Friday, September 14, 2012

Krawcheck warns of big bank complexity

Welcome to the morning roundup. Here's a look at what's news in banking and finance.

Krawcheck warns of bank complexity. Former Bank of America Merrill Lynch executive Sally Krawcheck warned bankers Thursday of the complexity of Wall Street banks during a conference in Manhattan, The New York Times reports. While she did not push a particular method of breaking up big banks, she said she supported the debate over reinstating Glass-Stegall and said executive compensation should be changed.

Wells and Discover. People are still talking about the rumors that Wells Fargo could pursue acquiring Discover Financial, but a Discover executive suggested the company wasn't taking it too seriously, the Wall Street Journal says.

Fed's new action. The Federal Reserve's new course of action will involve buying mortgage backed securities until the market improves, The New York Times reports, a departure from the smaller scale, time limited approach it had followed. Investors liked the news, powering the Dow, but many economists warned that the impact would be small, and could drive inflation.

JPMorgan shares make up Whale loss. JPMorgan Chase shares have now recovered from the steep decline that followed the announcement that it had lost billions in oversize trades, Bloomberg reports. The bank's stock jumped nearly 4 percent on Thursday, reaching $41.40, the first time it had exceeded the $40.74 it posted on May 10.


Anonymous said...

Posting the links you refuse to:

Now here's the ugly truth -- QE has not only failed, it has massively failed.

QE began in November of 2008.

During that time the labor participation rate fell, flat-lined, and has refused to recover.

The evidence is clear: QE doesn't work to stimulate employment, it instead destroys jobs.

The reason it doesn't work is that it can't; QE by definition debases purchasing power as it increases the denominator of credit and money. It is simply a sop to those who buy and speculate in the financial markets (in this case, in mortgages) but the positive effects on home prices are tiny. If we get a 50 basis point move in mortgages (unlikely; the more likely move is 25bps) then the price support is only 3%! If the more-reasonable expectation of 25bps is realized then the price support is 1.5%!

This is so tiny as to be beyond "marginal" and well-into the range of utterly insignificant and immaterial to the real economy.