Uber passengers who receive low ratings from their drivers will be subject to banishment from the service, according to a Tuesday announcement by the ride-hailing company.
Under the new community guidelines, riders with “significantly below average” ratings may lose access to the app.
Riders may lose access to Uber if they develop a significantly below average rating. Riders will receive tips on how to improve their ratings, such as encouraging polite behavior, avoiding leaving trash in the vehicle and avoiding requests for drivers to exceed the speed limit. Riders will have several opportunities to improve their rating prior to losing access to the Uber apps.
Respect is a two-way street, and so is accountability. Drivers have long been expected to meet a minimum rating threshold which can vary city to city. While we expect only a small number of riders to ultimately be impacted by ratings-based deactivations, it’s the right thing to do. –Uber
There is no word on whether riders will be able to earn their way back into Uber’s good graces, or if the bans will be permanent. The company did not disclose what ratings threshold would be used to begin taking action against passengers – who can see their rating underneath their name by opening the main menu while in the app.
Just as riders can rate drivers, drivers can rate passengers on a scale of 1 to 5 stars. A passenger’s rating is the average of the ratings they have received from drivers. According to Uber, very few people have a perfect rating of 5.
The app provides riders with tips on how to earn a high rating from drivers, including: arriving on time, extending courtesy and a positive attitude to drivers, and buckling their seat belt. –Washington Post
Uber drivers, meanwhile, have long been required to maintain a minimum rating to continue driving for the service. Those with a rating below 4.6 may lose their privileges according to Business Insider.
Via Business Insider
Uber also said that it will launch a campaign to educate both riders and drivers about their updated community standards. Those in the US and Canada will be the first to be greeted by an in-app prompt with a summary of the new guidelines, and will be asked to confirm them.
“By educating customers and partners about the Community Guidelines, asking them to confirm they understand, and holding everyone accountable, we can help Uber be welcoming and safe for all,” wrote Uber’s head of safety brand and initiatives, Kate Parker.
According to Gizmodo, the following behaviors could get you banned from Uber before the new guidelines “ranked from least sexy to most sexy”:
5. Damaging the property of your driver or another passenger.
Sure, smashing a car window has a certain raw, terrifying sexiness to it, but “intentionally spilling food or drink, smoking, or vomiting due to excessive alcohol consumption” doesn’t quite get me where I need to be.
4. Using inappropriate and abusive language or making inappropriate gestures
You’re not allowed to “ask overly personal questions” or make verbal threats or “comments or gestures that are aggressive, sexual, discriminatory, or disrespectful.” Harassment—both sexual and otherwise—is not sexy.
3. Making unwanted contact with the driver or a fellow passenger once the trip is over.
Uber prohibits “texting, calling, or visiting someone in person after a ride has been completed.” Stalking isn’t sexy—yet I couldn’t help but feel a tingle of *something* while watching great psychosexual thrillers like Single White Female and Basic Instinct.
2. Breaking the law while using Uber
There’s an inherent sexiness to breaking the law—why does doing something wrong feel so right? Who doesn’t lust after a bad boy or girl every once in a while? Uber warns specifically against having open containers of alcohol, “traveling in large groups that exceed the number of seat belts in the car,” using the car for human and/or drug trafficking, and “asking drivers to break local traffic laws such as speed limits.” Driving 100 MPH is sexy, albeit dangerous. Human trafficking is not sexy. Drug trafficking could be sexy, depending on the circumstances. Being smushed in the back of an Uber with six friends is either incredibly erotic or an absolute nightmare.
via ZeroHedge News http://bit.ly/2QvQDbf Tyler Durden
Another quarter, another failure by banks to do what they used to do so well under the Fed’s QE: grow revenue.
Speaking at a banking conference in New York, the two largest US banks have warned that the trading slump which started about a year ago, will continue.
Citigroup warned that second quarter revenue has declined compared to last year, following the largest US bank, JPMorgan, in reporting a downturn for the high profit margin business. And in a quarter in which the S&P was trading at all time highs less than a month ago, Citigroup CEO Michael Corbat found no shortage of scapegoats on which to blame the trading slump, including the relapse in the trade war, Brexit as wellas escalating tension between the U.S. and Ira, all of which have reportedly weighed on market sentiment in recent weeks.
“Clearly, trading revenue and wallets right now are down,” Citi’s CEO said quoted by Bloomberg, adding that “in periods of uncertainty, things tend to become pretty muted.”
Traders hoping to get some more clarity will have to wait about 6 weeks, when the banks report Q2 earnings, as Corbat declined to give specific number about his firm’s performance in Q2, instead deflecting to Chief Financial Officer Mark Mason, who would “give more details in coming weeks.” Yesterday, JPMorgan CEO Jamie Dimon warned this his firm’s trading revenue had dropped 4% to 5% in the first two months of the second quarter, while noting that “the next month could dramatically change that.” It wasn’t clear if the “change” would be higher or lower.
As part of his own attempt at optimistic spin, Citi’s Corbat said the company is focused on developing better ties between its trading and treasury-management units to improve the experience for corporate customers.
“We’ll likely continue to take share,” Corbat said. “We’ll go up and down with the market. But I would expect that we should either match, or, probably more importantly, outperform over time.”
Bizarrely, Corbat also said Wall Street would begin to benefit as central banks around the world step back from quantitative easing, or bond buying to stimulate economic growth, “because the policy change will create room for banks to step in and provide additional liquidity or financing.” We say bizarrely because the last time central banks tried to step back from quantitative easing, and a global coordinated tightening ensured, the S&P slumped into a brief bear market and banks reported atrocious earnings, which also underscores the bigger problem faced by banks: no matter the environment, they seem unable to grow revenue any more. Perhaps it is time to acknowledge the reason: there are simply no longer enough muppets out there trading day in and out in what, to even the most clueless, is a clearly rigged and manipulated market, and where if central banks truly step back the outcome would be a crash.
via ZeroHedge News http://bit.ly/2I6VR9w Tyler Durden
Now that a few hours have passed, the subtext of Robert Mueller’s first-ever public statement about the Russia probe is starting to sink in for both Democratic presidential contenders and the press (though comparing Mueller to a professor chiding his students for not ‘doing the reading’, like Buzzfeed did, misses the point).
Blaze media critic Robert Eno hit the nail on the head when he pointed out in a tweet that Mueller didn’t just restate the findings from his report: His statement was larded with hints appearing to goad Democrats into pursuing impeachment.
This whole reason Mueller gave this press conference was to give the media this soundbite.
This message wasn’t lost on the contenders for the 2020 Democratic nomination, many of whom swiftly demanded that the House begin impeachment proceedings immediately.
Mueller’s statement makes clear what those who have read his report know: It is an impeachment referral, and it’s up to Congress to act. They should.
Mueller leaves no doubt:
1) He didn’t exonerate the president because there is evidence he committed crimes.
2) Justice Department policy prevented him from charging the president with any crimes.
3) The Constitution leaves it up to Congress to act—and that’s impeachment.
Mueller made clear this morning that his investigation now lays at the feet of Congress. No one is above the law—Congress should begin an impeachment inquiry.
Even AOC, who isn’t seeking higher office this election cycle, reiterated her calls for impeachment and also accused Mueller of “playing a game of Taboo with Congress,” which is actually a fairly apt comparison.
But despite growing support for impeachment, members of the Democratic Congressional leadership sounded conspicuously restrained.
Nancy Pelosi’s statement on Mueller’s remarks was surprisingly restrained. Though the leader of the Democrats in the House acknowledged that the president should be investigated, she stopped short of calling for impeach:
It is with the greatest respect for Special Counsel Robert Mueller and the deepest disappointment in the Department of Justice holding the President above the law, that I thank Special Counsel Mueller for the work he and his team did to provide a record for future action both in the Congress and in the courts regarding the Trump Administration involvement in Russian interference and obstruction of the investigation.
Special Counsel Mueller made clear that he did not exonerate the President when he stated, ‘if we had confidence that the President clearly did not commit a crime, we would have said so.’ He stated that the decision not to indict stemmed directly from the Department of Justice’s policy that a sitting President cannot be indicted. Despite Department of Justice policy to the contrary, no one is above the law – not even the President.
The Special Counsel’s report revealed that the President’s campaign welcomed Russian interference in the election, and laid out eleven instances of the President’s obstruction of the investigation. The Congress holds sacred its constitutional responsibility to investigate and hold the President accountable for his abuse of power.
The Congress will continue to investigate and legislate to protect our elections and secure our democracy. The American people must have the truth. We call upon the Senate to pass HR 1, the For The People Act, to protect our election systems.
We salute Special Counsel Robert Mueller and his team for his patriotic duty to seek the truth.
Schumer’s response was similarly restrained.
Robert Mueller made clear today that the Russians interfered in our elections, the wellspring of our democracy.
If Pres Trump & Congress don’t do anything, it’ll be worse in 2020
Yet inexplicably, Sen McConnell & Senate GOP are blocking bipartisan election security legislation, despite Dems’ repeated calls to protect our democracy from interference—by Russia or any other foreign adversary
Robert Mueller’s statement also makes clear that Congress has a right—we believe an obligation—to continue our constitutionally mandated oversight without interference or stonewalling and follow the facts wherever they may lead.
The message is clear: Despite growing support for moving ahead with impeachment proceedings among some of the 2020 candidates, Pelosi, Schumer and the rest of the leadership are sticking with their plan to forego impeachment proceedings to try and avoid inflaming Trump’s base before the election.
Pursuing impeach very well might turn out to be a political trap for the Dems, but if Pelosi & Co. continue to push back against it, they could be setting themselves up for a showdown with left-wing Democrats.
via ZeroHedge News http://bit.ly/2HHxzUt Tyler Durden
While we had grown somewhat used to seeing horrific self-immolation scenes across various authoritarian regimes in Asia, the US Secret Service confirmed that a man has set himself on fire a short distance away from the White House today.
At approximately 12:20 p.m. a man lit himself on fire on the Ellipse near 15th and Constitution Ave., Secret Service personnel are on scene assisting @NatlParkService and @usparkpolicepio in rendering first aid.
— U.S. Secret Service (@SecretService) May 29, 2019
A Man Set Himself on Fire In Downtown Washington, Across From The White House Today.
The White House Spokesman Hogan Gidley said He could Not Immediately Comment On The Situation. pic.twitter.com/ksJzqrNzb2
Five years ago, a company called Yo raised $1.5 million at a $10 million valuation.
What did investors and end-users get for this much money? An app that allowed users to send the message “Yo,” (and NOTHING else) to their friends.
It didn’t take long for the company to blow through all that cash in typical Silicon Valley manner, and let go of all its employees.
At the peak of investing hysteria, it was that easy to scoop up a couple million dollars to fund your company, no matter how worthless the idea.
With so much easy money from low interest rates and booming stocks, people were dumping money into anything with a pulse.
There’s still a lot of money out there today. But investors have tightened their purse strings and become more discriminating with where they put their money.
Last year’s venture capital was distributed to fewer businesses, and it went to more established companies over startups.
It hasn’t been this hard for early-stage companies to get venture capital investments since 2011. And the number of SaaS (Software as a Service) investments is also at a seven-year low.
With the stock market looking shaky, and investors starting to worry, people are focusing on removing risk, not diving into uncertain new businesses.
But anyone looking to start a company shouldn’t feel like the chance to get funding has passed. There is still one big pool of money that NEEDS to be invested.
In order to take advantage of the tax savings, those funds need to invest that capital inside one of almost 9,000 designated underdeveloped areas in the US called Opportunity Zones.
Right now there are billions of dollars sitting in Opportunity Funds… and the clock is ticking. Opportunity Funds have to deploy 90% of their capital in Opportunity Zones within 6-12 months of receiving the money from investors.
If you have ever wanted to start a business, but worried about having to raise a lot of money, or attract investment capital, this is your chance.
Starting a business in an Opportunity Zone is a way to tap into billions of dollars of capital.
Instead of paying a huge tax bill, investors can put their gains into equity in your company and defer paying capital gains tax until 2026 (plus get a 15% discount if they hold the investment for seven years).
In the meantime, all that money that would have gone to taxes will be growing your company instead.
And a huge plus to investors is that any growth they spur in your business will be tax-free if they hold the investment for ten years.
That means you and your investors can focus on long term growth– not cheap gimmicks that don’t last.
Plus the IRS guidance on Opportunity Zones keeps getting better.
The whole point of these Zones is to bring investment and jobs into neighborhoods that need it most. So the IRS says a business must be active (you can’t just sit on real estate without improving it), and must earn 50% of its income inside the Opportunity Zone.
But the IRS gave three different ways to satisfy the income requirement:
Either your employees (and independent contractors) spend at least 50% of their work time within the Opportunity Zone.
Or at least 50% of the wages of your employees (and contractors) come from performing services within an Opportunity Zone.
Or at least 50% of the income of your business is generated by tangible property located in an Opportunity Zone, and the management or operational functions are performed within the Opportunity Zone.
This leaves the door open to all sorts of businesses.
A storefront business would easily apply, because all sales are in the OZ.
But even something like a landscaping company could work even if all of its clients are outside the Zone, as long as the physical equipment and business headquarters are located there.
Keep in mind that you don’t even have to employ anyone other than yourself.
And there is a wide range of business possibilities. For instance, many of these Opportunity Zones are in beautiful wilderness areas that would be perfect for nature tourism.
Bigger ideas can work too.
The Pearl Fund is a new Venture Capital Opportunity Fund looking for tech-startups with potential to grow at least 10x. Its ultimate goal is to fund “the next Apple or Google.”
But tech startups will have to be careful to deploy the capital properly to meet the requirement of doing business within the Opportunity Zone.
Still, it could be worth the extra effort to attract investors. If you go from an initial $1 million investment to a $100 million valuation in ten years, your investors will pay no capital gains on the $99 million growth.
But you do have to act quickly. A lot of the capital will flow into these funds by the end of the year, because after that, it will be too late to get the 15% discount on deferred capital gains.
And remember, these funds MUST invest their capital within a year of receiving it, which means they are hungry for good businesses to fund.
So this could be the perfect time to start your business.
While most eyes are focused on the collapse of the US yield curve and its recessionary predictions, there are many other critical issues that are flashing red ‘recession-imminent’ flags…
To keep buying the dip, investors have to ignore…
Bonds… (yields at cycle lows, curve at decade flats/inverted)
Lumber… (one of the most important factors in construction is at its lowest level since April 2016)
Copper…(the commodity with the PhD in economics rolled over ahead of stocks)
Global economic data… (suffering the longest negative streak – 286 days – on record)
Hope… (soft survey data has not picked up the mantle of ‘hope’ that stocks have ridden on since the start of the year)
Money Supply… (the fuel for PPT/National Team pumpathons is starting to run dry again)
And finally, why – if everything is awesome – is the market screaming for almost 2 full rate cuts by the end of 2020?
via ZeroHedge News http://bit.ly/2MhU5rv Tyler Durden
Despite the propaganda, could the Trump era be the least prejudiced in American history?
The left isn’t going to like this one. A recent study on racism in America has revealed some truths that directly contradict one of the progressives’ most beloved narratives. The Democratic Party and its allies in the press have expended no small amount of effort over the past few decades to convince the American public that everyone who isn’t a rabid lefty is a hateful racist.
Of course, President Trump has become the left’s favorite target for race-baiting antics; many claim that the president’s rhetoric and policies have emboldened white supremacists and made America more racially bigoted. But according to researchers at the University of Pennsylvania, that assertion is not quite accurate.
Racism Has Decreased Under Trump
Sociologists Daniel J. Hopkins and Samantha Washington conducted a study to analyze the impact of Trump’s election on prejudice against blacks and Hispanics. They used a panel of 2,500 Americans whose views on race and other matters had been documented since 2008. According to the report, the researchers expected to see an increase in racial prejudice in the Trump era. Yes, it might be difficult to believe that professors at a major university would immediately assume that the president singlehandedly made the country more racist, but it’s true.
And why did they make this assumption? Apparently, they formed their hypothesis based on the idea that people have deep-seated racism lying dormant within themselves, waiting to be awakened by a provocative event. The theory was that Trump’s election somehow pushed the magic “I’m totally a racist” button that lurks in the hearts of men – probably white men, specifically – and instantly transformed them into a legion of slobbering white supremacists bent on the utter destruction of minorities.
But the findings were surprising, and likely a bit disappointing, to the researchers and the media establishment. Instead of an increase in racism, the study revealed a marked decrease. Between 2012 and 2016, racist attitudes had decreased by a small degree, but after 2016, when Trump was elected, racism plummeted. The drop was equally present in Republican voters and Democrats.
Why The Change?
It is apparent that the findings of the study put the researchers and the press in quite a quandary. How could they spin the results in a way that doesn’t damage the narrative? Fortunately for them, being a progressive makes one highly proficient in the sport of mental gymnastics. Instead of acknowledging that America is not as racist as Al Sharpton wants us to think, the researchers posit that perhaps Trump’s racism has been so abhorrent, it made racist Americans want to be less bigoted.
It is possible that “Trump’s rhetoric clarified anti-racist norms… given that the declines in prejudice appear concentrated in the period after Trump’s election, it seems quite plausible that it was not simply Trump’s rhetoric but also his accession to the presidency that pushed public opinion in the opposite direction,” the sociologists wrote.
If this doesn’t quite make sense to you, congratulations! You’re a normal person. But some on the left had another idea. The Spectator suggested the reason racism declined was that it had risen to drastic heights when Obama was in office. It argues that, “maybe social science has got it the wrong way round: it was the sight of a mixed race man in the White House who brought out in the inner racist in Americans who are inclined towards those feelings, while the reassuring sight of white man back in the Oval Office has calmed them down.”
An Alternative Theory
Perhaps it is possible that both theories are wrong, and a wee bit of common sense might be appropriate. The reality is that the president does not have the power to make the country more or less racist. And yes, this also goes for Obama, who many conservatives blame for escalating racial tensions during his time in office. While neither president handles racial issues perfectly, American attitudes evolve on their own and are not subject to the whims of the person who happens to occupy the Oval Office.
This report showed that racial tensions were already decreasing under Obama, albeit at a slower pace. Perhaps some whites reaffirmed their opposition to racism when Trump was elected and the media tried to convince America that he was the Führer, who was going to bring back slavery and put Hispanics in catapults to launch them back over the southern border.
But it does not seem likely that these individuals account for the majority of the decrease. Maybe the truth is that America’s views on racial issues are continuing to evolve, and we are becoming gradually less racist every year, despite the far left’s attempts to foment division between whites and minorities through its favored propaganda outlets. As long as Americans continue to aspire towards the values on which the nation was founded, the country will move farther away from its racist past.
via ZeroHedge News http://bit.ly/2WdABsK Tyler Durden
After a strong 2Y, mediocre 5Y, we concluded this week’s trifecta of coupon auctions with, as one may expect, an abysmal sale of $32 billion in 7Y bonds.
With yields sliding lower all day, perhaps it had to do with the concessions into the 1pm auction, but whatever the reason, the 7Y auction stopped at a high yield of 2.144%, which while the lowest since September 2017, also tailed the When Issued by 1.9bps, the biggest tail in at least 4 years.
The internals were just as ugly, with the Bid to Cover tumbling from 2.492 to just 2.298, not only far below the 6 auction average of 2.53, but the lowest since February 2016, and second lowest since 2009.
And with both Direct and Indirect takedown sliding, as Directs took down only 11.3% from 19.1% last month, and half the 6 auction average of 22.5% and Indirects ending up with 58.3% of the auction, Dealers we left holding 30.5% of the auction, the highest percentage since March 2018.
Overall, a dismal auction, although one which can perhaps be ignored as it took place on a day when the 10Y yield tumbled to the lowest in almost two years. Or maybe not, because once the market digested just how ugly the auction was, the 10Y promptly sold off, and in just a few minutes wiped out all of the day’s gains.
via ZeroHedge News http://bit.ly/2Mgu7o8 Tyler Durden
With China’s bond market continues to be hammered in the aftermath of the government’s surprise seizure of Baoshang Bank (see “A Big Wake Up Call”: Chinese Bond Market Roiled By First Ever Bank Failure“), the PBOC – whose open market operations had been in dormancy for much of 2019 – finally panicked and on Wednesday injected a whopping net 250 billion yuan ($36 billion) into the financial system via open-market operations, as it fills what traders have dubbed a growing funding gap following the Baoshang failure.
The consequences of this liquidity flood were instant: China’s overnight repurchase rate, a measure of interbank liquidity, tumbled the most in three weeks, while the benchmark 7-day repo rate also declined. “The operations so far this week send a strong signal that the PBOC is ready to ensure ample liquidity for the market, amid fragile sentiment in the credit and bond market,” said Westpac strategist Frances Cheung. The central bank also set the daily yuan fixing at a stronger-than-expected level to prevent even a hint of speculation that China will be have no choice but to devalue the yuan as part of the “reliquification” of the market.
The PBOC’s massive liquidity injection, which was the largest since January when the S&P was still close to a bear market and started the tremendous Chinese stock market rally, also helped the Shanghai Composite be one of the few markets that closed in the green overnight.
However, while the near-term reaction was favorable to Chinese risk, the paradox is that this only became a viable option as a result of a far greater problem: China’s interbank funding market is starting to freeze.
As we reported on Tuesday, the bank has – or rather had – more than 60 billion yuan of negotiable certificates of deposit (NCDs) and 6.5 billion yuan of subordinated bonds outstanding. Trading in the the company’s NCDs and other bonds was promptly suspended on Monday, with traders fearing that a self-fulfillling prophecy would emerge as contagion spreads to other troubled banks’ NCDs and/or bonds.
As noted previously, the contingent convertible/perpetual debt issued by some of the more troubled banks such as Huishang, Bank of Zhengzhou and China Zheshang Bank, was hammered over the past three days and has yet to recover.
As an aside, for those asking why NCD’s matter, the answer is because as we explained as far back as two years ago, numerous smaller banks had become acutely reliant on such shadow banking funding mechanisms as Certificates of Deposit, which had become the primary source of short-term funding for many of China’s banks mid-size and smaller banks.
As Deutsche Bank further explained, the banks most exposed to a shut down in this “shadow funding” pathway are medium-sized and small banks, for whom wholesale funding made up 31% and 23%, a number that has risen substantially in the interim period.
The issue of NCD funding is especially troublesome, because as Bloomberg reported overnight, in the aftermath of the Baoshang seizure, some Chinese banks and securities firms “tightened requirements for negotiable certificates of deposits that are used as collateral for funding.” In some cases, private NCDs were shunned altogether, and some financial institutions now only accept NCDs sold by state-owned and joint stock banks as collateral while some have refused to lend money to investors pledging NCDs issued by lenders rated AA+ and below for now.
While the lock up in the NCD market is concerning, it is only partial so far, even as yields on Chinese banks’ NCDs spiked in the past 48 hours after only 44% of the planned amount was issued. Putting this in context, banks typically issue an average of 82% of the planned amount.
“The Baoshang incident is pressuring short-term liquidity,” said a trader at a Chinese bank. “Along with month-end seasonal factors, cash conditions are becoming tighter and pushing up the near-date swap points higher. And that has led the swap curve moving upward.”
Ji Tianhe, China rates and FX strategist at BNP Paribas in Beijing, said that the takeover of Baoshang could be interpreted as a “marginal targeted deleveraging” campaign, and could change the ecosystem of the interbank market.
“Smaller banks are supposed to serve the real economy, but some turned out be very active in interbank trading in order to expand their size. Now this latest move is pushing similar small lenders back to their core business,” Ji said according to Reuters. He added that as small banks are not allowed to borrow in the exchange market and have to largely rely on bigger banks for interbank funding, “they are now facing a challenging funding situation.”
This also explains why traders are casting concerned glances at Chinese bonds, because as Jianghai Securities explained overnight, China’s government bonds may slide as banks sell them to make up a liquidity shortfall from issuing fewer negotiable certificates of deposits.
Analysts at OCBC bank said in a note on Tuesday that the takeover had sparked a sell-off in Chinese sovereign bonds on Monday after reports that corporate deposits and interbank liabilities over 50 million yuan could be subject to a haircut of 20%-30%, “due to concern about the possible break of implicit guarantee.”
“This may cause interbank lenders to reassess their relationship with the smaller lenders,” the analysts said.
But a partial (or complete) freeze of the interbank funding market, which many believe is what was the key catalyst behind the US financial crisis as shadow funding conduits froze up in the aftermath of the Lehman failure, is just one of China’s major headaches. The far bigger one is the risk of a bank run.
And to address that, just around the time Baoshang was about to be nationalized, the central bank set up a wholly-owned deposit insurance fund with registration capital of 10 billion yuan on May 24, according to registration record on a website run by State Administration for Market Regulation. It’s also why on May 26, the central bank said on May 26 that PBOC, CBIRC and Deposit Insurance Fund will guarantee some Baoshang Bank debt repayment.
The good news is that for now, there have been no reports of bank runs, or even jogs, in China, although this is precisely the kind of news that would be throttled and censored as much as possible by Beijing, which can not afford a countrywide bank run, threatening the collapse of China’s massive $35 billion banking system.
China’s central bank will face increasing challenges in the coming weeks to balance liquidity injections and a depreciating yuan, Bank of America Merrill Lynch says.
The last item is that with the PBOC panicking, this may have major implications on the global scene, where the last thing China can afford is to be seen devaluing the yuan. Alas, as Bank of America notes, the PBOC is now trapped as it needs to inject even more liquidity into the system amid deteriorating data, signs of fund outflows, US-China trade tensions and as 463 billion yuan of MLF matures on June 6. The PBOC’s challenge lies in adding liquidity without letting the yuan depreciate too far, and as BofA’s Claudio Piron notes, “leaning more on monetary easing rather than fiscal will cause yields to fall and the yuan to depreciate against the greenback” which is why in preempting this, PBOC has added the massive cash injection through OMO. To be sure, while the PBOC will likely have to inject much more liquidity, the likelihood of a cut in banks’ reserve requirement ratio when the 463BN yuan of MLF expires in June is increasing.
One thing that is certain: Baoshang is just the tip of the iceberg. According to UBS analyst Jason Bedford, who in 2017 was the first to highlight Baoshang’s troubles, there are several other banks that have “identical leading risk indicators” to Baoshang. Hengfeng Bank, Jinzhou Bank Co. and Chengdu Rural Commercial Bank all failed to publish their latest financial statements, have a large portion of their balance sheets invested in “loan-like investment assets” and are subject to negative local media coverage, he said in a note to clients published Tuesday.
As Bloomberg reports, Hangfeng said that it hasn’t completed auditing and reviewing its financial statements. Officials at Jinzhou and Chengdu Rural didn’t reply to requests for comment.
In short expect more Chinese bank failures in the coming weeks.
The bottom line: while much of the world is focusing on the still intangible consequences of the latest round of trade war escalation, China is currently going through a very real, and very problematic rebalancing between adjusting the level of market liquidity without sparking a sharp selloff in the yuan, which would push it below 7.00 vs the USD, and provoking another major, and panicked, capital outflow which could have dire consequences on China’s capital market and economy.
So while focusing on any flashing red headlines over the latest trade war developments, keep a close eye on what is taking place below the surface in China’s banking system, where the risk of substantial deterioration has risen substantially following the first Chinese bank failure in nearly three decades.
via ZeroHedge News http://bit.ly/2Mfft0A Tyler Durden
A Bloomberg report reveals how a Mexican bank employee directed a retirement fraud scheme at American retirees living in San Miguel de Allende, a city in Mexico’s central highlands.
Monex Casa de Bolsa SA de CV Monex Grupo Financiero has been investigating allegations that an employee stole approximately $40 million from American clients.
Marcela Zavala Taylor, the suspected Monex banker at the center of the fraud, allegedly sent American clients falsified statements that showed their accounts were fully funded, said several of the bank’s clients in a Bloomberg interview.
The fraud was discovered in late December when clients couldn’t retrieve funds from their accounts. Bank officials told clients that $40 million in funds from 158 accounts disappeared.
Bloomberg spoke with several clients who said Monex attempted to reach settlements at a massive discount versus what was stolen from their accounts. Others said the bank asked them to file charges against Zavala.
“Legal action is continuing in the case, and details cannot be disclosed so as not to hinder the investigation,” Monex said in a statement. Bank spokeswoman Eva Gutierrez said Monex is working with affected clients and has settled with 70% of them.
Kenneth Karger, a retiree from Texas with property in Mexico, says Monex stole $400,000 from him. It was only last summer when he stopped receiving statements. Karger said, Zavala at the time, told him Monex was transitioning onto a new online banking system, and the account balance would be delayed for some time. Months later, Karger retrieved statements from Monex and discovered unauthorized withdrawals.
Bruce Brown, an Australian retiree who’d lost $250,000, was refunded entirely by the bank after he notified Mexican authorities.
Monex is an affiliate of Banco Monex SA Institución de Banca Múltiple Monex Grupo Financiero, with $5.2 billion in assets under management and operations in the US.
According to Condusef, Mexico’s consumer protection agency, there were 7.3 million complaints of financial fraud involving 18.9 billion pesos (about $1 billion) last year.
The scandal has devastated the expatriate community in San Miguel, as non-citizens have limited rights.
via ZeroHedge News http://bit.ly/2YXLThp Tyler Durden
