Financial market tensions are serious – but not yet acute. That is clear from today’s offer of seven day dollar funds from the European Central Bank in conjunction with the US Federal Reserve. Demand was precisely nil – as it has now been in four of the six such offers since they were re-introduced at the start of May. (At the first and third $9.2bn and $5.4bn were taken.)
One reason is that the interest rate agreed with the Fed is high (1.17 per cent in today’s offer). But the lack of demand also shows that, in spite of apparent difficulties obtaining dollar liquidity, eurozone banks are not having to grab whatever they can. Jean-Claude Trichet, ECB president, last week said it was good that the facility existed. “If it is not utilised, that is also good because that means that there was no need for it.” Read more
The White House is highlighting common problems of military families to push for more comprehensive financial reform.
Barack Obama today argued against an amendment which would exclude auto dealer lenders from increased consumer protections (that will be overseen by the Fed).
This amendment guts provisions that empower consumers with clear information that allows them to make the financial decisions that work best for them and simply encourages misleading sales tactics that hurt American consumers. Unfortunately, countless families – particularly military families – have been the target of these deceptive practices.
Last month, the White House blog included a post on military families being the potential victims of the proposed auto lending carve out, which said that, in the past six months, 72 per cent of military financial counselors had spoken with soldiers on abusive auto lending practices.
Dealers that target military families have an incentive to Read more
It’s easier to ask for the benefit of the doubt than to give it.
In response to a question about the Greeks’ low opinion of the IMF, Youssef Boutros-Ghali, chairman of the International Monetary and Financial Committee, called on critics to “give the IMF the benefit of the doubt,” arguing that it is a changed institution.
So is the IMF giving the benefit of the doubt to those whose financial systems held up in the crisis but who are now pushing back against calls for reform? Doesn’t look like it.
Dominique Strauss-Kahn, IMF managing director, in an apparent swipe at the Canadas of the world, said that resisting co-ordinated reforms was “short-sighted”. Countries whose financial systems came close to collapse, would likely have, in the pre-crisis days, felt that they too needed no stronger regulation. If banks in those countries failed, Mr Strauss-Kahn argued, others could be similarly overly optimistic about the strength of their system. Read more
Restructurings haven’t yet worked on a large scale with home mortgage loans, but that hasn’t stopped the Fed from being hopeful that commercial real estate might benefit.
In a speech today to community bankers, Fed governor Elizabeth A Duke, said: Read more
Sheila Bair, the chairman of the FDIC, today spoke on regulatory reform. Her comments were nothing surprising or new. She called for the creation of a resolution mechanism for large failing institutions, more sharing of information between regulators, and strengthening consumer protections.
But one interesting statement: Read more
The Irish central bank governor has repeated that recapitalisation will be needed by Ireland’s two largest banks. (He had said the same on February 22.) Claire Murphy at Herald.ie reports:
CENTRAL Bank governor Patrick Honohan has indicated that Anglo Irish Bank and Bank of Ireland will require additional recapitalisation “very soon” … It is expected that fresh cash will be provided to the two main Irish banks within the next two months as the toxic loans are transferred to NAMA … The Government has already provided a total of €11bn into Bank of Ireland, Allied Irish Banks and nationalised Anglo Irish Bank … [Anglo Irish Bank] is expected to reveal losses of up to €12bn within the next few weeks.
Ben Bernanke, Federal Reserve chairman, didn’t testify before the House Financial Services committee today on the central bank’s exit strategy. The committee meeting, like virtually everything else in the US capitol, was thwarted by the snow.
He did, however, release his prepared testimony, which received (as always) brilliant coverage in the FT, earlier on this blog, and in an editorial and other comment.
But I spent my day in a shutdown city. And in the spirit of passing time in a city where very little got done today, I’m choosing to write about what Mr Bernanke didn’t say, rather than what he did.
1. Mr Bernanke did not say how much will it cost the Fed to pay interest on banks’ holding of bank reserves. Read more
Why are people selling Goldman today? I’m not a trader and I would caution against taking any big positions based on policy that still lacks details. But it seems to me at first glance that Goldman and Morgan Stanley could end up benefiting in some ways from the Obama crackdown on the banks.
Goldman and Morgan can simply give up their bank charters and go back to being non-bank financial firms. Yes, they would still be subject to tougher prudential standards under the administration’s wider reg reform plan. Yes, they would lose access to central bank loans. Read more
Am I alone in feeling increasingly uncomfortable with the the global clamour for new taxes on banks and bankers?
Do I feel sorry for put-upon investment bankers with new tax demands? No. Am I comfortable with the greed culture in Wall Street and the City of London? No. is Barack Obama justified in asking for taxpayers’ money back? Of course. That is why we can give one cheer to the bonus supertax ideas in the UK and France; the US bank levy and the International Monetary Fund process of seeking ways to ensure the financial sector pays for its sins. Read more
Andrew Bailey, the Bank of England’s head of banking services, has just given details on how he hopes regulation can help solve the “too important to fail” issue. His list of what a future bank like Lehmans would have to do is quite an eye-opener writes Chris Giles of the Financial Times. Read more
Decoupling? Asian economies discuss increasing intra-regional trade that is less dependent on exports to the West. Conflicting indicators from the US and warnings of bubbles in the UK Read more
Money Supply, a Financial Times blog, rounds up the news for Friday, October 23 Read more
Money Supply, a Financial Times blog, wraps up the news for Wednesday, October 21 Read more
Money Supply, a Financial Times blog, rounds up the news for Monday, October 19 Read more