Bank of New York

"King would say 'Please finish what I started.' "

Analyst surveys have now risen to the level of fact, as we all know.  Thus Bloomberg and other news outlets feature detailed reports about the opinions of the Sell Side community as though these musings were burned into stone tablets with the fire of the Holy Spirit.

• Europe’s $39T Pension Threat Grows as Economy Sputters (Bloomberg)
• Monti Warns of Italy Protests as He Meets Merkel (Bloomberg)
• Bernanke Doubling Down on Housing Bet Asks Government to Help: Mortgages (Bloomberg)
• Europe Banks Resist Draghi Bid to Avoid Crunch by Hoarding Cash (Bloomberg)
• Europe Fears Rising Greek Cost (WSJ)
• ECB’s Nowotny Sees Risk of Mild Recession in Euro Region (Bloomberg)
• Republican Senators Criticize Fed Recommendations on Housing (Bloomberg)
• Spanish Banks Try to Build Their Way Out of Home Glut (WSJ)
• Europe Stocks Fluctuate After German Auction (Bloomberg)

While hardly news to those who have been following our coverage of the shadow banking system over the past two years, today Reuters has a curious angle on the European "repo" problem: namely, it appears that over the past several months the primary marginal source of cash in the ultra-short term secured market in Europe are not banks, the traditional "lender" of cash (for which banks receive a nominal interest payment in exchange for haircut, hopefully, collateral) but the companies themselves, which have inverted the flow of money and are now lending cash out to banks (with assorted collateral as a pledge - probably such as Italian and Greek bonds), cash which in turn makes its way to none other than the ECB (recall that as of today a record amount of cash was deposited by European "banks" with Mario Draghi). From Reuters: "Blue-chip names like Johnson & Johnson, Pfizer and Peugeot are among firms bailing out Europe's ailing banks in a reversal of the established roles of clients and lenders. One source with knowledge of the so-called repo deals or short-term secured lending, said the two U.S. pharmaceutical groups and French carmaker were the latest to sign up for them." Which intuitively makes sense: as has been well known for years, companies are stuck holding on to record amounts of cash, although what has not been clear is why? Now we know, and it is precisely for this reason: corporate treasurers have known very well that sooner or later the deleveraging wave will leave banks cashless, and corporates themselves will have to become lenders of last resort, especially in a continent in which the central bank is still rather concerned about sparking inflationary concerns.

Bank of America, which services mortgage loans on behalf of investors, may be acting for its own benefit, Knights of Columbus said in a lawsuit filed today in New York State Supreme Court.

“Operating against the backdrop of well-documented disarray and fraud in mortgage documentation, the shortcuts taken in Lee County courts mean that homeowners may never have a meaningful opportunity to refute faulty evidence supposedly supporting foreclosure.”