Also Noted: Spotlight On... The big picture on private equity News From the Fierce Network:
Today's Top News1. When will Wall Street take default likelihood seriously?
"We'll go right up to the point of extreme idiocy, but we won't cross it." So says Warren Buffett about the U.S. default situation. That's basically the conventional wisdom right now. Everyone assumes that our elected officials will posture and pontificate to the very end. But at that point, they would be crazy to actually do it. Indeed, the stock market seems little concerned. But not everyone thinks a default will be avoided. The esteemed Andrew Ross Sorkin writes: "Nobody believes the country will actually exceed the debt limit — which is exactly why it might. "Oddly enough, despite all the predictions of panic, the stock market was down only marginally over the last couple of sessions. "Here's the perversity of Wall Street's psychology: The more Wall Street is convinced that Washington will act rationally and raise the debt ceiling, most likely at the 11th hour, the less pressure there will be on lawmakers to reach an agreement. That will make it more likely a deal isn't reached." My sense is that the markets will start to react much more vehemently as October 17 approaches. The fact is that, we're in uncharted territory now. True, the nation defaulted once in 1979, but that was essentially a back-office accident. As of now, the power of the far right in the House is a real wildcard; it would be unwise to assume that they will play by conventional rules of assured survival. For more:
Read more about: default 2. Sales goals pressure some Wells Fargo employees
How aggressive is Wells Fargo in terms of winning more retail deposits? It's hard to generalize, of course. But a recent incident in the Los Angeles operations certainly opens a window on the internal sales culture. The bank has fired roughly 30 branch employees in the region who the bank said had opened unauthorized accounts and attempted to manipulate customer-satisfaction surveys, according to the Los Angeles Times. "The employees were trying to take shortcuts to meet bank goals for sales and customer satisfaction…. " To be sure, Wells Fargo employs about 6,500 people at branches in the LA metro area. So this number of people let go for these infractions is really small. "One of the fired employees said that in some cases signatures were forged and customers had accounts opened in their names without their knowledge. In other cases, the customers went along with the opening of the accounts." One fired employee told the paper that pressure to meet sales goals was intense. "At times, managers required workers to stay in the branch after the close of business, calling their friends and family members, if they failed to open enough accounts during the day, the worker said." In every bank, there will be some overly zealous managers. So, again, it would be unwise to generalize. That said, the bank needs some sort of check on this activity. In the end, the manager at issue looks really bad, as he or she will ultimately be blamed for what would appear to be a really undisciplined approach. For more: Read more about: Sales Staff 3. Messaging system may lead to other non-Bloomberg services
Will we look back on the near-scandal involving Bloomberg terminal spying on corporate executives as a watershed moment? That remains to be seen. But it's fair to say that the incident played into the hands of the eight banks that are supporting the new messaging service operated by Markit. The new system essentially serves as a software overlay that connects the messaging systems of Thomson Reuters, Goldman Sachs, Deutsche Bank, Citigroup, Credit Suisse, Barclays, JPMorgan Chase, Morgan Stanley, Bank of America Merrill Lynch and interdealer broker GFI Group, according to the Financial Times. The goal is break the instant messaging grip of Bloomberg, whose rise as more than an information powerhouse has raised brows across the industry. For Bloomberg, this is an interesting movement by companies that are clients as well as would-be competitors. Instant messaging has emerged as one of the killer applications that keep traders and other professionals beholden to the $20,000 a year Bloomberg machines. The economics of the new system is interesting. Banks will pay a connection fee, and then they are free to sign up as many of their employees as they like. The larger question going forward is whether this starts some sort of movement to attack the perceived tyranny of Bloomberg terminals on other fronts. One way to think about this is in terms of open source software. If the entire industry starts to create specific applications that can be seamlessly woven into a whole, kind of like the way Markit is weaving together individual messaging systems, then a lot becomes possible. For more: Read more about: Bloomberg Terminals, Messaging Systems 4. Madoff support staff trial gets underway
Bernard Madoff is in prison in North Carolina, but his scandal continues, seemingly without end. In Manhattan, five of his former subordinates are on trial, for essentially aiding and abetting Madoff's massive Ponzi Scheme over many years. The defendants: Madoff's secretary, Annette Bongiorno; Daniel Bonventre, his director of operations for investments; JoAnn Crupi, an account manager; and computer programmers Jerome O'Hara and George Perez. All have pleaded not guilty. The New York Post notes that the trial could prove to be somewhat salacious, as the judge will allow testimony on the numerous affairs and liaisons that were alleged to have taken place, some involving Bernard Madoff himself. One wonders how keenly he'll be following the trial from jail. The judge has already excluded testimony about the lavish lifestyles of the defendants. The trial will feature the government's prized witness: Frank DiPascali, Madoff's former finance chief, who previously pleaded guilty to fraud. The grip of the saga on the public has lessened over the years. It's doubtful that this trial will create any sort of media frenzy, despite the racy content. One gets the sense that people just want this whole thing to be over. But more trials may be on the way. An accountant was just arrested in connection with the Madoff crimes. He has pleaded not guilty. For more: Read more about: Bernard Madoff, Trials 5. Problematic email evidence in Steinberg trial
The problems with email as evidence in a criminal prosecution have been made abundantly clear recently. Prosecutors would be ill-advised to use emails as the core of their cases. The volume of email tends to be so voluminous that the defense can easily argue that the prosecution has merely cherry picked emails to bolster their cases, pointing to other emails that suggest more nuanced interpretations. That issue has cropped up in the insider trading case of Michael Steinberg, the former SAC Capital executive and confidante of SAC Capital founder Steven Cohen. "In the correspondence made public in Manhattan federal court, Jon Horvath, a former SAC Capital colleague, told Steinberg and another SAC trader that someone at Dell had told him the tech company's earnings would come in lower than expected for the third quarter of 2008. But the undisclosed email shows that Steinberg responded to Horvath's tip by saying he did not believe Horvath, say people familiar with the emails. That could give Steinberg's lawyers the opportunity to claim Steinberg did not take Horvath seriously and therefore was not motivated to make his Dell trades on Horvath's tip," reports Reuters. "If so, the undisclosed email could bolster Steinberg's defense that the trades he subsequently made for SAC Capital in shares of the computer company were not done using inside information he obtained unlawfully." Perhaps the most powerful evidence for the prosecution: direct testimony from Horvath himself. If he proves to be a strong witness, he'll likely be able to make up for evidentiary shortcomings in other areas. The trial is scheduled to start November 18. It will be interesting. For more: Read more about: insider trading, SAC Capital Also NotedSPOTLIGHT ON... The big picture on private equity It's been five years since the collapse of Lehman Brothers, and it's fair to say that big private equity firms have fared relatively well. None of the top firms went under, which we can't say for the top investment banks. Obviously, however, a new era has dawned, requiring some big changes. Most firms have wisely diversified. But even within private equity investment, companies have retooled for the future, aiming to win with smaller funds, a new approach to limited partners, and smaller profits. Article Company News:
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Wednesday, October 9, 2013
| 10.09.13 | When will Wall Street take default likelihood seriously?
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