Why J.P. Morgan Chase Is Building a Blockchain on Ethereum
J.P. Morgan Chase is developing a blockchain, commonly referred to as a public ledger, atop a crypto-network called Ethereum.
The system, dubbed “Quorum,” is designed to toe the line between private and public in the realm of shuffling derivatives and payments. The idea is to satisfy regulators who need seamless access to financial goings-on, while protecting the privacy of parties that don’t wish to reveal their identities nor the details of their transactions to the general public.
Amber Baldet, blockchain lead for J.P. Morgan, introduced the project in a technical steering committee meeting of the Hyperledger Project, a year-old off-shoot of the Linux Foundation that collaboratively researches blockchain tech, at the end of last month. She said the team had chosen to work with Ethereum, despite recent challenges, likely alluding to a recent hacking incident, because it has been around a while and banks are familiar with it.
Unlike the open free-for-all that is Bitcoin, in which anyone with a computer can participate in the network, the nodes that run Quorum must receive permission from some higher authority to join. In many bankers’ view, this gateway prevents corrupt or malicious operators from entering the system. Critics, meanwhile, counter that requiring permission bucks the main benefit of a blockchain: enabling untrusted parties to interact.
Wells Fargo's scandal reportedly impacted 10,000 small business accounts
Wells Fargo's recent accounts scandal was not limited to its retail banking unit, according to a report from Reuters.
Citing sources familiar with the matter, 10,000 small business accounts were impacted by Wells sales practices that also drove employees to open 2 million retail accounts without the knowledge of customers. It was not clear in the Reuters report how the small business accounts were impacted.
In a letter to Wells Fargo CEO John Stumpf on September 29, Sen. David Vitter claimed that the scandal went beyond the retail sector, according to Reuters.
Stumpf was asked during his testimony to the House Financial Services Committee on Thursday whether the accounts scandal impacted the small business division of the bank. He responded that he was not aware that it had spread. In semi-related news, credit rating agency Fitch Ratings downgraded the oulook for the bank's debt to negative from neutral based on the fallout from the accounts scandal. It did however maintain its AA- rating.
IMF cuts forecast for U.S.
The International Monetary Fund on Tuesday cut its forecast for economic growth in the U.S. and other advanced economies while citing increasing risks from isolationist sentiment, but upgraded its outlook for emerging markets.
As a result of the offsetting dynamics, the IMF left its global growth estimate unchanged from its July projection at 3.1% this year and 3.4% in 2017, and renewed its call for more forceful government action to fuel economic activity.
“Taken as a whole, the world economy is moving sideways,” IMF Economic Counselor Maurice Obstfeld said at a news conference at the annual meetings of the IMF and World Bank in Washington. “Without determined policy action to support economic activity over the short and longer terms, subpar growth at recent levels risks feeding on itself through the negative economic and implicit forces it is unleashing.”
In the U.S., the IMF lowered its growth estimate to 1.6% this year and 2.2% in 2017, down from 2.2% and 2.5%, respectively, in July. The agency cited weaker-than-expected growth of 1.1% at an annual rate in the second quarter as continued sluggish business investment and stockpiling offset solid consumption. The fund traced the soft capital spending to the energy sector downturn, the negative effects of a strong dollar on exports, and “possibly also the financial market volatility and recession fears of late 2015 and early 2016.”
Average Bank ATM Fee Rises to New High of $4.57
In 2016, ATM fees increased by 0.7% to $2.90 per transaction for consumers who use machines outside their own network. Consumers’ own banks also tack on an average $1.67 for using another bank’s ATMs. That means non-customers now pay an average of $4.57 for using an out-of-network ATM, up 1.1% compared with 2015 fees, and the tenth consecutive annual rise in the total transaction fee.
Over the past five years, the fee for using an out-of-network ATM has risen 12.2%, according to Bankrate. If there’s any good news about bank fees it is that checking account overdraft fees fell 0.1% in 2016, from $33.07 to $33.04. That tiny drop is the first after 17 consecutive years of overdraft fee increases.
The percentage of banks now offering non-interest-bearing checking accounts with no fees attached has reached 38%, up from 37% last year but down from 75% seven years ago. The five cities with the highest combined ATM fees are Phoenix ($5.07), Atlanta ($5.05), Cleveland ($4.98), Miami ($4.94) and Denver ($4.88).
Six cities where checking overdraft fees exceed the national average of $33.04 are Philadelphia ($35.20), Baltimore ($34.80), Milwaukee ($34.79), New York ($34.63), along with Phoenix and Pittsburgh ($34.05).
Boeing 'making progress' on airplane deal with Iran: CEO
Aircraft maker Boeing Co (BA.N) is making progress on a deal to provide more than 100 commercial airplanes to Iran though none will be delivered in 2016, the company's top executive said on Tuesday.
The deal is part of efforts to rebuild Iran's elderly fleet, an agreement included in a 2015 pact between Tehran and six world powers to lift most Western sanctions in exchange for limiting Iran's stockpiles of substances that could be used to make nuclear weapons.
"We won't deliver any aircraft under that deal this year - these are deliveries that are a year, two, three downstream," Boeing Chief Executive Officer Dennis Muilenburg told reporters on the sidelines of a conference in Chicago on future technologies. "But it's significant opportunity for us and I'm pleased to see that we're making steady progress."
Iran announced plans in January to buy 118 jets worth $27 billion at list prices from Europe's Airbus (AIR.PA) but has complained about unexpected delays in receiving U.S. licenses, which are needed due to the large number of U.S.-supplied parts. Boeing has also agreed to provide jets to Iran as it emerges from sanctions.
Wells Fargo’s Credit Outlook Lowered to Negative by Fitch
Wells Fargo & Co., the lender grappling with a scandal involving unauthorized customer accounts, had its outlook lowered to negative from stable by Fitch Ratings.
“The outlook revision reflects potential damage to the firm’s franchise and earnings profile following recent regulatory actions regarding improper unauthorized account openings,” Fitch said Tuesday in a statement. Fitch reaffirmed the San Francisco-based lender’s rating of AA-/F1+.
Authorities including the U.S. Consumer Financial Protection Bureau fined Wells Fargo $185 million on Sept. 8 for potentially opening about 2 million deposit and credit-card accounts without authorization. The debacle escalated over the last few weeks, with Chief Executive Officer John Stumpf appearing twice before congressional leaders and giving up more than $40 million in compensation.
The ratings company said that even as “customer damages appear limited," the scandal could pressure the bank’s earnings. “While WFC emerged from the financial crisis in a much better position than similarly sized peers, Fitch believes this issue creates reputational risk given the issue and allegations are understandable to the general public, in a way that misdeeds at other banks are not,” Fitch said, using the lender’s stock symbol.
Banks cut back on mortgage servicing staff by 50%
Bank mortgage servicers cut mortgage servicers by 50% in the past two years, according to the latest quarterly U.S. RMBS Servicer Handbook by Fitch Group, which deals in financial information services with operations in more than 30 countries. This decline in staff is due to a decrease in portfolio sizes as loan performance improve among borrowers, according to the report.
Foreclosure inventory and completed foreclosures decreased significantly in July from last year, according to the July 2016 National Foreclosure Report released by CoreLogic, a global property information, analytics and data-enabled solutions provider.
While banks are cutting back, however, nonbank servicers are still focusing on growth. Borrowers at nonbanks generally require more frequent interaction, driving the need for more staff.
While the average number of full-time mortgage servicing employees at banks decreased to 4,000, down from 8,000 two years ago, the same can’t be said for nonbanks. The number of mortgage servicing employees at nonbanks actually remained stable at 2,000 for the same time period. Lower mortgage delinquencies aren’t the only thing causing banks to lay off employees. High credit quality portfolio additions brought on by origination activity also contributed to the decrease.
Stealing is Legal in America
Yahoo secretly scanned customer emails for U.S. intelligence - sources
Yahoo Inc last year secretly built a custom software program to search all of its customers' incoming emails for specific information provided by U.S. intelligence officials, according to people familiar with the matter.
The company complied with a classified U.S. government directive, scanning hundreds of millions of Yahoo Mail accounts at the behest of the National Security Agency or FBI, said two former employees and a third person apprised of the events.
Some surveillance experts said this represents the first case to surface of a U.S. Internet company agreeing to a spy agency's demand by searching all arriving messages, as opposed to examining stored messages or scanning a small number of accounts in real time.
It is not known what information intelligence officials were looking for, only that they wanted Yahoo to search for a set of characters. That could mean a phrase in an email or an attachment, said the sources, who did not want to be identified. Reuters was unable to determine what data Yahoo may have handed over, if any, and if intelligence officials had approached other email providers besides Yahoo with this kind of request.
Brazil hit by more punches amid historic recession
Amid its historic recession, things are getting worse for many Brazilians since an impeachment trial began last May against former President Dilma Rousseff, who was forced to step down in late August.
About 12 million Brazilians are now out of work, up from 8.8 million a year ago, recent government figures show. On Tuesday, officials announced that Brazil's industrial production declined so much in August, it wiped out the gains from the past five months.
The International Monetary Fund gave a rough assessment of Brazil as well on Tuesday. "Confidence appears to have bottomed out in Brazil," IMF economists wrote in their World Economic Outlook. "Policy credibility has been severely dented by events leading up to the regime change."
Brazil is mired in in its longest recession since the 1930s and the IMF estimates meager growth next year. Latin America's largest economy shrank 3.8% last year and the IMF now forecasts it will fall another 3.3% this year. Brazil's job market is in tatters. Wages in Brazil declined 3% in August and the unemployment rate rose to 11.8%, up from 8.7% a year ago. Industrial production in Brazil declined 3.8% in August compared to July, negating five months of improvement.
Whom Is Gold Voting For?
“Whom is gold voting for?” wonders CNBC in half proper English. “Whom,” of course, being The Donald or Herself. “Some market participants say that a surprise Trump victory will cause considerable market anxiety,” says the network, “leading safe havens like gold to surge.
“Others,” it counters, “say that Trump’s antipathy for stimulative monetary policies will mean more rate hikes down the line, spiking the dollar and consequently hurting gold prices.” Citigroup thinks gold yanks the lever for Trump this fall: “We expect a Trump win would bring out higher volatility in gold and forex, which in turn should lead to higher volumes in other precious metals.”
But that’s not the half of it, according to John Ing, president and CEO of Maison Placements Canada. He predicts gold will spike $100 overnight if Trump wins. He compares the upcoming election to Brexit, when the “smart money” got taken for a ride: “The smart money is expecting a Clinton victory. The smart money expected the U.K. to remain, and of course, that smart money looks pretty dumb.”
Gold’s taking a riotous shellacking today — down $40! Immediate explanation: Cleveland Fed President Loretta Mester scared the horses yesterday with talk of a rate hike this November. If the data come in as she expects, she honked, the case for a move on Nov. 2 “would remain compelling.”
Where Does Money Come From Today?
The Coming Collapse Of U.S Net Worth Will Wipe Out Millions Of Americans
As the Financial Circus continues today, pushing down the precious metals prices, millions of Americans are going to get wiped out when the collapse of U.S. net worth begins in earnest. Anyone with a tad bit of common sense realizes these financial markets today are totally disconnected from reality.
With new stories of 40 million Russians to take part in “Nuclear Disaster” drill, the Philippine President telling President Obama “To Go To Hell”, he’s buying weapons from Russia, U.S. Suspends Diplomatic Relations With Russia on Syria, U.S. Ends Fiscal 2014 With $1.4 Trillion Increase: Third Largest In History, Deutsche Bank Troubles Raise Fear of Global Shock, it’s completely hilarious that the gold and silver prices are selling off big time today.
With the 90% of the U.S. media now in control by six large mega-corporations, Americans have no idea just how bad the U.S. financial system has become. News stories today that would have caused a stock market crash and a spike in the precious metals years ago… no longer are a realistic barometer of the market today. Instead, the broader Stock, Bond and Real Estate Markets where 99% of Americans are invested, continue to be propped up.
How propped up? Well, let’s say by a staggering $31 trillion in the past six years. According to the wonderful folks at the Federal Reserve, U.S. net worth increased from $57.9 trillion Q2 2010, to a stunning $89 trillion Q2 2016:
Obama Admin Releases 128K Illegal Immigrant Kids Into U.S. In Under 3 Years
The Obama administration has released more than 128,000 unaccompanied minors into the United States over a span of less than three years, according to the Office of Refuge Resettlement (ORR).
During Obama’s second term in office the southwest border has experienced a substantial influx of unaccompanied minors and families from Central America illegally entering the United States. Many of the undocumented entrants have been released into the United States and allowed to remain, ostensibly to await immigration hearings.
Unaccompanied minors, in particular, are granted special treatment and protections. Once apprehended by immigration officials, unaccompanied minors are transferred into the care of the Department of Health and Human Services’ ORR.
ORR cares for the minors until they can be placed with family member “sponsors” in the United States. Often those sponsors are in the United States illegally themselves. From Fiscal Year 2014 (October 2013 to September 2014) through August 2016, ORR has placed 128,299 unaccompanied minors in states throughout the country, including 53,515 unaccompanied minors placed in FY 2014, 27,840 unaccompanied minors placed in FY 2015, and 46,944 unaccompanied minors placed during the first 11 months of FY 2016.
Saddled with debt, grads head to most expensive cities
Nearly two-thirds of millennials graduated, or will graduate, with student debt, averaging $27,162 per borrower, according to a new report by LendingTree.
Despite that hefty student loan burden, newly minted grads are moving to some of the nation's most expensive cities, heavily concentrated in the Northeast, LendingTree found.
Boston was one of the most popular cities to live post-college, LendingTree said, followed by Irvine, California, and San Francisco. The states with the highest outstanding college debt per student loan borrower included Washington, D.C., and Maryland.
Particularly with regard to housing expenses, the cost of living in those locations far exceeds the national average. In Boston, for example, the average cost of renting a two-bedroom apartment is $2,821, which means that you would need to earn $120,900 a year just to afford it, according to a separate report by personal-finance site SmartAsset. (To calculate the gross income required, the site set the rent-to-income ratio at 28 percent.)
Mexican chain Don Pablo’s files for bankruptcy
Rita Restaurant Corp., the operator of the 12-unit Mexican chain Don Pablo’s, filed for bankruptcy protection on Tuesday, citing overall weakness in the casual-dining sector and the encroachment of fast-casual Mexican chains.
The filing is the second restaurant bankruptcy filed this week and the third in the past seven days. It’s also the 10th since November 2015— and the third bankruptcy of a company owned or managed by the San Antonio-based Food Management Partners, following previous filings by Buffets LLC and Zio’s Italian Kitchen.
In a statement, the company said it filed for Chapter 11 bankruptcy to “restructure its debts and liabilities and recapitalize the business” while continuing to operate “many of the remaining restaurants.” The statement said the company “currently operates 12 restaurants in nine states,” though a filing said the company operated 16 restaurants in 10 states.
“The restaurant industry is under severe pressure from outside forces,” Peter Donbavand, vice president of business development for Rita Restaurants said in the statement. “Increasing minimum wage requirements, more expensive employee benefit plans and rent hikes in many locations all add to mounting expenses. Add to that the recent slowdown in industry-wide sales and at our restaurants, and we cannot continue to operate under current obligations.”
Behind a $10B suit against Wells Fargo
Down the Monetary Policy Rabbit Hole
In the world of uncharted monetary policy, Japan has become the leader in exotic policies. They’re further along the easing curve than anyone else and represent a live case study on the limits of central bank intervention.
The BOJ recently made some major changes to how they will institute expansionary monetary policy going forward. It’s worth exploring these changes so that we can better understand their ramifications if and when the time comes for the US to consider following suit.
Over the last few years, Japan’s policy could be characterized as “easing at all costs.” Lower interest rates were deemed the harbinger of aggregate demand, and lower was considered better across the entire yield curve. That’s now changed, as a result of learnings from past experiments.
In the old days of monetary policy, the primary instrument central banks used to influence the economy was the interest rate on overnight commercial bank deposits. This is still the primary tool in use today, but its effectiveness has waned over time. While one would be inclined to think that changes in short-rates would impact longer-term rates, recent history has proven that not to be the case. Short rates are controlled almost entirely by central banks, while longer-term rates, such as the yield on 10-year bonds, have been predominantly under the influence of global investors.
California approves cars with no steering wheel, pedals for testing
Self-driving cars inched closer to reality this week (all by themselves) when the California governor approved a bill that would open small sections of public roads for testing.
California governor Jerry Brown signed a bill into law that would make available a section of a former naval weapons facility site and a business park to fully autonomous vehicle testing, according to The Mercury News.
According to the newspaper, the new law only applies to a project spearheaded by the Contra Costa Transportation Authority at the Concord Naval Weapons Station, called GoMentum, and a business park in San Ramon, California. The business park route would include a stretch of road open to the public.
The law includes provisions to keep the self-driving cars under 35 mph and strict reporting requirements for any crashes in the cars. Already, automakers such as Honda and the Uber-owned Otto are using the Concord site to test autonomous trucks. In 2014, Mercedes-Benz announced it would use the 2,100-acre site to develop its self-driving technology. Apple and Google are also reportedly interested in using the site for their self-driving cars (Google's version shown).
Hillary Clinton’s H-1B Outsourcing Program Has 100,000 Foreign Workers in Midwest White-Collar Jobs
Hillary Clinton has strongly backed the unpopular H-1B outsourcing program since at least 2005, even as it has gradually sent 100,000 foreign professionals into Michigan, Wisconsin, and Pennsylvania to compete for jobs against white-collar American professionals and young college graduates.
That could be a 2016 problem for Clinton because it is a direct economic threat to one of her strongest constituencies — university educated professionals. In fact, there are so many foreign workers in those three states that there’s a semi-hidden job network to help them apply for jobs ahead of American professionals.
The huge extra supply of foreign university labor, according to the law of supply and demand, pushes down the salaries earned by American professionals in those states. Nationwide, this so-called “immigration tax” annually transfers $500 billion away from blue-collar and white-collar Americans towards employers, Wall Street, and new immigrants, according to a Harvard analysis.
So far, Donald Trump has made only a few direct appeals to this upper income group of university voters. But those voters can provide him with the few extra points of support he needs to win those critical Midwestern states. A September 2016 poll by Monmouth University, for example, shows Trump was viewed favorably by just 29 percent of college voters. In contrast, he is viewed favorably by 51 percent of people with some college education, and by 47 percent of people with High School qualifications.