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MF Global sows winter of discontent for CME - (www.reuters.com) Agricultural bankers and other players in the world's grain markets say fallout from the collapse of giant broker MF Global is changing cash grain trading and fueling calls for alternatives and reforms. Trading changes include more "back to back" transactions and more direct contracting by farmers to end users, eliminating middlemen like MF Global, merchandisers say. Bankers and traders also say anger with lack of oversight by the Chicago Mercantile Exchange's clearing house regarding MF Global's supposedly secure customer accounts is rampant, spurring calls for more regulation of a traditionally close-knit, clubby and "self-regulating" industry. Proposals have included the idea of setting up a separate "insurance fund" to hold the so-called "segregated" accounts that futures commission merchants (FCM's) now hold and account for with the exchange clearinghouse, which is supposed to "mark to market" every trade every day to assure adequate capital.
U.S. State, Local Pensions Drop 8.5% - (www.bloomberg.com) U.S. public pension-fund assets fell in the third quarter by the most since 2008 as stocks sank amid concern that Europe’s debt crisis would curb economic growth, Census Bureau data showed.
Assets of the 100 largest public-worker plans decreased $237 billion, or 8.5 percent, from the prior quarter to $2.53 trillion by Sept. 30, the bureau said today in a report. It marks the first decline since the second quarter of 2010 and the biggest since the last three months of 2008, when holdings slid 13 percent during Wall Street’s credit crisis. The setback may strain state and local governments that have set aside more money to cover retirement benefits. That’s pressured governments already coping with diminished tax collections and has propelled efforts to reduce benefit costs.
Record use made of ECB deposit facility - (www.ft.com) The amounts of cash being deposited by eurozone banks at the European Central Bank increased further on Wednesday, just days after the ECB provided unprecedented levels of liquidity in an effort to reduce tension in the financial system. Banks placed almost €452bn ($591bn) overnight on Tuesday in the ECB’s deposit facility, which attracts a low rate of interest and in normal times is typically used by banks only to park excess cash, often at a loss. That pushed use of the deposit facility to a further record high after €412bn was deposited over the Christmas holiday.
Europe's Banks Face Pressure on Collateral - (online.wsj.com) Even after the European Central Bank doled out nearly half a trillion euros of loans to cash-strapped banks last week, fears about potential financial problems are still stalking the sector. One big reason: concerns about collateral. The only way European banks can now convince anyone—institutional investors, fellow banks or the ECB—to lend them money is if they pledge high-quality assets as collateral. Now some regulators and bankers are becoming nervous that some lenders' supplies of such assets, which include European government bonds and investment-grade non-government debt, are running low. If banks exhaust their stockpiles of assets that are eligible to serve as collateral, they could encounter liquidity problems. That is what happened this past fall to Franco-Belgian lender Dexia SA, which ran out of money and required a government bailout.
ECB Balance Sheet Increases to a Record $3.55 Trillion on Loans to Banks - (www.bloomberg.com) The European Central Bank’s balance sheet soared to a record 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money last week to keep credit flowing to the economy during the debt crisis. Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today. The balance sheet increased by 239 billion euros in the week and was 553 billion euros higher than three months ago. The euro weakened and stocks fell, halting a five-day advance in the Standard & Poor’s 500 Index, as the announcement highlighted risks from Europe’s debt crisis. “The market reaction is slightly incomprehensible,” said Jens Kramer, an economist NordLB in Hanover. “After that record liquidity injection it would follow that the balance sheet would swell. Seeing the figure in black and white, and the fear of what would happen to the ECB if a country defaulted, may have spooked the market.”
China’s Central Bank to Keep Monetary Policy ‘Prudent’ in 2012, Zhou Says - (www.bloomberg.com)
In Euro Zone, Austerity Seems to Hit Its Limits - (www.nytimes.com)
Europe’s leaders warn of tough 2012 - (www.ft.com)
U.S. consumer in the slow lane - (www.reuters.com)
I Just Got Here, but I Know Trouble When I See It - (www.nytimes.com)
A Year of Me-Firsts, and of Lessons Relearned - (www.nytimes.com)
A Margin for Error in Hedge-Fund Filings - (online.wsj.com)
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