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St. Louis Fed’s Bullard Discusses Quantitative Easing, Global Inflation and Commodity Standards
In remarks delivered Thursday at the Bowling Green Area Chamber of Commerce Coffee Hour, St. Louis Fed President James Bullard discussed three of the most widely talked about topics regarding monetary policy. In his presentation “Quantitative Easing, Global Inflation, and Commodity Standards” Bullard explained how the Fed’s second round of quantitative easing was a substitute for ordinary monetary policy easing. He concluded that quantitative easing is "an effective tool" when the policy rate is near zero. He then examined whether U.S. monetary policy analysis should focus on a global output gap rather than the U.S. output gap. He finished his discussion with a look at the merits of commodity standards and inflation targeting, stating that “inflation targeting is a better choice in the current environment.”
See Bullard's full speech here.
**CN: As of Thursday morning, CME Group Eurodollar Futures were pricing in about a 60% chance of a 25 basis point rate hike at the March FOMC meeting.
Lead Stories
Bullard says Fed may want to look global
By Steve Goldstein, MarketWatch
Fast-growing emerging economies may be behind rising commodity prices and could help explain how the Federal Reserve could be inadvertently stoking global inflation even at a time of high U.S. unemployment, St. Louis Fed President James Bullard said Thursday.
http://jlne.ws/eg4cqM
Problem banks grow in fourth quarter, FDIC says
By Ronald D. Orol, MarketWatch
The number of problem banks in the U.S. grew in the fourth quarter, with total failures reaching an 18-year high in all of 2010, the Federal Deposit Insurance Corp., said Wednesday, even as the agency reported another quarter of healthy profits overall for the banking industry.
http://jlne.ws/f6poNW
Chicago Economist's `Crazy' Education Idea Wins Ken Griffin's Backing
Bloomberg
John List, a University of Chicago economics professor, strides through the Griffin Early Childhood Center chatting with teachers, complimenting girls on their braids and hollering out the window.
http://jlne.ws/hZtkbh
Deutsche Bank Banned From Derivatives Trading in South Korea
By Seonjin Cha and Saeromi Shin, Bloomberg
Deutsche Bank AG was given the heaviest penalty ever levied on a foreign securities firm in South Korea for triggering a Nov. 11 stock market rout that erased $26 billion of value.
http://jlne.ws/gnWQ1Y
Deutsche Bank fined for irresponsible mortgage lending
DW-World
Deutsche Bank has become the first bank to be fined by the UK's Financial Services Authority for irresponsible lending practices. They have been ordered to pay 1.8m euros in compensation to customers.
http://jlne.ws/eqBBrU
**CN: My guess is there were many meetings held at the executive level at Deutsche Bank this week.
Geithner Says World in Better Position to Handle Oil-Price Jump
By Rich Miller, Bloomberg
U.S. Treasury Secretary Timothy F. Geithner said the economic recovery has put the world on a better footing to withstand the increase in oil prices caused by turmoil in the Middle East.
http://jlne.ws/g25EPr
Bad habits of credit bubble make comeback
By John Plender, FT.com
Here we go again. The start of the year in debt markets has been marked by record low yields on junk bonds, declining underwriting standards and a return of the more dangerous innovations of yesteryear such as payment-in-kind toggles which allow borrowers to issue more debt to pay the interest bill. Even covenant-lite loans, where normal borrowing conditions are shelved, have made a comeback in the leveraged buyout market and elsewhere, at a time when hapless small and medium sized firms are hard pressed to find credit.
http://jlne.ws/i0FrOM
Experts: U.S. Fed Mishandled International Dimensions Of QE2
WSJ.com
The Federal Reserve Board initially mishandled its controversial effort to boost the U.S. economy with government bond purchases, but has since taken some smart steps to make up for the mishap, according to senior economists.
http://jlne.ws/fjxm17
EU bank calls for more Egypt, Tunisia funds
By GABRIELE STEINHAUSER, Associated Press
The European Investment Bank said Tuesday that it needs more money to support a transition to democracy in Tunisia, Egypt and other countries in the Arab region, though even the increase it requested from the EU would only allow it to keep investments at their current level.
http://jlne.ws/dF4xNw
George Soros: Obama Has “Lost Control” Of His Economic Agenda
By Bess Levin, DealBreaker
Apparently it’s now “in the hands of the Republican Party,” which will prove negative for the economy. Republicans “are going to pursue a very strong effort to cut services by refusing to have any tax increases,” Soros said in an interview with CNN’s “Fareed Zakaria GPS” program.
http://jlne.ws/hP80li
MENA causing risk aversion
MarkIt
Risk aversion permeated the markets today as investors grappled with the implications of turmoil in the Middle East
and North Africa. After the revolutions in neighbouring Tunisia and Egypt, it now seems that Libya is the next most
likely country to see a forced change in government... The unrest had a predictable effect on other MENA sovereign spreads, i.e. widening. Libya itself doesn’t trade in the CDS market (no debt outstanding) but Morocco, a more liberal North African country, does. Its spreads widened beyond 200bp today, approaching the levels it reached at the peak of the “Jasmine Revolution” in Tunisia late last month.
http://jlne.ws/erTQ9L
Fed's Hoenig Says U.S. Should Break Up Largest Financial Firms
By Joshua Zumbrun, Bloomberg
Federal Reserve Bank of Kansas City President Thomas Hoenig said U.S. regulators should avert another crisis by breaking up large financial institutions that pose a threat “to our capitalistic system.”
http://jlne.ws/f0jEEz
Geithner Called Fannie Mae, Freddie Mac Biggest 'Moral Hazard'
Bloomberg
U.S. Treasury Secretary Timothy F. Geithner said government-sponsored mortgage giants Fannie Mae and Freddie Mac were the biggest sources of "moral hazard," leading investors to count on a bailout for risks gone wrong.
http://jlne.ws/gwiGNf
Weber sets Germany on collision course with EU
By Ralph Atkins, Financial Times
Axel Weber, Germany’s departing Bundesbank president, has put his country on a collision course with its eurozone partners by opposing a central part of proposals for resolving future sovereign debt crises.
http://jlne.ws/h9VCla
Europe’s reforms may come at a high price
By Axel Weber, Financial Times
In the coming weeks, European policymakers will have to decide on an overhaul of governance of the European monetary union. As a guiding principle the European Council has clearly – and, in my view, rightly – stated that the main foundations of EMU and the European Union treaty have to be respected. This means the principles of subsidiarity, responsibility of individual member countries and no-bail-out remain essential for the EU. In this context, what cornerstones are to be considered in the matter of reforming EMU governance?
http://jlne.ws/h5pw3s
ECB overnight lending rockets to 19-month high
Ramya Jaidev, Risk.net
Overnight lending by the European Central Bank (ECB) shot up to its highest level in just under 19 months on Wednesday, data published by the central bank.
http://jlne.ws/gacYi0
China Central Bank Raises Reserve Requirement
WSJ.com
China's central bank, continuing its battle against inflation, said on Friday it will raise the bank reserve requirement ratio by 0.5 percentage points, the second such hike this year. Economist expect more tightening to come.
http://jlne.ws/f0nlCB
Bernanke Defends Fed Policies
By JON HILSENRATH And LUCA DI LEO, WSJ.com
Federal Reserve Chairman Ben Bernanke offered his most pointed rebuttal yet on Friday to foreign critics who say the U.S. central bank's easy-money policies are causing inflation and asset bubbles abroad.
http://jlne.ws/guChL2
Free Trade Agreements Good for U.S. Jobs: U.S. Commerce Sec.
By Stacy Curtin, Yahoo Finance
Just over a year ago in his State of the Union Address, President Obama pledged to create 2 million jobs by doubling exports by 2015.
http://jlne.ws/eHdEDH
Banks Find Loophole on Capital Rule
By DAVID ENRICH, WSJ.com
Some foreign banks are moving to restructure their U.S. operations to avoid one of the most-burdensome requirements of the new Dodd-Frank law. In November, Barclays PLC quietly changed the legal classification of the U.K. bank's main subsidiary in the U.S. so that the unit would no longer be subject to federal bank-capital requirements. Several other banks based outside the U.S. are considering similar moves, according to people familiar with the matter.
http://jlne.ws/eJiwfn
Mutual Funds' Muni-Debt Prices Are Questioned
By JEAN EAGLESHAM, MICHAEL CORKERY And CARRICK MOLLENKAMP - WSJ
The Securities and Exchange Commission is investigating whether some mutual funds have overstated the value of risky municipal bonds that are thinly traded, according to people familiar with the matter.
http://jlne.ws/gHCjvc
Citigroup's Pandit Says U.S. Rules May Squeeze Credit
BusinessWeek
Citigroup Inc. Chief Executive Officer Vikram Pandit said new U.S. banking rules may mean tighter credit and less access for borrowers because of costs imposed on lenders.
http://jlne.ws/hyemGP
NY pension scammer is heading to prison
CNN Money
Henry "Hank" Morris, one of the masterminds of a pay-to-play scandal involving the New York state pension system, today was sentenced to up to four years in prison. He also agreed to repay $19 million in ill-gotten gains, and to be permanently banned from the securities industry in New York State.
http://jlne.ws/i2U1Vz
Events
Fixed Income Conference
March 7, 2011
FINRA's Annual Conference Focuses On Market Impacts On Fixed Incomes and How Regulators And Firms Are Responding - New York
http://www.finra.org/Industry/Education/ConferencesEvents/FixedIncomeConference/index.htm
The 36th Annual International Futures Industry Conference
March 15-18, 2011
FIA's Annual Convention - Boca Raton
http://www.futuresindustry.org/boca-2011-program.asp
SIFMA 2nd Annual Private Client Conference
Apr. 7 and 8, 2011
SIFMA's Conference For Private Client Groups At All Levels - New York
http://www.sifma.org/events/event.aspx?id=22289
Fixed Income Summit
Apr. 28, 2011
Pensions & Investments' One-Day Conference - Chicago
http://www.pionline.com/conferences/fixed-income/2011/register
2011 Morningstar Investment Conference
June 8-10, 2011
Morningstar's Conference For Leaders From Across The Investment Industry - Chicago
http://advisor.morningstar.com/products/mstr_conference.asp
Economic News
Kansas City Fed Mfg Survey Surges to Record Levels
The Bond Buyer
By Gary Siegel, The Bond Buyer
Manufacturing activity in the Federal Reserve Bank of Kansas City’s region “matched an all-time survey high in February, and firms expected strong activity in the months ahead.
http://jlne.ws/h5xXvC
Jobless Claims Fall; Durable Goods Reverse Declines
BY LUCA DI LEO, ANDREW ACKERMAN, JEFF BATER AND TOM BARKLEY, WSJ.com
The number of U.S. workers filing new claims for unemployment benefits fell more than expected last week, pointing to continued improvement in the jobs market as the economy picks up speed.
http://jlne.ws/hSxX4F
Existing Home Sales Up 2.7% In January
By Steve Goldstein, Bloomberg
Sales of existing homes rose a seasonally-adjusted 2.7% in January for the fifth monthly rise in six, a trade group said Wednesday as it also announced a major review into the quality of its data.
http://jlne.ws/hKbRvF
Case-Shiller: US House Prices Are Closing In On the Post-Bubble Trough
Credit Writedowns
The S and P/Case Shiller Home Price Indices shows that house prices in the U.S. continue to decline this winter. For data through December 2010, the broad Composite-20 index is down 2.4% compared to December 2009. The Composite-10 index is down 1.2% in that time frame. While these numbers were in line with expectations, they point to a continuing double dip in housing.
http://jlne.ws/eayxKa
US Consumer Confidence Rising
International Business Times
The US Consumer Confidence rose in February to 70.4; better than the predicted 65.0 and thr prior reading of 60.6.
http://jlne.ws/ft6mEP
Exchanges, Clearing Houses & MTFs
CBOE to Relaunch Credit Event Binary Options (CEBOs) Contracts on March 8
Press Release
CHICAGO, Feb. 22, 2011 /PRNewswire/ -- The Chicago Board Options Exchange (CBOE) announced today that on Tuesday, March 8, the Exchange will begin trading newly-designed Credit Event Binary Options (CEBOs) contracts.
http://jlne.ws/eJtXQc
CME Group Fed Funds Futures Go Green: February 28, 2011
Press Release
Beginning Sunday, February 27, 2011 (trade date Monday, February 28, 2011), CME Group will extend the listing cycle of 30-Day Fed Funds futures by offering a third year of monthly expirations, effectively listing 36 consecutive monthly expiries for trading. The "Green" Fed Funds futures expirations will be traded both on CME Globex and in open outcry.
http://jlne.ws/ec4oB9
Firms & Banks
Barclays purchase of Lehman unit ruled fair
By Telis Demos, Financial Times
A US bankruptcy court judge has ruled that Barclays’ purchase of Lehman Brothers’ US broker-dealer was fair and should not be revisited.
http://jlne.ws/ghHegB
Barclays online annual report short on transparency
Guardian Unlimited
Our desire is to make this report as transparent and open as possible, says Barclays' chairman, Marcus Agius, in his online introduction to his bank's 2009 annual report. This wish, however, failed to produce the startling statistic that Barclays paid just £113m in UK corporation tax in 2009 , a year in which the bank reported profits of £11.6bn (or £4.6bn excluding the sale of its fund ...
http://jlne.ws/hTk68y
Barclays' corporation tax bill blunts Bob Diamond's sparkling words
AFP Telegraph Finance News via Yahoo! Finance
Push Bob Diamond hard enough and he comes up with this sort of stuff: "I think payment of tax is an important responsibility of businesses, yes." That's what the £9m-a-year Barclays (LSE: BARC.L - news) chief executive said to the Treasury Select Committee on January 11, when he had a little mental block over how much corporation tax the bank paid in 2009.
http://jlne.ws/faXpyf
Barclays criticised over UK tax bill
Yahoo! Finance
Barclays bank has revealed it paid STG113 million ($A180 million) in corporation tax in Britain in 2009, about 2.45 per cent of its profits that year, sparking strong criticism on Saturday.Opposition lawmaker ...
http://jlne.ws/hgktAa
Citigroup Ignored Signs of Fraud in Madoff Scheme, Trustee Suit Says
New York Times
The lawsuit said red flags should have been apparent to Citi as early as 2005.
http://jlne.ws/edFCoB
Commerzbank returns to annual profit
By James Wilson, Financial Times
Commerzbank promised further significant improvement in profitability this year as it returned to annual profit for the first time since the financial crisis with results that were better than expected.
http://jlne.ws/gxAZxk
Former U.S. Congressman Harold Ford, Jr. Joins Morgan Stanley
Press Release
Morgan Stanley (NYSE: MS) today announced the appointment of former U.S. Congressman Harold Ford, Jr. to the Firm as a Managing Director and senior client relationship manager. Mr. Ford will work across all business divisions and report to Gregory Fleming, President of Morgan Stanley Smith Barney and President of Morgan Stanley Investment Management, and to Paul J. Taubman, Co-President of Institutional Securities.
http://jlne.ws/emws3a
Goldman Sachs' hedge fund VIP list
eFinancial News
It's a VIP list but not as we know it. Goldman Sachs has published a list of Very Important Positions for hedge funds (see Chart 1) and tracked how well the list has performed in the stock market since 2001.
http://jlne.ws/hdDQWf
Goldman's Blankfein Opposed Raising Salaries Before His Tripled
Bloomberg
Lloyd Blankfein , Goldman Sachs Group Inc.'s chairman and chief executive officer, warned against raising base salaries on Wall Street less than eight months before his own more than tripled to $2 million.
http://jlne.ws/ew7Mzs
RBS's Full-Year Loss Probably Shrank by 98% Since Credit Crisis
BusinessWeek
Royal Bank of Scotland Group Plc, Britain's biggest government-owned bank, may say its full-year loss shrank by 98 percent from 2008, when it received a record taxpayer-funded bailout.
http://jlne.ws/dQrLfa
Merger pays off for incoming Harris N.A. CEO
By: Steve Daniels, Crain's
The Marshall & Ilsley Corp. CEO who in December negotiated the sale of Wisconsin’s biggest bank to the parent of Chicago’s Harris N.A. is in line for $24 million in cash payments in addition to the salary, bonus and equity awards he’ll be getting under a three-year contract to run the combined banks.
http://jlne.ws/gqWOso
Credit Suisse banker arrested in United States
Reuters
A Credit Suisse banker was arrested in New York and was being moved to Florida for a court appearance, according to a law enforcement source familiar with the case.
http://jlne.ws/g7izdE
JPMorgan Says It Was Tricked Into Keeping Lehman's `Goat Poo' Collateral
By David McLaughlin, Bloomberg
Lehman Brothers Holdings Inc. tricked JPMorgan Chase & Co. into holding onto collateral that the bankrupt investment firm internally described as “goat poo,” according to a court filing by JPMorgan.
http://jlne.ws/gurCfx
Bank of America restates card unit results
By Justin Baer in New York, Financial Times
Bank of America has revised the results of its international credit card business for the last two years, adding a $20.3bn non-cash goodwill writedown in 2009 while reversing a $10.4bn charge made last year.
http://jlne.ws/fY2DEU
RBS to sell £1.6 billion of unwanted loans - report
Interactive Investor
Royal Bank of Scotland ( RBS.L ) is planning to sell 1.6 billion pounds of unwanted loans from the boom years of the commercial real estate sector, the Financial Times said on Monday.
http://jlne.ws/aGJ9oq
RBS chief: I won't bow to pay pressure
Scotland on Sunday
ROYAL Bank of Scotland chief executive Stephen Hester has become embroiled in an internal dispute with advisers over remuneration, telling them he will not commit the bank to being at the bottom of the pay league.
http://jlne.ws/g3FDDJ
Citigroup pays top execs bonuses
The Star
NEW YORK: Citigroup, recovering after a series of government bailouts, will pay some top executives millions of dollars of cash bonuses if its core operations earn at least US$12bil before taxes over the next two years.
http://jlne.ws/eOtDI3
US arrests Swiss banker in tax probe
By Kara Scannell and Justin Baer in New York and Haig Simonian in Zurich, Financial Times
A Credit Suisse banker has been arrested in connection with a long-running US tax evasion investigation and could be one of several individuals likely to face charges this week as prosecutors turn their focus from institutions to bankers and wealthy clients, said people familiar with the matter.
http://jlne.ws/hSFtJP
HSBC Amanah is Euromoney's Best International Islamic Bank for second year
Zawya
HSBC Amanah HSBC Amanah has again been named Best International Islamic Bank by Euromoney magazine, in its Islamic Finance Awards 2011. The awards are widely considered to be the most high profile accolades in the Islamic finance industry and annually recognise outstanding performance, quality, service, and innovation in the sector.
http://jlne.ws/fYH95m
Banking titan J. Christopher Flowers describes financial meltdown from the inside
Naples Daily News
Cautious optimism was on the agenda at Friday afternoon's Forum Club lecture, given by finance industry veteran J. Christopher Flowers. The full house that packed Naples Beach Hotel's ballroom listened with rapt attention as Flowers described the September 2008 financial meltdown - a meltdown he saw from the inside while actively trying to save some of America's largest financial institutions.
http://jlne.ws/fDfTtu
Regulators
U.S. Republicans push to delay Dodd-Frank reforms
National Post
Republicans escalated their push to delay and defund the Dodd-Frank Wall Street reforms on Thursday as top regulators appeared before the U.S. Senate Banking Committee with a new chairman presiding
http://jlne.ws/gBrVzG
CFTC butts heads with Shelby on funding
Market Watch
Commodity Futures Trading Commission Chairman Gary Gensler on Thursday took issue with criticism from Republican Sen. Richard Shelby of Alabama who complained that the CFTC failed to hire a chief economist in a timely manner. Gensler acknowledged that the agency took a long time to fill a chief economist slot, but said that cuts to the agency's budget would mean ...
http://jlne.ws/fcm2DD
Consumer Watchdog Hires Former Bankers
By BEN PROTESS, NY Times
As the new federal consumer watchdog agency takes shape, Wall Street might see a few familiar faces on its roster. Elizabeth Warren, the Harvard University law professor who is setting up the Consumer Financial Protection Bureau, announced her latest string of hires on Thursday, including former managing directors at Deutsche Bank and Morgan Stanley.
http://jlne.ws/h2LiR4
OTC
IOSCO identifies benefits of organised platform derivatives trading
Thaipr.net
The Technical Committee of the International Organisation of Securities Commissions (IOSCO) has published a Report on Trading of OTC Derivatives. The report analyses the benefits, costs, and challenge
http://jlne.ws/fR6lFm
Banks to Thwart CFTC Rule on Open Swap Trades, Oliver Wyman Says
By Matthew Leising, Bloomberg
A Commodity Futures Trading Commission plan to ensure open access to swap-trading systems will be thwarted by banks, who want to exclude customers and trade only among themselves in a part of the market, according to consulting firm Oliver Wyman.
http://jlne.ws/fxUvr3
Global News
National Bank of Rwanda Holds Rate at 6.00%
Central Bank News
The National Bank of Rwanda maintained its key repo rate unchanged at 6.00% in order to support its growth objective of 7% or more in 2011. Rwanda recorded real GDP growth of 7.4% in 2010; while the Bank estimated December 2010 inflation as 0.2% year on year, compared to 5.7% in 2009. The National Institute of Statistics of Rwanda reported inflation of 1.09% in January, up from 0.23% in December.
http://jlne.ws/fmNiEI
Vietnam Tackles Inflation, Raises Prices
BY JAMES HOOKWAY, WSJ.com
Vietnam's leaders unveiled measures aimed at curbing soaring inflation rates Thursday, even as residents worried over electricity- and fuel-price increases that are sending energy costs as much as 24% higher.
http://jlne.ws/ejNcUm
National Bank of Moldova Holds Rate at 8.00%
Central Bank News
The National Bank of Moldova maintained its base rate unchanged at 8.00%, while also holding the rate on overnight loans at 11.00%, and the overnight deposit rate at 5.00%. The Bank also maintained the required reserve ratio on local and foreign currency deposits at 11%. Moldova saw inflation of 6.7% in January 2011, down from 8.1% in December. The Bank expects inflation to pick up temporarily in the second half of the year due to rising international food and fuel prices.
http://jlne.ws/eCm2nH
Duvvuri Subbarao Speech: The Reserve Bank of India making a difference in your daily life
Convocation address by Dr Duvvuri Subbarao, Governor of the Reserve Bank of India, at the Sambalpur University, Sambalpur, 24 February 2011.
First of all, my thanks to the Governor and Chancellor, HE Shri M.C. Bhandare, Vice Chancellor Professor Pujari, faculty and students of Sambalpur University for inviting me to be the convocation speaker this year. This is an honour to which I attach a lot of value. It feels wonderful to be in this beautiful state of Orissa and in the bustling Sambalpur area.
http://jlne.ws/hbfXF9
FSA fines Deutsche Bank mortgage division
FT.com
DB Mortgages, the lending arm of Deutsche Bank, has been fined £840,000 ($1.4m) and ordered to pay customers £1.5m by the Financial Services Authority for “irresponsible lending practises” in the years leading up to the financial crisis. The penalty imposed by the FSA is the first time the regulator has taken enforcement action against a firm for irresponsible mortgage lending.
http://jlne.ws/hUNVWt
Inflation and interest rates: Mervyn's dilemma
The Economist
FOR many years the job of the Bank of England’s monetary-policy committee (MPC) seemed straightforward. The knocks that from time to time pushed the economy off its path of steady growth tended to shove inflation downward, too.
http://jlne.ws/i4Ekn7
ZFS in LatAm insurance tie-up with Santander
FT.com
Zurich Financial Services has bought a 51 per cent stake in the Latin American insurance operations of Spain’s Santander, the Swiss insurer said on Tuesday.
http://jlne.ws/i7X5Fb
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