Today's Top Stories Also Noted: Spotlight On... Low rates means pensions stay committed to hedge funds
Today's Top News1. Banks scramble to aid customers
I've noted that natural disasters afford banks the opportunity to be good neighbors at a times when customers are in need. I noted that JPMorgan Chase waived its late fees on a range of loans, including credit cards and business and consumer loans such as mortgages, home equity, auto, and student loans, for customers in eight states impacted by the hurricane. The bank has also said it will waive fees that occur when people don't properly manage their account balances, such as overdrafts and insufficient fund fees. Bank of America has followed suit. Customers in Rhode Island, New Hampshire, Maine, Massachusetts, Connecticut, New Jersey, New York, Pennsylvania, Delaware, Maryland, Virginia and Washington, D.C., may qualify for a range of exceptions. These include: Receiving credit line increases on cards; modifying payments on loans, credit cards or lines of credit; geting assistance with lost, missing or late loan or card payments; avoiding early withdrawal penalties on CDs; or getting refunds on any overdraft, non-sufficient funds or non-Bank of America ATM fees. Fannie Mae and Freddie Mac are also taking steps, asking mortgage services to suspend or reduce monthly payments for 90 days for homeowners adversely affected by the Hurricane. In special cases, mortgage payments may be delayed up to one year. Foreclosure and eviction proceedings will also be delayed in some cases for a year. Across the disaster zone, banks are pushing to get branches up and running. For more: Related articles: Read more about: fees, Disasters
2. Citigroup CEO coup: A contrarian interpretation
The conventional wisdom in the immediate aftermath of the stunning announcement that Vikram Pandit would step down as CEO of Citigroup was basically that boards were rising up to finally hold CEOs accountable, ending their rubber-stamp reputations. The immediate commentary was tinged with warnings for management: Directors will no longer give you a free pass. But as more details emerge about how the coup was engineered, the suspicious nature of the "resignation," and the shockingly bad timing of it all--the news was delivered the same day that the bank issued an upside earnings surprise--has led to some rethinking. A Breakingviews columnist has written that the premise of an independent chairman seems to have been undermined by the palace coup. "It seems O'Neill picked off Citi's directors in Machiavellian fashion, persuading each to support stripping Pandit of his job…Now other senior executives at Citi are considering leaving, including some who would be missed by new CEO Michael Corbat and the board. Some people inside the bank think O'Neill acted partly out of frustration that his own hopes of running a major financial institution never came to fruition. If widely held, that belief could damage Corbat's credibility. There may have been good reasons for regime change at Citi, such as the desire to turn over a new leaf with regulators. But part of a chairman's job is to manage any succession to ensure the maximum stability and continuity. By that test O'Neill failed. In the process, he has added unfortunate stigma to the useful separation of roles at the top." For more: Related articles: Read more about: CEO succession, Boards 3. Report on MF Global saga coming soon
We may soon get a close look at what went down during the MF Global implosion, which for better or worse has become something of a fading memory. The House Financial Services Committee's oversight panel has said it will release an investigative report about MF Global in the next few weeks. The report is expected to provide an "autopsy of how MF Global came to its ultimate demise and what policy changes need to be made to prevent similar customer losses in the future," according to DealBook. The conventional wisdom at the moment is that the top executives, notably Jon Corzine, whose rash bets on European sovereign debt plunged the firm into crisis, will escape criminal prosecution, much to the chagrin of those who were hoping for someone to be held personally accountable. It's doubtful that the report will blame any executives with prosecutable wrong-doing, but it will perhaps paint a picture of a firm wholly lacking strong controls and checks, which seems to have been the case. Surprisingly, there have been some benefits flow from the incident. The exchanges have been pushed into taking a harder line on policing members. The CME was rather outspoken about the harm that MF Global foisted on the community. But in the end, it looks like the saga will end with a whimper, not a bang. I do look forward to the report, and hope it offers a detailed narrative about how such disaster could have happened. For more: Related articles: Read more about: MF Global, Jon Corzine 4. Twitter lies cost man his job
The arduous task of recovering from hurricane Sandy was made worse by a man haphazardly spreading rumors and lies via Twitter. His most egregious lie was that the NYSE trading floor was three-feet deep in water. That rumor spread quickly, especially when the likes of CNN and New York magazine passed it on, leaving it to the NYSE to finally put the truth to it. Other made-up Tweets included one that said power would be shut down in all of Manhattan and that the New York subway would be closed for the entire week, according to ABC News. The man responsible for these lies was soon identified as Shashank Tripathi, who used the Twitter handle @ComfortablySmug. Tripathi also has written for a finance blog for Stone Street Advisors under the same handle. Interestingly enough, he was also a paid member of the political campaign of someone running for Congress. After he was outed by Buzzfeed, Tripathi apologized and resigned from the staff of Christopher Wright. What's unclear in all of this is why he was doing this. Did he get some weird sense of power spreading rumors and watching the Internet buzz about them? Was this his idea of fun? All in all, however, the upside to Twitter and other social media outlets during and after the storm outweigh the negatives by far. Banks were able to get their messages out in part because of good use of social media outlets, despite the rumor mongering. For more: Related articles: Read more about: Twitter, Social Media 5. UBS goes nuclear in reorganization bid
UBS has decided that it's future lies not in gradual transition but in a dramatic, all-at-once transformation that will once again reshape the bank for the future. It's not often that a bank announces that it will cut 10,000 jobs over the next few years, on top of 3,500 job cuts last year, and the layoffs are already underway. The bank has pared back the number of traders it employs in Asia, for example. Other traders showed up for work in London, only to find that their security pass cards did not work. The traders gathered at a local pub to commiserate, cheering as more locked-out employees showed up. The UBS traders who were kept out of the business "were either handed their belongings in plastic bags, or had to call colleagues inside the bank to bring down their possessions," notes Reuters. This shouldn't be all that surprising, as management does not want to risk an incident or the chance of intellectual property theft. Some traders were told they were on paid leave until further notice. About two years ago, the bank had decided to transition out of investment banking, which had been ailing, to focus on wealth management. That hasn't changed. What has changed is the apparent desire to hasten the change process, hence the mass layoffs. At a time when other banks are feasting on FICC activity, UBS has decided it cannot compete. It will largely exit fixed income and focus strategically on advisory services, research, equities, foreign exchange and precious metals. One big issue here is the extent to which other Swiss and European banks will be forced to follow suit. "I suspect that many banks have not yet really understood what the consequences of the new capital rules for business will be when they come into full effect in 2019," the chairman of the UBS was quoted by Bloomberg. "Swiss rules commit us to even higher own capital demands than the 10 percent capital quota that Basel III orders." Read more about: Reorganization, UBS Also NotedSPOTLIGHT ON... Low rates means pensions stay committed to hedge funds Pensions still can't live without hedge funds, as long as they perform. Pensions have little choice but to continue to alter their asset allocation mix, shifting funds from fixed-income investments to hedge funds, as long as low rates continue. Over the past five years, pension funds have lowered their return expectations for hedge funds from 6 percent to 8 percent annualy. They've moderated their return expectations for fixed income investments even more. Article Company News:
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Friday, November 2, 2012
| 11.02.12 | Banks scramble to aid customers
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