ABA spending $1M to keep Ga.'s Perdue in Senate; Bitcoin rally widens

Wall Street Journal

How high the moon?

The rally in bitcoin, which has “nearly tripled in 2020 and is up 90% since early September,” is being “driven in part by the emergence of new investors from passionate individuals to return-starved hedge funds looking to profit from the digital currency’s momentum.” After hitting a record intraday high of $19,834.93 last Monday, the digital coin closed Friday at $18,832.76. It had been trading as low as $3,867 back in March.

“The move is the latest resurrection for the upstart digital currency, which is known for wild bouts of speculative fervor and equally violent crashes. So far this year, there have been more than 11.9 million transfers of less than $1,000 of bitcoin into personal wallets. That is up from about 9.1 million in 2017 and suggests more investors are taking part in this year’s rally.”

Achilles’ heel

Ant Group’s “staggering” growth is being driven by unsecured loans to hundreds of millions of individuals made through Chinese banks, which pay Ant a fee for “connecting them with users of Alipay, its ubiquitous payments app used by hundreds of millions of Chinese citizens and many of the country’s small businesses. At the end of June, Chinese banks and trust companies had the equivalent of around $230 billion in outstanding loans to consumers who borrowed through Alipay.”

“In the span of a year, Ant Group originated loans to half a billion people in China and accounted for nearly a fifth of the country’s outstanding short-term consumer debt as of June. The staggering figures show how Jack Ma’s financial-technology giant has quickly become one of China’s biggest originators of unsecured loans to individuals, and why Ant is now under intense regulatory scrutiny. Ant has exposed the Achilles’ heel of China’s financial system because the weaker financial institutions with poor risk-management capabilities have become more dependent on the fintech giant to source loans—and are left holding the bag when defaults happen.”

Financial Times

Sign of the times

Société Générale is combining “its main retail bank network with that of its subsidiary, Crédit du Nord, in an effort to trim its cost base by about €350 million by 2024 and €450 million by 2025.” With the move, which will result in the closure of 600 branches, “the French lender looks to capitalize on changes in consumer behavior wrought by the pandemic.”

New York Times

Missing money?

A parliamentary report is claiming that the Bank of England is “having trouble keeping track of billions of pounds.” The report “released on Friday said that 50 billion pounds (about $67 billion) of paper money is ‘missing’ from the country’s cash supply and that the Bank of England ‘seems to lack curiosity’ about where it’s all gone. Of the more than £70 billion worth of bills in circulation in Britain, the report found that only about a quarter was being spent in stores and on other purchases. That leaves the majority of those bills — which by design are not traceable — unaccounted for.”

The bank brushed off the criticism. “It is the responsibility of the Bank of England to meet public demand for bank notes. The bank has always met that demand and will continue to do so,” a spokeswoman said. “Members of the public do not have to explain to the bank why they wish to hold bank notes. This means that bank notes are not missing.”

Elsewhere

Insurance premium

The American Bankers Association “is spending $1 million on television ads to boost Republican Senator David Perdue in a bid to ensure the Senate remains in Republican hands after Georgia election runoffs in January,” Reuters reports. “Perdue, who sits on the Senate Banking Committee and has long been an industry ally, backing lighter banking regulations, is seeking re-election against Democratic challenger Jon Ossoff.”

“The campaign launched last week marks the single biggest sum the group has spent backing a candidate since it began running independent political ads in 2018, according to federal campaign data. The large expenditure underscores industry worries that Democratic control of the Senate could lead to tougher banking policies, as well as clear the way for Democratic President-elect Joe Biden to nominate hard-charging regulators.”

“The banking trade lobby is traditionally cautious about declaring support for candidates in congressional races, but industry groups do strategically pick certain races to focus on — typically to back incumbents who have advanced the sector's causes,” American Banker notes.

Hard times

Nearly two-thirds of Americans “say they’re now living paycheck-to-paycheck as the year draws to a close,” according to a survey commissioned by Highland Solutions. “Millennials seem to be the hardest hit, with 64% saying they’re living off their paychecks. A staggering 82% admit they cannot afford a surprise $500 expense, if they suddenly have to face one.”

“For Americans who’ve been saving for a rainy day, 2020 washed out most (if not all) of their funds. The polls finds 47% have run out of emergency savings during COVID. Two in three Americans add they regret not having enough in the bank before the crisis started.”