Hong Kong, China most at risk of financial crisis

By Jane Cai

The Basel, Switzerland-based BIS routinely collects and analyzes data to monitor vulnerabilities in the global financial system. These figures typically include the amount of credit in an economy and house prices, as well as borrowers’ ability to service their debts.

China, Canada and Hong Kong are among the economies most at risk of a banking crisis, according to early-warning indicators compiled by the Bank for International Settlements.

Canada -- whose economy grew last year at the fastest pace since 2011 -- was flagged thanks to its households’ maxed-out credit cards and high debt levels in the wider economy. Household borrowing is also seen as a risk factor for China and Hong Kong, according to the study.
“The indicators currently point to the build-up of risks in several economies,” analysts Inaki Aldasoro, Claudio Borio and Mathias Drehmann wrote in the BIS’s latest Quarterly Review published on Sunday.
Hong Kong and mainland China are the most vulnerabl…

Yellen and the Fed are afraid of a corporate debt bubble, but investors still aren't

By Jeff Cox,

Former Fed Chair Janet Yellen was the latest high-profile person to express concern over corporate debt.In an appearance Tuesday in New York, Yellen said problems in the area could exacerbate another downturn.Conversely, Bank of America Merrill Lynch said lower-rated corporate debt remains a solid investment.Leveraged loans, another potential problem spot, are one of the best-performing parts of the market this year. The corporate debt scaring policy experts like former Fed Chair Janet Yellen isn't throwing too much of a fright into market participants.
In fact, some of them are continuing to load up on lower-grade corporate debt because it's managed to be a better performer than some of the investments considered to be safer.
"Offense is the best defense," Hans Mikkelsen, credit strategist at Bank of America Merrill Lynch, told clients in a note pointing out that BBB-rated companies are outperforming their A-rated counterparts. BBB is the …

Janet Yellen Warns Another Financial Crisis Could Be Brewing

By Fortune

Janet Yellen, former chairwoman of the Federal Reserve, is sounding a warning bell about another financial crisis in the making, saying the loss of authority by banking regulators and the move toward deregulation are worrisome.
Yellen pointed to leverage loans—those extended to businesses with weaker credit—as a primary area of concern, since regulators are currently powerless to address them at the top level. Instead, they can only focus on problems at individual banks.
“I think things have improved, but then I think there are gigantic holes in the system,” Yellen told a New York audience Monday night, as quoted by CNBC. “I’m not sure we’re working on [the leverage loan issue] in the way we should, and then there remain holes, and then there’s regulatory pushback. So I do worry that we could have another financial crisis.”
The warning is a significant course reversal for Yellen, who in 2016 said she wasn’t worried about a recession, and last year said she did…

Fed Piles Up $66 Billion in Paper Losses as It Faces Trump Wrath

By Rich Miller,

The Federal Reserve is piling up unrealized losses on its $4.1 trillion bond portfolio, raising questions about its finances at a politically dicey moment for the independent central bank.

The Fed had losses of $66.5 billion on its securities holdings on Sept. 30, if it marked them to market, according to its latest quarterly financial report. That dwarfed its $39.1 billion in capital, effectively leaving it with a negative net worth on that basis, a sure sign of financial frailty if it were an ordinary company.
The Fed, of course, is not a normal bank and does not mark its holdings to market. As a result, officials play down the significance of the theoretical losses and say they won’t affect the ability of what they call “a unique non-profit entity’’ to carry out monetary policy or remit profits to the Treasury Department. Case in point: the Fed handed over $51.6 billion to the Treasury in the first nine months of the year.
The risk though is…

Stocks Wiped Out as Trump Threatens Shutdown

By Sarah Ponczek and Brendan Walsh,

A U.S. stock rally reversed course as traders grew skeptical of progress in the trade war and President Donald Trump threatened to shut down the government.

The S&P 500 flipped to negative after an intraday gain that reached 1.4 percent, with financial shares suffering as Trump said he’d be “proud” to shut down the government if his demands for border funding aren’t met. Carmakers edged higher after China signaled it may cut tariffs on auto imports, but investors were cautious about a broader deal. The dollar rose with oil.
U.S. stocks have been whipsawed in recent weeks as traders searched Trump’s tweets for clues about the outlook for trade talks, tried to decide if a stock selloff could prompt the Federal Reserve to pare back rate increases and evaluated economic data that signaled a slowdown may be coming. Monday’s session saw the S&P 500 Index’s biggest full reversal since Feb. 6 as it erased a 1.9 percent decli…

Arrest of Huawei executive is a dangerous escalation of Trump’s economic war with China

By Jeffrey Sachs, MarketWatch

The arrest of Huawei CFO Meng Wanzhou is a dangerous move by President Donald Trump’s administration in its intensifying conflict with China. If, as Mark Twain reputedly said, history often rhymes, our era increasingly recalls the period preceding 1914. As with Europe’s great powers back then, the United States, led by an administration intent on asserting America’s dominance over China, is pushing the world toward disaster.

The context of the arrest matters enormously. The U.S. requested that Canada arrest Meng in the Vancouver airport en route to Mexico from Hong Kong, and then extradite her to the U.S. Such a move is almost a U.S. declaration of war on China’s business community. Nearly unprecedented, it puts American businesspeople traveling abroad at much greater risk of such actions by other countries.

The Trump administration’s conflict with China has little to do with U.S. external imbalances, closed Chinese markets, or even China’s …

Deutsche Bank’s Troubles Are Donald Trump’s Troubles

By Timothy O'Brien, Bloomberg

Deutsche Bank AG, the sprawling German financial giant, is in trouble again. And, to a certain extent, Deutsche's troubles are going to be President Donald Trump's troubles.

German police raided Deutsche's Frankfurt headquarters on Thursday as part of a money-laundering probe related to the Panama Papers scandal. Investigations tied to the 2016 disclosure of previously private bank and legal records linked to shell companies created by a Panama-based law firm, Mossack Fonseca & Co., revealed that Deutsche had used that network to help its clients create offshore accounts and avoid taxes.

German officials said Thursday's raid was unrelated to another problem currently hanging over Deutsche: its role in helping Danske Bank A/S launder billions of dollars for the Denmark bank's clients.

Authorities identified two bank employees by their ages only as primary targets in the new Deutsche investigation and…