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Monday, April 30, 2012
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| 04.30.12 | Goldman Sachs reveals banker's identity
Today's Top Stories Editor's Corner: New FierceFinance e-book Also Noted: Spotlight On... Shareholders vote "no" on pay News From the Fierce Network:
Today's Top News1. Goldman Sachs reveals banker's identity
One defense strategy in the upcoming trial of former Goldman Sachs director Rajat Gupta will be to argue that the government is prosecuting the wrong guy, that someone else tipped off Raj Rajaratnam. To that end, it was exciting news when the defense made it known in a recent hearing that yet another Goldman Sachs employee was under active investigation. At the time, the banker's identity was not revealed. But the media has now identified the banker as Matthew Korenberg, who is being probed by the United States Attorney in Los Angeles. The focus of the probe appears to be whether Korenberg tipped off people, including a former Goldman Sachs colleague who went to work for Rajaratnam's Galleon fund, about various health care deals, include a big Abbott Laboratories deal for Advanced Medical Optics. Korneberg remains employed by Goldman Sachs. t's unclear how this really helps the defense, except to create doubt and uncertainty around the issue. It may work to the defense's favor to portray an atmosphere of rampant tipping, to show that some tips could have come from anywhere. However, it may be difficult to show that Korenberg was in position to provide the kind of tips that Gupta stands accused of providing Galleon. In any case, it's shaping up to be a tantalizing trial. For more: Related article: Read more about: Goldman Sachs, insider trading 2. How big bank might be wound down
The debate over too big to fail has kicked up again. To add to the discussion, a professor at Seton Hall Law School has issued a paper that takes a look at how Bank of America might be liquidated should it run into financial problems ahead--an interesting hypothetical, to be sure. The general regulatory view is that the living wills that banks are required to submit in conjunction with the Dodd-Frank Orderly Liquidation Process will suffice in winding down large troubled banks without taxpayer support. However, what the study "reveals is that no matter how complex Lehman was, the remaining 'too big to fail' financial institutions are infinitely more complex. The exercise reveals some serious doubts about the ability of Dodd-Frank to perform in its most idealized way, it also shows how the Bankruptcy Code, at least as currently drafted, would be equally unsuited to the task. Moreover, this paper explain why adapting the code to the resolution of large financial institutions would involve something far more substantial than a few 'tweaks,' as is often suggested. Ultimately it would involve adopting something that takes many features from both OLA and Chapter 11, while applying the name bankruptcy to the resulting beast." For more: Related articles: Read more about: too big to fail, banks 3. Durbin Amendement faces critics
The Durbin Amendement was sold to the public and to Congress with this tantalizing promise: Retailers, which would see their interchange fees on debit card swipes significantly reduced, would then turn around and reduce prices, making consumers the ultimate winners of the landmark legislation. So has it panned out that way? Not if you ask the banks and their lobbyist the Electronic Payments Coalition (EPC) which has argued that gas retailers, at which many people use debit cards, has reaped savings of about $1 billion a year--but they have not slashed prices in a way that transfers this effective subsidy to customers. "There continues to be no evidence that retailers are passing along savings," according to an EPC release. "No one is surprised to see that gas retailers are keeping billions of dollars for themselves, while their customers continue to be punished at the pump. Americans should go to their gas stations and demand what's theirs - a discount for debit." The EPC wants consumers to demand discounts. Certainly, banks would like some relief, though they may have to live with the law as is. The conclusions were contested by fuel industry groups, which said the conclusions were flat-out wrong. For more: Related articles: Read more about: Interchange Fee, Checking Accounts 4. Wells Fargo jumps into prime brokerage industry
Wells Fargo's franchise is in consumer banking, with "wholesale banking," which includes securities services and wealth management playing second and third fiddles. But the bank, perhaps with an eye towards JPMorgan's business model, is apparently aiming for more diversification and moving into the prime brokerage arena. Wells Fargo has agreed to buy Merlin Securities, a prime brokerage with as much as $2 billion in assets, notes Bloomberg. The terms were not disclosed. The bank has said that it wants to beef up its institutional securities and trading business, and this might not be the last of the purchases. Merlin has about 500 clients including hedge funds, family offices and registered investment advisers and about 100 employees. The deal comes at an interesting time for the prime brokerage industry. In the immediate aftermath of the financial crisis, some large primes scaled back, opening a window of opportunity for smaller players. As more hedge funds opted for relationships with prime brokerages, the more players rushed in, some with very niche services. Now, the industry has tightened again, and prime brokerages backed by strong parents with strong credit ratings may be in the best position to win assets. Some hedge funds are apparently cutting back on the number of primes they use, focusing their assets on a core group. For more: Related articles: Read more about: prime brokerage 5. Analyst showdown over Bank of America
Richard Bove and Mike Mayo are both known as outspoken stock analysts, hardly shy about putting their opinions on the public record. Now, it appears that Bove has picked a fight with Mayo. Deal Journal notes that in a short research note, Bove lists some numbers from another "prominent analyst on Bank of America," who has a sell on the bank. "He then lists a small set of estimates through 2014, earnings, price-to-earnings, dividend and dividend yield. This 'other analyst' has earnings rising from a 65 cents this year to $1.20 in 2014, with PE ratio plunging and dividend soaring from 9 cents to 83 cents. All Bove says about the numbers are 'My confusion lies in the fact that if this is a sell, what is a Buy?' That's it. That's his whole report." The numbers in question come from a Mayo report. Mayo indeed, may be sailing against the wind right now. Many analysts have turned more bullish on the entire industry, in light of surprisingly strong revenue and profit results in the first quarter at big banks. Bove remains a firm believer in Bank of America, and several other big-name sell-side analysts have raised their price targets and earnings estimates. Mayo, of CLSA, is sticking with this price target of $8 but issued his "sell" call based on "our ongoing view that the firm's earnings power is declining and its uncertain ability to significantly reduce expenses without damaging the franchise" and that the first quarter marked a high-water mark of sorts. For more: Related articles: Read more about: Stock Analysts, Stock Research Also NotedSPOTLIGHT ON... Shareholders vote "no" on pay Executive pay plans were rejected by shareholders of Barclays and Credit Suisse, underscoring the notion that the rejection of Citigroup's pay plan was no fluke. In both cases, about 30 percent of the shareholder vote opposed the plans. Shareholders were active in their disgust, with a good deal of heckling going on. This sets the stage for more shareholders votes in the U.S., where we may be in for more "no" votes. Article Company News: Industry News: Regulatory News: And Finally … Winklevi on the cloud. Article
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