Today's Top Stories Also Noted: Spotlight On... Bank of America cuts some managers News From the Fierce Network: Today's Top News1. Is JPMorgan too big to manage?
A twist on the "too big to fail" debate has cropped up: Is JPMorgan too big to manage? And should therefore be broken up? Bloomberg notes that "Congress's inquiry into JPMorgan Chase & Co.'s $2 billion trading loss has reignited the question of whether a bank can grow too large and complex for its own executives to oversee. The banking industry is taking notice that a move to cap the size of Wall Street firms is gaining traction on Capitol Hill." Sheila Bair, former chairman of the FDIC said that, "There seems to be growing interest in some type of breakup proposal." We've heard variations of this of before--break-up calls are not new--and so far the talk has amounted to little more than grandstanding. I do not expect any serious proposals that would break up too big to fail or manage banks. Still, "the JPMorgan loss has spurred lawmakers in both parties to confront anew the issue of complexity in the banking system. And the discussion is more bipartisan than in the past." It's worthwhile to go through this exercise, and it's always possible, of only in theory, that the two sides of Congress can coalesce on this issue. But if recent history has shown anything it's that the big bank lobby reigns in Congress. We're more likely to get consensus on the need to leave big banks intact. For more: Read more about: too big to fail 2. Database of complaints sparks controversy
The recently born Consumer Financial Protection Board (CFPB) continues to stir the waters. The latest controversy stems from its plans to create a massive database of consumer complaints about credit cards--and then make the database publically available. The CFPB says "it will only publish complaints after it has verified the consumer's relationship with the company. The new database will include not only the name of the company involved, but also the nature of the complaint and the consumer's Zip code. It will also report whether the firm responded in a timely manner, how the matter was resolved and any disputes," according to the Washington Post. Banks regulated by the CFPB oppose the idea. They are not comfortable with having all complaints publically released, as the complaints may be without merit or may be intended as retribution. "It appears to be a gotcha mentality when it didn't have to be that way," one lobbyist said. The bureau does not have plans to release complaints in other areas, such as mortgage and checking accounts. The CFPB is quick to note that it can mediate disputes in some cases. It noted the "the story of a blind, elderly Army veteran from Georgia who overpaid his mortgage lender by $30,000 because he could not find the paperwork proving he had paid off his loan. The CFPB helped the man get a refund." For more: Read more about: Consumer Financial Protection Bureau, Credit Cards 3. Activist hedge fund takes stake in Lazard
For years, people have been extolling the virtues of boutique banks and trading outfits. The standard view is that these firms are less encumbered by new regulations and stand to benefit greatly from an exodus of talent from bulge bracket banks. But executing on the promise has been hard for several of the big-name boutiques. Lazard, one of the biggest names, has just picked up vote of confidence so to speak from activist investment fund Trian, led by Nelson Peltz, who's known for tussling with management of underperforming companies. This time, the dealings were cordial on the surface. The hedge fund has announced that it owns a 5.1 percent stake in the bank and that it now "believes Lazard is a premier global financial services company with significant brand and franchise value. Lazard's attractive low capital-intensive, fee-based business model is positioned to be a natural beneficiary of long-term financial market trends." Trian held several meetings with Lazard's management to discuss its business and strategies and came away impressed with Lazard's new strategic plan, announced in April. The news led to a bump in the stock prices, which is down for the year but not nearly down as much as some of the bulge bracket banks. For Lazard management, the pressure is on. The fund is betting that the executive team will double the stock price. The cordial relationship can easily turn adversarial if it doesn't execute as promised. For more: Read more about: Hedge Funds, investment banking 4. Goldman Sachs pays Gupta legal fees
One great irony of the Rajat Gupta trial is that Goldman Sachs, as per Delaware law, has been forced to pay Gupta's legal bills, according to the New York Times. So far, the tally has risen to $30 million, and will continue to rise until the One great irony of the Rajat Gupta trial is that Goldman Sachs, as per Delaware law, has been forced to pay Gupta's legal bills, according to the is finally resolved. As of now, Gupta is planning to appeal. For Gupta's lawyers, this amounts to a really enviable situation, a nearly blank check. For Goldman Sachs, the bottom line is that it had to pay lawyers to bash it in court. Lawyers--led by Gary Naftalis and a team from Kramer Levin Naftalis & Frankel--were not kind to Lloyd Blankfein, the CEO of the bank who testified for the prosecution, and its premise was that insider tipping was common at the bank. But there is an out for the bank. "Under a deal reached well before the trial, Mr. Gupta agreed that if he was found guilty of insider trading, he would reimburse the bank for the legal fees advanced to him." However, at that point, if the conviction stands, then Gupta will likely end up financially bereft and of course in prison, leaving the bank no choice but to write off the legal payments as a loss. P&G also has paid some legal bills, but Gupta was acquitted on the count involving the company. It's unclear how the company will respond. For more: Related articles: Read more about: Goldman Sachs 5. Wells Fargo grapples with media risks from customer death
When it comes to the retail mortgage market, the foreclosure crisis exposed a seamy underside: The process by which foreclosures are executed and evictions enforced. This is not the sort of business that "the suits" in nice offices would want to get involved in. Most banks outsource evictions and related nasty business--like debt collection--to local contractors, who operate sometimes in shady ways. Bank of America has suffered mightily for this, as media outlets across the nation feasted on stories of botched foreclosures, wrongful evictions, and the like. Who can forget the story about the bank foreclosing on a man who didn't even have a mortgage! But there's a new big beast in the market, Wells Fargo, and it too will take its lumps. Consider the story of Norman Rousseau, "who shot himself to death in the bedroom of the house he was going to lose. The next day … his wife was served the eviction notice," according to the New York Daily News. The couple had been locked in war with Wells Fargo (via an inherited Wachovia loan) that had not gone well for them. They filed a complaint last year in California Superior Court, saying that a loan officer "fraudulently doctored without their knowledge or consent" their financial information. "In 2009, the couple was told by Wells Fargo that they missed a payment, which they denied. After going back and forth with the bank, the couple said, they decided to apply for a loan modification, but claim advice given through the bank hurt them further…. By late 2010, the alleged miscommunication came to a head — the bank denied the loan and said their home was to be sold." Norman tried to save his home but eventually snapped, his wife told media outlets. No bank wants to be associated with this sort of misery. Wells Fargo may have to understand that its breadth will bring these sorts of risks in scope, though hopefully the foreclosure wave has crested. For more: Read more about: mortgages, Foreclosures Also NotedSPOTLIGHT ON... Bank of America cuts some managers It's no secret that Bank of America, via Project New BAC, was aiming to cut deeply to get expenses in line with its revenue prognosis. Toward that end, the bank apparently did some paring recently in the management ranks at U.S. Trust. Reuters notes that CEO Brian Moynihan is "seeking ways to lower expenses without reducing the productivity of wealth managers." He will offer more details next month about how Project New BAC might "trim as much as $3 billion in annual expenses in the firm's wealth-management and investment-banking units." Article Company News: And Finally… A closer look at Mr. Softie's tablet. 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: | |||||||||||||||||||||||||||
Wednesday, June 20, 2012
| 06.20.12 | Wells Fargo grapples with media risks from customer death
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment