Today's Top Stories Also Noted: Spotlight On... Lloyd Blankfein buys home in Hamptons News From the Fierce Network:
Today's Top News1. Money market reform returns to spotlight
Proponents of money market fund reform were dealt a significant and surprising setback in August when commissioner Luis Aguilar made it clear that he would not support a reform proposal put forward by SEC Chairman Mary Schapiro. Schapiro was in favor of ending the long tradition of valuing these funds a rock-solid $1 per share and requiring more collateral to be held by funds among other things. Aguilar's move scuttled a planned vote on the issue. At the time, he said he wanted to see additional research. The latest development is that the SEC has come forward with new research, and Aguilar seems more amendable to reform. "The huge benefit of having the study and the comments we receive on the study is that it will put me, and I suspect my colleagues, in a much better position to allow us to vote on a proposal," Aguilar told Reuters, adding that, "It's important information that was lacking in the earlier draft." The SEC's new study, which was released last week, found "that while the 2010 reforms helped bolster the industry, they would not have been enough to prevent a run on the Reserve Primary Fund in 2008 during the financial crisis." Aguilar's move might be construed as grandstanding, but he might have done the SEC a favor. Several provisions in Dodd-Frank have been challenged on legal grounds that the regulators did not perform rigorous cost-benefit analyses. The additional study on the money market reform proposals may come in handy if legal challenges emerge. For more: Read more about: money market funds, SEC
2. Stakes high in FHFA lawsuit
The massive legal woes faced by banks would alleviate greatly if only the lawyers could eliminate the lawsuit filed by the Federal Housing Finance Agency, which oversees the two big housing GSEs. Last month, the lawyers for the 17 banks on the receiving end of the FHFA suit made an aggressive move to have the lawsuit dismissed, arguing that a statute of limitations had expired. The effort is crucial, especially in light of the fact that the federal judge overseeing the case, Denise Cote, seems bent on moving the case ahead, according to Thomson Reuters News & Insight. "Cote has set an aggressive schedule for document discovery, depositions and expert witness reports, leading straight to the FHFA's trial date against UBS in January 2014 and against JPMorgan Chase and Merrill Lynch six months later. The judge has left room in the schedule for summary judgment motions, but as I noted in a post last month on her denial of JPMorgan and Merrill dismissal motions, Cote does not seem even slightly inclined to let the banks off the hook without a jury trial." There are lots of other fairly new legal claims against the banks for faulty mortgages, by prosecutors, insurers, investors and other regulators. Not all of these potential liabilities have been reserved against. The ultimate price tag across the industry could hit $300 billion, which makes only the lawyers happy. For more:
Read more about: banks, Lawsuits 3. Lending falls at investment bank-owned wealth units
Do wealth management units with commercial banking parents have an advantage over those with investment bank parents? Reuters takes a look at the wealth management unit of Morgan Stanley and notes that "in wealthy enclaves across the United States, Morgan Stanley has suffered a series of defections of top advisers such as Rothstein, in part because they think the firm is weak at providing loans to private banking clients compared with rivals owned by commercial banks." More than a dozen current and former Morgan Stanley brokers told Reuters they felt "the firm's lending practices put it at a competitive disadvantage. Four brokers said they quit to join the likes of Merrill and Wells Fargo & Co in part because these firms made it easier to pitch loan products." In one case, a Beverly Hills-based advisor to super wealthy celebrities and executives defected from Morgan Stanley to Merrill Lynch, taking $2.5 billion in assets with her. She was quite satisfied apparently when she worked for Smith Barney--when it was owned by Citigroup. "Merrill, a unit of Bank of America Corp, has about 600 bankers working with brokers, for example, compared with 170 bankers at Morgan Stanley. In the third quarter, Merrill reported $1.5 billion in net interest income, compared with $410 million for Morgan Stanley's wealth unit." Morgan Stanley told the news service that its wealth management unit offers "competitive specialized loans through its tailored lending program" and is working to build up its loan services. There's something to be said about the notion that wealth management loom as a critical market for both investment banks and commercial banks. As lending becomes more critical, perhaps the commercial banks have the upper hand. For more: Read more about: wealth management, brokerages
It's safe to assume that investigators have mined what data they have on trades conducted by SAC Capital. Finra has forwarded a lot of trading data on to criminal and civil investigators no doubt. In cases where the controversial firm has apparently hit a home run, suspicions will intensify. Media reports hold that the fund's trading in Weight Watchers shares and InterMune shares are now under investigation. "Regulatory filings show that Cohen's $14 billion fund briefly held 2.1 million shares in Weight Watchers during the period under scrutiny by authorities - at which time the diet company's stock price roughly doubled. The inquiry is in its early stages and it is not clear whether anything improper was done either by SAC Capital or Cohen himself," according to Reuters. In addition, "SAC bought 1.9 million shares of InterMune in the first quarter of 2010, after holding none in the prior two quarters, and held 10,983 shares at the end of the second quarter of 2010," according to data compiled by Bloomberg. "InterMune's stock soared in the first week of March after the drugmaker's experimental medicine for a deadly lung disease was reviewed more favorably by U.S. regulators than analysts had expected. Two months later, the stock slumped after the company's application for a potential $1 billion-a-year lung treatment was rejected by regulators." Moving from investigation to actual charges in either case will likely depend on a witness willing to work with the government. That has proven to be a bridge too far for the government so far. For more: Related articles: Read more about: insider trading, SAC Capital 5. Bank of America rethinks teleworking
Like many companies, Bank of America slowly but surely embraced teleworking as a workplace strategy. The bank launched a "My Work" program in 2005, and it has expanded significantly ever since. The benefits for employees are fairly obvious. Those with suitable jobs, the lack of commute and the flexibility was nice. For the bank, it was a way to save money and promote environmentally sound workplace policies. But as the pressure to keep costs low mounts, the bank is rethinking the program. According to the Charlotte Observer, "the bank has asked department managers to determine which job categories would better serve the bank by having workers come into the office…Specific changes will vary depending on the line of business, the Charlotte bank said Tuesday. Some new employees may be told they are not eligible to work from home until they've worked at the bank for a year. Others may lose the ability to work remotely altogether. Workers who will be affected are being notified in the next several weeks." The bank apparently also "intends to curtail the practice of informally allowing employees to keep an office at a bank location while spending much of their time working remotely." The issue first and foremost is cost. If the programs are not saving the company money, executives will be less likely to support them. Indeed, unless these sorts of programs are done right, the savings could easily prove elusive. Some employees may end up with a laptop and desktop, a smartphone as well as a desk phone. The teleworking software and security issues are certainly not trivial from a cost perspective. For employees, this is disconcerting to say the least. For many, this will be a life-altering change. But at a time like this, they'd be wise not to complain. For more: Read more about: Bank of America, Telework Also NotedSPOTLIGHT ON... Lloyd Blankfein buys home in Hamptons Goldman Sachs CEO Lloyd Blankfein is doing his part to revive the high-end residential real estate market. As noted by the Mail Online, he has purchased a seven-bedroom mansion in Bridgehampton for $32.5 million. He still owns a $14 million home in nearby Sagaponack, which apparently is having trouble attracting a buyer. It's been on the market for five years. The new property is far from the waterfront, but it has a pool. Article Company News:
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Tuesday, December 11, 2012
| 12.11.12 | SAC Capital probe expands
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