Shadow banks win share, manufacturing activity slows, and appy daze

The daily briefing “FirstFT” from the Financial Times.

Shadow banks win share, manufacturing activity slows, American socialism’s day in the sun

Non-bank lenders have overtaken US banks to grab a record slice of government-backed mortgages, after regulatory curbs on risk-taking and billions of dollars in fines forced mainstream providers to retreat from the $9.8tn home loan market.

So-called shadow banks accounted for 53 per cent of government-backed mortgages originated in April, nearly double the amount from a year earlier.

These lenders are subject to lighter supervision because they are funded by professional investors rather than retail depositors, but concerns are growing that standards in underwriting are slipping. (FT)

In the news

Senate’s Patriot games The National Security Agency has lost its authority to use several electronic spying tools that Barack Obama deems critical to combating terrorism, after Rand Paul, the libertarian senator running for the White House, succeeded in blocking efforts to prevent them expiring. (FT)

Bleak in Greece Athens’ chances of striking a deal to access a much-needed EUR7.2bn in rescue aid looked even worse on Sunday after Alexis Tsipras, prime minister, accused bailout monitors of making “absurd” demands and seeking to impose “harsh punishment” on Athens. (FT)

Island defence China says its efforts to dredge new islands in the South China Sea are for peaceful, “international public services “, in a vigorous justification offered a day after criticism by the US defence secretary. (FT)

Political cycle: John Kerry, US secretary of state, has cancelled the remainder of his European diplomatic tour after breaking his leg in a bicycle crash on Sunday near Geneva, where he had been holding nuclear talks with Iran’s foreign minister. (FT)

It’s a big day for

Beijing smokers The city has introduced the toughest smoking curbs in China, the world’s largest tobacco consumer, with a blanket ban in the city’s restaurants, offices and on public transport. (FT)

Eurozone data Measures of manufacturing activity in France, Germany and the eurozone will be released today, following readings across Asia, from Australia all the way across the region to India. Drawing the most interest, Chinese manufacturing activity rose for a third straight month in May, according to official data, but a subsequent private sector survey painted a less rosy picture. (FT)

US economy Consumer spending probably cooled in April, incomes are likely to have picked up and manufacturing is forecast to have expanded in May at a faster pace than a month earlier. In other words, more middling data are expected today for the US Federal Reserve to consider as it considers future rate rises, and for its observers to obsess over. (FT)

BP former executive David Rainey goes on trial in New Orleans, accused of lying to investigators about the size of the 2010 Gulf of Mexico oil spill. This comes weeks after the company agreed settlements with Transocean and Halliburton to resolve legal disputes over the disaster. (FT)

Food for thought

American socialism The term may be an oxymoron along the lines of “clean coal” or the “Bolivian navy” but with the candidacy of Vermont senator Bernie Sanders, the left is having itsday in the sun – and dragging presumptive Democratic nominee Hillary Clinton along with it, writes Edward Luce. (FT)

Appy daze Sebastian Thrun, former head of Google X — the advanced projects lab set up to make big bets on the future — knows all about technological ambition. But when it comes to the Android operating system for mobile devices, Mr Thrun says this is not the time for Google to pursue bold new visions. (FT)

US universities addicted to Chinese students They bring much-needed cash to American universities but an estimated 8,000 students from China were expelled from universities and colleges across the US in 2013-14, according to a new white paper from WholeRen, a consultancy. About 80 per cent were removed for cheating or failing their classes. (The Atlantic)

Libya: families, friends and feuds As UN-sponsored talks to end the country’s civil war drag on, weary fighters are trying to forge their own separate peaces, sometimes in defiance of their leaders. (FT)

Elon Musk’s $4.9bn in government subsidies The billionaire’s companies – Tesla, SolarCity and SpaceX – together have benefited from nearly $5bn in public assistance. Says one analyst: “He definitely goes where there is government money … That’s a great strategy but the government will cut you off one day.” (LA Times)

The Othello of soul music On Otis Redding’s meteoric rise and tragic death. “Like Shakespeare’s protagonist, the Big O, as even he called himself, had a complex marriage and died both violently and too early … Like his slightly older contemporaries James Brown and Little Richard, Redding seemed to rise like a golem from the thick mud of middle Georgia, a swampy amalgam of hucksterism, gospel music and soul-scalding poverty.” (Atlas Obscura, WSJ)

Video of the day

Mexico’s sea of poppies Meeting the farmers in the mountains of Guerrero who farm the plants that go to make heroin, and those who have given up. (FT)

This article is published in collaboration with The Financial Times. Publication does not imply endorsement of views by the World Economic Forum.

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Author: FirstFT is the Financial Times’ editors curated free daily email of the top global stories from the FT and the best of the rest of the web.

Image: A view shows the headquarters of a business. REUTERS.