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2. A changing face of bias on Wall Street?

There's no denying that Robert Greifeld, the CEO of Nasdaq, is under pressure right now. Technology malfunctions have severely undermined its public reputation. The inability to find a merger partner has raised brows, leading to talk of missed opportunities. And the decision not to communicate more quickly about the recent 3-hour outage was thoroughly lambasted by many, perhaps most memorably by James Cramer, who went on something of rant.

So it's not surprising that we're seeing more quotes like the following in the Financial Times. "Time after time there is a problem at Nasdaq; they need new leaders. Bob has been there for 10 years and has been a great cost-cutter, but the core focus has not been on investing in the technology. He's been looking for a high event to leave on, but the May [Facebook] events from last year hampered that and this makes it worse."

There have been few outward signs that the Nasdaq OMX board has lost confidence in Greifeld. But directors certainly can't stick their heads in the sand.

Perhaps the worst situation might be akin to the one that strangled Microsoft for many years. The last thing the board wants is to find itself in a situation during in which people assume that the company would be better off without the current CEO. That will merely build in a somewhat permanent discount. Steve Ballmer was able to survive for many years in this scenario. But it eventually caught up with him.

It will be interesting to see if Greifeld ends up in the same long-term situation.

For more:
- here's the FT article

Read more about: exchanges
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By Jim Kim

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3. JPMorgan faces massive FHFA settlement costs

DealBook reports that Merrill Lynch has agreed to pay $160 million to settle a racial discrimination lawsuit that was first filed in 2005.

The settlement affects 700 black brokers who worked for Merrill and "would be the largest sum ever distributed to plaintiffs in a racial discrimination suit against an American employer." As part of the deal, Merrill, which is owned by Bank of America, also agreed to take advice from black employees on workplace issues.

The big issue, however, is whether anything has changed over the past 8 years to improve the lot of women and minorities at the firm. One would like to think that there has been a sea change across the industry.

Over the past decade anyway, managers have become keenly aware that untoward practices and comments will only cause problems for them. The smart ones know to keep that stuff to themselves. If a gender or race dispute crops up in the office, there may no longer be a knee-jerk defense of the old guard. An executive would have to be stupid to take risks in this area. Some may argue that political correctness has taken over, but for many, that may be a sign of progress.

The modern face of bias is undeniably more complex, much harder to measure and analyze. While the work place is more hospitable, it's fair to say that opportunity distribution and financial remuneration are still big issues. What we need at one level is more detailed data by which to analyze all this. One danger is that women and minorities increasingly decide that the financial services industry just isn't for them. Long-term, that would be a huge loss.

Is that now happening?

For more:
- here's the article

Read more about: Discrimination Suits
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By Jim Kim

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4. JPMorgan Chase faces new consumer charges

In the welter of enforcement actions facing JPMorgan, Bank of America and other top banks, there is still a lot of uncertainty around potential settlement deals. A good reminder just cropped up in the form a news report from the Financial Times, which holds that regulators at the FHFA are demanding that JPMorgan Chase pay more than $6 billion to settle charges about a variety of misdeeds in the way it sold mortgages to the big housing GSEs. That would be a massive sum, one that the bank is apparently fighting. We would appear to be in the midst of a fairly intense negotiation, with both sides hoping to settle at some point. No one would be surprised if the settlement terms came in a bit lower, while everyone would be surprised if this actually went to trial.

Some might think that the UBS settlement for $885 million last month set an analytical baseline of sorts. But the circumstances across all banks are different. While the volume of JPMorgan securities at issue is about 5 times larger than the UBS volume, one can't linearly extrapolate.

Still, you get the idea that the ultimate costs to the bank will be big. This case will be closely watched by Bank of America as well, which is grappling with its own FHFA case. Morgan Stanley has suggested that a straightforward extrapolation based on the UBS settlement would lead to settlement figure of $10 billion. For various reasons, that's not going to hold. The more likely Bank of America settlement might be about $3.6 billion, the analysts estimate. The FHFA may have other ideas.

One market trend working in the banks favor is that the toxic securities at issue have rallied, which will tend to lower settlement costs.

For more:
- here's the article

Read more about: Litigation Costs, Enforcement Action
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By Jim Kim

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Much of the enforcement activity aimed at JPMorgan Chase so far has been about wholesale, B-to-B practices. But get ready for a raft of consumer-related charges, which will add a new dimension to the bank's laundry list of regulatory woes. The bank has been nothing less than a lawyer's dream over the past few years, a litigation factory that has surpassed the likes of Goldman Sachs and Bank of America.

DealBook reports that the OCC and the CFPB plan to announce various actions in the next month or so. The settlement terms call for the bank "to acknowledge internal flaws and dole out at least $80 million in fines, said the people."

"The most costly cases for JPMorgan center on concerns that the bank duped its credit card customers into buying products pitched as a way to shield them from identity theft. In separate actions reflecting their varied jurisdictions, the consumer bureau will levy a roughly $20 million fine, while the comptroller's office is expected to extract about $60 million. In another set of actions, the regulators are aiming at the bank for the way it collected overdue bills from consumers, the people said. It is unclear whether those cases will yield any fines."

To be sure, $80 million is a mere pittance for the banks. The settlements will likely encourage more private litigation, which carry costs as well, but those costs will likely be manageable. The much more costly case will be the one that the FHFA is trying to settle for about $6 billion.

At the consumer level, there could be some reputational costs that should be considered. The bank has developed a reputation in certain quarters for dubious behavior that leaves small customers short-changed. The bank has been shamed into action previously, like when it announced that it would alter is account policies to make them less friendly to usurious online lenders.

The bank would be wise to carefully study how all this enforcement activity is affecting the brand.

For more:
- here's the article

Read more about: Enforcement Action
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5. P2P loan market thrives

By Jim Kim

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