Today's Top Stories Also Noted: Kaseya News From the Fierce Network:
Today's Top News1. FHFA opposes eminent domain plan
I've noted previously the view of big MBS holders that using eminent domain to seize homes attached to underwater mortgages is not a good idea. It's true that MBS holders face losses when mortgages in their securitized holdings are refinanced. Another opponent of the idea, which has gathered steam in California and Chicago, has emerged in the Federal Housing Finance Agency (FHFA), which oversees the two big housing GSEs, Fannie Mae and Freddie Mac. The agency in fact says that it "may take action to prevent the proposed use of eminent domain by municipalities to seize and restructure underwater mortgages, citing potential risks to taxpayer-supported firms Fannie Mae and Freddie Mac. The concern by the FHFA comes as a few municipalities have 'said they are considering a plan that would allow them to purchase underwater loans from mortgage bond trusts at a discount, then refinance them at current market value'," according to Developments. The proposal, which was pitched to municipalities by Mortgage Resolution Partners, "has alarmed banking and other trade groups that warn stripping loans from investors would create unnecessary losses and reduce the availability of credit. Already, the Securities Industry and Financial Markets Association, or Sifma, has proposed prohibiting loans originated in areas using eminent domain from a key part of the $5 trillion mortgage-backed securities market that is a backbone for U.S. housing finance." Mortgage Resolution Partners, however, is sticking to its guns. The firm, led by a venture capitalist, said the plan will survive legal challenges and represents the best way to grapple with the housing crisis. Certainly, the clout of the bond holders will be tested. More cities seem to be considering the idea. For more: Related articles:
Read more about: mortgages, FHFA 2. Chance of criminal prosecutions plummets
For the better part of two years now, critics of the banking industry have been lamenting the lack of criminal prosecutions of Wall Street executives, the insider trading cases excepted. The idea was that the executives at Bank of America, Bear Stearns, Lehman Brothers, Merrill Lynch and others had gotten away with high crimes. A few might have been harboring hope that a significant criminal prosecution would materialize. At points, the speculation about an indictment of Lehman Brothers executives seemed to reach a fever pitch, but the charges never came. Now, with the Justice Department's announcement that it will not bring any criminal charges against Goldman Sachs executives, can it now be definitively said that there will be no charges against a significant executive at all? DealBook notes that, "The two greatest threats from government investigations are now behind it. It does not look as if any other criminal cases against other banks are likely to emerge from the financial crisis now that four years have gone by. The Justice Department has already passed on cases against executives from firms like Countrywide Financial and the American International Group, and nothing else seems to be drawing the attention of prosecutors at this point." For those baying for personal charges, it may be time to give up hope. For more: Related articles: Read more about: prosecutors 3. Jamie Dimon still the same CEO
"I'm an outspoken defender of the truth," says Jamie Dimon to New York magazine. "Everyone is afraid of retaliation and retribution. We recently had an event with a hundred small bankers here, and 85 percent of them said they can't challenge the regulation because of the potential retribution. That's a terrible thing. Okay? This is not the Soviet Union. This is the United States of America. That's what I remember. Guess what. I's a free. [Expletive]. Country." Say what you will about him, but Dimon remains the banker you either love to love or love to hate. He's been battered and bruised reputation-wise, but in the end he had amassed so much good will with the analysts, the media and Washington power brokers, that he's still in the game on his terms. Some murmured that he should step down from the board of the New York fed bank, but there were no calls for his scalp that were taken super seriously. As his unvarnished comments to New York make clear, he's the same CEO. He still refuses to talk much about Sandy Weill, and he's still apologizing for the Whale Trade fiasco. In the end, he's not much changed. The notion that he has been humbled may be off the mark. In any case, he's not going anywhere. And there is something refreshing about a CEO willing to use the F-word with a reporter, knowing it will end up in print. Now, if only he could get his stock price up. For more: Related articles: Read more about: Jamie Dimon, CEO 4. Carl Icahn drives hard bargain with son
Since 2010, Brett Icahn and David Schechter have been managing about $300 million of personal funds for Brett's dad, Carl Icahn. The pair fared well, so the elder Icahn is apparently willing to more than double down. According to the Financial Times, he has allocated an additional $3.0 billion to his son and Schechter to manage. Under the agreement, Icahn's son and Schechter will receive $2.4 billion from Icahn Enterprises and $600 million from High River Partnership, an investment vehicle controlled by Icahn. But the elder Icahn drives a tough bargain. The duo will be entitled to just 7.5 percent of all profits made from the portfolio in a "one-time lump sum payment" in four years' time, according to the FT. That's a pittance compared to the 20 percent annual performance fee that many hedge funds are entitled to, in addition to the management fee. But $3 billion in assets instantly is hard, if not all but impossible, to come by. The bigger benefit to Brett is that the allocations will make him an instant force in the hedge fund world. Combined with his ostensible track record and the sheer size of his fund, he will be able to approach pensions and others with a legitimate shot at winning mandates. If his son is successful, the shrewd elder Icahn also wins. Their deal requires Brett to give Icahn Enterprises 15 percent of all profits made from any hedge fund he sets up in the future--in perpetuity! For more: Related articles:
Read more about: Carl Icahn
Over on FierceFinanceIT, I frequently discuss high-frequency trading issues. The issue has had profound ramifications for all market participants and regulators and its rising importance has been reflected by its rising prominence as a general issue for the media. The New York Times, for example, has weighed in with several pieces about various aspects of such trading on its front page. The articles proved to be quite influential. Recall the article on flash quotes, which led to such an emotional response. The paper has just weighed in with a look at an interesting development in the high frequency trading debate: Transaction costs are now going up, as documented by Credit Suisse, Abel/Noser and Celent. The argument by high-frequency traders has long been that they reduce spreads and drive commissions down---and this is good for all. So now that costs are going up, what can the industry surmise? It may be that the HFT influence is waning, as they continue to grapple with low volume and struggle to find new sources of revenue. It may also signal that the buy-side is willing to pay more for the kind of executions that it deems necessary. It certainly seems as though the returns to speed are diminishing. With that in mind, if volume were to kick back up, especially from the retail sector, there may be improvement at high-frequency firms and lower costs all over again. All in all, this is an interesting development, but there are many big market structure issues to be dealt with. That hasn't changed. The industry does seem to be at point where falling costs as an argument will prove less powerful than it once was. For more: Related articles:
Read more about: High Frequency Trading, Market Structure Also Noted
SPOTLIGHT ON... Long jail term in massive identity theft case The two masterminds of a vast criminal conspiracy to defraud banks were sentence to decades in prison this year. So far, 27 people have either pleaded guilty or been convicted in the conspiracy, which spanned six states and was successful over five years. The scheme seems to a textbook case of how ID theft can led to the theft of actual money. Over the life of the scheme, more than $50 million was stolen, as stolen identity information was used to bilk cash in a variety of ways. Unfortunately, many more criminal rings are still active. Article Company News: Industry News: Regulatory News: And Finally…Teen achieves nuclear fusion. Article
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Wednesday, August 15, 2012
| 08.15.12 | Jamie Dimon still the same CEO
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