Week InReview
Friday | Jul 10, 2020
Farewell protocol.
The pandemic has ruined the college drop-off. That emotional ritual in which parents leave their child on campus — is the latest Covid-19 casualty. What had morphed into an all-day affair for families in recent times will be a mostly students-only process this year.

let's recap...
Stricter banking regulations enacted after 2008’s global financial crisis risk undermining the effectiveness of U.S. monetary policy in times of stress, according to a report examining the cause of turbulence in funding markets last September. U.S. global systemically important banks have become the world’s “lenders-of-second-to-last-resort.” That was the case in September when large banks tapped reserves at the Fed to increase short-term lending amid a quarter-end dollar shortage that saw interest rates in repurchase-agreement markets spike higher. (Bloomberg Law | Jul 9) see also Fed withdraws from repo market after 10 months (Financial Times | Jul 8)

A bond market once thought to be key to the futures of Fannie Mae and Freddie Mac – and the roughly $5 trillion of home loans they backstop – could instead find itself on the scrap heap due to their own regulator. In the past several years, so-called credit-risk-transfer securities have been a primary way for government-controlled Fannie and Freddie to offload the risk of borrowers defaulting on their mortgages to private investors. (Bloomberg Markets | Jul 8)

It’s not your imagination: Stock markets are lurching from meltdown to melt-up like never before. After one of the swiftest corrections in history, the S&P 500 is now back within a spitting distance of pre-crisis levels. The danger now is that investors are stampeding into yet another cross-asset rally ripe for a violent reversal. This tendency for markets to sway suddenly between extremes highs and lows is increasingly a feature of modern trading. (Bloomberg Markets | Jul 8)

Fear is still rife across volatility markets even as greed powers U.S. stocks anew after their best quarter since 1998, in a historic divergence making life harder for Wall Street speculators. Systematic traders who make a living by wagering on price gyrations ahead are in a bind. (Bloomberg Markets | Jul 6)

The surge in Covid-19 cases has bond ETF investors shedding their riskier holdings in favor of the safety of U.S. government debt. More than $2.6 billion exited from junk-bond exchange-traded funds last week, in addition to the  $5.6 billion  that fled from high-yield mutual funds. (Bloomberg Markets | Jul 6)
Risk in nonbank firms needs better scrutiny, says Quarles
(Jul 7) — As financial assets continue to migrate from banks to nonbank financial firms, Randal Quarles  –  Federal Reserve vice chair for supervision and Financial Stability Board chair  –  said the increased risks in that sector need more attention.
  • “The market turmoil in March underlines the need to better understand the risks in non-bank financial intermediation and reap the benefits of this dynamic part of the financial system without undermining financial stability,” Quarles said in remarks prepared for an online event hosted by the Exchequer Club
  • The share of bank assets as a percentage of total financial assets declined to 39% in 2018 from 46% in 2008, Quarles said during the Tuesday event
  • Speaking in his role as chair of the global Financial Stability Board, Quarles said the FSB has developed a working group to look at the issues, “and the Covid event has given focus and vitality to this effort”
  • The FSB has also announced that its next evaluation will be of reforms in the last decade to money-market funds, which have drawn increased attention in the economic turmoil caused by the coronavirus

Source: Bloomberg Government
Compliance with Reg BI & Form CRS  — It's Here
(Jul 8)  — Bloomberg Law has been tracking developments with the Securities and Exchange Commission's standards package since it was issued in June 2019, focusing on the package’s two main components: Regulation Best Interest and Form CRS Relationship Summary . Their coverage has included the birth of the package from the SEC’s   initial heated meeting , a less-than-robust   investor education campaign , and   various efforts  questio ning the legitimacy of   Reg BI.
the cyber cafe
NY Fed’s biggest financial stability concerns focus on cyberattacks, shadow banking
The U.S. Federal Reserve Bank of New York’s biggest financial stability worries are possible cyberattacks on the banking system and the migration of assets from banks to the less-regulated shadow-banking sector, President John Williams said.
—  MLex

FBI chief slams Chinese cyberattacks on U.S.
In blistering remarks Tuesday, FBI Director Christopher Wray slammed the Chinese government for its use of espionage and cyberattacks against the United States which has amounted to what he called “one of the largest transfers of wealth in human history.”

Home router warning: They're riddled with known flaws and run ancient, unpatched Linux
Researchers at Fraunhofer Institute for Communication in Germany  analyzed  127 routers under seven brand names for known security problems, finding that none were free of vulnerabilities. Some companies hadn’t updated the firmware on some router models in five years and many models had easy-to-guess passwords. Some routers didn’t allow users to set their own authorization codes, which could let hackers exploit known credentials. Routers from ASUS, AVM, D-Link, Linksys, Netgear, TP-Link and Zyxel were tested.
—  ZDNet
binge reading disorder
The bank drive-thru makes a Covid comeback
Long before ATMs and online banking, drive-through lanes were a popular customer convenience by the 1950s. The digital age threatened survival of the mechanical systems, built on 19th-century technology, but Covid-19 has started to reverse their declining fortunes. Banks are reopening decommissioned and unused lanes. Some are installing new ones.

Brooks Brothers, hurt by casual Fridays and Covid-19, files for bankruptcy
Brooks Brothers dressed the American business class in pinstripes for more than 200 years and survived two world wars and the shift to casual dressing. But it was no match for the coronavirus.

How to keep your phone working when there’s no service
No cell service? There are apps that work offline, essential in-car gear, and other tips to consider before seeking social  –  and cell-signal  –  distance on your summer road trip. Before you hit the road or go off the grid, download these helpful apps that work without an internet connection, and consider gear to keep your phone charged and safely positioned when you’re out of service range.
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