That the U.S. Federal Deposit Insurance Corporation (FDIC) insures deposits in people’s bank accounts up to $250,000 is fairly common knowledge. What is less known is that this $250,000 cap is, in many cases, a fiction, because companies and savvy, wealthy depositors can circumvent it, or avoid it altogether.
Barclays was fined a record $450 million last month by U.S. and UK authorities for manipulating the London Interbank Offered Rate, or Libor, the interest rate that underpins transactions worth trillions of dollars worldwide, between 2005 and 2009. More than a dozen banks are expected to be drawn into the scandal, which is being probed by authorities in North America, Europe and Japan.
Chris Reese contributed to this post
In an article entitled “Our financial oligarchy,” published in Harper’s magazine in December 1913, Louis Brandeis, who three years later would be appointed to the Supreme Court, delivered a scathing critique of the banking sector that bears an uncanny resemblance to the charges against Wall Street today.
Federal Reserve Chairman Ben Bernanke “might have something up his sleeve next week” when he delivers his semi-annual monetary policy report to Congress: he could hint at a “funding for lending” program similar to what the Bank of England announced last month, according to one long-time Fed watcher.
There appears to have been a significant slowdown in the second quarter. In particular we saw the pace of job creation slowed to a pace of 75,000 per month in the second quarter down from 226,000 in the first quarter and there are also concerns about slowing growth globally, beyond Europe but also in the emerging world and China, which was highlighted in the minutes (to the June meeting) this week. So, where do you think we’re headed? Are we just going to remain in a soft kind of pace? Are there upside risks to growth? Are there downside risks to growth?
Maybe the massive U.S. repo market isn’t as massive as we thought. That’s the conclusion of a study by researchers at the Federal Reserve Bank of New York that suggests transactions in the repurchase agreement (repo) market total about $5.48 trillion. The figure, though impressive, is a far cry from a previous and oft-cited $10 trillion estimate made in 2010 by two Yale professors, Gary Gorton and Andrew Metrick. The Fed researchers, acknowledging the “spotty data” that complicates such tasks, argue the previous $10-trillion estimate is based on repo activity in 2008 when the market was far larger, and is inflated by double-counting.
Simon Johnson is on a mission. The MIT professor and former IMF economist is trying to push JP Morgan CEO Jamie Dimon to resign his seat on the board of the New York Fed, which regulates his bank. Alternatively, he would like to shame the Federal Reserve into rewriting its code of conduct so that CEOs of banks seen as too big to fail can no longer serve.
Just as the proverbial shoemaker’s children can go without shoes so, apparently, can a cleaner of corporate office bathrooms not have time for a bathroom break. And with the lack of time to use one of the 24 bathrooms Adriana Vasquez must clean in a five-hour shift at the JP Morgan Chase Tower in Houston, Texas – 22 of them with multiple stalls – comes the absence of a living wage.
Seemingly lost in the talk about whether or not the Federal Reserve should ease again is the idea that financial conditions have tightened and the U.S. central bank may have to offer additional stimulus if only to offset that tightening. Writes Goldman Sachs economist Jan Hatzius:
If anything positive can be said to have come out of the global financial crisis of 2008-2009, it may be that the theory arguing major economies could “decouple” from one another in times of stress was roundly disproved. Now that Europe is the world’s troublesome epicenter, economists are already on the lookout for how ructions there will reverberate elsewhere.