earlier level, according to Bloomberg, but is it plausible that no bank’s short-term borrowing costs have appreciably risen in recent weeks, given all that’s been going on? (e.g. in Spain and Italy)? Your Morning Scan will entertain rational explanations and give the benefit of the doubt to the banks that report their hypothetical borrowing costs for the British Bankers Association’s LIBOR survey.
The CFPB: The controversial new federal agency has requested public input for its effort to stop financial scams that target the elderly and veterans, the Post reports. The Times’ “Bucks” blog has highlighted some of the comments the CFPB solicited from the public on their experiences with student loans. One of the examples puts the industry in a particularly bad light: “Private student loan originators and servicers make it extremely difficult, if not impossible, to pay down the principal on an existing student loan. … I have made multiple calls to my loan servicer requesting that the extra money I include each month be applied to principal, and am told each time that the money is applied to (future) principal (payments) and continue to have my payment advanced, despite documentation in my loan disclosures stating that my loan is eligible for prepayment.” But the CFPB itself continues to wage a charm offensive on the industry. Our American Banker colleague Maria Aspan reports from this week’s Underbanked Financial Services Forum in San Francisco that an official from the agency praised nonbanks as well as banks for “groundbreaking” innovations. And in a BankThink blog post, financial services veterans Robert L. Johnson and Ken Rees write that they were pleasantly surprised by the open-mindedness of CFPB officials in a recent meeting to discuss a product they are jointly bringing to market.
Milestone: The New York Fed said it has fully recouped the more than $70 billion of loans extended in 2008 to rescue Bear Stearns and AIG. The loans were extended to the Maiden Lane vehicles, which purchased toxic assets from those two teetering companies, allowing JPMorgan to take over Bear and the government to take over AIG. There are still assets in the Maiden Lane portfolios that need be sold, though, and the government still owns three-fifths of AIG, down from 92% a year and a half ago. Wall Street Journal, Financial Times, New York Times
Wall Street Journal
Short sellers have been ganging up on bank stocks. Short interest in the financial sector increased 9% in the second half of May from the previous fortnight, the biggest two-week jump since 2009, according to KBW. Fun comment thread on this one: “Bears can't inflict near as much damage on the banks as the Fed has with the crushingly flat yield curve,” writes one Journal reader. Another reader replies: “there's nothing like that ‘crushing flat yield curve’ that creates opportunities to set up a nice solid carry trade on a basket of undervalued equities and corporate debt.” We wonder if these commenters might be talking about two different species of banks …
We missed this one a few days ago, but it’s still worth noting: Bank robberies have become less frequent in recent years, and the average amount of loot stolen, net of money recovered by authorities, has dropped as well. “With so much of banking having migrated online, robbers might no longer think of brick-and-mortar banks as places where money physically resides,” writes columnist Jason Zweig. “Furthermore, the universal spread of mobile phones may have made it harder to pull off a heist and getaway without being photographed or reported to 911.” There’s an inevitable punch line about inside jobs by executives.