Opinion

Ben Walsh

from Felix Salmon:

Counterparties: The next bank CEO on the hot seat

Ben Walsh
Jun 29, 2012 21:29 UTC

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Bob Diamond, the CEO of Barclay's, is under increasing pressure (a $450 million settlement over charges of manipulating a key interest rate will do that). The governor of the Bank of England declined to call Diamond "fit and proper" to run the bank. For American readers, that's British English for 'I'm not saying he shouldn't be fired, but...'

The Financial Times has called on him to resign, saying "if he had an ounce of shame, he would immediately step down". The FT cites this almost too-poetic quote from Diamond: "Culture is difficult to define but for me the evidence of culture is how people behave when no one is watching".

The vitriol isn't new. In 2010, Bloomberg Markets wrote that "in some UK media and political circles, Diamond is the personification of a greedy banker, a symbol of all that has gone wrong in global finance". Diamond's public comments since have done little to change this view.

In 2011, he was called the "unacceptable face of banking" by Lord Mandelson, despite forgoing a bonus in 2008 and 2009. Last year, Diamond told Parliament that "there was a period of remorse and apology for banks, that period needs to be over...The biggest issue is 'How do we put some of the blame game behind us?'...There’s been apologies and remorse, now we need to build some confidence". (Diamond pulled in a $10 million pay package last year.)

from Felix Salmon:

Counterparites: Barclays’ $450 million LIBOR settlement

Ben Walsh
Jun 27, 2012 21:18 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

It's always the emails:

“always happy to help,”...“Done…for you big boy,”

“Dude. I owe you big time! Come over one day after work and I’m opening a bottle of Bollinger”.

Those are the thanks sent to Barclays employees for manipulating key interest rates. The gloating, conspiratorial tone is in full public view now that the bank has settled charges with the CFTC, the Department of Justice and the FSA that it manipulated Libor and Euribor for just over $450 million. CEO Bob Diamond promptly apologized in a written statement, and he and three other top execs will forgo bonuses this year. Breakingviews' George Hay notes that the scandal confirms the worst of the public's view of banks and thinks that the "full costs of the affair for Diamond and Barclays will be more than just financial".

from Felix Salmon:

Counterparties: A tentative housing recovery

Ben Walsh
Jun 26, 2012 22:16 UTC

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It isn't yet a full-fledged housing recovery, but it is good news of a certain kind: The Case-Schiller Index shows that average home prices increased 1.3% in April, after seven consecutive months of decline. April also showed the smallest year-over-year decline in home prices since September 2010:

What's driving the tentative recovery? If you ask the National Association of Realtors, it's partly because of shrinking home supply. Calculated Risk, who says it's likely home prices have bottomed nationally, dismisses concerns about how backlogs of distressed homes may affect home prices:

Why regulators need to be JPMorgan’s risk managers

Ben Walsh
Jun 26, 2012 16:52 UTC

JPMorgan is improving risk management by boldly endeavoring to not make the same mistake  — huge positions in credit derivatives — twice, the WSJ reports. But that’s about as far as the changes go. The CIO will still be able to buy “asset-backed securities, emerging-markets debt, collateralized debt obligations and troubled corporate debt”.  That’s an incredibly small correction in response to the CIO’s losses.

The message from Jamie Dimon to traders is clear: our risk management process is fine, keep doing exactly what you were doing before. Just don’t do that (points to “$2 billion blunder” headline”).

In seeming contrast to his positive view of JPMorgan’s risk management, Dimon had less than kind words for new financial regulation in his testimony last week before the House and Senate. But here’s the weird thing: the two things aren’t actually that different.

from Felix Salmon:

Counterparties: SCOTUS’s massive healthcare decision

Ben Walsh
Jun 22, 2012 21:23 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

The Supreme Court is holding off issuing a ruling on the constitutionality of Obamacare until next week.

The are four basic scenarios of what the Court can do and the decision has massive economic implications. The industry accounts for some 18% of US GDP; billions of dollars in federal spending and the future of hundreds of community healthcare centers are in play.

from Felix Salmon:

Counterparties: Bailouts and money market funds

Ben Walsh
Jun 21, 2012 21:49 UTC

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Shadow banking has at least one component that non-financial types have actually heard of: money market funds. These are supposed to be low-risk investments, with accordingly low yields. MMFs are all about keeping your principal intact – a net asset value (NAV) below $1 is generally a mortal failure.

In the fall of 2008, the Reserve Primary Fund famously broke the buck after it was stuck with massive amounts of Lehman Brothers debt, unleashing any manner of craziness into a market that had been treated by many as a savings account.

from Felix Salmon:

Counterparties: Euro next

Ben Walsh
Jun 18, 2012 21:40 UTC

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Sunday's Greek election ended with a narrow victory for the conservative, pro-bailout New Democracy party, which now must try to form a coalition government. That is, of course, the same untenable status quo that preceded the election.

Meanwhile, the NYT reports that European leaders are working toward a "grand vision" that, at first blush, sounds a lot like the many vague promises we've heard from eurozone officials before. The plan this time is to prevent bank runs and what the NYT's Jack Ewing calls the "vicious cycle of government debt problems turning into banking crises". But like everything in Europe, the politics of this are tricky; Lisa Pollack walks us through who wants banking union, a closer political union, a fiscal union or some permutation of the three.

Green finance datapoint of the day, BofA edition

Ben Walsh
Jun 14, 2012 19:07 UTC

Bank of America has joined Goldman Sachs in making a new commitment to clean energy. BofA is making a $50 billion dollar 10-year plan, which is $10 billion more than Goldman over the same time frame, so it wins the headline arms race. But BofA’s announcement shares the same faults as Goldman’s. (Full disclosure: I used to work in the Goldman’s Environmental Markets Group, which in part set and tracked the firm’s green initiatives).

Both announcements are deeply depressing. These dollar figures are basically the amount of financing and investment the banks will offer to businesses and consumers to do things like expand wind and solar energy production and increase energy efficiency. It you listen to the story banks tell about what they are great at — raising capital, allocating risk, etc. —  they should be diving into this market.

But instead of ambitious plans, we get very small amounts of good wrapped up in press releases aimed at grabbing headlines and generating glossy sustainability reports. It’s pretty pathetic, but not entirely surprising. Since the financial crisis, banks have largely failed in their efforts to prove their social utility; climate change is no different.

from Felix Salmon:

Counterparties: A guide to Jamie Dimon’s stroll on Capitol Hill

Ben Walsh
Jun 13, 2012 22:09 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

Heading into Jamie Dimon's testimony before the Senate Banking Committee, Andrew Ross Sorkin, Bloomberg View, Occupy the SEC and many others offered up the questions they would ask JPMorgan's chairman and CEO. But this was, after all, the Senate Banking Committee, whose members are no strangers to JPMorgan's campaign donations.

The Senators by and large met our low expectations, delivering performances that Brian Beutler said "turned the cross-examination into a coronation, and exposed the extent to which elected officials still feel compelled to genuflect to powerful financial interests". Dimon decidedly got the best of his questioners, so much so that David Weidner said he came "off too much like a know-it-all. His inner confidence and cockiness have come to the surface".

from Felix Salmon:

Counterparties: Parsing the Spanish bailout

Ben Walsh
Jun 11, 2012 21:27 UTC

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com

This weekend Spain requested the bailout it had previously denied it needed – here's the official statement (PDF). The Spanish government has formed the Fund for Orderly Bank Restructuring (FROB), which will accept loans of up to $125 billion from the euro zone and inject needed capital into its banks. The final details of the aid, however, will not be set until the European Commission conducts its own assessment of Spanish banks' financial health.

Markets shrugged at the news. "The hourglass … has been turned over, but each time it's happened in Europe over the past few years there seems to be less and less sand in it," as one analyst put it.

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