• Tag Archives Regulation
  • Inflation Spikes Most since 2008 in Mexico. Bad Timing

    Before the Elections and despite Bank of Mexico’s ‘monetary shock.’ Inflation is a touchy topic in Mexico where wages are tight and not growing fast enough. Inflation is spiking. And consumers, trying stretch ever further just to keep up, are not happy.
    Consumer prices, as measured by the national consumer price index, soared 6.44% in July compared to a year ago, according to Mexico’s statistics agency INEGI. It was the sharpest annual inflation rate increase since December 2008, sharper than economists had forecast. It has now accelerated for the thirteenth month in a row. And it’s very much unwanted by regular Mexicans:
    ***
    The spike in inflation at the beginning of the year was to some extent due to a jump in gasoline prices brought on by deregulation of the gasoline market on January 1. At the time, some politicians in the opposition Democratic Revolution Party called on Mexicans to stage a ‘peaceful revolution’ against the price increases. It triggered a series of protests, and road blockages snarled traffic for days. But those gasoline prices didn’t come back down. On the contrary.

    This post was published at Wolf Street on Aug 10, 2017.


  • Should the Federal Reserve Be Doing the Nation’s Work with a Skeleton Crew?

    The Federal Reserve Board of Governors is supposed to have a roster of seven Governors. It currently has four. Equally alarming, it lists just two members serving on each of its eight committees. One Fed Board Governor, Lael Brainard, is listed as one of the two members on six of the eight committees, or 75 percent of all committees. Governor Jerome Powell sits on five of the eight committees, or 63 percent of all committees.
    The Fed’s Committee on Supervision and Regulation consists of just Powell and Brainard. And yet, this is what the Fed’s 2015 Annual Report describes as the institutions the Fed supervises:
    4,922 Bank Holding Companies
    442 Domestic Financial Holding Companies
    470 Savings and Loan Holding Companies
    839 State Member Banks
    154 Foreign Banks Operating in the U. S.
    Along with other entities per the graph above.

    This post was published at Wall Street On Parade By Pam Martens and Russ Marte.


  • FDIC’s Hoenig: Bank Lending Weak Because of Payouts (99% Net Income Distribution)

    Thomas Hoenig, the former KC Fed Chairman and current vice chairman of the Federal Deposit Insurance Corporation (FDIC) stated recently that banks are choosing to distribute their earnings to investors rather than lend.
    WASHINGTON (Reuters) – Big banks say tight U. S. financial regulation forces them to sit on capital and not put money to work by making loans, but in truth they choose to distribute all of their earnings to investors instead of lending them, a long-time regulator said in a letter to two powerful senators released on Wednesday.
    Using public data to analyze the 10 largest bank holding companies, Hoenig found they will distribute more than 100 percent of the current year’s earnings to investors, which could have supported to $537 billion in new loans.
    On an annualized basis they will distribute 99 percent of net income, he added.

    This post was published at Wall Street Examiner by Anthony B Sanders ‘ August 3, 2017.


  • We Need a Social Economy, Not a Hyper-Financialized Economy

    We all know what a hyper-financialized economy looks like–we live in one:central banks create credit/money out of thin air and distribute it to the already-wealthy, who use the nearly free money to buy back corporate shares, enriching themselves while creating zero jobs. Or they use the central-bank money to outbid mere savers to scoop up income-producing assets: farmland, rental properties, etc.
    This asymmetric wealth accumulation and avoidance of risk creates a self-reinforcing feedback loop, as the super-wealthy financiers and corporations use a slice of their income to buy political protection of their income streams, creating cartels and quasi-monopolies that are impervious to competition and meaningful regulation. The only possible output of a hyper-financialized economy is rapidly increasing wealth and income inequality–precisely what we see now. What we need is a social economy, an economy that recognizes purposes and values beyond maximizing private gains by any means necessary, which is the sole goal of hyper-financialized economies.

    This post was published at Charles Hugh Smith on THURSDAY, JULY 27, 2017.


  • Bank Deregulation Back in Vogue: It’s time to dance the last fandango!

    The Great Recession was so great for the only people who matter that it is time to do it all again. Time to shed those bulky new regulations that are like clod-hoppers on our heals and dance the light fantastic with your friendly bankster. Shed the encumbrances and get ready for the new roaring twenties.
    The banks need to be able to entice more people into debt because potential borrowers with good credit and easy access to financing are showing no interest in taking the banks’ current enticements toward greater debt. That could indicate the average person is smarter than the banks and apparently recognizes they are at their peak comfort levels with debt. The banks, on the other hand, want to reduce capital-reserve requirements in order to leverage up more.
    Thus, President Trump, blessed be he, is working (in consort with the Federal Reserve) on cutting bank stress tests in half to once every two years and working to significantly reduce the amount of reserve capital banks are required to keep. He also wants to make the stress tests a little easier to pass. Such are the plans of his Goldman Sachs economic overseers to whom Trump has given first chair in various illustrious White House departments.
    READ MORE

    This post was published at GoldSeek on 26 July 2017.


  • Deutsche Bank CEO tells staff: Prepare for Brexit “worst outcome“

    Deutsche Bank CEO John Cryan told employees that the German lender is preparing for a hard Brexit in which roles will “inevitably” move from London to Frankfurt.
    Cryan said in a video announcement on July 11 that the bank “will assume a reasonable worst outcome” from the U.K.’s talks with the European Union, according to a Bloomberg News report.
    “The worst is always likely to be worse than people can imagine,” Cryan said.
    Deutsche Bank operates a branch in the U.K., and while London is one of the firm’s major investment banking hubs, Cryan said he will move “the vast majority” of the markets balance sheet to Frankfurt. As a result, some roles will move too.
    “There’s an awful lot of detail to be ironed out and agreed, depending on what the rules and regulations turn out to be,” Cryan said in the video. “We will try to minimize disruption for our clients and for our own people, but inevitably roles will need to be either moved or at least added in Frankfurt.”

    This post was published at Business Insider


  • U.S. Mega Banks Are This Close to Breaking Their Profit Record

    The last time big U.S. banks made so much money, the financial world was heading toward the brink of collapse. This time, it’s stiff regulation that’s in danger.
    Ten of the nation’s biggest lenders including JPMorgan Chase & Co. and Bank of America Corp. together made $30 billion last quarter, just a few hundred million short of the record in the second quarter of 2007, according to data compiled by Bloomberg. The achievement comes just as the industry’s long campaign against post-crisis rules finds traction with the Trump administration.
    Banks have been decrying regulations aimed at curbing risk, blaming them for hurting capital markets and discouraging lending to consumers and companies. President Donald Trump, echoing those complaints, has asked regulators to find ways to ease off. But in this year’s second quarter, banks saw their profits propped up by lending operations even after a surge in revenue from more volatile trading units subsided.
    ‘It shows that the legislation we passed in no way retarded the ability of the banks to make money,’ said Barney Frank, the former congressman whose name is on the 2010 law tightening industry oversight. Banks are supporting the economy, he said. And ‘very specifically, it refutes Trump’s claim that we cut into lending. How do banks make record profits if they can’t lend — especially when they’re down in trading?’
    The second quarter wasn’t a fluke. Even looking at the past 12 months, profits are still near the same level as 2007.

    This post was published at bloomberg


  • A Pro-Growth Move

    When President Trump was elected last November, the stock market threw a pro-growth party that resulted in a robust year-end rally for the major indices. Stock market participants were enthused by the prospect of reduced regulations, increased infrastructure spending, the repeal and replacement of the Affordable Care Act (aka Obamacare), and, most importantly, tax reform.
    That enthusiasm manifested itself in the outperformance of value stocks, but in more recent months, growth stocks have flexed their muscle and have been leading the major indices to new record highs.
    The shift in leadership has been plain to see and it plainly suggests that the stock market isn’t as hopeful as it once was that the assumed pro-growth legislation will come to pass.
    That has been discouraging in an economic sense because the real-time economic data have served as a reminder that the US economy is still stuck in its low-growth rut.

    This post was published at FinancialSense on 07/24/2017.


  • Wall Street Efforts to Improve Its Image Fail to Sway Americans

    Bad news for financial titans like JPMorgan Chase & Co.’s Jamie Dimon and Goldman Sachs Group Inc.’s Lloyd Blankfein: Most Americans hold unfavorable views of Wall Street banks and corporate executives, and distrust billionaires more than they admire them.
    Despite efforts by Wall Street firms to regain trust since the 2008 financial crisis, fewer than a third of Americans view the industry positively — unchanged from 2009, according to the latest Bloomberg National Poll.
    Dimon, 61, and Blankfein, 62, each chief executive officers for more than a decade, have sought to influence the public policy debate on issues including infrastructure investment, regulation, education, immigration and corporate tax reform. Both were revealed as billionaires in 2015, according to the Bloomberg Billionaires Index.
    Yet the poll shows that Americans are much more likely to distrust billionaires than admire them, 53 percent to 31 percent. And just 31 percent look favorably on corporate executives and Wall Street.
    Big banks ‘are still pushing for deregulation and they are going to get us right back to where we were with the financial crisis,’ said poll participant Chad Boyd, 36, an independent voter and information technology worker who lives in Louisville, Colorado, about 10 miles east of Boulder.

    This post was published at bloomberg


  • Greatest Fools? The Countries That Trust Their Government Most (And Least)

    Trust in government serves as a vital driving force for a country’s economic development, increases the effectiveness of governmental decisions, as well as leading to greater compliance with regulations and the tax system. As Statista’s Niall McCarthy notes, the level of confidence in a country’s government is generally determined by whether people think their government is reliable, if it can protect its citizens from risk and whether or not it is capable of effectively delivering public services.
    The latest edition of the OECD’s Government at a Glance report has found that confidence in government varies widely between countries.
    ***
    Unsurprisingly, Greece has the lowest level of confidence in its government, unsurprising given the economic pain it has suffered since the onset of the financial crisis. In recent years, Greece has had to deal with multiple elections, bank shutdowns, defaulting, the introduction of capital controls and being on the frontline of the European migration crisis. That has all led to 13 percent of the Greek public having confidence in their government. South Korea also has a low level of confidence at 24 percent, most likely due to President Park Geun-hye’s impeachment scandal.

    This post was published at Zero Hedge on Jul 17, 2017.


  • China Small Caps Crash To Lowest Since 2015 Amid Deleveraging “Selling Panic”

    Despite China reporting solid economic data on Monday, with beats across the board in everything from retail sales, fixed asset investment, industrial production and GDP printing at 6.9% and on track for its first annual increase since 2010…

    … despite the biggest net liquidity injection by the PBOC since mid June after the central bank injected a net 130 billion yuan, and despite yet another rebound in the Yuan, overnight China’s Shanghai Composite slumped by 1.4%, the most since December as a result of a plunge in the small-cap ChiNext index, which tumbled by 5.1%, and is now down 16% in 2017 to levels not seen since January 2015 following a fresh round of broad deleveraging amid concerns about tougher regulations and more IPOs following a high-level conference over the weekend attended by President Xi Jinping in which China hinted at the formation of a “super-regulator”.

    This post was published at Zero Hedge on Jul 17, 2017.


  • ‘Bigger Systemic Risk’ Now Than 2008 – Bank of England

    – Bank of England warn that ‘bigger systemic risk’ now than in 2008
    – BOE, Prudential Regulation Authority (PRA) concerns re financial system
    – Banks accused of ‘balance sheet trickery’ -undermining spirit of post-08 rules
    – EU & UK corporate bond markets may be bigger source of instability than ’08
    – Credit card debt and car loan surge could cause another financial crisis
    – PRA warn banks returning to similar practices to those that sparked 08 crisis
    – ‘Conscious that corporate memories can be shed surprisingly fast’ warns PRA Chair
    ***
    Editor Mark O’Byrne
    Stark warnings have been issued by the Bank of England and its regulatory arm, the Prudential Regulation Authority (PRA).
    In less than one week the two bodies issued papers and speeches to warn industry members that many banks are showing signs of making the same mistakes that led to the 2008 financial crisis – the outcomes of which are predicted to be worse than those seen just nine years ago.

    This post was published at Gold Core on July 17, 2017.


  • French Riots Erupt in 20 cities

    The riots is France has been forming for the last two weeks and have now erupted violently with protesters carrying banners that read ‘Break Destroy Ravage’ that is similar to the destructive forces unleashed in Hamburg. The police report that the mob is composed of the youth. It is hard to see how these people can practice restraint when unemployment among the youth is so high because of taxes and regulation prevent small businesses from forming.

    This post was published at Armstrong Economics on Jul 16, 2017.


  • Europe’s Unsustainable Welfare State

    Angela Merkel used to say that ‘the European Union is about 5% of the world’s population, about 25% of its GDP, and about 50% of global welfare spending’:
    The real data is more concerning.
    The European Union is:
    7.2% of the World Population.
    23.8% of the World’s GDP.
    58% of the World’s Welfare Spending.
    Something has to give.
    The EU average tax burden on workers is 44.9%. The average worker in the EU spends half a year working for the tax man.
    Taxation accounts for 41% of the euro area GDP.
    Ease of doing business remains below the leading economies of the world.
    Bureaucracy is asphyxiating. The EU approves on average 80 directives, 1,200 regulations and 700 decisions per year.
    The main EU economies remain significantly below the leaders in economic freedom.

    This post was published at Ludwig von Mises Institute on 07/14/2017.


  • Nomi Prins: Easy Money Policy Allows for Another Crisis

    Nomi Prins joined The Foreign Correspondents’ Club of Japan in Tokyo to discuss the banking landscape and state of financial regulations in the Trump era. The central bank historian and financial expert also took a deep dive into the shifting relations between the United States and Japan and what easy money policy has meant for financial markets.
    The author began the discussion noting that, ‘A lot of things have happened in the past months in particular within finance and trade alliances amongst countries in the Trump era.’
    Speaking on the recent gathering of world leaders Prins’ notes, ‘One of the things that came out of the G20 is whether it is America last in terms of the alliances occurring today. The American first policy is pushing new diplomacy and agreements with countries that have not spoken with one another in the past. This is happening for two reasons. One, from a standpoint of protecting the commonality of the world. It is filling the gap between receding powers versus rising power. Two, it is an anti-protectionist move.’


    This post was published at Wall Street Examiner on July 13, 2017.


  • How Trump’s Nominee for the Fed Could Turn Central Banking on Its Head

    Jay L. Zagorsky, The Ohio State University
    President Donald Trump on July 10 nominated Randal Quarles to be one of the seven governors of the Federal Reserve System, the central bank of the United States.
    Before I get to Quarles and his qualifications, it’s important to understand the Fed and what it does. Its decisions are vital to every person on the planet who borrows or lends money (pretty much everybody) since it has enormous influence over global interest rates. Its board of governors also influences most other aspects of the global financial system, from regulating banks to how money is wired around the world.
    Quarles, for his part, is clearly qualified for a job at the pinnacle of financial regulation. He has held numerous positions in the US Treasury Department, including undersecretary for domestic finance under George W. Bush, and was the US executive director at the International Monetary Fund (IMF). He has also worked on Wall Street for The Carlyle Group and founded his own investment company, The Cynosure Group. He also has a law degree from Yale.
    The issue that I believe deserves careful scrutiny, however, does not involve his qualifications. Rather it’s a view of his that, if allowed to permeate the Fed, would represent a seismic shock to how the central bank operates and could potentially have severe consequences if – or when – we stumble into another financial crisis like the one we endured only a decade ago.

    This post was published at FinancialSense on 07/12/2017.


  • Volcker Says Trump Changes to Volcker Rule Won’t Erode Principle

    Paul Volcker said he isn’t worried that the Trump administration will undermine the financial rule that bears his name.
    ‘If they can do it in a more efficient way, God bless them,’ the former Federal Reserve chairman said in a phone interview about proposed revisions to the regulation. ‘The basic principle remains valid. I hope that won’t go away, and I expect that it won’t.’
    The Volcker Rule, part of the 2010 Dodd-Frank Act, restricts trading by banks to ensure they don’t make risky bets that lead to big losses. It took five regulatory agencies more than three years to hammer out the details of how firms can continue to help clients trade without engaging in so-called proprietary bets with their own money. A report released by Treasury Secretary Steven Mnuchin last month recommended that regulators simplify some of those directions and exempt community banks.
    ‘Everybody wants to see it more simple,’ said Volcker, 89, who served as Fed chairman under presidents Jimmy Carter and Ronald Reagan. ‘The basic premise is hard to fight against. Yet the banks have powerful lobbyists who have been fighting it from day one.’

    This post was published at bloomberg


  • U.K. banks ordered to prove booming consumer credit is not a danger

    Banks have been ordered to prove that the boom in lending on credit cards and other household loans is not excessively risky – or face the consequences.
    Lenders have been given two months to examine underwriting standards and write to the Bank of England to explain themselves.
    That information will then be used by the Prudential Regulation Authority (PRA) to decide if any further steps need to be taken to rein in risky lending.
    Officials at the Bank are worried that debt is growing at an extraordinary pace, which can only be achieved if lenders are taking more and more risks and giving out loans to households that are less able to afford the burden.
    Ultra-low interest rates could also have lulled banks into a false sense of security, as customers can afford their debts right now but might get into trouble when rates rise.

    This post was published at The Telegraph


  • Traders Who Left Banks for Hedge Funds, Heading Back to Banks

    Traders who fled banks for hedge funds are on their way back to Wall Street.
    This month, Barclays Plc hired Chris Leonard, a founder of two hedge funds in the decade since he left JPMorgan Chase & Co., to turn around U.S. rates trading. At the end of last year, ex-bankers Roberto Hoornweg and Chris Rivelli, both of Brevan Howard Asset Management, left that London hedge fund for banks.
    Recruiters say these moves and others aren’t just the usual attrition: banks in New York and London are interesting employers again a decade after the financial crisis, and may get involved in more proprietary trading if President Trump eases regulatory burdens. There’s also another factor: many macro funds just don’t make money anymore.
    ‘In the last quarter of the year or first quarter of 2018, you will find more people leaving the hedge funds to join banks to run proprietary money,’ said Jason Kennedy, chief executive officer of the Kennedy Group in London, which hires for banks and hedge funds. ‘The banks will become more attractive in terms of jobs and pay.’
    That’s due to expectations that Donald Trump will be good for bankers. In a report released June 12, the U.S. Treasury Department urged federal agencies to re-write scores of regulations that Wall Street has frequently complained about in the seven years since the passage of the Dodd-Frank Act. They include adjusting the annual stress tests that assess whether lenders can endure economic downturns, loosening some trading rules and paring back the powers of the watchdog that polices consumer finance.

    This post was published at bloomberg


  • Hedge Fund Traders Return To Banking As Trump Promises To ‘Make Prop Trading Great Again’

    The hedge fund industry is finding itself in increasingly dire straits as persistently weak returns and the advent of low-cost investing have forced more and more funds to shut down. So, it’s unsurprising that, amid this steadily worsening backdrop, more traders are heading for the exits. But where are the heading? Increasingly, more traders are moving back from where they came – i.e. the big banks, which expect to see a boost in trading revenue as President Donald Trump has vowed to dial back postcrisis regulations that forced banks to wind down their prop desks.
    In recent months, a number of high-profile hedge fund names have made the leap back to banking, according to Bloomberg.
    ‘This month, Barclays Plc hired Chris Leonard, a founder of two hedge funds in the decade since he left JPMorgan Chase & Co., to turn around U. S. rates trading. At the end of last year, ex-bankers Roberto Hoornweg and Chris Rivelli, both of Brevan Howard Asset Management, left that London hedge fund for banks. Recruiters say these moves and others aren’t just the usual attrition: banks in New York and London are interesting employers again a decade after the financial crisis, and may get involved in more proprietary trading if President Trump eases regulatory burdens. There’s also another factor: many macro funds just don’t make money anymore.
    One recruiter says he expects defections to increase over the next nine months.
    ‘In the last quarter of the year or first quarter of 2018, you will find more people leaving the hedge funds to join banks to run proprietary money,’ said Jason Kennedy, chief executive officer of the Kennedy Group in London, which hires for banks and hedge funds. ‘The banks will become more attractive in terms of jobs and pay.’

    This post was published at Zero Hedge on Jun 30, 2017.