Khamenei’s son is frontrunner to be Iran’s supreme leader

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0:17Good morning from The Financial Times. Today is Thursday, March 5th, and this is your FT News Briefing. The war in Iran is expected to last a while, and we'll take a look at how the country will choose its next supreme leader. Plus, a collapsed London mortgage provider is raising questions about the asset-backed finance market. I'm Mark Filippino, and here's the news you need to start day.

0:49Israel expects the war in Iran to last weeks. Current and former Israeli officials told the FT that the country is preparing for a multi-week military onslaught alongside the U.S. The mission? To fully dismantle key pillars of the state as well as the Revolutionary Guard. But Israeli officials have not explained how they plan to lay the groundwork for the Iranian regime to be overthrown or what might come after. In the meantime, the war is disrupting shipping traffic in the Strait of Hormuz and sending insurance costs soaring. U.S. President Donald Trump said on Tuesday the U.S. Navy could guide trade through the critical oil passageway.

1:26Even still, the price of insuring a ship is up 12-fold.

1:36Who will become Iran's next supreme leader? That's the question on the minds of an 88-member panel of religious experts who are tasked with selecting a new ruler after Israel and the United States killed Ayatollah Ali Khamenei in a strike last weekend. But whomever the council picks will likely become the next top target for U.S. or Israeli missiles. The FT's Tehran correspondent Najmeh Buzorgmir has been following the story. She joins me now. Hi, Najmeh. Hello. So tell me how far along this succession process is. Right now, the succession process is happening in the middle of a war. And there is actually a real threat to the lives of senior clergy if they try to hold a session.

2:18There is concern here that if they meet all in one place, they could be attacked by the U.S. and Israel. Under the Constitution, they are supposed to pick a new leader as soon as possible. but clearly these are not normal times. Some people are saying that the final decision might come after the war while others are saying it could happen as soon as next week. It's all still up in the air but it looks like they are meeting online these days and talking about three main candidates. So are there any front runners emerging? These sessions are confidential so there are no official details confirmed yet.

3:03But from what we have learned, it seems Mujtaba Khamenei, the second son of the late Supreme Leader, is the leading candidate in the initial voting. That doesn't mean it's final, but it does indicate he's in a strong position. If he's chosen, we need to wait and see what kind of leader he would be. There is hardly any public records of his religious opinions and political or cultural possessions. If I'm not wrong, only once we have heard his voice in a short video, and that's it. So it seems like whoever the Council of Experts picks as the next supreme leader of Iran will almost certainly face the threat of assassination.

3:51How serious is that threat? As we all know, Israel has threatened to target the successors of Ayatollah Ali Khamenei, similar to what they did with Lebanon's Hezbollah. But this hasn't been publicly discussed in Tehran, and I believe all senior figures are under tight security protection. Still, it's a significant concern, especially given that dozens of senior figures have been assassinated since the June War and during this current conflict. Najme, what does a new leader mean for Iran and the war? And does it really change anything? This war is being managed by the Revolutionary Guards. And it seems that many decisions that they are taking today were made in advance on how to handle this conflict.

4:45Under the current circumstances, choosing the next leader isn't directly related to the war. But according to the constitution, the supreme leader holds ultimate authority and it's up to the leader to use all his power as Ali Khamenei did or choose not to. We'll have to wait and see how things unfold in the coming days. But one thing is certain, if you ask me, Iran is entering a new phase in its modern history. That's EFT's Tehran correspondent Najmeh Buzorgmir. Thanks, Najmeh. Thank you.

5:28There was a big win and a big first for the digital assets industry yesterday. The crypto exchange Kraken said it's been granted access to the Federal Reserve's core payment systems. That includes Fedwire, a direct same-day payment service with less reliance on middlemen. This now basically puts Kraken in line with major banks and credit unions. And with that, crypto is becoming one step closer to traditional finance. But with limits, the company was approved for a limited-purpose account for an initial one-year term. Banks have pushed back against crypto companies having this kind of access to the Fed's systems, but the Trump administration and its advocates are continuing to push for more crypto-friendly policies.

6:15The collapse of a London-based mortgage provider has set off alarms. Market Financial Solutions, or MFS for short, is facing fraud allegations. U.S. hedge fund Elliott Management, Barclays, Jeffries, and a unit of private capital firm Apollo Global Management have all been impacted. And it's brought up larger questions about underwriting standards and the asset-backed lending market. The FT's Ewan Healy has been investigating, and he joins me now. Hi, Ewan. Hi. So tell us a little bit about MFS and the fraud it's being accused of. So Market Financial Solutions is a small, until last week, little known short-term property loan provider that over the last decade or so has managed to borrow about£2 billion from some of Wall Street's supposedly most sophisticated and largest institutions to finance its lending of short-term mortgage loans.

7:12and it has sunk suddenly into a sort of UK form of insolvency with allegations of fraud and particularly double pledging, which means that banks like Jeffries or Barclays and asset managers like Apollo, hedge funds like Elliot, have lent it money secured on its portfolio of loans. But what it appears, what it's accused of, is pledging one or two loans or a portfolio of loans to multiple different lenders at one time. So in a case of a default, when these lenders come to the table to seize their collateral, it might be the case that multiple lenders were pledged the same collateral and don't have the right to the assets that they thought they did.

7:53And you know, what ultimately put MFS in administration? One of the first triggers that pushed it towards administration is Barclays, who are one of the largest lenders to MFS because they have a roughly 500 million pound exposure. so when the credit team were doing extra due diligence on their loan book and came across some irregularities with MFS they flagged some of this internally and then Barclays as an organization first began blocking certain transactions that MFS were trying to conduct in as early as November and then in early January froze all of MFS's accounts tied to Barclays which caused a bit of a liquidity problem which has contributed to hurtling towards administration.

8:39What is happening to these banks and entities that we're talking about that had been dealing with MFS? So right now the lenders of MFS are scrambling really to try and get documentation out of the company from the administrators and from other parties probably from each other to try and figure out how much the assets that they thought they had are actually worth. One of the problems with double pledging, as it's accused of, not yet proven, is that all of these entities will have thought that they had a right to a certain value of loans and mortgages. And it now appears that they might actually not be quite sure what collateral they have.

9:19So now is a scramble of information that I think the lenders, and we've heard from a few of them, they're finding quite difficult to get out of the company. Now, we should say that MFS founder Paresh Raja did not respond to requests for comment. Ewan, I guess my question is, what does this tell us about the wider health of this asset-backed finance market? Well, that's what everyone's trying to figure out. People like Jamie Dimon has come out and referenced first brands in Tricolor as cockroaches, and that when you see cockroaches, there's a good chance you will see more. Others in the market say that these are idiosyncratic events.

9:56One thing hopefully it will mean is that lenders will start beginning to have a closer look at their loan book. Some of the asset managers and banks with exposure to MFS first came across issues surrounding MFS because the issues with First Brands and Tricolor last year prompted them to take a closer look at their collateral. Now, that is probably a positive thing, but whether it's an indication that there are a lot more of these on the balance sheets of banks and asset managers and in portfolios of large lenders, that's what everyone's trying to figure out, and it is not obvious. That's the FT's Ewan Healy.

10:32Thanks, Ewan. Thank you.

10:40Before we go, U.S. President Trump's global tariffs are coming back this week at 15%. That's up from 10. That's what Treasury Secretary Scott Besson told CNBC yesterday. Believe it or not, we're coming up on the one-year anniversary of Liberation Day, where Trump outlined his grand tariff plan. And we want to hear from you. Has this policy impacted you or your business? Send us your voice memo with your name, location, and how you've been handling the tariffs to the email and the show notes. We might even play it in an upcoming episode. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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