Also Noted: Spotlight On... Hedge funds never believed in actual default News From the Fierce Network:
Today's Top News1. Jon Corzine aims to lift legal cost cap
From an enforcement standpoint, Jon Corzine, to the chagrin of some, has fared well. Not too long ago, many thought that a criminal enforcement action against him personally, for his role in the implosion of MFGlobal, was a sure shot. But it never panned out, as prosecutors apparently couldn't quite find the necessary evidence. He has been targeted personally in civil action by the CFTC, however. Still, he has racked up some hefty legal bills. "From February through September 2013, defense fees incurred to date exceed $40 million, a figure that has never been adequately explained or justified and which suggests duplication of efforts," lawyers for the bankruptcy administrator argued in court, as noted by the New York Post. Corzine and other executives, unsurprisingly, are seeking to lift the $30 million cap on legal costs, saying that "they are unable to pay for the costs themselves." While the money would be paid by an insurance company, "it could reduce distributions to other creditors, bankruptcy experts said." The costs aren't going to disappear anytime soon, not with the CFTC case alive and well and with more than 20 suits outstanding. Forcing the disgraced executive to foot their legal bills might strike some as poetic justice. For more: Read more about: Jon Corzine, MFGlobal
2. Jamie Dimon racks up more legal bills than his one-time mentor
The lore of Jamie Dimon holds that he was fired by his one-time mentor Sandy Weill for issues that didn't pertain strictly to office performance. Weil hired Dimon as his assistant at American Express in 1982. "After Dimon helped his mentor assemble the first so-called universal bank with Citigroup's 1998 merger with Travelers Group Inc., the protege clashed with other executives and was fired. He then led Chicago-based Bank One," notes Bloomberg. Some still think that Dimon's rough treatment (in the view of some) of Weill's daughter, Jessica Bibliowicz, played a role. Weill seems to have gotten the better of his one-time protégé in one area: Dimon has now racked up more legal costs than Weill. "Facing probes into mortgage bonds, energy trading and hiring practices in Asia, JPMorgan took a $7.2 billion charge on Oct. 11 for expenses tied to regulatory matters and litigation, bringing the total the bank has set aside or spent since the start of 2010 to $28 billion. Weill's tenure at Citigroup ended up leaving the bank with at least $5.5 billion in legal costs, then the most in history for a Wall Street firm." That said, Dimon can point to a lot of other successes. The stock price hasn't cratered. But if it ever does, it will test his Teflon status with shareholders. It's still entirely possible that he will face another movement to strip him of his chairman title in 2014. For more: Read more about: CEO, CEO succession
The news that Twitter, which will soon go public, has chosen the NYSE as its listing home comes at a critical time for the exchange's parent company, NYSE Euronext. It will soon merge with IntercontinentalExchange. In fact, the $10 billion deal is set to close within a month, an event that will only intensify the discussion about the future of the vaunted Big Board. Some think that CEO Jeffrey Sprecher, who will run the combined company, will eventually opt to unload the bellwether stock exchange, preferring to focus on the company's roots as derivatives exchange company. Notes the Financial Times, "While the exchange benefits from membership, trading and listing fees, the contribution of a single company makes little difference to its annual revenues or its competition with its rival. Instead, landing a high-profile name to list on an exchange in the US is mainly a matter of prestige." To be sure, the Twitter decision may be more of a knock against the Nasdaq than a real coup for NYSE. Nasdaq of course has suffered some PR hits as a result of its botched Facebook IPO, for which it agreed to pay $10 million. The loss of the Twitter battle comes at an inopportune time. In grand scheme of things, however, the Twitter decision may not matter much. The win might indeed "bolster" the NYSE's claim to running a differentiated listings business. Still, some think that NYSE and Nasdaq are destined to merge at some point. At that point, the dealer-driven market versus the specialist-driven approach will matter a lot less. For more: Read more about: IPO, Twitter 4. JPMorgan setting precedent on admitting guilt?
The enforcements actions against JPMorgan Chase have intensified at a time when the government has essentially been forced to take a new approach to resolving these issues. Across the board, federal prosecutors have been instructed to force targets to actually admit that they have done something unlawful. This has long been a bitter pill for targets to swallow, and for decades, they have been able to get away with neither admitting nor denying guilt. But no longer. Which means that JPMorgan will likely admit to some sort of infraction when it settles with the CFTC over charges that its trading practices were manipulative and reckless, posing harm to the markets. DealBook notes the admission is not an unqualified victory for prosecutors. "The fine print of JPMorgan's admission — in both the S.E.C. and C.F.T.C. cases — provides the bank some cover from private litigation. Rather than admitting market manipulation, the bank is expected to acknowledge a series of facts that the C.F.T.C. will characterize as 'recklessly employing manipulative devices.' While it is a small and technical distinction, it could save the bank from an onslaught of shareholder lawsuits," according to the article. "The bank also won some ground on the breadth of its wrongdoing. It agreed, the people briefed on the negotiations said, to admit wrongdoing stemming from trading on one particular day. The trading commission is likely to refer to other trading in its order against the bank, but JPMorgan is expected to neither admit nor deny wrongdoing in those instances." All in all, it remains to be seen if admissions of wrongdoing become the norm. The bank is expected to also admit to some sort of wrongdoing when it settles the many actions related to mortgage fraud. Negotiations so far have put the settlement costs at a whopping $11 billion. Knight Capital, however, was able to settle charges related to its trading woes that pushed it to the brink in 2012 without admitting any wrongdoing. For more:
Read more about: Enforcement Action 5. Goldman Sachs misses revenue estimates
The top line was the big story of Goldman Sachs' third-quarter earnings release. Total net revenue in the quarter fell to $6.72 billion, about 20 percent lower than the $8.35 billion reported a year earlier. Sequentially, revenue fell 22 percent. The average revenue estimate was $7.36 billion. Revenues were weak across the board. The most eye-catching drop off came, unsurprisingly, in FICC-oriented sales and trading activity. Revenue fell to $1.2 billion, down a whopping 44 percent year over year and 49 percent sequentially. Revenue for institutional client services as a whole fell to $2.9 billion, down 32 percent year over year and 34 percent sequentially. There were few meaningful offsets. Investment management revenue managed a 2 percent gain. On a brighter note, the company's operating expenses in the third quarter were $4.56 billion, 25 percent lower than in the third quarter of 2012. And profits still beat estimates. Diluted earnings per common share came in at $2.88, compared with $2.85 for the third quarter of 2012 and $3.70 for the second quarter. The third quarter average estimate from analysts was about $2.43 a share. As for the compensation ratio, for the first nine months of the year, it was 41 percent, compared with 44 percent for the first nine months of 2012. For the third quarter, the bank set aside $2.38 billion, about 35 percent less than a year ago. For more: Read more about: Goldman Sachs, earnings Also NotedSPOTLIGHT ON... Hedge funds never believed in actual default To some, it might have seemed like a once in a lifetime opportunity, like the housing collapse of 2007. But in the end, most hedge funds just didn't see the potential of a U.S. default as something they wanted to bet on. Portfolio managers have been through a lot of political crisis over the budget the past few years. They do not see it as an investible theme. That said, at some point, if the government were to actually default, that view might change dramatically. As of now, the next political crises loom in January and February. Article Company News:
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Thursday, October 17, 2013
| 10.17.13 | NYSE wins Twitter listing
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