Orphan: Ways of Making Money

The London Stock Exchange is becoming the lender of last resort for many banks in Italy as concerns over the country’s debt levels squeeze liquidity out of the Italian financial market.

With cash increasingly hard to come by, Italy’s banks are turning to CC&G, the exchange’s Italian clearinghouse, for short-term lending. That includes some of the country’s largest financial institutions, including Unicredit and Mediobanca, according to a person close to the situation.

While just two banks received short-term capital from CC&G in 2009, that number has now risen to 15 — half of them Italian and the rest European financial institutions that trade in the country.

Under terms of the deals, the clearinghouse, which acts as a middleman to guarantee trades between financial parties, is offering money to both Italian and European banks with a presence in Italy for up to three days.

The money, which comes from collateral that traders must put up to complete financial transactions, is deposited with the banks to cover shortfalls in liquidity. CC&G earns a profit by charging banks interest on the money that they borrow.

Previously, banks had used the so-called repo market, where banks lend capital to each other on a short-term basis, to meet their financing requirements. But fears about Italy’s ability to repay its debts has pushed up borrowing costs and reduced the ability of banks to access that market.

A spokesman for the exchange said the company was in close discussions with the Italian central bank about any potential problems in the country’s financial sector, and used stringent risk management to decide whether to give banks access to capital.

CC&G also doesn’t technically lend money to banks, but instead deposits the cash with them on a short-term basis. Under Italian law, this distinction makes CC&G a depositor with the banks, and places it ahead of other creditors looking to get their money back if any financial institution should fail.

The legal distinction may still leave CC&G exposed if a lender defaults. And analysts question the sustainability of lending to struggling banks. That’s particularly true as the collateral offered to institutions as short-term financing is often provided by the same bank’s separate trading operations.

Paul Rowady, senior analyst at financial consultancy TABB Group in Chicago, said the global squeeze on liquidity was forcing institutions to look elsewhere, including to clearinghouses, to meet their short-term financing commitments.

He added that central clearing parties might feel secure in lending to banks because it was on a short-term basis and they were eager for extra revenue.

“Financial entities are making money in new and different ways,” he said. “Just because times are bad doesn’t mean they’re not looking for profits.”

And Italy’s turmoil has been good business for the London Stock Exchange. According to the exchange, CC&G reported a 209 percent jump in income to £54.3 million, or $83.6 million, during the first half of the year, compared with the same period in 2010.

The Italian business now represents 14 percent of the exchange’s overall income, compared with just 5 percent in the first half of 2010.

In our ever-so-humble opinion, this should be added near the top of the list of crisis canaries-in-the-coal-mine as the cracks of desperation appear more and more across the largest and most-levered financial firms in the world.

After playing in eight games this year, Jackson has 29 catches for 503 yards and two touchdowns. He’s still on track to eclipse 1,000 yards for the season, but during the course of games, he seems to disappear. Whether if it’s intentional or if it’s because the Eagles want to spread the ball around is still up for debate.

Jackson and Reid mutually agreed recently that he and Jackson have always had a good relationship, but undeniably, the strength of that relationship is fading as the season progresses.

If Jackson wanted to wage war against Reid and the Eagles’ front office for a new contract, Jackson certainly chose the right general to lead him—Drew Rosenhaus, an agent notorious for representing some of the NFL’s top athletes, attaining ample amounts of money for his players and having them hold out.

The Eagles know Rosenhaus all too well since he defended a former controversial Eagles receiver Terrell Owens during his frenzied contract negotiations in 2005.

Before exiting Philadelphia, Owens performed for the media and the public on the front lawn of his home, which looked like his own version of “Taebo” or “How to Get Ripped in 5 Days.”

So far Jackson has been reserved when in front of the camera, but there’s unquestionably more going on behind the scene then what’s being disclosed. In previous years, the Eagles have never been hesitant to part ways with players with character issues.

Sooner or later Jackson’s demeanor will get the best of him, and he’ll be reprimanded for being a distraction to the team, whether through fines or long-term suspension.

The advantageous things Jackson can do are stop being petulant; demonstrate why he deserves the money and is the best receiver in the league; and he will get his payday, just not with the Birds.

Side note: Teams that could use a wide receiver are the Arizona Cardinals, Baltimore Ravens, Washington Redskins and Minnesota Vikings.