Obama taps former federal prosecutor to lead SEC | Cypriot rescue is delayed by money-laundering suspicions | Monti defends Draghi over Monte dei Paschi oversight
25 January 2013
CFA Institute: Financial NewsBrief

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Bond buying boosts Fed's balance sheet to record $3T
The size of the Federal Reserve's balance sheet has reached an all-time high of $3.055 trillion, boosted by purchases of Treasurys and mortgage-backed securities. The latest Fed data put liabilities, made up mostly of its lending to the U.S. financial system, at $2.994 trillion. CNBC/Reuters (24 Jan.)
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Obama taps former federal prosecutor to lead SEC
President Barack Obama has nominated former federal prosecutor Mary Jo White as chairman of the Securities and Exchange Commission. White, who is in private practice, was the first woman to serve as U.S. attorney for the Southern District of New York and also has been on the board of Nasdaq OMX Group. The New York Times (free-article access for SmartBrief readers)/DealBook blog (24 Jan.), Pensions & Investments (free access for SmartBrief readers) (24 Jan.), The Economist (tiered subscription model)/Schumpeter blog (24 Jan.), The Wall Street Journal (tiered subscription model) (25 Jan.)
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Cypriot rescue is delayed by money-laundering suspicions
A financial rescue of Cyprus is running into resistance because many creditors think a bailout would benefit mainly Russian oligarchs who use the nation's unusually large banking system for money laundering. The Eurogroup of finance ministers has decided to put off further discussion until March. The Christian Science Monitor (24 Jan.), Cyprus Mail (24 Jan.), Financial Mirror (24 Jan.)
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Monti defends Draghi over Monte dei Paschi oversight
Italian Prime Minister Mario Monti is defending European Central Bank President Mario Draghi over charges that when the latter was governor of the Bank of Italy, lax oversight permitted disastrous losses to occur at Banca Monte dei Paschi di Siena. Monti denies that there were oversight issues. Meanwhile, Monte dei Paschi says it is well capitalized and is being used as a pawn in Italy's upcoming election. "The board ... is bewildered for how superficially the issue of recapitalization of the bank is being treated," according to the bank. "The situation is completely under control." Reuters (24 Jan.), Financial Times (tiered subscription model) (24 Jan.)
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More Libor problems for Barclays execs
E-mails read in court suggest that top Barclays executives knew about manipulation of the London Interbank Offered Rate a year earlier than previously thought, further enveloping them in litigation. Meanwhile, a court ruled that a list of bank executives under investigation would be made public. Financial Times (tiered subscription model) (24 Jan.), The Guardian (London) (24 Jan.), The Telegraph (London) (tiered subscription model) (24 Jan.)
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Lew's time at Citi will get scrutiny in confirmation hearings
Jack Lew, President Barack Obama's nominee to be U.S. Treasury secretary, is expected to face tough questioning about his work for Citigroup during his upcoming Senate confirmation hearings. He was the chief operating officer of one of the bank's most troubled units, Citigroup Alternative Investments, during the financial crisis. The Washington Post (tiered subscription model) (24 Jan.)
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Investigators: Boeing 787s will be grounded indefinitely
U.S. investigators say they are a long way from determining the reason a Boeing 787 Dreamliner's battery caught fire in Boston and, until they find an answer, Dreamliners will remain grounded. "There are multiple systems to prevent against a battery event like this," National Transportation Safety Board Chairwoman Deborah Hersman said. "Those systems did not work as intended. We need to understand why," she added. The New York Times (free-article access for SmartBrief readers) (24 Jan.)
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Market Activity
Most Asian-Pacific markets fall, but Japan jumps as yen weakens
Responding to a falling yen, Japan's Nikkei 225 rose 2.9% on Friday, ending at its highest level in nearly three years. Other Asian-Pacific markets were mixed. Hong Kong's Hang Seng Index edged down 0.1%. China's Shanghai Composite lost 0.5%. South Korea's Kospi dropped 0.9%. Taiwan's Taiex edged slipped 0.3%. Australia's S&P/ASX 200 gained 0.5%. India's Sensex was up 0.9% at midafternoon. MarketWatch (25 Jan.), The Economic Times (India) (26 Feb.)
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Microsoft reports profit down 3.7% and revenue up 2.7%
Microsoft said net income for its fiscal second quarter fell 3.7%, to 76 cents a share, just ahead of the 74 cents analysts expected. Revenue increased 2.7%, driven largely by corporate customers. Expenses for sales and marketing jumped 15% as Microsoft rolled out Windows 8 and the Surface tablet. Bloomberg (25 Jan.), The Seattle Times (24 Jan.)
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Japan reportedly raises growth forecast for next fiscal year
Anticipating that stimulus measures will help pull it out of recession, Japan is raising growth projections for the next fiscal year, Kyodo News and the Nikkei newspaper reported. For the year beginning in April, the government expects real gross domestic product to expand 2.5%, according to the reports. Bloomberg (25 Jan.)
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More than a quarter of Spanish workers are unemployed
Spanish unemployment reached a record-high 26% in the fourth quarter, up from 25% in Q3, according to the nation's statistics agency. The jobless rate was 60% among 18- to 25-year-olds. Gross domestic product declined 1.3% last year, and the International Monetary Fund expects 1.5% contraction this year. Deutsche Welle (Germany)/The Associated Press/Agence France-Presse/Deutsche Presse-Agentur (24 Jan.), Sky News (24 Jan.)
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Chinese graduates turn their backs on factory work
Factory jobs are plentiful and well paid in China, but college graduates are refusing to take them, seeking office work instead. For thousands of years, Chinese tradition has been that educated people do not perform manual labor. Students entering higher education often expect to become part of an elite group when they graduate. The New York Times (free-article access for SmartBrief readers) (24 Jan.)
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Sommers plans to step down from CFTC
Jill Sommers, a Republican member of the Commodity Futures Trading Commission, says she will resign at the end of this quarter. Sommers, a commissioner since 2007, led the CFTC's investigation of MF Global Holdings. "I think for me personally it is the right time to leave," she wrote in an e-mail. Bloomberg (25 Jan.), The Wall Street Journal (tiered subscription model) (24 Jan.)
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GOP is expected to fight Cordray renomination to CFPB
Senate Republicans are expected to attempt to block President Barack Obama's reappointment of Richard Cordray as head of the Consumer Financial Protection Bureau. Republicans oppose the agency's broad power over the financial-services industry. Cordray has been running the agency since late 2011 under a recess appointment. The Washington Post (tiered subscription model) (24 Jan.)
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FSB says banks have trouble determining excessive risk
Global regulations that call for reduced bonuses as a penalty for excessive risk taking are proving hard to implement, according to the Financial Stability Board. In addition to trouble defining "poor behavior" that should be penalized, opinions differ on whether such penalties are legal. Bloomberg (24 Jan.)
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White House opposes EU effort on Internet privacy
The Obama administration and U.S. business groups are resisting an EU push to restrict how Internet companies collect and use consumer data. A bill in the European Parliament to establish digital-privacy rules has broad support among privacy advocates. The Washington Post (tiered subscription model) (24 Jan.)
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Advisers' compliance is challenged by social media innovation
A steady stream of features being added to social media such as Facebook, Twitter and LinkedIn will test financial advisers' ability to comply with securities law and company policy. LinkedIn's endorsement feature could inadvertently put advisers in violation of regulations governing advertising in the securities industry, compliance experts say. Reuters (23 Jan.)
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Financial Products
First Trust aims to launch actively managed low-beta ETF
First Trust has filed with the Securities and Exchange Commission to introduce an actively managed exchange-traded fund that would invest in low-beta equities. The First Trust Enhanced Low Beta Income ETF would invest in U.S. stocks and international securities that trade as American and global depositary receipts on U.S. exchanges. IndexUniverse.com (24 Jan.)
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