Today's Top Stories Also Noted: Spotlight On... Banks prepare for job cutbacks News From the Fierce Network: Today's Top News1. Bank of America's script on Merrill Lynch
Thanks to private litigation wending through the system, lots of material related to the controversial Bank of America deal for Merrill Lynch, which closed on January 1, 2009, has been recently released. One interesting tidbit--one that underscores just how important the massive losses were in the minds of Bank of America executives, including then-CEO Ken Lewis--is that bank lawyers prepared a scripted phone call intended to be used by the now disgraced Lewis in a call with Merrill Lynch CEO John Thain. Deal Journal notes that in the drafted script, "Lewis was to start by saying 'John, I am calling to express my grave concerns regarding [Merrill's] recent financial results.' He was expected to go through in detail the mounting losses that Merrill Lynch was suffering as a result of its soured investments in collateralized-debt obligations, which continually exceeded company forecasts…. Lewis was then to say the losses would hamper Merrill earnings 'for years to come' and while other investment banks were taking losses, 'it is clear that the current market dislocations have had a disproportionately adverse effect' on Merrill." The point was to underscore that the bank wanted to renegotiate--or walk away. Later, after all this exploded in controversy, Lewis would claim that despite his misgivings, which have been amply documented, he went through with the original deal because he was pressured to do so my government officials worried about the stability of the financial system. For more: Related articles:
Read more about: Bank of America, Merrill Lynch
2. Trading ring informant gets light sentence
The saga of the mortgage brokers, the day trader and the deal lawyer at top firms ranks as one of the more compelling human interest stories to emerge from the insider trading scandals. For more than 17 years, the unlikely trio of Kenneth Robinson, Garrett Bauer and Matthew Kluger formed an uneasy team of cheats. Kluger would gets tips on major deals from his prestigious law firms, and pass them on to the middle man, Robinson, who would pass them onto Bauer, who would trade on the tips. It was fabulously profitable, generating $37 million. They got away with their crimes with no hardship--until the middle man started trading, and that's when the feds closed in. But Robinson ended up cooperating with authorities, and for that he was rewarded with a 27 month prison sentence. That contrasts with the 12 years Kluger was given, the longest sentence ever for an insider trading case, and the 9 years for Bauer. The message that prosecutors would like to convey is simple: It pays to cooperate, even if means turning on your friends. U.S. District Judge Katharine Hayden said that, "In those terrible moments, after you've been caught; then is the time that you make your decision — and I believe he has honorably followed through (with agreeing to help investigators) in those hours after." For ore: Related articles: Read more about: insider trading, Prison Sentences 3. Nasdaq to compensate members over Facebook IPO
Nasdaq, which prides itself on its technology, was one of the big losers in the Facebook IPO fiasco. The exchange's technical glitches delayed trading and lead to numerous unfilled orders, which made people forget all about the BATS fiasco when it tried--and failed--to list its own stock. Nasdaq OMX will compensate member firms hit by the problems with Facebook's initial public offering a total of $40 million through a combination of cash and rebates. Nasdaq said that pending regulatory approval, $13.7 million would be paid to its affected member firms and the balance would be credited to members to reduce trading costs, with all payments to credited within six months. Forbes notes that to qualify for the program, members must have been "directly disadvantaged" by the Nasdaq's technical problems prior the the 11:30 a.m. start of trading in Facebook shares, and had "uncertainty regarding their IPO cross position." Three kinds of orders placed during the IPO cross will be accommodated: Sell orders at $42 or below that did not execute; sell orders at $42 or below executed at an inferior price; and buys at $42 executed but not confirmed. Nasdaq has also hired IBM to help review what went wrong. For more: Related articles:
Read more about: Nasdaq, exchanges 4. The best paid CEOs in the industry
So who's the best paid CEO in the financial services universe? According to Bloomberg Markets Magazine, the top earner was Henry Kravis, the buyout kingpin at KKR, who made $30 million. Close behind in the number two spot was his cousin and fellow KKR founder George Roberts, who made $29.9 billion. The top five also included John Strangfeld , of Prudential, who made $23.7 million; Jamie Dimon of JPMorgan Chase, who made $23.1 million, and Ken Chenault of American Express, who made $23 million. The top 50 financial CEOs' compensation collectively "rose by an average of 20.4 percent in 2011 -- a year when most big banks and brokerages saw their revenues, profits and stock prices plummet. The 2011 pay rise followed a 26 percent increase in 2010 for CEOs who held the same job in both years." The article also looked at 2011 pay against stock price performance for the previous three years, and found that the worst value, so to speak, was Citigroup CEO Vikram Pandit, who raked in $15 million for his 2011 work, while the stock floundered over the prior three years. Shareholders have made his pay an issue. The best value? None other than the Sage of Omaha, Warren Buffett. For more: Related articles: Read more about: ceo pay, executive compensation 5. New head of Fannie Mae's tough departure from Bank of America
Is the revenge of Timothy Mayopoulos at hand? Recall that he was sacked as general counsel of Bank of America back in December 2008 by the now-disgraced former CEO Ken Lewis. The move was made to pave the way for the bank to retain Brian Moynihan, who was planning to leave. Of course, Moynihan eventually became the CEO. Mayopoulos soon landed at Fannie Mae ss general counsel and just recently was named CEO. He now has the pleasure of running a company "currently battling Bank of America over loan repurchases. Though he has so far recused himself from those battles, his position may add some extra heat to the exchanges given his unceremonious termination." When he was let go by Lewis, he was forced to leave his office immediately with an escort, according to Deal Journal. He wasn't allowed to even take his pictures of his children. The only thing he managed to sneak out was a 20 birthstone ring given to him by his grandfather. Mayopoulos's sacking at Bank of America is seen by some as a major moment in the Bank of America-Merrill Lynch drama. He has testified that he was concerned about rising losses at Merrill Lynch and intended to speak with other executives about disclosure issues. He was fired before those discussions took place. For more: Related articles:
Read more about: Bank of America, Fannie Mae Also NotedSPOTLIGHT ON... Banks prepare for job cutbacks The second-quarter looks to be rather bleak from an earnings perspective, and it's no surprise that big banks are once again in layoff mode. The threat of job cuts has been fairly constant over the past few years, to be sure. Goldman Sachs has recently pared back in its securities division, and Morgan Stanley will likely follow suit soon. Other banks are acting as well. This is a horrible job environment, but one that employees have learned to live with. Article Company News Industry News: And Finally…Man catches on fire after applying sunscreen. Article
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Thursday, June 7, 2012
| 06.07.12 | Bank of America's script on Merrill Lynch
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