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Today's Top News1. Bank of America still suffering from Countrywide deal
It's become something of a cliché to state that Bank of America's (NYSE:BAC) 2008 purchase of then-mortgage giant Countrywide in 2008 was one of the worst bank deals ever. Few would dispute that contention at this point. To underscore the point, I turn to recent data released from the Consumer Financial Protection Bureau (CFPB). Bank of America accounted for 30 percent of all mortgage-related complaints logged by the bureau. The LATimes noted that "the level of customer discontent " was "far greater than at home-lending rivals Wells Fargo & Co. and JPMorgan Chase & Co." Two-thirds of the complaints involved the bank's handling of loan modifications, debt collection and foreclosures, "a fact the bank attributed to the concentration of toxic Countrywide loans." About one-fifth of the complaints involved customer-service, such as the handling of payments and escrow accounts used to pay taxes and insurance. Bank of America responded by noting the bureau's website, which shows that 98 percent of these complaints had been resolved. "As a result of the Countrywide acquisition, Bank of America became the largest mortgage servicer at the peak of the housing crisis, and the servicer of a disproportionate share of loan types impacted by the economic downturn," the bank said in a statement. While we make every effort to provide a good experience for all customers, the servicing of mortgage loans in delinquency or foreclosure predictably results in more frequent customer concerns." It appears that the bank is indeed making headway in clearing up its mortgage woes. That said, the effort has been costly in so many ways. The opportunity costs cannot be denied. The Herculean effort to clean up its current mortgage mess has left it weakened and poorly positioned to capitalize on the brimming market for new mortgages. For more: Related articles: Read more about: Bank of America, mortgages
2. Dell special committee under lots of pressure
In the still-unfolding Dell buyout drama, the board's special committee, which was set up to evaluate bids, has no choice but to go overboard in its efforts to find the best possible deal. It has every reason to be transparent about its efforts to. The last thing it wants is to leave itself open to charges that it was somehow less than vigilante in this task. Toward that end, it released a 26-page history of the leveraged buyout drama so far, detailing its efforts to find alternative bids. It has turned to Evercore Partners, which was given special incentives to find alternatives, to conduct the go-shop process. That process ended recently with two firm bids submitted. But to generate those two bids, the investment bankers at Evercore ended up talking to 71 potential bidders, including TPG Capital, GE Capital and some who were interested only in purchasing the PC operations. "By the go-shop deadline of March 22, Evercore bankers had received three expressions of interest. One was from GE Capital, which proposed to buy Dell Financial Services only if combined with any takeover bid, including Mr. Dell's," notes DealBook. "Blackstone also submitted an offer, now known to be over $14.25 a share, that would leave an unspecified portion of Dell public to let investors continue to own a piece of the company if they so wished. The firm disclosed that it was working with Francisco Partners and Insight Venture Partners," it said. Blackstone took the additional step of demanding that the special committee pay for its efforts to put together the bid. The committee agreed to pay $25 million. So even if Blackstone does not prevail, the effort will not have been a total loss. For more: Related articles:
Read more about: lbo, deals 3. Do Wall Street bank boards deserve such high pay?
When it comes to serving on corporate boards, Wall Street banks pay exceedingly well. DealBook notes data from Equilar showing that the average director compensation at one of the six biggest banks in 2011 was $328,655. That compares with an average $232,142 at 500 publicly traded companies. The most lucrative director jobs on Wall Street reside at Goldman Sachs. Pay--all in stock--rose to $488,709 in 2011, up more than 50 percent from 2008. Given that the stock soared last year, directors no doubt enjoyed a huge windfall. The article delves into an old debate: Are the directors worth the huge sums now being paid for their services? Banks that pay in stock argue that the arrangement effectively aligns their interests with the banks, noting also that at some banks directors cannot cash out until they resign. Proponents of hefty pay also argue that the job has become more much more complex since the passage of the Sarbanes-Oxley in 2002 generally and since the financial crisis and the passage of Dodd-Frank specifically. The counter-argument is that directors really do not have all that such discretion in what they do. "Some Wall Street insiders also question the need to pay bank directors more than their counterparts at other big corporations, arguing that the increased regulation has actually limited bank boards' ability to perform important tasks, like raising capital and issuing dividends. Even when it comes to paying senior executives, boards have less leeway because regulators have pressured boards to bring down executive pay," according to the article. My sense is that the regulations have actually made it harder to be an effective director. Of course, each director has a different set of duties. Those tasked with overseeing risk management, audits, compensation and other high pressure duties will hopefully not be coasting. Hopefully, they'll be taking the job seriously enough to devote the requisite amount of time necessary to do well. For many, it's not the part-time gig it once was. As it is with all employees, some directors will coast and some will step up. The trick is to find those that will step up. For more: Related articles:
Read more about: directors, executive compensation 4. Judge strikes down Libor suits against banks
In a Good Friday gift to the banking industry, a U.S. District judge has struck down a raft of private suits that alleged the banks engaged Libor manipulation. The suits had been consolidated into a single piece of multidistrict litigation, one that targeted the likes of Bank of America, JPMorgan Chase, Citigroup and roughly 15 others. U.S. District Judge Naomi Reice Buchwald granted the banks' motion to dismiss the plaintiffs' federal antitrust claims and partially dismissed their claims of commodities manipulation, according to Reuters. She also dismissed racketeering claims. Reuters notes that, "The decision is a significant setback for private plaintiffs, whose lawsuits had been consolidated before the New York judge as part of a multidistrict litigation proceeding." The banks are hardly in the clear when it comes to legal risks stemming from the Libor probe. Government investigations continue to heat up. Three big banks have settled with authorities so far. RBS agreed to pay $612 million to U.S. and British authorities, UBS agreed to pay $1.5 billion, and Barclays agreed to pay $453 million. Most expect more settlements soon, including some involving U.S. banks. Not all of the claims were struck down by Judge Buchwald. She allowed some claims involving harm to Libor interest rate traders to proceed. But this is really a small portion of the overall suits. My guess is that plaintiffs will appeal or perhaps try again, as the judge left open the possibility that they can re-file their suits. For more: Related Articles: Read more about: suits, LIBOR 5. An entertaining look at the investment banking lifecycle
An anonymous managing director, who happens to also be a talented blogger, offers an interesting and quite entertaining look at the various stages of career advancement at an investment bank. The writer likens it to "an eager young tadpole fresh from the leafy groves of academe" transforming himself or herself "into a hoary old bullfrog barking orders and swilling scotch from a gilded lily pad." The trickiest part to career advancement comes after the first five to seven years, when analysts become associates and then aspire to vice president. "Because the nature of the job shifts so dramatically from anal-retentive, in-the-weeds detail mongering to actual independent thought, interpersonal relationship cultivation, and growing sales responsibilities, the transition from Associate to Vice President is the most fraught for many investment bankers to make. The very intellectual and personal qualities which make you an attractive and effective candidate for Analyst or Associate become increasingly irrelevant, only to be replaced by interpersonal skills and predilections which are often fundamentally at odds with your prior role and responsibilities. For this reason alone, we see substantial attrition, both voluntary and involuntary, in Vice President ranks across my industry. It is not for nothing my fellow Associates and I made fun, shortly after we arrived, of an aging Vice President at my first firm, who could not seem to make the transition. We dubbed him amongst ourselves a 'very, very good Associate.' He did not last very long." This where the weeding out begins in earnest. This is the organic chemistry course that all pre-meds fear. This is where the wheat and chaff separate. This is also where book agents come calling for a banker who can write. For more:
Read more about: jobs, career Also NotedSPOTLIGHT ON... Public pensions fare well with hedge funds Last year may have been a middling year for hedge funds as a whole. But for public pensions that invested in hedge funds, 2012 was a fine year. P&I, which analyzed the holdings of 19 hedge fund portfolios, notes that many of these portfolios exceeded internal projections and standard industry benchmarks. "All but four of the public fund hedge fund portfolios in P&I's universe topped the one-year return of the HFRI Fund of Funds index, the benchmark most commonly used by institutional investors. Seven of 19 portfolios trailed their internal benchmarks." The Missouri State Employees' Retirement System fared especially well. Article Company news:
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Tuesday, April 2, 2013
| 04.02.13 | Bank of America still suffering from Countrywide deal
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