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Today's Top News1. Wall Street wary of Elizabeth Warren
Elizabeth Warren, the brains behind the Consumer Financial Protection Board, on Tuesday won the so-called Kennedy Seat in Massachusetts, wresting the Senator position away from incumbent Republican Scott Brown. Warren is an old foe on Wall Street, one whom the industry vowed to oppose at all costs. While she conceived the CFPB, and while she was more than willing to become its first head, the Obama Administration never put her forward for the job, perhaps sensing extreme industry opposition. Should Wall Street be concerned anew now that she is a Senator? Warren will have the opportunity to weigh in on regulatory issues, and her victory is "one of Wall Street's worst nightmares come true," according to a Forbes commentary. Indeed, Warren revisited the get-tough-on bank rhetoric as she campaigned. Wall Street will no doubt be on the alert, but in the end, it would not be surprising if bank regulation declined as a major public policy issue. To be frank, the big battles have already been fought, and Dodd-Frank has been passed. Other issues will take priority. Warren will no doubt be tough on banks, but I can't see major new regulation emerging from the new Congress or the administration. It's all about Dodd-Frank implementation now. Warren's voice will no doubt be raised on occasion, but there is little reason to think that her victory represents a regulatory sea change for the industry. For more: Related articles:
Read more about: regulation, Regulators
2. Goldman Sachs seeks arbitration
Lisa Parisi, H. Cristina Chen-Oster and Shanna Orlich caused a big stir when they sued Goldman Sachs in 2010, charging that the bank systematically discriminated against women. The suit itself painted an ugly picture of gender relations at the bank, featuring allegations of lewd, hostile acts as well as acts of exclusion that did not do the bank (or Wall Street) any PR favors. Chen-Oster, was a vice president; Parisi was a managing director; and Orlich was an associate in the fixed-income unit. The case is alive and well, and, as Reuters notes, there's a lot of skirmishing going on legally. The bank asked a U.S. appeals court this week to send the dispute to arbitration rather than allow it to go forward as a class action suit. "The case is being watched closely because it could help other employers avoid discrimination class actions." After the lawsuit was originally filed, Goldman Sachs asked the court to enforce the arbitration agreement, which was agreed to by contract. But an April 2011, a judge denied the request. The case has grown in prominence as of late. "Both sides in the Goldman dispute have prominent backers in their corners. The U.S. Chamber of Commerce and Securities Industry and Financial Markets Association both filed friend-of-the-court briefs urging the 2nd Circuit to uphold Goldman's arbitration rights. The former employees are meanwhile supported by groups including the NAACP Legal Defense and Education Fund, the National Women's Law Center, the National Employment Lawyers Association and Public Citizen." For more:
Read more about: Goldman Sachs, arbitration 3. Prepaid cards flood the market
Walmart and American Express caused quite a stir with their new prepaid card, Bluebird, which they launched last month, pitching it as a bid to connect with small-account customers. Consumers who lacked a conventional relationship with a mainstream bank appeared to be one likely market. The card was also aimed specifically at Walmart customers who may be less inclined to see value in their traditional bank. The hope was that the lack of account minimums or overdraft charges and the ability to use the card at ATMs and retail outlets would prove very attractive. Do new-fangled prepaid cards represent a threat to banks and credit unions? They certainly have the potential, which has many banks are jumping on the bandwagon. Almost 60 percent of banks now offer prepaid or reloadable debit cards, according to the American Banker. It will perhaps not be long before such cards become a standard offering, as many banks, especially smaller institutions, feel that the current regulatory environment favors these cards. For more: Related articles: Read more about: Prepaid cards 4. Another insider trading case goes to trial
The FBI raids of Level Global Investors and Diamondback Capital Management generated modest media two years ago, an apparent blip in a massive effort to indict bigger fish. But the case continued to the point where two defendants from those firms are on trial in Manhattan federal court this week. Given the government's track record so far--prosecutors have racked up about 60 convictions--you would have to make Level Global co-founder Anthony Chiasson and Diamondback portfolio manager Todd Newman the underdogs. They are accused of making more than $67 million illegally via inside information about Dell and Nvidia. The government has lined up its signature advantages in the 5-yeatr investigation. "Of the eight people charged in relation to this case, six have pleaded guilty to insider trading and are cooperating with the U.S. They include Jesse Tortora, a former Diamondback analyst; Spyridon "Sam" Adondakis, an analyst at New York- based Level Global; and Danny Kuo, a former analyst at Whittier Trust Co., a South Pasadena, California-based wealth-management company," notes Bloomberg. The prosecution also intends to play taped phone calls, which have proven devastatingly effecting in other insider trading trials. Prosecutors have said that the case "describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information. It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information." For more: Related articles:
Read more about: insider trading, prosecutors 5. Goldman Sachs partner ranks thin
There was always a downside to becoming a Goldman Sachs partner. For many, winning that coveted title basically represents a personal high water mark. But "Partner" is hardly a life-long designation at Goldman Sachs. As soon as you made partner, you have to start thinking about what you want to do next, because the average life of a Goldman Sachs partner is only about seven years. As of now anyway, the partner ranks have been greatly reduced, according to media reports. The bank has reduced the number of partners to 407, down 31 from February numbers. The bank's filing did not identify the partners, but Bloomberg Businessweek made a credible attempt to identify who was no longer a partner. The bank may have been happy to get the ranks down ahead of the coming announcement of new partners, which the bank names every two years. Most assume that the bank would like to maintain some discipline in terms of the sheer number of partners to help keep its compensation in check. I'm not so sure it matters greatly at this point to the bottom line. It does seem as if partners are departing at a somewhat higher rate than usual. But it may reflect some natural causes. Some partners stayed on through the crisis, to prevent an image of a sinking-ship bailout. In any case, it would be nice if management could address this. For more: Related articles:
Read more about: Goldman Sachs, partners Also Noted
SPOTLIGHT ON... Analyst bullish on Bank of America Bank of America has a huge fan in Atlantic Equities analyst Richard Staite, who met with the bank's CFO recently in London. In the midst of a selloff of sorts, Staite promptly reiterated his "overweight" rating for Bank of America with a $12 price target, expressing "confidence that in Q4 there will be a decline in Legacy Asset Servicing costs, that mortgage delinquencies will decline and that the NIM will benefit from lower funding costs," according to TheStreet.com. Article Company News:
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Friday, November 9, 2012
| 11.09.12 | Wall Street wary of Elizabeth Warren
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