Office of the Comptroller of the Currency
Either the Fed and the OCC are unaware of this thing called "computers" which allows them to find out what a bank's trading desk somewhere, anywhere in the world has done at any point in the past 30 or so years, or they really felt the need to stretch their legs around London's Canary Wharf, or they heard very good news about Citi's seafood buffet at its London HQ, but whatever the reason Reuters reports that "the U.S. Federal Reserve and Office of the Comptroller of the Currency have sent investigators to Citigroup's London headquarters as part of an international investigation into alleged manipulation of the global currency market, a source familiar with the matter told Reuters on Wednesday."
So much for the strict, evil Volcker Rule which was a "victory for regulators" and its requirement that banks dispose of TruPS CDOs. Recall a month, when it was revealed that various regional banks would need to dispose of their TruPS CDO portfolios, we posted "As First Volcker Rule Victim Emerges, Implications Could "Roil The Market"." Well, the market shall remain unroiled because last night by FDIC decree, the TruPS CDO provision was effectively stripped from the rule. This is what came out of the FDIC last night: "Five federal agencies on Tuesday approved an interim final rule to permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) from the investment prohibitions of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Volcker rule." In other words, the first unintended consequences of the Volcker Rule was just neutralized after the ABA and assorted banks screamed against it.
HSBC is back in the news. This time it relates to their transferring funds on the behalf of financiers for the militant group Hezbollah. If transactions such as these had even the slightest link to Bitcoin, there would be endless uproar, calls for countless Congressional hearings and demands to stop the currency at all costs. But when HSBC is caught doing it, what happens? A $32,400 settlement.
The grind higher in equities, and tighter in credit, continues as markets brush aside concerns about a December taper for the time being. Overnight futures levitation has pushed the Fed balance sheet driven record high S&P even higher, despite as Deutsche Bank points out, the fact that we had three Fed speakers advocate or talk up the possibility of a December taper, including the St Louis Fed’s James Bullard who is viewed as a bit of a bellwether for the FOMC. Bullard said the probability of a taper had risen in light of the strengthening of job growth in recent months. Indeed, he noted that the best move for the Fed could be a small December taper given the improving jobs data but below-target inflation readings. The Fed could then pause further tapering should inflation not return toward target during the first half of 2014. Looking at today’s calendar, the focus will be on US JOLTs job openings - a report which Yellen has previously highlighted as an important supplement to more traditional labour market indicators. US small business optimism and wholesale inventories are the other major data releases today. As mentioned above, US financial regulators are due to announce Volcker rules at some point today although as we just reported, the CFTC's meeting on Volcker was just cancelled due to inclement weather.
- With website improved, Obama to pitch health plan (Reuters)
- Joe Biden condemns China over air defence zone (FT)
- Tally of U.S. Banks Sinks to Record Low (WSJ)
- Black Friday Weekend Spending Drop Pressures U.S. Stores (BBG)
- Cyber Monday Sales Hit Record as Amazon to EBay Win Shoppers (BBG)
- Ukraine's Pivot to Moscow Leaves West Out in the Cold (WSJ)
- Investment banks set to cut pay again despite rise in profits (FT)
- Worst Raw-Material Slump Since ’08 Seen Deepening (BBG)
- Democrats Face Battles in South to Hold the Senate (WSJ)
- Hong Kong reports 1st case of H7N9 bird flu (AP)
- In Fracking, Sand Is the New Gold (WSJ)
- Washington turns bond market upside (FT)
- China Air-Zone Move Expands Field of Islands Spat With Japan (BBG); Japan rejects China claim on airspace over disputed islands (FT)
- 'Great Satan' meets 'Axis of Evil' and strikes a deal (Reuters)
- Iran Pact Faces Stiff Opposition (WSJ)
- Allies Fear a US Pullback in Mideast (WSJ)
- India to resume paying Iran in Euros (Economic Times)
- At 'Business Insider,' it's time to sell (USA Today)
- More ECB currency war jawboning: ECB’s Hansson Says Rate Cut Options Not Fully Exhausted (BBG)
- Spy World Links Plus Obama Ties Stoke Concern About NSA Review (BBG)
- A disunited Europe will struggle even to disintegrate (FT)
- Desperate Philippine typhoon survivors loot, dig up water pipes (Reuters)
- Fading Japanese market momentum frustrates investors (FT)
- China's meager aid to the Philippines could dent its image (Reuters)
- Headline du jour: Granted 'decisive' role, Chinese markets decide to slide (Reuters)
- Central Banks Risk Asset Bubbles in Battle With Deflation Danger (BBG)
- Navy Ship Plan Faces Pentagon Budget Cutters (WSJ)
- Investors pitch to take over much of Fannie and Freddie (FT)
- To expand Khamenei’s grip on the economy, Iran stretched its laws (Reuters)
- Short sellers bet that gunmaker shares are no long shot (FT)
- Deflation threat in Europe may prompt investment rethink (Reuters)
- Congress Vote Ends Impasse to Be Revisited in January (BBG); Congress Passes Debt, Budget Deal (WSJ)
- House GOP extracts no concessions (Politico)
- Washington becomes the biggest risk to the U.S. economy (Reuters)
- Debt Deal Seen Boosting U.S. Consumers as Holidays Approach (BBG) - only thing missing: disposable income
- Federal Employees Head Back to Work (WSJ)
- Regulator Suggested Shift for Dimon at J.P. Morgan Unit (WSJ)
- Twitter hires Google ad exec ahead of IPO (CNET)
- Teens can now post publicly, but posts are friends-only by default (WaPo)
- Germany Moves to Finalize Coalition Deal (WSJ)
- Draghi Turns Judge on EU Banks as ECB Studies Accounts (BBG)
- UK nuclear deal with China a ‘new dawn’ (FT)
How Many Constitutional Freedoms Have We Lost?
"By late April 2012, JPMorgan senior management knew that the firm's Investment Banking unit used far more conservative prices when valuing the same kind of derivatives held in the CIO portfolio, and that applying the Investment Bank valuations would have led to approximately $750 million in additional losses for the CIO in the first quarter of 2012." Translated: Jamie Dimon lied to Congress.
'Larry Summers for Fed Chair' proponents are working hard to reverse his generally poor reputation and seem to have gained some ground. They’ve tempted even Fed skeptics with reports that Summers doesn’t believe much in quantitative easing. But his supporters are also making claims that don’t stand up to the facts. Call us old-fashioned, but we think we should be wary of power-hungry egotists whose personal philosophy is to obscure the truth.
There was a time when Jamie Dimon liked everyone to believe that his JPMorgan had a "fortress balance sheet", that he was disgusted when the US government "forced" a bailout on it, and that no matter what the market threw its way it would be just fine, thanks. Then the London Whale came, saw, and promptly blew up the "fortress" lie. But while JPM's precarious balance sheet was no surprise to anyone (holding over $50 trillion in gross notional derivatives will make fragile fools of the best of us), what has become a bigger problem for Dimon is that slowly but surely JPM has not only become a bigger litigation magnet than Bank of America, but questions are now emerging if all of the firm's recent success wasn't merely due to crime. Crime of the kind that "nobody accept or denies guilt" of course - i.e., completely victimless. Except for all the fines and settlements. Here is a summary of JPM's recent exorbitant and seemingly endless fines.
We are confident the following amusing bill titled grandiosely enough "A 21st Century Glass-Steagall Act" (the Bill text here) by Elizabeth Warren, John McCain et al, to pretend Congress is not a bought and paid for by Wall Street marionette, will have a last minute rider that says "Compliance with any or all of the above provisions is purely voluntary."
- MSM discovers that soaring dollar hurts corporate profits: P&G to Apple Hurt by Strong Dollar Keep S&P 500 Profits in Check (BBG)
- China Posts Surprise Drop in Exports (WSJ) - lol: "surprise"
- Plan Reins In Biggest Banks (WSJ)
- European Commission Seeks Authority to Wind Down Banks (WSJ) - and Germany just says 9
- U.S. Banks Seen Freezing Payouts as Harsher Leverage Rules Loom (BBG)
- Brussels sets up clash with Berlin over banks (FT)
- EU to Toughen Creditor-Loss Rules at Failing Banks From August (BBG) - or September, or October, but definitely November... 2023
- China's crude, iron ore imports falter as demand cools (Reuters)
- Obama pushes economic case for immigration as House eyes next steps (Reuters)
This week's biggest news is not the Non-Farm Payrolls, or the European Central Bank or even Portugal's government falling. No - this week's big deal is the openness with which the Federal Reserve is preparing a major margin call on the too-big-to-fail banks in the US. This has been a long time coming since the introduction of the Dodd-Frank law back in 2010 but it is a game changer. Remember all macro paradigm shifts come from policy impulses, often mistakes. Is the Fed about to given the whole banking industry a major margin call?