Levine on Wall Street: Dimon Doubloons
JPMorgan gets into the cryptocurrency racket
One reason some people think Bitcoin might be a real thing is that it apparently has a faster and better payment infrastructure than the dollar does. But this doesn't require a whole new currency; you could just build a better dollar payment system. Apparently JPMorgan had that idea in August, and filed a patent application "for a computerised payment system that resembles some aspects of Bitcoin." Then there's something about blockchains and other pseudo-Bitcoiny stuff. This is a risk for Bitcoin for two reasons: One, if JPMorgan's system gets off the ground, then the "Bitcoin has a better payment system" argument goes away. And, two, if JPMorgan manages to patent pseudo-bitcoins -- I hope they call them Dimon Doubloons -- then it can probably sue people for using regular bitcoins.
Nobody needs banks any more
The Bank for International Settlements has a quarterly review of banking that is always interesting. Izabella Kaminska at FT Alphaville flags a section about how "banks are losing their raison d'etre due to the erosion of their funding advantages versus non-banks." Businesses are increasingly getting their funding from capital markets, not from banks, because markets don't trust banks and the banks have to pass on the costs of that lack of trust to their borrowers.
Some people like the Volcker rule
Mike Konczal has a smart column at Wonkblog about how the Volcker Rule isn't as silly as I think it is. Konczal acknowledges that lending is riskier than prop trading, but thinks that lending is (1) important and (2) uniquely suited to banks, while those things are not true of prop trading. This is a plausible position though it is a bit undercut by the fact that Goldman Sachs, say, has always been much more a provider of market liquidity than it is a provider of small-business loans. It is a bit more undercut by the fact that, as we just discussed, "banks are losing their raison d'etre due to the erosion of their funding advantages versus non-banks." If everyone's borrowing from business development companies, hedge funds, or the capital markets anyway, distinguishing the good of lending from the evil of prop trading gets even harder.
Brian Moynihan approves of friskiness
Bank of America's Brian Moynihan is solidifying his position as my second-favorite bank CEO. (Lloyd Blankfein is forever No. 1.) Yesterday he said, "The average business person we talk to is getting incrementally more frisky," which is maybe just a testament to the effect of being around Brian Moynihan. Frisky business means that things look bright, or bright-ish, for BofA's core lending business in 2014. As for its trading business, Moynihan is not particularly worried about the Volcker rule: BofA has shut down its prop businesses already, and the rule doesn't seem too onerous for market-making businesses. "A lot of the change is already taken out of the system," said Moynihan.
Here is a collection of various econobloggers' favorite charts of 2013. Magically, it really does provide a great data-driven overview of today's important economic stories. On the financial side, I particularly like Joe Weisenthal's contribution, a chart showing the absolute correlation of asset classes declining from around 50 percent in 2012 to just over 20 percent in late 2013. As he puts it, "2013 will go down as the year the financial crisis really came to an end. For the first time since 2008 there were very few moments when it felt as though things could unravel again. In markets, one of the characteristics of a crisis is extreme correlation between multiple asset classes: everything trades up or down together." Now it doesn't.
Evan Soltas wrote a good post yesterday here at Bloomberg View about how air-travel fees work as carbon taxes and should be much higher, but much more importantly he did his math in a hyperlinked footnote. There is no great stagnation etc.
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Matthew S Levine at firstname.lastname@example.org