Today's Top Stories Editor's Corner: Is BlackRock the next Goldman Sachs? Also Noted: Spotlight On... Mystery bidder emerges for software firm News From the Fierce Network:
Today's Top News1. CFPB eyes senior, veteran issues
The birth of the Consumer Financial Protection Bureau was long and arduous. The political angst was almost overwhelming at times, but it has been up and running long enough to make some waves in the regulatory world. It certainly caused a stir when it decided to take a fresh look at overdraft fees, an issue that many executives thought was settled. The bureau is now seeking input from the public as part of an effort to initiate some financial safeguards for elderly people and veterans, two groups that have been preyed upon in the past. Some of the scams have been heart-breaking, to be sure. The bureau is on firm ground with this sort of investigation, as it would be hard for anyone to criticize efforts to safeguard these two groups. The focus of the new initiative appears to be on helping seniors and veterans choose legitimate financial advisors and on financial education in general. It would be hard to oppose such an effort, so this counts as a politically savvy move as well as the right thing to do. The public can submit comments or report instances of financial abuse to the CFPB by visiting www.regulations.gov. For more: Related articles:
Read more about: CFPB 2. Inside Wells Fargo's mortgage machine
I've noted on several occasions that there's a new sheriff in town when it comes to the retail mortgage market. Bank of America, which once had major ambitions to wear the badge, has pulled back sharply in the market, brought in part by the major clean-up effort necessitated by its disastrous purchase of Countrywide. Wells Fargo is the new power, and it has a goal to boosting its market share from its current 34 percent. At a recent sales conference, it underscored to managers that it's "40 percent or bust." Bloomberg offers an interesting look inside the new retail mortgage powerhouse. Wells Fargo executives have often said that boosting its share of the market wasn't a goal, but what executive doesn't want market share? Shareholders might take issues with such non-goals. That said, you can understand the sensitivity around the issue, as concentration in banking isn't exactly in vogue right now. Does the bank loom as the next Countrywide or Bank of America? That is, is it destined to implode? I certainly hope not. About 9 in 10 mortgages of Wells Fargo mortgages are sold to GSEs, and I'd like to think that all consumer lenders have learned their lessons on the more dubious loans that cropped up at the height of the mania. There are a lot of end-user safeguards in place now, as well. At this point, given the pressure at other banks and capital requirements on thrifts, it's hard not to see the bank boosting its share. This is not a great situation from a regulatory point of view, but what's the alternative? For more: Related articles: Read more about: Wells Fargo, mortgages 3. Facebook's legal blame game
Who is to blame in the Facebook IPO fiasco? Lots of litigation is assured, and all aggrieved parties will seek restitution. The blame game has begun in earnest. Facebook certainly has some blood on its hands, if you ask the many shareholders who have filed suit already. The latest development, according to DealBook, is that "the social network is set to file a motion to consolidate all the shareholder lawsuits against the company, according to a person with knowledge of the matter, who requested anonymity because the document was still private. The lead underwriters, Morgan Stanley, Goldman Sachs and JPMorgan Chase, are expected to join the motion, which could be filed in the Federal District Court for the Southern District of New York as early as Friday. The motion will represent the first time Facebook has publicly addressed the lawsuits and the performance of its highly anticipated, but ultimately lackluster, I.P.O. on May 18. While the document is expected to be relatively thin on detail, it will provide some perspective on Nasdaq's role on listing day and the effect its actions had on the stock's trading activity." And here's the point: "Facebook is expected to place some blame on Nasdaq." The exchange company would appear to be an obvious scapegoat on any trading-related issues, but it's confident that it will not be held liable. Nasdaq OMX CEO Robert Greifeld has been making clear that the exchange is protected by its member contracts and it status as an SRO. He says that the company has never been successfully sued for a trading error. That won't stop people from trying to make history. For more: Read more about: Nasdaq OMX, Facebook IPO 4. Cash equity commissions remain depressed
The equity trading environment is expected to weaken in the second quarter, and volume will likely remain depressed. That will translate into fewer commission dollars earned by broker dealers and will force the buy-side to allocate even more of their commission spend to research and related services. In other words, we're in for more of the same. The value of commissions paid by U.S. institutional investors to brokers for domestic equities trades declined 6 percent from Q1 2011 to Q1 2012, according to Greenwich Associates 2012 U.S. Equity Investors Study. "That decline helped push institutional spending on sell-side equity research and advisory services down to $6.2 billion for the year, from $6.8 billion in the prior 12-month period. The decline in overall institutional brokerage commission payments marked the third consecutive year the pool has contracted. The $10.86 billion in total U.S. equity brokerage commissions paid by institutions last year is the lowest amount reported since 007." Will this reverse anytime soon? "There is evidence to suggest that it might be difficult to reverse U.S. equity commission pool shrinkage. Approximately a quarter of large institutional investors interviewed by Greenwich Associates for its 2011 U.S. Investment Management Study said they planned to make significant reductions to their active domestic equity allocations by 2014 and 16% planned sizable reductions in passive U.S. equity allocations. In both cases, only 3–4% of institutions planned significant increases." To be sure, the bloom has been off the rose for the cash equities market for many years. The margins were always thinning, and now volume has tanked. The better markets for traders are the high-margin derivatives markets. This in many ways is a market structure issue. It may be time to reverse the decades old trend to penny increments. That's the view of some. I explore that in other posts over on FierceFinanceIT. For more: Related articles: Read more about: commissions 5. Nasdaq OMX CEO rejects House meeting
Nasdaq OMX CEO Robert Greifeld has taken a beating in the court of public opinion lately, stoked in part by a front page treatment in the WSJ. He has worsened his plight just a bit by his decision not to appear for questioning before a House committee. According to Deal Journal, there were discussions about an appearance, but he has apparently decided against it. The Congressmen will hear plenty from executives of NYSE Euronext and Knight Capital, and will be accorded friendly treatment, to be sure. The Nasdaq's decision is not a good one. It's not a good idea to give a high profile open forum to your biggest competitor and your most-outspoken critic, which is exactly what Nasdaq OMX has done. The better options would have been for Greifeld to appear and defend his company, not unlike the way Jamie Dimon did when he appeared before the Senate Banking Committee. To be sure, the company is undertaking an effort to communicate their apologies with their constituents. He's on something of an apology tour. He certainly wants to reassure Silicon Valley that his company can handle a big deal. Still, when an article in Fox Business notes that, "Robert Greifeld is pretty confident that he will keep his job following the botched Facebook IPO," it's a bad sign. He's been confiding to friends apparently that he hope the storm passes soon and that the botched IPO has taken a personal toll. In any case, skipping the House hearing seems like a missed opportunity. For more: Related articles:
Read more about: Nasdaq OMX Also NotedSPOTLIGHT ON... Mystery bidder emerges for software firm Quest Software's board had been hoping a bidding war would break out that would significantly boost the value of the company. A new bidder has come forth with a bigger offer, but the bidder has opted for anonymity. Some have speculated that the bidder might be Dell, but that doesn't appear to be the case. It's unclear why the bidder wants to operate anonymously, but that state cannot last for long if it eventually wins the company. Article Company News: And Finally…Microsoft to debut table soon. Article
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Monday, June 18, 2012
| 06.18.12 | Is BlackRock the next Goldman Sachs?
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