Week InReview
Friday | Apr 5, 2019

"Investment bankers across Wall Street are tripping over themselves, and sometimes each other, to win business advising smaller companies on deals — assignments they would have scoffed at a few years ago. They are hiring bankers in cities like Dallas and Atlanta and cozying up to a different set of corporate executives....

"Goldman dispatched four partners to regional offices in Dallas, Seattle, Atlanta and Toronto and assigned a dedicated banker to hundreds of what it calls 'lonely clients,' which get little attention from New York bankers."

in case you missed it...
The Federal Reserve risks stoking the same sort of asset bubbles that Chair Jerome Powell has linked to the last two recessions with its new-found eagerness to fan inflation. (Bloomberg Economics | Apr 3)

Years of aggressive monetary easing have blunted the signals from the bond market. According to a new piece of research from Pictet Wealth Management, the curve has been sending out misleading signals for a while. The distortions created by extraordinary post-crisis monetary policies have led to the breakdown in the relationship between interest rate expectations and economic growth, the firm argues. (Financial Times | Apr 3)

Participants at the annual Moody's U.S. asset-managers conference indicated that they were increasingly wary that a recession might happen in the next year or two and were adjusting their portfolios accordingly. (Business Insider | Apr 2)

Markets have been calm so far in 2019. That’s bad news for Wall Street trading desks. A decline in Cboe’s volatility index hurts trading results, but banks avoid further layoffs. (The Wall Street Journal | Mar 31)

More than 25% of new investing dollars are allotted to companies that investors regard as socially responsible, according to the Forum for Sustainable and Responsible Investment. In 2018, investors poured $12 trillion of professionally managed assets into companies with positive environmental, social or governance concepts, representing a 38% increase over the previous two years. (CNBC | Mar 30)
Fed targets G-SIB holding companies
(Apr 2) — In a move to limit the interconnectedness of Wall Street megabanks, the Federal Reserve and other regulators proposed a rule that would require lenders to hold additional capital against certain kinds of debt.

Key elements
  • The proposal targets global systemically important bank holding companies — which are the largest and most complex firms — the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency said in a Tuesday statement.
  • Such lenders are required to issue debt that could be used to recapitalize them in the event of a failure under a Fed regulation known as the total loss-absorbing capacity rule, or TLAC.
  • To prevent banks from making excessive purchases of each others’ TLAC debt and thus becoming overly interconnected, the new proposal would require lenders to hold additional capital against substantial holdings of such debt.
  • “This would reduce interconnectedness between large banking organizations,” the agencies said in their statement. If a Wall Street lender were to collapse, the proposal would “reduce the impact on the financial system from that failure,” the regulators said.
  • The proposal also would require banks to report publicly their TLAC debt outstanding.
  • The Fed and other agencies will seek comment on their proposal for 60 days.

More info
  • TLAC is an international requirement that forces banks to have enough loss-absorbing liabilities so they can recapitalize themselves quickly after a restructuring.
  • The idea to limit vulnerability among top-tier banks was a part of the original proposals to implement TLAC, but the agencies never finalized that part of the rule.

Source: Bloomberg Government
binge reading disorder
What happens when an economist walks into a brothel?
Unexpected places to understand risk.... Is it worth swimming in shark-infested waters to surf a 50-foot, career-record wave? Is it riskier to make an action movie or a horror movie? Should sex workers forfeit 50 percent of their income for added security or take a chance and keep the extra money?
—  Portfolio

A magician explains why we see what's not there
Our brain is constantly picturing what the future should be.
—  Nautilus

5 ways to free up your schedule
Always ask yourself, “Am I running both my work and personal lives well?” From understanding your natural tendencies to avoiding meetings as much as possible.
—  Fast Company