Today's Top Stories Also Noted: Spotlight On... Goldman Sachs faces calls for more lobbying disclosure News From the Fierce Network:
Today's Top News1. More lawsuits in Bank of America, Merrill Lynch controversy
It's the deal that keeps on giving, for attorneys anyway. Bank of America's 2008 purchase of Merrill Lynch continues to generate an awful lot of litigation. There was the SEC lawsuit, which was settled for $150 million in 2010, but the private litigation has been perhaps just as contentious, and now we're seeing plaintiffs pitted against one another. One group has struck a settlement with the bank's directors for $20 million. The New York Times notes that another plaintiffs group is none too pleased. It has sued the other plaintiffs group, arguing that the $20 million settlement is grossly unfair, in that it offers way too little compensation. It also charges the accord was the result of some form of collusion. The group that thinks the settlement is unfair argues that the directors should be made to pay sum that is not fully covered by insurance. It's unclear exactly how much is covered by the policies. The group also argues that the $20 billion deal was struck by a group that has not performed extensive discovery and thus would have a hard time justifying the $20 million. This is scheduled for trial in October. The lawyers for the bank's directors would appear to have expertly played the plaintiff groups against one another. For more: Related articles: Read more about: Legal Settlement, Litigation
2. Company survives Muddy Waters report
Muddy Waters Research, which produces research to support short positions for a hedge fund, was once an obscure firm based in Hong Kong. But then came its blockbuster report on Sino Forest, which caused the stock to tank, taking down big investors like John Paulson with it. Since then, the firm has developed a reputation as a stock-killer. Even the rumor of one of its impending reports is enough to move stocks. Now the firm has issued another report, but this time the effects were muted. As noted by ChinaRealTimeReport, Muddy Waters posted a report on interrelated frauds at Chinese firms, mentioning Nasdaq-traded Fushi Copperweld. And yet the company managed to rise on the day, though it fell earlier in the week. The company "categorically denies all of its claims, which are vague and non-specific, and were made in the absence of any discussion with the Company." It also notes that the report was not specifically about Fushi Copperweld. To be sure, the great hunt is on for overvalued Chinese companies, and there may be other examples that come to light. But the short gains may be harder to come by now that the low-hanging fruit has already been grabbed. For more: Related articles: Read more about: short sellers 3. Volcker Rule crimps tail-risk hedges
In the wake of the financial crisis, tail-risk protection has been more important for portfolio managers, who often use long-term options for this purpose. The easiest way to do this perhaps is to simply buy put options with an expiration date several years away. But a portfolio manager notes that the Volcker Rule has crimped this market, leading big sellers to withdraw from the market. Because of the rule, banks "need to decrease the amount of long-dated options they will sell. In addition, regulatory changes have increased the amount of collateral required for these trades, further constraining the number of option sellers. One example is Berkshire Hathaway, which has historically been a significant seller of long-dated put options on the United States equity markets. Berkshire stated in its annual letter than it plans to stop selling options because of regulatory changes." The strong demand combined with a dearth of sellers has led to volatility, which has tended to raise the cost of tail risk protection. One would think that the savvy financial engineers at Wall Street broker dealers will be able to come up with a product that both sides can live with. One simple solution might be some form of a credit-spread, as a way to cap the potential losses of sellers. Then again, they might be prohibitively expensive for buyers. For more: Related articles:
Read more about: hedging, Options 4. Overdraft protection still a big regulatory issue
A lot of people were expecting a massive revenue hit to consumer banks from the reform effort aimed at overdraft charges. Recall that a much-discussed Reg E change no longer allows banks to automatically enroll customers in lucrative overdraft protection programs. Instead, they must offer an opt-in program. The rule went into effect in July 2010. Since then, revenue has held up surprisingly well, though many end customers have chosen not to opt-in. Fees for those who do not opt-in have been inching higher, to be sure. All in all, revenue from overdraft fees were $31.6 billion in 2011, down from $33.1 billion in 2010, according to Moebs Services. Banks have suffered much more as a result of the Durbin Amendment. But the overdraft issue is relevant as bank one again face an inquiry about their overdraft policies. According to Bloomberg Businessweek, the new CFPB is looking at "how financial institutions persuade customers to enroll in what they call overdraft protection programs. Examiners are looking at online and mailed marketing material as well as scripts used by the banks' customer-service representatives to determine whether they could be confusing to consumers, said the people." The inquiry doesn't mean that we'll see a whole new set of rules. But the new bureau does seem a bit skeptical. The probe is looking at the big four consumer banks plus some big regionals, such as U.S. Bancorp, Regions and PNC. For more: Related articles: Read more about: Overdraft Fees, CFPB 5. Other banks to be targeted on say-on-pay?
The shocking "no" vote cast by shareholders against Citigroup CEO Vikram Pandit's pay package has led to a lot of angst about who's next. A lot of people immediately wondered about Bank of America, JPMorgan Chase and other big banks. But the first two just might be okay, as they have not been targeted by proxy advisory services. Bank of America "might be in the clear." Deal Journal notes that Glass Lewis has recommended shareholders vote in favor of (the bank's) plan, saying "it has some concerns but applauding the close ties to performance of the pay structure. CEO Brian Moynihan's pay is 70 percent tied to metrics and the other top executives are 60 percent." JPMorgan, whose CEO Jamie Dimon collected the biggest payday, "is also unlikely to get a no vote, as the bank has outperformed rivals and has clawback provisions that allow the board to pull back bonuses from any employees." Influential proxy advisory firm Glass Lewis in fact has not targeted the bulge bracket crop. The only investment banks they have advocated "no" votes for are boutiques Lazard and Greenhill, the latter of which was able to muster a passing vote at its annual meeting despite the "no" recommendation. The other banks to be targeted for say-on-pay action: Huntington Bancshares, Hudson City, FirstMerit, Associated Bancorp. To be sure, many bank boards have done their homework on this issue. As for Citigroup, the world awaits its next move. While the no vote was nonbinding, it would not be wise for the board top pretend as if it did not happen. Some sort of response is merited. For more: Related articles: Read more about: ceo pay, executive compensation Also NotedSPOTLIGHT ON... Goldman Sachs faces calls for more lobbying disclosure Lots of companies face pressure to reveal their lobbying and political activities. Goldman Sachs has been among the banks that have stepped up their lobbying activity significantly. The gilded bank now faces a shareholder resolution calling for more disclosure. While Goldman Sachs does make limited information available via financial statements, some would like to see much more detailed information released. Article Company News: Industry News: Regulatory News: And Finally…How high does Wal-Mart scandal go? Article
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | |||||||||||||||||||||||||||||||||||
Tuesday, April 24, 2012
| 04.24.12 | More lawsuits in Bank of America, Merrill Lynch controversy
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment