Friday, June 6, 2014

This Week in Bank Failures

Economic theory generally holds that negative interest rates are impossible: if you charge people for letting you use their money, they will hold on to the money themselves. Of course, we know that view is a bit simplistic, and in the real world this week, The European Central Bank announced a cut in its deposit interest rate from 0 to -0.10 percent, proving that interest rates can go slightly negative. The European Central Bank also cut its lending rate from 0.25 to 0.15, along with other steps, trying to boost economic activity and to keep inflation in the positive range.

In the United States, there are hopeful signs for the economy’s continued expansion, despite the various statistics that indicate a slowdown between September and February on the government shutdown and severe winter weather. Most notably, the labor market continues to improve steadily. The gross U.S. job count has recovered approximately to its pre-crash peak, which according to the popular understanding of such things means that the depression is over.

A bill to allow student loan refinancing could get a Senate vote as soon as next week.

Charged: Liquidnet, a dark pool operator, for selling customers’ confidential financial information. The company is paying $2 million to settle the charges without admitting guilt, but acknowledging that its internal controls were inadequate. High-speed broker Wedbush, for helping customers circumvent market controls for three years, ending last year. Two executives were named but not charged.

Guilty: A director of the failed Montgomery Bank & Trust in Georgia, whose high-risk securities trading and embezzlement of $21 million contributed to the bank’s insolvency. Aubrey Lee Price pleaded guilty to a series of fraud charges to avoid prosecution on the most serious charges. He had been on the run for a year before police caught him on December 31.