Yesterday’s News

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Jul 17, 2012 4:27:54 AM

and tagged Yesterday's News

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After a tough weekend and Monday for finance, we have a slow day. There are no articles of particularly new financial or economic interest on any of the front pages—nice to see that for a change.

There are a couple of themes though. In the business section of the New York Times (NYT), three articles highlight conflicts between regulators and financial companies. On the front page are “British Bank Fighting Bid for Data in Rate Case,” which is about the LIBOR scandal, and “Regulators and HSBC Are Faulted by Senate,” which discusses the money laundering scandal. On page 3 is “U. S. Consumer Bureau to Oversee Companies That Handle Credit Reports.” On page C1 of the Wall Street Journal (WSJ), you’ll see “Senate Probe Faults HSBC” and “Banker Accounts on LIBOR Conflict.” And on its front page, the Financial Times (FT) has “Regulator hits out at Diamond over Libor”—but that’s not really new.

The LIBOR and HSBC money laundering scandals continue to expand and to pull in the regulators. If there is a regulatory problem here, I don’t think that the governments will respond by regulating less or with a lighter hand. I think any flexibility or leniency shown to any of these banks will probably come back and bite the regulators—so don’t expect to see any such in the future.

It is not just the major financial institutions in the cross hairs either. On page B1 of the NYT is “Merchants Considering Credit Card Surcharges,” while on page 1 of the WSJ is “Goldman Builds Private Bank.” The world is definitely changing when cash starts to make a comeback—which it most likely will, in these frugal times, if it costs money to use a credit card—and when Goldman is looking to take deposits and make mortgage loans. This is just one more link in the process of downsizing and normalizing the financial sector, which even now has hardly begun.

One positive article of note is on page A12 of the NYT, “Universities Reshaping Education on the Web.” As I will be discussing in a future post, the financial model of higher education is broken and is not sustainable, and these websites represent the future. The one discussed in the article, www.coursera.org, is worth a look. Another site, www.khanacademy.org, is similar but very different. Finally, one of my alma maters, MIT, was the first to do this seriously, and its offering is ocw.mit.edu. This is the start of a solution to a problem that is a real burden to students and young people in general today.

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