Today's Top Stories Editor's Corner: Advisors fear future of robust hedge fund advertising Also Noted: Spotlight On... Banks turn to psychologists News From the Fierce Network:
Today's Top News1. Is Pawlenty banking's top lobbyist?
When he was running for president, Tim Pawlenty had a "truth message" for Wall Street, recounts Bloomberg: "Get your snout out of the trough." One could argue that Pawlenty, at one point a Tea Party favorite, has just stuck his snout in another kind of trough, as he has become the industry's top lobbyist. He's now the CEO of the Financial Services Roundtable, which is dominated by the large banks. So why did he change his tune? Well, it's a great job in terms of compensation, paying $1.8 million to the then CEO in 2010. And Pawlenty apparently doesn't think that anti-big bank message from yesteryear is that big a deal. The notion that he has sold out to big corporations will not likely persists. Indeed, the big banks that he now works for think he is ideal for the job, and he may well be. He is a big name after all, and that counts for a lot in lobbying. Given his political career, he will be able to seamlessly pick up on the idea that big government can have deleterious consequences for industry. When it comes to "too big to fail," however, he's kind of a fan of Dodd-Frank. "He argues that Dodd-Frank, as passed, did enough to address the too-big-to-fail problem. The law required large banks to draft 'living wills,' or contingency plans anticipating how they would be liquidated in a crisis. And it created a financial stability council charged with monitoring excessive risk-taking. Wall Street, according to Pawlenty, has been sufficiently weaned from the bailout trough." That said, there are plenty of people inside the industry, including some credit raters, who disagree. In any case, he's now a force banking force to be recokend with. For more: Read more about: Lobbying, Lobbyist
I've suggested from the start of the Citigroup CEO transition debacle that the Citigroup board needs to be as transparent as possible, because on the surface the explanation that Vikram Pandit stepped down of his own volition was false. The conventional wisdom is that the board grew frustrated with Pandit, and that there was personal acrimony between the chairman and the CEO. And it all came to head when Pandit "resigned" in the face of the fact that he was going to be terminated. The most detailed account has just appeared in the New York Times and the news is surprising. The article reports that, "Mr. Pandit strode into the office of the chairman at day's end on Oct. 15 for what he considered just another of their frequent meetings on his calendar. Instead, Mr. Pandit, the chief executive of Citigroup, was told three news releases were ready. One stated that Mr. Pandit had resigned, effective immediately. Another that he would resign, effective at the end of the year. The third release stated Mr. Pandit had been fired without cause. The choice was his. The abrupt encounter, described by three people briefed on the conversation, included a terse comment by the chairman, Michael E. O'Neill: 'The board has lost confidence in you.' " Now that's hardball. A stunned Pandit chose to resign. As he was being told his fate, three board members approached John Havens, who was also persuaded to resign. The article makes clear that O'Neill has a lot of explaining to do. "Even though Mr. Pandit and the board have publicly characterized his exit as his decision, interviews with people close to the board describe how the chairman maneuvered behind the scenes for months ahead of that day to force Mr. Pandit out and replace him with Michael L. Corbat, the board's chosen successor." The backstory here is that O'Neill was once a candidate for the job he fired Pandit from. The danger here is that the backroom maneuvering and corporate ambushes will make the board look like little more than a bunch of amateurs. It seemed so unprofessional and poorly timed (on a day of solid earnings). The directors would appear to have some communications work to do. For more: Related articles: Read more about: CEO, directors 3. Citigroup fires analyst, agrees to fine over improper disclosures
The Facebook compliance fallout may be starting to hit. Massachusetts's securities regulator has fined Citigroup $2 million for failing to supervise top-ranked internet analyst Mark Mahaney and one of his analyst subordinates, each of whom apparently illegally disclosed confidential information about issuing companies. According to the state's complaint, the unnamed junior analyst emailed a document to journalists at TechCrunch.com that included confidential details about Citigroup's outlook for Facebook's revenue after its IPO. Mahaney, ranked the number one Internet analyst by Institutional Investor, was said to have provided information to French journalists about Google's YouTube unit. His email said that, "This could get me in trouble. Shoot." Mahaney has been terminated as an employee, according to media reports. The junior analyst was let go at the end of September. So what to make of this? This is certainly a wake-up call for all analysts who deal extensively with the media. It may well have been that the analysts were trying to be helpful by providing some background information that was never meant to be published in articles. That sort of thing does go on. It's hardly unheard of. In the case of Citigroup, firm rules prevent analysts from offering off the record information. The Facebook disclosure might have been a violation of IPO rules, but it's doubtful that the YouTube disclosures breached any laws; the state went after the bank on ground of failure to stick to internal policies, though it appeared at compliance officers were on the case. All in all, banks need to redouble their efforts here, and rethink their policies on journalist-analyst communications. Analysts should not assume that their communications with journalists are not being monitored somehow. For more:
Read more about: Stock Analysts, Compliance 4. Chicago banker sued by grandfather
Geoffrey Richards, the head of William Blair's Special Situations & Restructuring boutique in Chicago, has found himself on the wrong end of a lawsuit. One might expect that in his line of work, but this suit was brought by his own grandfather, who has gone public with an interesting domestic drama. The New York Post reports that Allan Ash, 95, has sued his grandson in state court in Manhattan, saying that Richards reneged on a loan made when Ash was dying. Ash says he had just one condition when he gave the $950,000 to Richards earlier this year — "that if he recovered from heart problems and needed any of the money back, his grandson would give it to him. Ash did get better and asked for $200,000 back in early April — but Richards refused to pay him a dime," he charges. Ash was quoted saying, "He is a scoundrel. He loves money. He is the greatest disappointment in my life." Ash's disappointment stems in part from the fact that he had given greatly to his grandson over the years. Ash's success as a CPA enabled him to provide material comforts and advantages for his family. According to the suit, that included paying for boarding school, college and law school, not to mention vacations in Israel, Amsterdam, Greece, Italy and Sweden. He has also given him $600,000 over the past 14 years in cash. Ash says that when his grandson refused to give him back some money, he said, "I never promised to give it back to you." Money and family is a combustible mix. It can really mess up what should be a straightforward relationship. For more: Read more about: banker pay 5. Banks face growth challenges in mortgage boom
The current boom in the mortgage market, which gave several banks a lift in the third quarter, is notable because it could be so much more. The reality is that, as of now anyway, some banks seems to be leaving some profits on the table as they simply cannot expand quickly to better meet demand. Reuters notes that, "Banks still committed to the home loan business are hiring to meet increased demand, but fewer banks are committed to the business after the 2007-2009 mortgage crisis pulverized some of the biggest lenders in the United States and wounded many others." The top player and most committed bank would appear to be Wells Fargo, which controls one-third of the market, followed by JPMorgan Chase, which controls 11 percent of the market and also appears to be committed. U.S. Bank (5.4 percent), Bank of America (4.4 percent) and Citigroup (3.8 percent) come in third through fifth. A certain lack of commitment by Citigroup might have been one reason that the board ousted then CEO Vikram Pandit; the bank apparently was not in position to tap the surge in demand. All in all, we're seeing more banks hire up to better able mortgage processing. Wells Fargo hired 2,000 in the third quarter. Chase has also been hiring. "Lenders making mortgages say they do not want to hire too many staffers only to lay them off when volume declines. The Mortgage Bankers Association estimates that banks will make $1.47 trillion of home loans this year for home purchases and refinancings, but then just $1.04 trillion in 2013, a decline of nearly a third," Reuters reports. All in all, the current boom has revealed a lot about the state of the industry, the winners and the losers. For more:
Read more about: mortgages, bank earnings Also NotedSPOTLIGHT ON... Banks turn to psychologists Behavioral investing has been making in-roads on Wall Street for years. A great indication of this is the fact that some banks now hire psychologists to help clients with their investment decisions. A behavioral expert at Barclays told CNBC that he uses his knowledge to try to help clients become better investors. He does this "by helping them to understand their personalities better, their own proclivities, and how to make better long-term investing decisions by controlling their emotions." Article Company News:
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Monday, October 29, 2012
| 10.29.12 | Backroom drama at Citigroup
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