JPM Exits T-Bond Settlement; Consumer Debt Worries

Wall Street Journal

And then there was one: JPMorgan Chase's decision to stop handling the settlement of U.S. Treasury debt for big bond brokers—leaving Bank of New York Mellon Corp. as the lone firm in the business—has some people worried about how the $13 trillion market will be able to withstand any potential shocks.

"You have all your eggs in one basket here, and if you're the Fed, that has to be a little disconcerting, because you don't want any hiccups in this market," said Ray Stone, a former New York Fed researcher and head of Stone & McCarthy Research Associates.

JPMorgan announced its decision on July 21 and expects to complete its exit next year. That will leave Bank of New York to settle most secondary market government bond trading, Treasury securities sold at auction, and government debt exchanged in the overnight "repo" market, a key source of funding for financial institutions, which use the bonds as collateral for cash loans.

Financial Times

Debt worries start to grow: Credit card and other revolving loans rose at a seasonally adjusted annual rate of 7.6% in the second quarter to $685 billion, the paper says, citing Federal Reserve data. More than $18 billion was added in the last quarter. That is raising fears that U.S. banks are taking on too much consumer credit risk in a slowing economy.

"In the present environment it's probably a safe strategy, but as we saw with housing in 07/08 that environment can change very rapidly," said Nancy Bush, banking analyst at Georgia-based NAB Research. "They need to be very careful."

New York Times

No cash, no problem: Sweetgreen got more grief from customers than when it removed bacon and sriracha from its menu then when it stopped accepting cash, as some of its 48 restaurants did last January. Cash purchases had declined to less than 10% of payments from 40% when the chain opened nine years ago as customers prefer using credit and debit cards and mobile apps. Electronic transactions are faster and safer for employees, the chain's co-founder and co-CEO says.

Washington Post

Worth keeping: Columnist Michelle Singletary writes that the Consumer Financial Protection Bureau needs to be kept intact, despite congressional and legal attempts to rein it in or kill it. "I loathe bringing in partisan politics, but having seen and worked with consumers who have been taken advantage of, I believe the bureau is worth keeping around despite its critics," she says in her "The Color of Money" column.

She recently interviewed CFPB Director Richard Cordray and other high-ranking officials to discuss the agency on its five-year anniversary. In her next few columns she'll go over what the agency has done and how consumers can better use its resources.