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The trio of clients that got Deutsche Bank AG in regulatory trouble this week had a shared back story: They were all castoffs of JPMorgan Chase and Co.

Deutsche Bank moved millions of dollars across the globe for convicted sex offender Jeffrey Epstein in the past decade, and billions on behalf of international lenders Danske Bank A/S and FBME Bank Ltd. Along the way, the German bank missed or disregarded compliance red flags for years, New York’s Department of Financial Services said Tuesday in levying $150 million in penalties.

JPMorgan’s moves to offload those same clients years earlier may have helped it dodge a similar bullet. The biggest U.S. bank stepped away from handling money for FBME in 2009. It distanced from the others around 2013, the same year it undertook a broad purge of higher-risk clients from its correspondent banking business.

The bank had incentive to offload risky clients. JP Morgan’s primary U.S. regulator, the Office of the Comptroller of the Currency, put it on notice in early 2013, faulting its due diligence processes and ordering it to clean up its anti-money laundering controls. Later that year, the bank said it would spend $4 billion to shore up its compliance operations — a process that included reviewing the accounts of hundreds of clients and shedding many of them.

JPMorgan declined to comment.

Deutsche Bank, whose business is regulated in New York, said this week that it has cooperated with authorities and that it regretted bringing Epstein on as a client. Although it acknowledged deficiencies in its oversight of the FBME and Danske relationships, the bank said it found no intentional effort to facilitate unlawful activity. It declined to comment for this article.

Danske Flags

Concerns about Danske Bank, Denmark’s biggest bank, centered on its Estonia unit. News organizations including the Organized Crime Corruption and Reporting Project wrote in 2018 that the unit had helped rich Russians move nearly a quarter-trillion dollars from their country over the course of a decade, largely through anonymized shell corporations. The bank acknowledged later that year that many of those transactions should have been flagged as suspicious.

JPMorgan stopped providing the Estonia unit access to the U.S. financial system in 2013, citing the high percentage of client accounts domiciled outside the Baltic country. Deutsche Bank continued providing banking services to Danske for another two years.

The Justice Department is investigating the role played by Danske’s correspondent banks in the U.S., including Deutsche Bank, people familiar with the matter have said, adding that the authorities are also trying to understand JPMorgan’s role.

Deutsche Bank had a decades-long relationship with FBME, which is registered in Tanzania and based in Cyprus. In the 1980s, the small bank was a client of Banker’s Trust, which Deutsche Bank acquired the next decade. By 2005, Deutsche Bank had deemed FBME high on its risk scale, and its monitoring systems were flagging suspicious transactions at a rate of more than twice a week during some years, according to the New York regulator. Although Deutsche Bank admonished FBME at times over its practices and demanded more information about its clients, the German bank continued doing business with it, the regulator said.

JPMorgan started doing business with FBME in the early 2000s and quickly grew frustrated with its failure to fully explain certain transactions, according to documents reviewed by Bloomberg News. The banking giant was also wary of other practices at FBME, such as offering “hold mail” services, in which a bank allows clients to use the bank’s address to limit paper trails, according to those documents.

Deutsche Bank provided banking services to FBME for five years after JPMorgan stopped, processing some $618 billion in all. It ended the relationship in 2014, after the U.S. Treasury labeled FBME a “primary money laundering concern” for its alleged work with organized crime and terror groups, effectively freezing it from the U.S. financial system. FBME has disputed those allegations.

The late Epstein, for his part, was a longtime client of JPMorgan — characterized inside the bank as a “center of influence” who could help it attract lucrative clients. Epstein stayed with the bank well after 2008, when he pleaded guilty in Florida to soliciting minors for prostitution. Epstein moved over to Deutsche Bank in 2013, after a banker who’d recently joined from JPMorgan persuaded executives to bring him aboard, according to the DFS.

Epstein’s legal troubles mounted again in 2018. That November, the Miami Herald published a series of articles cataloging allegations from women who said they had been abused sexually by him as minors. Deutsche Bank notified Epstein in December 2018 that it would be closing his accounts.

More must-read finance coverage from Fortune:

  • If Ernst & Young auditors had done this one thing, they might have uncovered Wirecard’s $2 billion fraud years sooner
  • After overbooking flights in a pandemic, American Airlines is now paying passengers to get off
  • Should Facebook investors ride out the ad boycott—or cash out?
  • Safelite’s CEO on steering the company through crisis—and getting sales back to pre-pandemic levels
  • Former Honeywell CEO David Cote just wrote one of the best guides ever on how to lead a company

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A rally in the shares of Square over the past few months has pushed the market valuation of the digital-payment company into the ranks of some of the biggest U.S. banks.

Square has a market capitalization of about $55 billion after doubling since May, making it worth more than Truist Financial Corp. and all but four banks in the KBW Bank Index. While it’s still dwarfed by JPMorgan Chase & Co. and Bank of America Corp., Square is less than $20 billion shy of Goldman Sachs Group Inc.’s market valuation, which stands at $74 billion.

Square shares have continued to set records in recent weeks as optimism swells over the growth of digital payments, and as the coronavirus pandemic changes consumer and corporate spending behavior.The San Francisco-based company has benefited in particular from positive sentiment about its popular cash app, its handling of pandemic-related government stimulus payments and its ability to garner deposits from traditional banks with fewer digital offerings.

Technology stocks have soared this year, while banks have sunk. The tech-heavy Nasdaq 100 Index has gained 21% and the KBW Bank Index has fallen 35%.

Square rallied as much as 13% on Monday after an analyst suggested it could eventually win as much as 20% of U.S. direct deposit accounts.

More must-read tech coverage from Fortune:

  • Why companies like Porsche and Nestle are using worker-owned site Braintrust for new hires
  • Samsung made a closet that disinfects your clothes
  • Russia’s online censorship machine is no longer running smoothly
  • Can Nikola Motor’s big battery promises be true?
  • Big investors like Bitcoin for the wrong reason

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This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.

Good morning, Bull Sheeters. It’s a risk-on Monday with Asia, Europe and U.S. futures all soaring. China is very bullish on its second-half recovery, and in the capital markets—for investors, that’s enough to drown out weak data elsewhere, plus bearish forecasts and new global records in coronavirus cases.

Let’s see where investors are putting their money.

Markets update


  • The major Asia indexes are soaring in afternoon trade, with Shanghai up more than 5% .
  • Investors in mainland China and Hong Kong are seeing their best day in over a year as the influential state-run China Securities Journal turned bullish on “the wealth effect of the capital markets.” That enthusiasm is lifting global markets.
  • Alas, the coronavirus crisis is worsening, as the WHO this weekend reported a new record daily tally (212,000) led by Brazil, India and the United States.


  • The European bourses jumped out of the gates, with the benchmark Stoxx Europe 600 up 1.7%.
  • The U.K. is now expected to phase Huawei out of its 5G buildout plans as soon as this year, a remarkable about-face by Boris Johnson’s government.
  • The closely watched German factory order numbers came in below estimates this morning, suggesting the rebound could be a bit more protracted than first hoped.


  • The major U.S. indexes appear set to extend last week’s impressive gains as futures all point more than 1% higher. That’s despite Goldman Sachs again lowering its U.S. GDP forecast, now seeing a full-year 4.6% contraction (vs. -4.2%, previously.)
  • M&A is back on… Uber Technologies is expected to announce today its purchase of Postmates in a $2.65 billion all-stock takeover, setting up a food fight with privately-held Door Dash in the U.S. meals-delivery market.
  • Warren Buffett’s Berkshire Hathaway Inc. is finally putting its mammoth cash pile to work, buying Dominion Energy Inc.’s natural gas pipeline and storage assets for $10 billion. Dominion had just bailed out of a pipeline deal as it seeks to reach net-zero emissions by 2050.


  • Gold is down.
  • As is the dollar.
  • Crude is up, tracking in line with equities.

The view from the C-suite

Today’s markets surge is yet another indicator that investors will run with the good news (in this case, from Chinese state media on a China 2H bounce) and shrug off the bad (Goldman’s U.S. downgrade from over the weekend).

So let’s dig into the “good news” this morning. Last week, Deloitte published its latest COVID-themed CFO survey, and the chief finance suite sees reason for optimism as the economy reopens. (A note: the poll, involving 118 large North American companies, is from mid-June, before the latest record daily surges in the U.S. South and West, but it’s still worth parsing the numbers.)

Nearly 20% of CFOs polled by Deloitte say they are already at or above pre-crisis operating levels, and another 12% expect to reach this milestone by the end of this year. That would mean roughly one-third of companies back to normal (or just about) by year-end. As the Deloitte chart below shows, at this stage, companies have bounced back faster than they thought would be the case back in April. That’s encouraging.

The less encouraging news is that this is an extremely uneven recovery. In sectors such as retail, financial services and manufacturing, the majority of CFOs don’t expect to be at or near pre-crisis levels before next year. And, 17% of all CFOs polled said they won’t reach that level before Q1 2022.

CFOs are a conservative lot. Still, these surveys are a helpful indicator to gauge sentiment inside Corporate America. And while it’s not great news, it is showing an improvement in sentiment.

But does that improved sentiment warrant such a rally in equities?

CFOs aren’t convinced, as the next Deloitte chart shows:

Nearly seven out of ten CFOs say equity markets are either “overvalued” or “very overvalued.”

The S&P has climbed a further 2% since this poll was conducted.



Not all Italians go to mass on Sunday. For a hearty few, it’s the bicycle that brings them closer to a state of grace.

Here, in little Amandola, every Sunday morning cyclists fill the town square at 8 a.m., just outside Bar Belli’s red brick facade. The cyclists then split up. The mountain bikers head up into the mountains. The road bikers descend into the valleys. It’s a remarkable scene of young and old, men and women, guys and girls. There’s also a lot of brightly colored bikes, and skin-tight attire.

The region where Amandola can be found, Le Marche, decided this year to promote cicloturismocycling tourism (do yourself a favor: at some point, click this link and escape for 2-minute-48-seconds)—a green, low-impact, pedal-from-medieval-hilltown-to-hilltown message to attract tourists. It was a genius idea: there’s so much history, beauty and good food around every bend, that they figured the best way to discover most of these gems was to tell people: take it slow, and discover it at your own pace—preferably, on two wheels.

What they conveniently left out was: some of these hills will knock you out.

A few years ago, I went for a short spin in the valley below my house. I wasn’t in tip-top shape, and when I finally peddled back into the garden I nearly fell over with exhaustion. I grabbed my water bottle and chugged what little was left.

“Where’d you go?,” a voice asked from the shade. It was Fiore, my elderly neighbor. I caught my breath. “Around here,” I replied. I was knackered, but the details of my ride energized him. Fiore just turned 97. In his teens, he was an avid cyclist. He knows every back road and navigable track around here like he knows his pockets.

Under that shady oak, he recounted a story I don’t think I’ll ever forget.

He was a teenager just as Italy was entering World War II. At the height of the war years, Mussolini wanted every fit male in the land to go and fight for the glory of some destructive vision. Fiore wanted none of it. He wasn’t a fighter. Cycling was his thing, not guns. Whenever he had the chance, he’d get on his bike and ride for hours—all day, rain or shine. As the recruitment drive was picking up, Fiore’s dad devised a plan to foil Mussolini. It all came down to, he told me, a girdle.

“A girdle?!,” I jumped in. “Did you say….?”… Si, he nodded. He’d draw tight (with some help) the girdle around his mid-section, and then hop on his bike. He’d go uphill and downhill. And uphill again. For hours on end. Every day he’d do this. The plan was to ride so many kilometers with that tight-fitting girdle it would transform his appearance, creating an hourglass physique that would force the recruitment office to reject him for military service. 

War recruiters are funny about the upper body, apparently.

Fiore so wanted to stay off the battleground that he’d cycle distances on his pre-war bike that I can’t even fathom. He’d make it a good half-way to the sea, or climb straight up into the mountains. He became obsessed. It was hard to know what was his real aim: to achieve some new personal best, or to pull one over on Mussolini.

“Did it work?,” I asked. “Did they make you go to war?”

“They wouldn’t take me,” he said with a grin.

He was done talking. “Tell me about your ride.”


Have a nice day, everyone. I’ll see you here tomorrow.

Bernhard Warner

If you were to assemble the people who could help you truly understand health care and how it’s affected businesses today, who would you pick? Here’s a few on Fortune’s list:

  • The CEOs and presidents of healthcare giants Johnson & Johnson, Moderna, Novartis, Aetna
  • co-discoverer of CRISPR-Cas9 Dr. Jennifer Doudna
  • Dean of Stanford Medicine Dr. Lloyd Minor
  • chief medical officers from IBM, Verily, Google Health
  • healthcare venture capitalists like Sue Siegel
  • Thrive Global CEO Arianna Huffington
  • CEO of REFORM Alliance Van Jones
  • NBA Commissioner Adam Silver

Hear from them and more at FORTUNE Brainstorm Health, our virtual health-care conference on July 7-8. As a newsletter subscriber, you’re invited to use this code—BSH20HALF!—and get half off.

As always, you can write to or reply to this email with suggestions and feedback.

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Good morning, Bull Sheeters. We made it! Welcome to 2H.

The first half ended yesterday on a high note—in sheer defiance of all the unnerving geopolitical and pandemic news. There are escalating tensions between Hong Kong and Beijing, and between Washington and Beijing. And, Dr. Anthony Fauci told Congress yesterday that America is “going in the wrong direction.” Clearly, he wasn’t talking about the markets.

As long as we have tech stocks and gold, investors will be pretty content.

Let’s check in on today’s action.

Markets update


  • The major Asia indexes are mixed in afternoon trade. Shanghai is up; the Nikkei is slipping and Hong Kong is closed for the holiday.
  • The Chinese central government’s new national security law went into effect yesterday evening local time, and, not soon afterwards, Hong Kong police had made its first arrest: a man holding a flag declaring “Hong Kong Independence.” The matter is spilling across borders as it’s looking likely that Beijing will now slap “reciprocal” restrictions on U.S. media outlets operating in the country.
  • Asia’s economy is expected to contract in 2020, “for the first time in living memory,” the IMF gloomily predicts.


  • The European bourses were mixed in light trade, with Germany’s Dax up 0.6%. Paris and London were down.
  • There’s more trouble in the skies today as Airbus announced its biggest restructuring in its history. 15,000 jobs must go to stabilize an epic cash burn. Norwegian Air, one of Boeing‘s best customers, canceled a huge order for 737 Max planes.
  • Polls close today in Russia as Vladimir Putin seeks a constitutional overhaul to stay in power for another 16 years. He’s well on his way to getting his wish.


  • The major averages closed out the quarter (and the half) on a high note yesterday. It was the best quarter for U.S. stocks in 22 years.
  • Dr. Anthony Fauci wasn’t sounding bullish yesterday. He told a Senate committee that 100,000 new COVID cases per day is looking likely. The U.S., he said, “is going in the wrong direction.” The markets rallied afterwards.
  • Here’s a persuasive argument for extending the supplemental $600 weekly unemployment benefits: fail to do so, and the U.S. economy will head straight back into recession.


  • Gold is up. Again.
  • The dollar is flat.
  • Crude is up.

Six months that shook the world

The first half of 2020 was brutal. Great Depression-like falls in employment. An unprecedented wave of bankruptcies. A global recession. More than a half-million COVID-19 deaths. But you know what? A lot of canny investors have made a lot of money in 2020.

That’s particularly true of the past quarter. As I mentioned above, Q2 2020 was the best quarter for U.S. stocks since Q4 1998.

The S&P 500 closed the quarter up 20%. The Dow Jones Industrial Average climbed an impressive 18%, and the Nasdaq scored a whopping 31% quarterly gain.

But that’s only part of the story. The full first-half reveals where the big winners and losers of this pandemic can be found. I ran the numbers this morning… and found an asset that actually outperformed the Nasdaq.

If your portfolio is long on tech, you’re pretty happy this morning. The Nasdaq is one of the few major averages to be showing YTD gains (12.1%). For the year, the S&P is down roughly 4%. (More on that in a moment). And, despite a recent rally, both Japan’s Nikkei and Germany’s Dax are showing single-digit losses for 2020.

The big winners are tech (look at Apple, up nearly 25% YTD) and gold (17.4%).

Now, back to the S&P. The benchmark index is full of contrasts in 2020. As you know, the tech components are flying high. Meanwhile, energy (-37%) and finance (-24%) have been a huge drag.

Looking forward, the second half could be an even more volatile one than the first. The first major test of investor sentiment comes tomorrow with the June jobs report. And, further out, we have the elections.

It wouldn’t be a surprise if the most cautious investors were to sit it out until the data improves and the political picture clears up.


Have a nice day, everyone. I’ll see you here tomorrow… And, a reminder: the U.S. markets are closed on Friday for the Independence Day holiday, so there will be no Bull Sheet newsletter on Friday.

Bernhard Warner

A note from my Fortune colleagues on a timely new initiative:

Many companies are speaking out against racial injustices right now. But how do they fare in their own workplaces? Black employees in the corporate world, we want to hear from you: Please submit your anonymous thoughts and anecdotes here.

As always, you can write to or reply to this email with suggestions and feedback.

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This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.

Good morning, Bull Sheeters. Buckle up. Equities are facing a bumpy ride this morning as second-wave jitters grip the markets. That’s despite economies continuing to reopen.

Let’s check in on the action.

Markets update


  • Asia’s major indices have begun the week in the red. Hong Kong’s Hang Seng and Japan’s Nikkei are down more than 2%.
  • There’s a fresh outbreak of COVID-19 in Beijing, spreading fears of a second wave of the virus hitting the world’s No. 2 economy. India too is seeing a worrying spike that could shut down parts of its economy.
  • SoftBank has pumped $500 million into a series of Credit Suisse investment funds, which in turn has backed the Japanese conglomerate’s Vision Fund. That means some of CS’s clients may unwittingly be backing SoftBank startups, the FT reports.


  • The European bourses plunged out of the gates. The benchmark Stoxx Europe 600 opened 2.1% lower. BP is down 5% after announcing a $17.5 billion write-off.
  • The last round of trade talks between the EU and U.K. went nowhere. Can Boris Johnson break the impasse on today’s video call?
  • European countries, including Germany and France, will further open their borders to neighbors today in a bid to salvage some of the 2020 summer travel season. After nearly three months on the tarmac, budget carrier Easyjet will resume (mostly domestic) flights today. Food onboard? No. Face masks required? Yep.


  • The Dow, S&P 500 and Nasdaq futures point to a rough start to the week. The Dow (-5.5% last week), S&P (-4.7%), Nasdaq (-2.3%) had their worst weeks since March 20.
  • Record numbers of coronavirus cases and hospitalizations hit a swath of U.S. states this weekend, particularly the Sun Belt.
  • Now for some good news: Morgan Stanley is doubling down on its call for a V-shaped recovery in the global economy. A “sharp but short” recession is in the cards, with healthy recovery by Q1 2021.
  • What’s on this week’s calendar? Fed Chairman Jerome Powell will deliver monetary policy testimony to the Senate on Tuesday; retail sales (Tuesday); housing starts (Wednesday); jobless claims (Thursday); manufacturing data (Thursday).


  • Gold is down.
  • The dollar is up.
  • Crude extends its downward slide. Brent is off 3%, trading below $37.50/barrel.

Winners and losers

Investors this morning see more of the latter. Take Big Oil. BP, for one, is telling the markets it’s banking on “weaker demand for energy for a sustained period.” The energy sector and crude are sharply lower on the news.

But it’s not an overwhelmingly brutal picture. Some of BP’s biggest customers—the airlines—are seeing a jump in demand, which will only grow (from near-zero) as flights resume. Motorists too will be road-tripping in the weeks ahead. (I’ve been criss-crossing Central Italy the past few days; I’ve filled the tank three times. Each time, it cost me a bit more). Whether that’s enough to push the price of oil back above $40, then $50 per barrel, is the big question hanging over the energy markets in the near term.

I was curious about where consumers are spending their money as lockdown measures ease, and found some interesting data in Bank of America Securities latest research note on the U.S. economy from Friday evening.

According to BofA, there are big state-by-state and sector-by-sector differences as it pertains to consumer spend. Spending is relatively lower in states where lockdown measures are strictest. That makes sense. In Georgia, “total [credit] card spending” is up year-on-year, while it’s down in New Jersey, as the table below shows.

But, regardless of state, there are a number of categories that consumers are avoiding like, well, the plague. That includes entertainment services (okay, sporting events and concerts have been canceled just about everywhere) and beauty salons. On the flip side, online retail and grocery spend is up across the country.

That last line though tells the full story. Card spend is down nearly across the board—in some cases, by a significant double-digit measure. That’s why BofA is predicting economic activity will jump from contraction to transition to recovery. It won’t be a smooth flip-of-the-switch contraction-to-recovery bounce, in other words.

The transition slope will more likely be a U-shaped phenomenon for the likes of energy and entertainment. For those sectors, it could take several quarters to recover; years, even. Home improvement and furniture, meanwhile, will bounce back quickly.

For the economy as a whole, we’re firmly in the “transition” part of the trend curve. We may be here for a while.



Warning: this item will include a bit of poetry.

Every Italian school kid is required to set to memory the poetry of Giacomo Leopardi, the 19th century poet who hailed from this part of the country. His most famous poem, L’infinito, is an homage to the wild terrain of the region—the cartoon-like hills that plunge and climb, plunge and climb some more, infinitely rolling from one end of the horizon to the next. The poem opens with the lines, This lonely hill was always dear to me/ and this hedgerow, which cuts off the view/ of so much of the last horizon.” Here’s Dustin Hoffman taking a crack at it a few years ago.

I can never remember much more than that first line. But it faithfully pops into my head the moment I’m back in the Sibillini Mountains, taking in the view.

On Thursday, when the markets were tanking, I was up there in the mountains. (Hours earlier, I had spent part of my stimulus check on a new mountain bike). I could see nothing but green.

The land of Leopardi: Italy’s Marche region. Original Photo: Bernhard Warner.

So, that’s where I was the past few days. I needed to clear my head. Too many days cooped up in an apartment, staring at screens, made me feel the opposite of “infinite” and all-seeing.

Afterwards, I cycled back to a mountain refuge that, over the years, has grown into a 3-star hotel and restaurant. I bought a beer and sat at a table. I was the only one there. A few moments later the manager came by. She started to make small talk. When she heard my accent, she ventured: English? American, I corrected.

She excitedly showed me her smart phone. She wanted to post images to Instagram in multiple languages, and needed someone—me!—to edit her English entries. We agreed a reference to Leopardi was needed. “Experiencing the infinite,” it read. It sounds better in Italian, I told her.

She was so happy with our collaboration, she offered me the beer on the house.

Now that’s poetry, I thought.


Have a nice day, everyone. I’ll see you here tomorrow.

Bernhard Warner

A note from my Fortune colleagues on a timely new initiative:

Many companies are speaking out against racial injustices right now. But how do they fare in their own workplaces? Black employees in the corporate world, we want to hear from you: Please submit your anonymous thoughts and anecdotes here.

As always, you can write to or reply to this email with suggestions and feedback.

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