Week InReview
Friday | Aug 23, 2019
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Who’s afraid of the Big Bad Tech?
Fictionalized versions of big tech companies are being cast as the bad guys in a new crop of books, playing on fears about the pervasive reach of technology. Many of the tomes ask how much people are willing to give up in exchange for high-tech gadgets and algorithms that anticipate their every need.
In the books, fictionalized doppelgängers with names such as Cloud, TheShop or Beetle have grown so big that no government can regulate them. Several are in development for film and TV.
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The Securities and Exchange Commission took an initial step Wednesday to lay out the legal limitations of a powerful industry that’s known for questioning companies’ decisions on executive pay and business strategy. (Bloomberg Markets | Aug 21)
The plan is expected to envision a version of what has been called “recap and release,” which would ensure the firms have adequate capital to absorb loan losses in a future housing slump. Its provisions aren’t expected to give details for initial public offerings for the firms. If the proposal is carried out, the firms could ultimately return to the way they operated before the financial crisis. (The Wall Street Journal | Aug 21)
US banking regulators on Tuesday eased trading regulations for Wall Street banks. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) approved the revamped version of the so-called “Volcker Rule,” which aims to ban lenders that accept US taxpayer-insured deposits from engaging in proprietary trading. (Reuters | Aug 20)
Investors unnerved by volatility in the stock market are unloading exchange-traded funds. Nearly $18 billion has left US stock ETFs in the past three weeks, with more than $3.5 billion fleeing in the five days ending Friday. (BNN Bloomberg | Aug 19)
A group of states is preparing to proceed with a joint antitrust investigation of big technology companies. The effort involving state attorneys general is expected to be formally launched as soon as next month, and is likely to focus on whether a handful of dominant technology platforms use their marketplace powers to stifle competition. (The Wall Street Journal | Aug 19)
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Volcker tweak leaves ban on CLOs investment in bonds for now
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(Aug 20) —
The Federal Deposit Insurance Corp. board and other regulators that
tweaked
the Volcker Rule Tuesday did not address an issue that could have allowed collateralized loan obligations to invest in bonds, Elliot Ganz, general counsel of the Loan Syndications And Trading Association, told Bloomberg. However, the issue may be brought up in separate rulemaking at some point in the future.
- FDIC board did little to address the definition of “covered funds” or “ownership interests” in its vote, Ganz said. It mainly addressed the proprietary trading issue today, which does not relate to CLOs or loans, he said
- Under the original Volcker Rule regulations, banks are limited in how much they can invest in “covered funds”, which included debt securities of CLOs, except for a narrow carveout for “loan securitizations”
- Because of this, post-crisis CLOs are not allowed to contain buckets for bonds, and CLO 2.0 bonds have not had such buckets
- Last year, the federal bank regulatory agencies and SEC proposed major revisions to the Volcker Rule regulations, to ease trading bans and potentially revise the definition of “covered fund” so that more securitizations are more clearly exempt
- LSTA has been advocating to change the definition of “ownership interest” to allow banks to invest in CLOs with small buckets of bonds.
- There is already a carveout for “loan securitizations” but “the way it is described now, it is very narrow — it just applies to loans and short-term cash equivalents,” Ganz said. “That’s why CLO 2.0 have no bond buckets. However, those potential revisions are still on the table and may be brought up going forward in separate rulemaking”
- “The CLO market has obviously done very well notwithstanding this limitation” of not being able to have bond buckets, Ganz said. “This is not a ‘hair-on-fire’ issue.”
- “Bond baskets give CLO managers some flexibility to react to some market trends, and it’s good for them to diversify their portfolios a little bit.”
- Even in pre-crisis CLOs, you seldom saw bond baskets in CLOs, and if you did, it was usually limited less than 5%, Ganz said. “And in reality most CLOs didn’t have any securities; those that did had between 1% and 3%. It was never something super-critical, just a ‘nice-to-have’. We think it would be a ‘nice-to-have’ again”: Ganz
- Read more: Volcker rule trading overhaul sought by Wall Street takes shape
Source: Bloomberg Government
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A cyberattack could be as bad as a nuclear attack, expert warns
A major cyberattack could be as devastating as a nuclear attack, disabling power and water systems, creating dangerous traffic disruptions and creating widespread food shortages, writes Jeremy Straub, a computer science assistant professor at North Dakota State University. The scenario isn't far-fetched, he adds, noting that malware is thought to already be in US water and power systems and that the FBI says hackers are targeting nuclear plants.
Malware upload offers insight into nation-state hackers
US Cyber Command has released a malware sample linked to North Korean hackers, uploading it to a security research database and offering a glimpse into the cybertactics of financial-crime hacking group APT38. A leaked UN report states that North Korea is funding its weapons programs with the help of more than $2 billion stolen in cyberattacks.
The case against borrowing charging cables
Charging cables for smartphones, tablets and laptops can expose the devices to cyberattacks and shouldn't be shared, experts warn. The cables, as well as public USB charging stations, can be infected with malware or modified to give hackers access.
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What if aging weren’t inevitable, but a curable disease?
If this controversial idea gains acceptance, it could radically change the way we treat getting old.
The life of a person who wakes up really, really early
They walk among us, endowed with a superpower invisible to the naked eye. Before an important early meeting, they never have to forgo a shower and settle for dry shampoo and a baby wipe. They rarely wake with a jolt at 10 in the morning and stare groggily at a phone screen with five missed calls and texts that say, “You on your way? ETA?”
'Adult recess' is booming, because being a grown-up is hard
Adults are reliving their playground memories — good and bad. Athleticism is nice, but not totally necessary. In Seattle’s Cal Anderson Park, for example, about 1,000 people turned out one Saturday this month for an adult recess that included kickball, hopscotch and tetherball, along with chicken nuggets and grilled-cheese sandwiches.
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