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Today's Top News1. Analyst: Moynihan is industry's worst
And the worst CEO award goes to…Bank of America's Brian Moynihan, according to a ranking by analyst Mike Mayo. Here's the rationale: Moynihan became the CEO of the beleaguered bank in early 2010. Since that time the bank's shares have fallen 42 percent, more than any other bank CEO over his tenure at the top. "It's not just the stock market performance," notes Fortune. "Mayo says there are a number of things that Moynihan has done wrong. One of the biggest was the bank debit card flip-flop, which turned off customers despite B of A eventually deciding under pressure that it wasn't going to charge the fee afterall. What's more Moynihan, like other bank CEO, was slow to stem the problems in its mortgage servicing division, which led to the $25 billion industrywide settlement with state AGs." To be fair, no other CEO in the industry has been forced to grapple with what could rightfully be called the worst deal in corporate history. It wasn't Moynihan who inked the foolish deal to buy Countrywide in 2008. That distinction belongs to his predecessor Ken Lewis. It fell to Moynihan to lead a recovery effort, and that has proven much harder than most predicted. As of now, no one is calling for his job. The 40 percent run-up in the stock price has assuaged some critics, but it's unclear how long the rally will last, as clouds hover over the second half of the year. If he can push the stock price back to book value, that will speak volumes. I do think the worst has passed. For more: Related articles:
Read more about: CEO succession, Bank of America
2. Morgan Stanley can take a downgrade
The issue regarding Moody's and Morgan Stanley appears to be one of how much--not if--Moody's will cut the bank's credit rating. Recall that the big bank was one of 17 that the credit rating company put on watch due mainly to capital market issues. The bank is not sitting still. It has disclosed in a filing that counterparties could seek $7.21 billion in collateral if Morgan Stanley's rating is cut three levels by Moody's and two grades by Standard & Poor's, as noted by Bloomberg. The previous estimate was $6.5 billion. The company would also have to post $2.4 billion in collateral to exchanges and clearinghouses. So the total cost would be $9.61 billion. The extent of the downgrade will not be revealed until June. As of now, it's anyone's guess what Moody's will do. Analysts rate the probability of a two-grade cut anywhere between 40 and 75 percent. At least one analyst pegs the chances of a three-level cut at 60 percent. In any case, the bank has made it known that it has built its liquidity to the point that it can take the hit. That said, action by credit rating companies has to be factored into the short-term prognosis. I's one of several reasons why not all analysts think the current rally can be sustained. For more: Related articles: Read more about: Morgan Stanley, Credit Rating 3. Profile: Morgan Stanley's star banker
Even before the Facebook IPO, Morgan Stanley's top Silicon Valley banker, Michael Grimes, was well-known. But the upcoming IPO of the social media giant, which just might eclipse Google as the biggest Internet firm IPO ever, is pushing his stardom to a new level. At stops on the Facebook road show, he has been the one to take the stage to introduce the CFO and COO to investors. His personal story, as told by the New York Times, is compelling. "Growing up in East Los Angeles in a modest two-bedroom house with his sister and parents, Mr. Grimes attended the Polytechnic School, a prestigious prep school in Pasadena, Calif. His father, David Grimes, the owner of a mapping and land-surveying business, worked Saturdays to afford his son's $5,000-a-year tuition." He ended up going to Berkley as an engineering student, but he was soon bitten by the finance bug. He worked at Salomon Brothers and then Bear Stearns before he caught the eye of Frank Quattrone at Morgan Stanley. When Quattrone left with most of the team in 1996, Grimes stuck around the rebuild the unit. A huge milestone was when he won over Google with his willingness to attempt a Dutch auction, which certainly raised his profile. Since then, his prodigious networking and quirky personal marketing has made him the top banker in the industry. The Facebook offering is the culmination of everything he's been working for. He's now threatening to eclipse the one-time master, the guy who hired him. Indeed, Quattrone not too long ago suggested that going-public companies need not automatically embrace what he termed a duopoly in the IPO business. At some point, Grimes will have to decide what he wants to do with the rest of his career. He's perhaps put himself in position to ascend at the bank, but he may exist for tech deals alone. For more: Related articles: Read more about: investment bankers 4. ISS favors management on two big Goldman Sachs issues
Goldman Sachs, to its credit, understood that its 2012 annual meeting represented a lot of risk. The chances of yet another PR fiasco were quite high. Well ahead of the event, the bank reached out to shareholders with a beef against the company and was able to lock in some agreements. It agreed to name a lead independent director, for example, to appease a union group, even though it would have likely done this anyway. The work seems to have borne fruit. The latest indication is this: Bloomberg reports that ISS Proxy Advisory Services has advised shareholders not to oppose the longest- serving director and compensation committee chairman, James Johnson, and not to oppose the company's executive compensation plan. That's not going to go over well with shareholder groups that staunchly oppose Johnson, and we may hear some grandstanding about executive pay at the meeting. In the end, you would have to think that management will prevail on both issues. Recall that last year, ISS recommended against Goldman Sachs' pay plan, which passed anyway. We'll keep an eye on the percentage of negative both casts on each issue. The meeting is scheduled for May 24. For more:
Read more about: Annual Meeting, executive pay 5. Mounting political anger over MF Global
Lots of people remain chagrined that no executive of a top financial service firms has been criminally charged in the post-financial crisis prosecutorial effort. MF Global certainly wasn't a major financial services firm, but it was headed by a big-name, ex-Goldman Sachs CEO, who just happened to lead the firm off a cliff in scandalous fashion. The circumstances of the collapse were salacious, as $1.2 billion in customer funds disappeared. In Washington, the collapse has been politicized, as some are calling for an independent prosecutor to be put in charge of the criminal investigation, as reported by DealBook. The idea here is that Corzine, the former governor of New Jersey, is a Democrat and was a big giver to the party, which to some means that the current Justice Department is conflicted. I doubt the argument will carry a lot of water. As political theater, it is fairly routine stuff, but it does suggest that there are lots of Republicans who would like to see Corzine prosecuted. That means fanning the flames for all those who are convinced that top Wall Street execs have gotten away with nary a slap on the wrist. In the end, it remains unclear if we'll ever see charges. The last hope boils down to some key executives who are presently seeking immunity deals. If they have the goods, we might see an enforcement action. But at this point, the smart money may be betting on the opposite. For more: Related articles:
Read more about: scandal, MF Global Also Noted
SPOTLIGHT ON... Protests loud at Bank of America meeting Few banks have become lightening rods for protestors the way Bank of America has. Hundreds of protesters rallied at the meeting in Charlotte. The bank was afraid some might take the fight indoors. CEO Brian Moynihan "read a long list of rules, emphasizing time limits on questions and warning anyone out of order would be escorted out of the meeting. Several large clocks warn people of their looming 4 minute time, an addition from last year," according to Deal Journal. In the end, management does not look vulnerable on the main issue, such as executive pay. Article Company News: Industry News: Regulatory News: And Finally…Amazing ultimate catch. Article
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Thursday, May 10, 2012
| 05.10.12 | Analyst: Moynihan is industry's worst
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