When the WSJ published an allegation on Tuesday that BNP Paribas had been cut off by US money-market funds, the bank responded with indignation, saying that it “categorically denies the statements made by this anonymous source”. But it never quite came out and said that it had access to US money-market funds — it just said that it still owed them money, and that it was “fully able to obtain USD funding in the normal course of business, either directly or through swaps”.
It’s looking increasingly as though the proximate cause of the next big global crisis is going to be a liquidity crunch at French banks, rather than a European sovereign default. This is not the kind of stock chart that any leveraged institution likes to see:
It’s beyond ironic — closer to moronic, really — that Jamie Dimon would give an interview to London’s very own Financial Times, complaining that international bank-regulation standards are “anti-American,” on the very day that the Vickers Report — Robert Peston calls it “the most radical reform of British banks in a generation, and possibly ever” — is released.
One of the problems with mortgage modifications, the way the big banks do them, is that they tend not to work very well. Borrowers who were underwater stay underwater; often their total amount outstanding goes up rather than down. The amount of time and effort expended by both borrower and lender is enormous, much of it duplicated due to bad document management by the banks, and policies requiring borrowers to get at least two modifications — one for a “trial period” and then a second, permanent one. Redefault rates are very high.
Here’s how best to explain what happened to Sallie Krawcheck yesterday: Krawcheck was the head of Merrill Lynch’s Thundering Herd, reporting directly to Bank of America CEO Brian Moynihan. But Merrill Lynch’s Thundering Herd is no longer particularly important to Bank of America. When Krawcheck was offered a position commensurate with the importance of her team to the bank, she quit — as Moynihan knew she would.
Why is BNY Mellon’s ex-chief, Bob Kelly, getting $33.8 million in severance and benefits in the wake of resigning his position? As Theo Francis explains, it’s because, in the words of the official 8-K, “Mr. Kelly will receive the benefits to which he is contractually entitled on a termination other than for cause”. If this was actually a resignation, Kelly would have got much less. But in reality — and this will come as a surprise to absolutely no one — he had no choice in the matter: he was fired by the board.
American Banker runs this eye-opening chart today, showing what’s happened to the availability of free checking over the past couple of years. In a nutshell, at small and medium-sized banks, and at credit unions, things are little changed. It’s down a bit; it’s not down a lot. But America’s biggest banks, behaving in a pretty cartel-like manner, have nearly all abolished it in unison. Two years ago, 96% of them had free checking; now, only 35% do.
Going into the Jackson Hole conference, everybody was breathlessly awaiting Friday’s speech from Ben Bernanke, which turned out to be incredibly boring. The most important speech of the meeting, by far, came on Saturday, and came from the new head of the IMF, Christine Lagarde. In decidedly undiplomatic prose she came right out and said what needed to be done:
Behold the power of Buffett! With a $5 billion investment which will pay him $300 million per year in perpetuity, Warren Buffett has managed to boost the share value of Berkshire Hathaway by something north of $12 billion. Oh, and Buffett also gets a massive free option on BofA stock — the right to buy 700 million shares at $7.14 apiece, at any point over the next decade. If exercised, that would give him 7% of the company.