In other news of the day -
When you finish reading both articles ask yourself - AND WHAT ABOUT SHAREHOLDERS AND DEPOSITORS?
Can you spell bail-ins? And, look who is on the working groups? Oh my!
1)
Up Yuan Trading and Clearing in America
Stephen Kirkland
November 30, 2015 — 5:58 AM PST Updated on November 30, 2015 — 10:08 AM PST
The U.S. took an unprecedented step toward allowing trading and clearing of the Chinese yuan in America.
Finance and industry leaders said Monday they are setting up a group aimed at allowing U.S. institutions to make or receive yuan payments, according to a press statement released before the International Monetary Fund said it will add the currency to its Special Drawing Rights basket. The road map will be subject to review by U.S. authorities, with the aim of lowering transactional costs and helping build stronger trade and business partnerships, they said.
This “will improve the competitiveness of U.S. companies, increase market transparency and accrue direct benefits to the U.S. economy,” the group said.
Formation of the working group comes after U.S. President Barack Obama and China’s President Xi Jinping agreed in Washington in September to further strengthen the financial cooperation between the two nations. Michael Bloomberg, the founder and majority owner of Bloomberg LP and a former New York mayor, will chair the group and Mary Schapiro will serve as vice chair, while Thomas Donohue, Timothy Geithner and Henry Paulson will co-chair.
A string of financial centers have tried to set up yuan trading hubs outside China, a step that would help the world’s second-biggest economy integrate further into global financial markets. Monday’s announcement came as the IMF decided to add the yuan to its basket of reserve currencies effective in October 2016. Inclusion gives IMF member countries who hold it the right to obtain any of the currencies in the basket -- currently the dollar, euro, yen and pound -- to meet balance-of-payments needs.
Bloomberg LP is the parent of Bloomberg News.
The working group will also include the following member institutions:
The U.S. Chamber of Commerce
* Bank of America Corp.
* Bank of New York Mellon Corp.
* Citigroup Inc.
* Goldman Sachs Group Inc.
* JPMorgan Chase & Co.
* Morgan Stanley
* Wells Fargo & Co.
* Agricultural Bank of China Ltd.
* Bank of China Ltd.
* Bank of Communications Co.
* China Construction Bank Corp.
* Industrial & Commercial Bank of China Ltd
2)
CNN - Fed News
Fed ends 'too big to fail' lending to collapsing banks
The Federal Reserve is cutting its lifeline to big banks in financial trouble.
The Fed officially adopted a new rule Monday that limits its ability to lend emergency money to banks.
In theory, the new rule should quash the notion that Wall Street banks are "too big to fail." Translation: the government has to save them during a crisis.
The Fed's new restrictions come from the Dodd-Frank Act of 2010, which brought in a wave of reforms after the financial crisis.
Under the new rule, banks that are going bankrupt -- or appear to be going bankrupt -- can no longer receive emergency funds from the Fed under any circumstances.
If the rule had been in place during the financial crisis, it would have prevented the Fed from lending to insurance giant AIG (AIG) and Bear Stearns, Fed chair Janet Yellen points out.
Politicians like Senator Elizabeth Warren have pushed the Fed to end such emergency lending to banks that are going under.
She does not think the Fed's new rule goes far enough.
"There are still loopholes that the Fed could exploit to provide another back-door bailout to giant financial institutions," Warren, a Democrat, told CNNMoney.
At first glance, the new rule sounds like a common sense change. If a bank is going under, American taxpayers shouldn't be bailing it out.
However, it's important to note that the new rule allows the Fed to judge by its own measures whether a firm qualifies for its emergency aid.
The idea is the Fed can still lend to banks during times of emergency, but the bank must be able to pay it back. Yet the true health of a bank in turmoil can be very difficult to assess.
"It's very hard to judge in real time whether a firm is insolvent or just having liquidity problems because it becomes impossible to price assets," says Paul Ashworth, chief U.S. economist at Capital Economics, a research firm.
That's why Warren wants clearer guidelines.
"It's up to Congress to close those loopholes and ensure that Fed emergency lending is limited to protecting the economy and not to saving a few favored banks," Warren says.
The rule is the latest in a series of reforms the Fed has put on the biggest banks in an effort to prevent the next crisis.
The Fed performs "stress tests" on banks to see how they perform in a mock financial crisis scenario. It's also forced banks to increase the amount of cash they have stashed away to weather the next rainy day.
The new rule can be seen as a warning sign from the Fed to big banks: don't expect another bailout next time. Yellen emphasizes that its emergency lending to banks is a last-resort option.
Yellen said the Fed "has long had" this lending authority, but it was only used "sparingly" and in "severe financial crises."
And, if not clear - the IMF decided today to include the Yuan in the basket of currencies that back the SDR.
When you finish reading both articles ask yourself - AND WHAT ABOUT SHAREHOLDERS AND DEPOSITORS?
Can you spell bail-ins? And, look who is on the working groups? Oh my!
1)
Up Yuan Trading and Clearing in America
Stephen Kirkland
November 30, 2015 — 5:58 AM PST Updated on November 30, 2015 — 10:08 AM PST
The U.S. took an unprecedented step toward allowing trading and clearing of the Chinese yuan in America.
Finance and industry leaders said Monday they are setting up a group aimed at allowing U.S. institutions to make or receive yuan payments, according to a press statement released before the International Monetary Fund said it will add the currency to its Special Drawing Rights basket. The road map will be subject to review by U.S. authorities, with the aim of lowering transactional costs and helping build stronger trade and business partnerships, they said.
This “will improve the competitiveness of U.S. companies, increase market transparency and accrue direct benefits to the U.S. economy,” the group said.
Formation of the working group comes after U.S. President Barack Obama and China’s President Xi Jinping agreed in Washington in September to further strengthen the financial cooperation between the two nations. Michael Bloomberg, the founder and majority owner of Bloomberg LP and a former New York mayor, will chair the group and Mary Schapiro will serve as vice chair, while Thomas Donohue, Timothy Geithner and Henry Paulson will co-chair.
A string of financial centers have tried to set up yuan trading hubs outside China, a step that would help the world’s second-biggest economy integrate further into global financial markets. Monday’s announcement came as the IMF decided to add the yuan to its basket of reserve currencies effective in October 2016. Inclusion gives IMF member countries who hold it the right to obtain any of the currencies in the basket -- currently the dollar, euro, yen and pound -- to meet balance-of-payments needs.
Bloomberg LP is the parent of Bloomberg News.
The working group will also include the following member institutions:
The U.S. Chamber of Commerce
* Bank of America Corp.
* Bank of New York Mellon Corp.
* Citigroup Inc.
* Goldman Sachs Group Inc.
* JPMorgan Chase & Co.
* Morgan Stanley
* Wells Fargo & Co.
* Agricultural Bank of China Ltd.
* Bank of China Ltd.
* Bank of Communications Co.
* China Construction Bank Corp.
* Industrial & Commercial Bank of China Ltd
2)
CNN - Fed News
Fed ends 'too big to fail' lending to collapsing banks
The Federal Reserve is cutting its lifeline to big banks in financial trouble.
The Fed officially adopted a new rule Monday that limits its ability to lend emergency money to banks.
In theory, the new rule should quash the notion that Wall Street banks are "too big to fail." Translation: the government has to save them during a crisis.
The Fed's new restrictions come from the Dodd-Frank Act of 2010, which brought in a wave of reforms after the financial crisis.
Under the new rule, banks that are going bankrupt -- or appear to be going bankrupt -- can no longer receive emergency funds from the Fed under any circumstances.
If the rule had been in place during the financial crisis, it would have prevented the Fed from lending to insurance giant AIG (AIG) and Bear Stearns, Fed chair Janet Yellen points out.
Politicians like Senator Elizabeth Warren have pushed the Fed to end such emergency lending to banks that are going under.
She does not think the Fed's new rule goes far enough.
"There are still loopholes that the Fed could exploit to provide another back-door bailout to giant financial institutions," Warren, a Democrat, told CNNMoney.
At first glance, the new rule sounds like a common sense change. If a bank is going under, American taxpayers shouldn't be bailing it out.
However, it's important to note that the new rule allows the Fed to judge by its own measures whether a firm qualifies for its emergency aid.
The idea is the Fed can still lend to banks during times of emergency, but the bank must be able to pay it back. Yet the true health of a bank in turmoil can be very difficult to assess.
"It's very hard to judge in real time whether a firm is insolvent or just having liquidity problems because it becomes impossible to price assets," says Paul Ashworth, chief U.S. economist at Capital Economics, a research firm.
That's why Warren wants clearer guidelines.
"It's up to Congress to close those loopholes and ensure that Fed emergency lending is limited to protecting the economy and not to saving a few favored banks," Warren says.
The rule is the latest in a series of reforms the Fed has put on the biggest banks in an effort to prevent the next crisis.
The Fed performs "stress tests" on banks to see how they perform in a mock financial crisis scenario. It's also forced banks to increase the amount of cash they have stashed away to weather the next rainy day.
The new rule can be seen as a warning sign from the Fed to big banks: don't expect another bailout next time. Yellen emphasizes that its emergency lending to banks is a last-resort option.
Yellen said the Fed "has long had" this lending authority, but it was only used "sparingly" and in "severe financial crises."
And, if not clear - the IMF decided today to include the Yuan in the basket of currencies that back the SDR.
