| August 22, 2012
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Today's Top Stories
1. Bank of America branch closures stoke controversy
2. Whitman found guilty of insider trading
3. Wells Fargo now the big retail player
4. Banks face tough road on credit card recoveries
5. Facebook director cashes out Also Noted: Kaseya
Spotlight On... Apple market cap sets record
More criticism of Jon Corzine; Pandit dishes on breakups; and much more... News From the Fierce Network:
1. Banks may outsource mortgage servicing
2. As Dimon's luster fades, who will rise?
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Events > Investment Consultants Forum - The Crowne Plaza Times Square, New York, NY - March 2, 2012
> NFC Ticketing Europe 2012 - March 20-21 - London
> NYIF Essentials of Project and Infrastructure Finance - September 10-12 - New York, NY
> Investment Trends Summit - September 12-14, 2012 - The Four Seasons, The Biltmore - Santa Barbara, CA
> Investment Trends Summit - September 12-14, 2012 - Santa Barbara, CA
> NYIF Core Skills Analyst Program - October 22- November 16 - New York, NY
> NYIF Wealth Management Program - October 29- November 16 - St. Petersburg/Tampa FL
> NFC Payments USA Unites NFC Experts in Boston Once Again - October 29-30 - Boston, MA
> The Mobile Wallet Summit - November 28-29 - London
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* General ad info: Click here | Today's Top News 1. Bank of America branch closures stoke controversy Everything that Bank of America does is controversial--and magnified. While it is no longer the largest consumer bank, it continues to be a lightning rod for criticism. The issue of bank branch closings is especially sensitive right now, in this down economy. Bank of America is in the middle of a drive to reduce its branch network. The Charlotte Observer reports that "Nearly a third of the closures last year occurred in low- to moderate-income communities. And while that's roughly in line with the percentage of such branches in the bank's overall network, it worries some banking experts and consumer advocates, who say eliminating bank branches has a disproportionate effect on the poor and their neighborhoods, removing important community anchors and raising the cost of banking. At a time when big banks across the country are stepping up efforts to cater to their most profitable customers, advocates worry that others could be left behind." Bank officials told the paper that will add more branches in low- to moderate-income neighborhoods than other big banks. "Branches in those neighborhoods, where the household income is less than 80 percent of the geographic area's median income, made up 27 percent of the bank's total network at the end of 2011. That compares with 24 percent for Wells Fargo and 23 percent for JPMorgan Chase." It looks like Bank of America wants to get in line with the percentages at its two big competitors. It's tough because the bank pretty much has to chase profits, though the idea of having to shutter branches in areas where they are sorely needed will not sit well with many. Of course all banks are rationalizing their branch networks right now. This would appear to be an opportunity for local institutions, though the economics are tricky. What it really calls for is a bank to really want to make an investment in such communities. The projected ROI would look better if we could get the economy humming again. For more:
- here's the article Related articles:
Bank of America continues to reduce ATMs
Where Bank of America is axing branches Read more about: Bank Branches
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2. Whitman found guilty of insider trading It's not often in a criminal trial that the defense puts the defendant on the witness stand. It's always a gamble and the circumstances need to be extraordinary for a defense lawyer to even consider. It is often seen as a Hail Mary -- a sign of near desperation. So when Doug Whitman of Whitman Capital in Menlo Park, Calif., took the stand in his own insider trading trial, it wasn't a good sign at all. Indeed, the outcome was predictable. A jury took less than a day to pronounce Whitman guilty of insider trading. Those trades allowed him to make about $1 million in illegal profits trading technology stocks. He now faces a maximum possible sentence of 25 years in prison. He will be sentenced in December. In hindsight, one is tempted to ask why his lawyers allowed Whitman to even go to trial. In the unfolding insider trading investigations, those who went to trial fared poorly. You would have to be blind to see that the chance of winning at trial was always slim, especially when there's a strong array of cooperating witnesses ready to sing about the defendant, as there was in this case. Surely Whitman's lawyers saw how poorly Raj Rajaratnam fared with the all-my-trades-were-grounded-in-stock-research defense. He's serving 11 years. Whitman will likely get less than that, suggests Forbes, noting that Judge Jed Rakoff will be the sentencer. Still, you would have to think he would have fared better had he settled. For more:
- here' the article Related articles:
Analyst to plead guilty to insider trading Read more about: insider trading, Conviction
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3. Wells Fargo now the big retail player Is an oligopoly emerging in the retail mortgage market? According to Inside Mortgage Finance, Wells Fargo and its two largest rivals, JPMorgan Chase and U.S. Bancorp, made half of all U.S. mortgages in the first six months of the year. Wells Fargo, the retail mortgage kingpin, accounted for 33.1 percent of the market all by itself. In mortgage servicing, the top four banks controlled half of the market; Wells Fargo once again was the leader, with 18.5 percent of the market. The Charlotte Observer notes that, "The concentration in the mortgage business has drawn warnings from the inspector general for Fannie Mae and Freddie Mac, the head of Ginnie Mae, Fitch Ratings, and congressmen, including one from Wells Fargo's home state of California, about growing risks to borrowers, taxpayers, investors, housing markets and the financial system. Scenarios include a setback or strategy shift at Wells Fargo that could choke off credit for homebuyers and compel the United States to again pump in money to keep the housing market from seizing up." In such a situation, the danger is that the overall market is overly susceptible to the action of a few. Obviously, everyone would be better off with robust competition. But at a time like this, this might be about the best we can hope for from banks. Credit unions loom as a wild card in all this, and we can only hope they compete robustly. They have stepped up their volume. In fact, credit unions made more mortgage loans than ever during the second quarter of 2012---a welcome trend indeed. For more:
- here's the article Related articles:
Wells Fargo eyes Ally in auto loans
Why retail investors avoid equities Read more about: Wells Fargo, retail banking
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4. Banks face tough road on credit card recoveries Credit card debt delinquencies and defaults would appear to be under control at the big banks, which have reserved prudently against eventual losses in this area. I tend to think of these issues as akin to student loans, which is to say that while there will be some customers who default, the eventual costs will be nothing at all like the great mortgage meltdown. As they work through bad loans, American Express, Citigroup and others are suing to recover owed money. Unfortunately, "many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases. Lenders, the judges said, are churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers. The concerns echo a recent abuse in the foreclosure system, a practice known as robo-signing in which banks produced similar documents for different homeowners and did not review them," according to DealBook. Indeed, this is all too familiar. One judge estimates that 90 percent of credit card lawsuits are flawed to the point that the financial company cannot prove how much a card holder owes it. "The problem, according to judges, is that credit card companies are not always following the proper legal procedures, even when they have the right to collect money. Certain cases hinge on mass-produced documents because the lenders do not provide proof of the outstanding debts, like the original contract or payment history. At times, lawsuits include falsified credit card statements, produced years after borrowers supposedly fell behind on their bills, according to the judges and others in the industry." Again, all too familiar! So what's the solution? It may end up requiring regulators to broker a massive deal. For more:
- here's the article Read more about: banks, Credit Cards
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5. Facebook director cashes out PayPal founder-turned venture capitalist Peter Thiel invested so early in Facebook that even after the stock has tanked in the aftermarket he turned a massive profit. It's hard to know exactly how much he has made, but he invested $500,000 in the company, on whose board he sits, back in 2004. He has since sold additional stock--in the IPO and in subsequent sales after his lock up expired--generating about $1 billion. "Later backers haven't fared as well, with the stock losing almost half its value since the IPO amid signs that the company's growth is slowing and concerns that more insiders will exit their stakes," notes Bloomberg Businessweek. Thiel's post lock-up sales, "at prices from $19.27 to $20.69 a share, represents most of the 27.9 million shares the investor held after the IPO. He still holds more than 5 million shares, and the proceeds don't reflect underwriter or broker fees." So he's in a good position. He remains a director of the company and has cashed out massively. He still holds a lot of shares, and will thus benefit if the company's stock price recovers, which seems now to be a long-term endeavor. Some will suggest that the sales suggest a lack of confidence in the company long-term. You can't blame him for wanting to take some chips off the table. For more:
- here's the article Related articles:
Big investor Peter Thiel launches fellowship to help dropout entrepreneurs Read more about: venture capital, Facebook
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Also Noted | This week's sponsor is Kaseya. |  | Ten Effective Habits of Indispensable IT Departments
It's no secret that responsibilities are growing while budgets continue to shrink. Enact these ten IT habits throughout your financial institution to help you cut costs, create operational efficiencies and align IT to business goals. Download Today!
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SPOTLIGHT ON... Apple market cap sets record Apple has been on a tear as of late. Forbes notes its rising stock raised the company's market cap to $623 billion, which beat the record for market capitalization set by Microsoft in a previous era. The recent surge seems to have been powered by optimism over the iPhone 5 and other products, such as iTV and smaller form-factor iPads. It remains a darling of hedge funds. It will be interesting to see when they decide to take profits. Article Company News:
> More from Pandit on breakups. Article
> Bank of America raises CLO for BlackRock. Article
> Deutsche Bank probed for sanctions issues. Article
> More criticism of Jon Corzine. Article
> Bank of America, JPMorgan soar. Article
Industry News:
> Green startups now toxic. Article
> Glencore CEO prepared to walk away from deal. Article
> The future of universal banking. Article
Regulatory News:
> Regulatory arbitrage now an issue. Article
> State regulators flex their muscles. Article
> Big German banks want to give big watchdog power. Article
> Iran looks to Armenia to skirt sanctions. Article And Finally…Best places to live in the U.S. Article > Controls for automated trading. Can you rely on the sell-side alone? Wednesday, August 29th, 11 am ET / 8 am PT Join us for this informative and thought-provoking webinar, lead by renowned Capital Markets expert Richard Bentley, VP of Capital Markets, Progress Software . And learn how you can better mitigate and manage the risk of automated trading. Register today! > Webinar: Network Security: Emerging threats require updated Best Practices- September 12, 2pm ET/ 11am PT The security picture at financial services seems to be getting cloudier by the day. While many banks have awoken to the risks imposed by possible network breaches, the landscape continues to morph, raising the stakes. Cyber criminals continue to refine their techniques and to develop more advance hacking methods to compromise corporate networks, and they are as sophisticated as ever. The very notion of Best Practices in the realm of network management and security continues to evolve. We take a look at current trends and up-to-date practices. Register today!
| > Investment Consultants Forum - The Crowne Plaza Times Square, New York, NY - March 2, 2012 This conference provides a unique environment for developing dialogue between plan sponsors, managers and consultants. This event will feature panel-driven discussions focused on specific investment techniques of fixed income and hedge fund managers, the evolving role of institutional consultants, the manager evaluation process and more. Register today. > NFC Ticketing Europe 2012 - March 20-21 - London Come and join MasterCard, Renfe, Deutsche Bahn, Visa Europe, Orange, Arriva Netherlands, O2 and many more for the first event to bring together the whole NFC Ticketing industry for discussion, debate and quality networking. Click here. > NYIF Essentials of Project and Infrastructure Finance - September 10-12 - New York, NY This is a practical course that provides executives, whether as financiers, sponsors, or professional support, an opportunity to understand the risk-return character of limited recourse projects from multiple perspectives. Case studies span a variety of sectors and geographical regions. This course will not use in-depth models involving Excel™, but the instructor (a broad-based finance and investment executive with global experience throughout the U.S., Europe and the emerging markets of Latin America and Asia who has negotiated numerous transactions, including mergers and acquisitions, public offerings, mezzanine financings, international bank syndications, corporate valuations and fairness opinions) will review modeling approaches with examples. Register today. > Investment Trends Summit - September 12-14, 2012 - The Four Seasons, The Biltmore - Santa Barbara, CA The Investment Trends Summit is an educational forum focused on analyzing trends for the future, and exploring ways to implement new strategies in investment plans. Speakers and attendees will discuss topics such as investor's perspectives, investment management theories, and more. Register Today! > Investment Trends Summit - September 12-14, 2012 - Santa Barbara, CA Opal Financial Group's Investment Trends Summit will serve as an educational forum focused on analyzing trends for the future, as well as exploring ways to implement new strategies in particular investment plans. As one of our Platinum Series Events, we have designed this investment trends conference to meet the needs of money managers, senior pension fund officers and trustees who prefer smaller, more structured programs. By limiting this event to select managers, participants will be able to more carefully examine a distinct set of topics specifically tailored to their interests. > NYIF Core Skills Analyst Program - October 22- November 16 - New York, NY Bringing together core finance concepts and theories, this program is a challenging and rewarding experience for entry-level analysts, finance and investment professionals seeking to enhance their skill set. Real-life case studies supplement the hands-on learning experience, providing a wealth of practical knowledge to take back to the workplace. The program provides four weeks of intensive training in accounting (optional), corporate finance, credit risk and financial modeling. Register today. > NYIF Wealth Management Program - October 29- November 16 - St. Petersburg/Tampa FL The 3-week Program captures the best practices and insights from corporate thought leaders and wealth management firms. This modular suite of classes is designed to prepare client-facing professionals with the knowledge and skills to meet and add value to wealthy individuals and families. The Program explores the following topics: Global Economic Impact on Wealth, Consultative Discussions and Recommendations, Asset Allocation and Portfolio Optimization, Lending and Leverage, Tax and Intergenerational Planning, and Maintaining Good Relationships with Investment Clients. Register today. > NFC Payments USA Unites NFC Experts in Boston Once Again - October 29-30 - Boston, MA NFC Payments USA (Oct 29-30th)is back for its second year, hosting 150 senior level delegates to debate industry challenges and facilitate the roll out of NFC payments. Speakers include Best Buy, PayPal, Verizon, Barclaycard, T-Mobile, Best Buy, VISA, Capital One, MasterCard. Click here for more information. > The Mobile Wallet Summit - November 28-29 - London The Mobile Wallet Summit is the only show that looks at the future of mobile transactions. It brings together every industry you find in your physical wallet, loyalty, identity, ticketing and payments and provides a forum for debate on how they will fit on your mobile.
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