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Today's Top News1. Grudging praise for Citigroup chairman
So now that the dust is settling a bit on the Vikram Pandit exit mess at Citigroup, what more can be said about the Citigroup board? Two lines of thought have emerged in the aftermath of the decision to oust former CEO Pandit. In one view, the board acted recklessly and imperially, without thinking through how a legitimate CEO transition should occur. In the other view, the board reflects a new activism when it comes to corporate governance, a sign that directors are taking their jobs seriously. So which view is correct? My sense is that they both are. For support, we I turn to an essay in the HBR. "Independent boards of directors are still the best mechanism — or the least worst one — for holding business leaders accountable, even if many boards have failed in their attempts to do this, often in spectacular fashion. Much of the Citigroup commentary has focused on the behind-the-scenes campaign of Citigroup board chair William O'Neil to oust Pandit and his stark ultimatum during a one-on-one confrontation: resign now, resign at the end of the year, or be fired. Many have criticized O'Neil for his ham-handedness, saying this was rude to Pandit, demoralizing to essential Citi leaders, lacking in clear public rationale…But the tactics surrounding the decision should not obscure the potential importance of the decision itself." All in all, the board no doubt felt it was acting in the best interests of shareholders. "Let us not over-praise O'Neil," the essay says. But let's also give him some credit. For more: Related articles:
Read more about: Citigroup, corporate governance
2. How one trader became a Sandy relief volunteer
Normalcy remains far away on Wall Street, as employees struggle to get into the office and conduct business as usual. The last time the routine has been disrupted to this extent was during 9/11. One trader, Rachel Simons, decided to join the volunteer effort after work. "Simons arrived to a City Hall in need of a wide array of volunteer work, and with its mayor, Dawn Zimmer, dispatching helping hands for a range of Federal Emergency Management Agency and National Guard-assisted recovery tasks," according to a story in TheStreet.com. "In what Simons calculates as roughly six hours of relief work from when she returned to Hoboken to midnight, the banker by day was going door-to-door in the city to hand out National Guard appointed MRE's [meals ready to eat] and poll residents on urgent prescription needs by nightfall…Simons seemed most proud of how her Wall Street skills came to immediate use, amid a chaotic recovery effort that still needs far more helping hands, supplies and time. After volunteers broke up into...'sub teams,' she and a pharmacist went door-to-door on an assignment to find or fill-in missing information on the urgent drug prescription needs of Hoboken residents. Given a set of hand-scrawled notes compiled through the day with hard-to-understand information on prescriptions, dosages and pharmacy locations, Simons decided her daily work building trading spreadsheets…Once her team had finished their canvassing, Simons rushed home to make a spreadsheet that described the location of patients, their prescriptions, dosages and the priority of their drug need - with input from her medically-trained colleague of just a few hours." There are many more instances of quiet heroism and of people putting skill to work for the common good. I would love to read more posted here. For more: Read more about: Business Continuity, Sandy Relief 3. Wall Street moves to aid Sandy victims
It would be hard to interpret the aid that Wall Street banks and investment funds are pledging to victims of Sandy as anything other than a humanitarian gesture. The financial district took a direct hit, as did many areas in which lots of Wall Street employees live. The drive to aid victims is very much a case of helping their own and their neighbors, and the banks are to be applauded for this effort. Goldman Sachs has pledged $5 million in loans to small businesses affected by the storm. The bank also says it and its employees will donate another $5 million to victim relief efforts. Goldman employees also are planning volunteer for projects to help the Tri-state area. JPMorgan Chase has also pledged $5 million for storm relief. Bank of America, Citigroup and Wells Fargo also announced charitable donations. As noted, many consumer banks in hard-hit areas have waived certain fees for customers as well. Hedge funds and private equity have gotten in on the act. The Robin Hood Foundation has pledged $3 million. DealBook detects a bit of defensiveness from Goldman Sachs, which executed its continuity plans with great success, in ways that helped others. "I'm not going to take it that someone is going to scorn us for doing what we did," CEO Lloyd Blankfein was quoted. "We worked hard and did sensible things. And by the way, having done that, it put us in a position to help other people in the neighborhood. I don't want to sound haughty, but I think if other people did it, the place would be better off." For more: Related articles:
Read more about: Business Continuity, Sandy Relief 4. Morgan Stanley's management shake-up
So what's Morgan Stanley's strategy on FICC sales and trading? At times, the bank seems to want to scale back just a bit, reducing risks, relying on such activity for less of its revenue, and diversifying into wealth management. But in the end, it wants to have its cake and eat it too. Why not diversify a bit as well as post massive gains in FICC? Surely, the bank does not want to go slack as a trading entity. Someone's got to give Goldman Sachs a run for their money. Toward that end, the bank has shaken up its management ranks. "One of Wall Street's most prominent deal makers, Paul J. Taubman, will leave the company, while another executive, Colm Kelleher, will become the sole head of sales and trading. Mr. Kelleher's power within the bank will be rivaled only by Greg Fleming, who oversees the wealth and asset management units, and James Gorman, the chief executive," according to DealBook. Something like this was not entirely unexpected, as Taubman and Kelleher had been "infighting" for years. CEO James Gorman decided that the unit needed a single leader. "Behind Mr. Gorman's move was a desire to better align the sales and trading operations with the investment banking arm. The goal is to persuade clients who rely on Morgan Stanley for advice on mergers and stock sales to use it for trading services as well," the article noted. For more: Related article:
Read more about: trading, Ficc 5. Rogue Apple trade sinks Rochdale Securities
How could this have happened? About a month ago, a trader at Rochdale Securities bought $1 billion worth of Apple stock--$1 billion! The kicker here is that he was not authorized to do so. He intended to buy 165,000 shares in an standard agency trade, but due to some sort of snafu, he ended up buying 1.65 million shares. Unfortunately, those shares did not fare well after the purchase, and the bank lost millions. Making matters dire, the company only has $3.5 million in capital. After making the trade, the trader was apparently not seen again on the trading floor, according to media reports. In short order, the company, which is best known for employing the ubiquitous analyst Richard Bove, confirmed the loss and commenced an aggressive search for a capital injection. The FBI has now entered the fray, opening an investigation. It may have been a fat-finger sort of mistake, but there is concern within the firm that it was rogue trading. "While many details of the alleged scam are not yet known, the trader who purchased the Apple shares in question has been identified by sources as David Miller. Miller, a 20-year Wall Street veteran, has not been charged with any trading violations or any crimes," notes the New York Post. It alludes to scheme that had been underway for a while and involved at least on outside trader. If it was a scam, it will be interesting to see how it was supposed to work. For more: Related articles: Read more about: FBI, rogue trader Also Noted
SPOTLIGHT ON... Stifel buys KBW Bank boutique KBW has agreed to a $550 million purchase by Stifel. As an investment banking boutique that focused on the financial services industry, KBW had run into some hard times, as deals proved scarce. Meanwhile, Stifel's recent acquisitions, which include Legg Mason's capital markets business and Thomas Weisel Partners, have helped the firm post record net revenue every year since 1997, notes Bloomberg. Article Company News:
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Wednesday, November 7, 2012
| 11.07.12 | Grudging praise for Citigroup chairman
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