Deutsche Bank forced into rethink as strategy overhaul stutters: sources
Threatened with a multi-billion-dollar fine from U.S. regulators, Deutsche Bank's management is rethinking elements of its year-old strategic overhaul that has made faltering progress, people familiar with the matter said. The organizational change, launched in October last year by the then new chief executive John Cryan, aimed to slash costs by cutting staff, overheads and selling off some non-core businesses at Germany's largest lender.
But a year on, with its staff numbers barely changed and little clarity on what the bank's long-term business model will look like, management is being forced to find ways to speed up its turnaround.
"There will be some tweaks, likely decided on this quarter," said one person familiar with thinking at the bank. "It will hit areas where the bank is making no money." The need to adjust the flagging plan has been given added urgency following a U.S. demand to pay up to $14 billion for the misselling of toxic mortgage securities before the financial crisis.
Worries that a fine of that size would cripple Deutsche have sent its shares to a historic low, prompting speculation that the government could be forced to help a bank, whose returns have already slumped to zero. Last week, Christine Lagarde, the head of the International Monetary Fund, took the unusual step of questioning the bank's business model, urging it to "decide what size it wants to have" after turbulent weeks in which its share price plunged.
Why There’s A War On Cash In Europe
The debate on cash is heating up right now. European governments and central banks have stepped up capital controls in the last few years, cash has become a major hurdle for conventional monetary policy. As a result, many economists and high-ranking government officials have routinely argued in favor of abolishing cash.
Although most European citizens do not approve further restrictions on cash, the outcome of the political debate remains uncertain. The political reasoning for a ‘European’ war on cash is based on an ideological mindset that is identical to what is heard across the Atlantic. The difference, however, is the popularity of the use of cash, which also differs from country to country within Europe.
While the Scandinavians have largely become a cashless society, other countries still prefer notes and coins. Recent surveys show that over 70% of the German population opposes further restrictions on cash. Switzerland’s National Bank has announced that it will not follow other countries’ example of phasing out what is the world’s highest denominated bill (in terms of exchange rate value), the 1,000 Swiss franc note.
People’s attitude towards cash appears to depend on culture and history. Germans, for example, have faced at least four monetary reforms in the last 100 years. The great hyperinflation in the 1920s may have an enduring presence in the German public consciousness. The Swiss, however, have never experienced the same kind of monetary instability as the Germans. A generally suspicious attitude toward government power has led the Swiss to take a conservative stance towards cash.
Venezuelan regime runs out of other people's money
Though every eye in the country is focused on the election, Americans should take a moment to look at the socialist disaster unfolding in Venezuela. Domestic economic anxiety is legitimate, but we should be thankful we're so much better off than those subjected to the economic nostrums of the far Left.
Americans are fortunate they no longer have to worry about diphtheria; Venezuelan doctors warn that their country may be on the verge of an epidemic because vaccines and antibiotics are so scarce. Americans are fortunate that prices are fairly stable; Venezuela has the highest inflation rate in the world, expected to hit 700 percent this year.
Americans can walk into a store when they like and find stocked shelves. In Venezuela, thanks to government price fixing and therefore insufficient supply, you have to stand in line to buy a single bag of corn flour, and there is no guarantee of success even then.
Food delivery trucks are attacked by starving citizens, and stores conduct business through cracks in security gates. Trucks need armed escorts and store-owners fear they will face chaos and looting if they actually open their doors. President Nicolas Maduro probably knows his reign will soon end. A recent survey by Venebarometro found that 71 percent of Venezuelans want him gone "as soon as possible," and the opposition is trying to overcome his resistance to a recall vote.
Why is College So Expensive?
Majority of Americans Believe Feds Should Do Less
A slight majority of Americans believe that the government is doing too much and that businesses should take on more responsibilities, according to a poll released Monday.
The federal government takes on a wide range of responsibilities that impact people every day. Policy experts have long debated what role government should play. A total of 54 percent of respondents in a new survey believe the government has been doing too much, according to Gallup. “Americans continue to favor a smaller role for government, with 54% saying the government is attempting to do too many things that should be left to individuals and businesses,” the poll stated. “And 41% saying it should do more to solve the country’s problems.”
Private-sector businesses take on a whole host of responsibilities in order to provide people services and products. Supporters often argue businesses are more efficient and responsible while critics contest they are at risk of perverse profit motives. The poll results appear to partially reflect a counteraction to whoever is in office.
“[It] was somewhat larger during the last seven years of the Clinton administration and the entire Barack Obama presidency than in the George W. Bush years,” the poll stated. “This most likely reflects a counteraction to perceptions that the two Democratic presidents were oriented toward increasing the government’s role.”
Medicare Improperly Paid $34 Million in Benefits to Incarcerated Individuals
The Centers for Medicare and Medicaid Services paid $34.6 million in benefits to incarcerated individuals in 2013 and 2014, according to an audit from the agency’s inspector general.
“Medicare generally does not pay for services rendered to incarcerated beneficiaries,” the audit states. These include individuals who are “under arrest, incarcerated, imprisoned, escaped from confinement, under supervised release, on medical furlough, required to reside in mental health facilities, required to reside in halfway houses, or required to live under home detention, or confined completely or partially in any way under a penal statute or rule.”
Laws governing the agency require it to ensure that payments for Medicare services are not made to incarcerated beneficiaries. The agency is required to take steps to prevent improper payments from occurring and recoup improper payments if they are made.
“Both [Centers for Medicare and Medicaid Services] policies and procedures to ensure that payments are not made for Medicare services rendered to incarcerated beneficiaries and its planned revisions to those policies and procedures, did not comply with Medicare requirements,” the audit said. The agency uses data from the Social Security Administration to determine whether beneficiaries are incarcerated and the period of time for which Medicare will not pay health services for them.
U.S. Commerce Head Discusses How the Government Collects Data
The government may be perceived by Silicon Valley as being slow to technological trends, but that doesn’t mean it’s slow to collecting data.
U.S. Secretary of Commerce Penny Pritzker explained Monday during a conference on the economy hosted by O’Reilly Media about how her department is attempting to make available to businesses its vast collection of data.
Some of the data the Commerce department routinely collects include census information, patent and intellectual property data, climate data from the National Oceanic and Atmospheric Administration (which is part of the Commerce Department), and international trade data. All of this collected data is used to calculate the U.S. gross domestic product, a measure of the general health of the nation’s economy.
She also said that the Commerce Department is “kind of the government survey organization for other parts of the government” and other government agencies will contact her department to have it conduct data-collecting surveys on their behalf.
Turkey, Russia approve Turkish Stream pipeline
Samsung to halt global sales, exchanges of Galaxy Note7
Samsung Electronics Co Ltd (005930.KS) said on Tuesday it will ask all global partners to stop sales and exchanges of the Galaxy Note7 smartphones, further deepening the smartphone company's recall crisis. Samsung, in a statement, said it was still investigating recently reported cases of fires in new Note7 devices.
"Consumers with either an original Galaxy Note7 or replacement Galaxy Note7 device should power down and stop using the device," the company said. Samsung's decision to pull Note7s off the shelves for the second time in two months underscores the South Korean firm's struggles to fix its problems. It had already recalled 2.5 million Note7s due to faulty batteries, but the latest reports of damage on the replacement devices is raising fresh doubts about the firm's quality control abilities.
A person familiar with the matter told Reuters on Monday Samsung had temporarily halted production of Note7s.
U.S. Consumer Product Safety Commission Chairman Elliott Kaye said in a separate statement Samsung was making the right decision by halting sales and exchanges of the device and also urged consumers to stop using all Note7s.
Sears, Macy's, and JCPenney are fueling a $48 billion crisis in the retail industry
There's no end in sight to American's shopping mall crisis, according to a Morningstar research report.
Hundreds of shopping malls have shut down over the last several years amid a pullback in consumer spending on apparel and accessories and the growth of ecommerce.
But the US is still oversaturated with shopping malls, and that's putting $48 billion in loans backed by mall properties at risk, according to the Morningstar analysts. "The abundance of space, the growth of e-commerce, and other factors are forcing retailers to reconsider their physical store strategy," the analysts wrote.
The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia — the next two countries with the highest retail space per capita. Department stores like Sears, Macy's, and JCPenney have been closing stores to try and get rid of unprofitable stores, and that's had a devastating effect on malls. When an anchor stores closes, it often triggers a "downward spiral in performance" for shopping malls "that in some cases has led to massive losses on loans," analysts said.
Yahoo Turned Off E-Mail Forwarding Just When People Might Want To Leave
Whether it’s become of the breach of their account data, reports that the company built a tool for the U.S. government to monitor users’ e-mail, the pending sale (maybe) to Verizon, or because they’ve simply outgrown the service, a lot of users want to quit using Yahoo for their e-mail. Some of them already had quit, and then learned that automatically forwarding e-mail to a new address isn’t an option.
While Yahoo is an American company, its web mail users are all over the world, and the Associated Press interviewed users in multiple countries united by their common goal of ditching Yahoo Mail.
Going by the service’s help pages, the feature was working on July 28 of this year. One user in New Zealand who has had a Yahoo e-mail account for 18 years noted that the sudden disappearance of the ability to forward mail had some “extremely suspicious timing.” Users told the AP that the ability to forward e-mails for new users disappeared at the beginning of October.
Yahoo’s help pages say that the feature has been turned off for new forwarding addresses so the company can improve it. “While we work to improve it, we’ve temporarily disabled the ability to turn on Mail Forwarding for new forwarding addresses,” the current version of the page says.
Not Working Makes People Sick
It has become one of the Great Questions of Our Age: Why have so many prime-age American men dropped out of the labor force? The percentage of American men ages 25 through 54 who are neither working nor looking for work has been growing for decades. In September, it was 11.4 percent -- which is down from the all-time peak of 12.1 percent in October 2013, but still almost quadruple the level of the early 1960s.
I wrote last week about Nicholas Eberstadt's new book on this topic, which looks into several possible explanations but puts the biggest emphasis on what Eberstadt calls the "incarceration explosion" of the 1980s and 1990s. On Friday, Bloomberg Businessweek's Peter Coy reported on new research by Princeton University economist Alan Krueger that explored another possibility -- maybe men have given up on working or looking for work because they really don't feel good.
“Nearly half of prime age NLF [not-in-the-labor-force] men take pain medication on a daily basis, and in two-thirds of cases, they take prescription pain medication,” according to Krueger’s paper, Where Have All the Workers Gone?
Overall, men are less likely to be taking pain medication than women. But men who have dropped out of the labor force are much more likely to be taking pain meds than either other men or the women who've dropped out.
“Credit Squeeze” Planned in China to Deflate Housing Bubble?
All kinds of officials are fretting about the dangers of the housing bubble in China that has been fueled by easy credit that officials have made available last year to stop the implosion of the prior housing bubble.
City by city, they’re grappling with this problem, trying to put a lid on it. Caixin Online reports: About 20 Chinese cities tightened home purchasing requirements in late September to cool an overheated market, with some prohibiting property developers from selling homes to residents who don’t have a local hukou, or residency registration, and to those who already own more than one home. Other cities have raised the minimum down payment required.
But easy credit still rules: Total new loans in August reached 948 billion yuan ($142 billion). Over 71% of this debt was taken out by households, mostly mortgages.
New mortgages skyrocketed from 2.2 trillion yuan in 2014, to 3 trillion in 2015, and already hit 3.6 trillion in 2016 through August, according to the Wall Street Journal. Medium and long-term household loans, mostly mortgages, are now up 27% from a year ago.
Things are getting so bad for Wells Fargo even Catholic nuns are dumping the bank
A group of religious leaders and investors that hold shares in Wells Fargo condemned the bank and are calling for a deeper investigation into the bank's business, it announced Monday.
As part of Wells' ongoing scandal involving the opening of 2 million accounts by retail banking employees without customers' knowledge, the Interfaith Center on Corporate Responsibility passed resolutions expressing disappointment in the bank.
"At our meeting with Wells representatives last December, we pressed for disclosure and we were denied the truth," Sister Nora Nash of the Sisters of St. Francis of Philadelphia said in a release from the ICCR.
"Now we are confronted with painful accounts of fraud including some 80,000 customers in Pennsylvania alone. As shareholders and customers ourselves we feel betrayed and have no choice but to call for a full review of business standards through this resolution which we hope other shareholders will support." The ICCR is a group of asset managers and religious leaders that advocate responsible investing and corporate governance.
Think Wells Fargo scandal is bad? Royal Bank of Scotland did something so much worse
The revelation that low level branch staff at Wells Fargo retail operations opened accounts against the interests and knowledge of its customers is bad. In fact, it so bad that the bank's CEO faced a hammering at the hands of both the House and the Senate in the wake of the scandal, and perhaps far worse moving forward.
Turns out, in terms of bank scandals, the Wells Fargo indiscretions are fairly tame compared to what’s happening across the pond right now at the Royal Bank of Scotland. Newly leaked files revealed in a Buzzfeed report pull back the curtain on a “Dash for Cash” practice where staffers were allegedly instructed to look for otherwise healthy business banking customers to steer to the bank’s troubled business unit, the Global Restructuring Group.
Once there, these files reveal, the bank began a systemic crippling of those client’s businesses through deliberate fees and interest-rate hikes and asset fire sales. And unlike the Wells account scandal, this was a top-to-bottom effort to shore up the balance sheet of RBS. What’s more, RBS is taxpayer-owned, well 73% of it, anyway.
In the Wells Fargo scandal, there is the impression that bank staff felt they could get away with opening these accounts as the damage on a per-client basis remained minimal. There may be some redemption, now, in this feeling that these crimes were as close to victimless as possible. The RBS “dash for cash” actually included executives forwarding managers “target lists” of loans secured against properties that were then scoured for potential clients to force into costlier loans, according to the in-depth report.
Why does it feel like the economy is still stuck in neutral?
America is in the midst of a strange sort of economic malaise. On the one hand, some economic numbers, like the unemployment rate, look pretty good. On the other hand, neither incomes nor the economy are growing fast enough.
Some people call this "the new normal." Others call it "the great stagnation," a term coined by economist Tyler Cowen. Cowen's theory is that technological change has slowed, leading to a stagnating economy. In this line of thinking, he is joined by Peter Thiel, one of the top investors in Silicon Valley. But in a recent interview with Vox's Timothy B. Lee, entrepreneur Marc Andreessen lays out an interesting theory for our paradoxical predicament.
This strange feeling of economic stagnation, Andreessen says, is due to the fact that there are actually two kinds of industries: some that are growing very quickly, and others that are holding back growth. Here's how he explains it:
You've got these sectors of the economy where there's rapid productivity growth. Prices are falling fast. Those are the industries where everyone is worried that the jobs are going away — or to China or Japan or Mexico. People say there's too much disruption — too much technological change. The Silicon Valley kids are wreaking havoc on the economy. Then you have the sectors in which prices are rapidly rising: health care, education, construction, prescription drugs, elder care, and child care. Here there's very little technological innovation. Those are sectors with insufficient productivity growth, innovation, and disruption. You've got monopolies, oligopolies, cartels, government-run markets, price-fixing — all the dysfunctional behaviors that lead to rapid increase in prices.
Bubble economy sins
Jeep's luxury Grand Wagoneer could cost $140K, CEO says
Tired of watching rival brands capitalize on strong demand for luxury SUVs, Jeep is planning to launch new Wagoneer and Grand Wagoneer models to take the brand into much loftier pricing territory than we’re used to seeing.
Sergio Marchionne, who heads Jeep parent company Fiat Chrysler Automobiles [NYSE:FCAU], in early 2015 said Jeep was working on a rival for the Range Rover, which starts at $86,645 and top outs at $171,990 for the extra-chic SVAutobiography Dynamic model.
Jeep CEO Mike Manley has reaffirmed Marchionne’s promise to directly challenge the Range Rover, explaining to Auto Express that the new Grand Wagoneer could nudge the $140,000 mark. “Pushing the car up to $130,000 to $140,000 may be possible, but we need to establish Grand Wagoneer in its own right first,” he said.
The new Wagoneer and Grand Wagoneer are expected to utilize a stretched version of the next-generation Grand Cherokee’s platform and arrive on the market in 2018. Both will be three-row SUVs, while the Grand Wagoneer will be particularly plush, just like its predecessor which in the 1980s offered leather trim, thick carpeting and power everything.
US Consumer Borrowing Up
Fueled by school loans and purchases of new cars, U.S. consumers borrowed more in August than they have in almost a year, according to a Bloomberg report.
According to the report, borrowing in August increased by $25.9 billion, or 8.5 percent, compared to a $17.8 billion gain in July. Most experts believed that borrowing would actually be lower than it was in July, with an increase of only $16.5 billion. This was the largest increase in borrowing since Sept. 2015, according to Bloomberg.
Non-revolving credit, which includes automobile and school loans, rose by $20.2 billion in August, while revolving debt rose by $5.6 billion. According to the Federal Reserve, federal government lending to U.S. consumers — mostly in the form of school loans — rose by $18.7 billion in August, mainly fueled by students preparing for school in the fall and borrowing to pay their first semester’s tuition.
An increase in consumer borrowing and spending on large purchases, like automobiles, reflects increased confidence in the strength of the U.S. economy, another positive sign in recent months to go along with steady hiring and income growth.
Nobel winner: U.S. economy "doing well"
Harvard economist Oliver Hart, talking to reporters after learning he’d won the Nobel economics prize with Bengt Holmstrom of the Massachusetts Institute of Technology, sized up the state of the U.S. economy as OK.
“It’s doing well,” he said. “Not as well as we’d like, but it seems to be moving in right direction.”
U.S. employers added 156,000 jobs in September, according to the government’s latest figures released Friday.
Although that’s well below last year’s average monthly gain of 230,000, the report paints a picture of a resilient economy that continues to steadily produce new jobs.