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Aug 19, 2016

DealBook Morning News - August 19, 2016: Italy’s Banks Pile On the Debt

The New York Times

Friday, August 19, 2016

Italy’s Banks Pile On the Debt Feltrinelli, an Italian publisher, stacked up three consecutive years of losses totaling nearly 11 million euros, or about $12.4 million. It managed to secure a €50 million line of credit at an interest rate below what top-rated companies in Europe were paying.
Benetton, a clothing retailer that has lost €240 million since 2012, also managed to get a loan at a below-market rate.
How? They (and others) can thank Italian banks, whose liberal lending seems to have ignored the lessons of Japan’s zombie lending cycle in the 1990s.
As the European Central Bank has freed up cash to spur the eurozone economy, Italian banks have continued to lend to inert companies. That has held back economic growth in Italy and increased the country’s pile of bad loans. Italy’s €360 billion in bad loans makes up about a third of the eurozone total.
Italy is not, however, the only culprit. Greece is also struggling with nonperforming loans — its total is around €108 billion and rising. The problem, according to the Center for Economic Policy Research, is that Italy has not learned the lessons of Japan’s experience, which led to a lost economic decade.
Will Italy become another zombie nation?
Redstones Said to Win the Fight for Viacom It had the makings of a Shakespearean tragedy: feuding family members, a struggle for money and power, a disputed inheritance, and sullied reputations. In the end, the victor was Sumner M. Redstone, 93, the mogul with a $40 billion media empire whose mental capacity was questioned time and again.
A truce has been called, according to people briefed on the agreement. Mr. Redstone’s empire will remain firmly under his and his daughter Shari Redstone’s control. Philippe P. Dauman will be dismissed as chief executive of Viacom but will depart with a severance package worth about $72 million.
There could still be one more twist though.
Keryn Redstone, Mr. Redstone’s granddaughter, who asserted that she had been disinherited of $6 million and potentially $1 billion more, also filed to join the lawsuit over Mr. Redstone’s mental capacity. Her lawyer said she had not participated in the settlement negotiations. That trial is to start on Sept. 19.
Marcus: Goldman Sachs for the Masses We’ve had Earnest for lending, Oscar for insurance and now we have Marcus for Main Street. Goldman Sachs, not exactly known for its youthful bona fides, has jumped onto the start-up trend for simple brand names and given its retail banking operation the same name as one of its founders, Marcus Goldman.
Marcus is likely to make its debut in October, offering relatively small consumer loans online. It is unclear whether the brand will be merged with GS Bank, which began offering online savings accounts in April.
Goldman has traditionally eschewed consumer lending and has preferred to serve corporations, governments and the ultra-wealthy. But times are tough for Wall Street and even Goldman has to find other ways to make money.
The question is whether retail banking can help the bank shed the reputation it acquired after the financial crisis of being a “great vampire squid wrapped around the face of humanity.”
 
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