Editor's Corner: Jamie Dimon's strongest argument Also Noted: Spotlight On... VC firm aims for transparency News From the Fierce Network:
Today's Top News1. Madoff support staff trial to run long
The trial of five former associates of Bernard Madoff will not end anytime soon. It's expected to drag on for five long months. 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 seem to have agreed upon the same general strategy, which is to argue that they were duped and victimized by Madoff. Lawyers for all say they never knew that a massive fraud was being conducted under their noses and that they all thought they were in legitimate business. Lawyers say that Madoff's employees saw him as "almost a god," notes Bloomberg. Bongiorno "looked up to Mr. Madoff. She believed in Mr. Madoff. She saw him as a kind of hero," her lawyer argued. "While he wasn't quite her knight in shining armor, he was her knight in plaid." The case of the two programmers is particularly interesting. The prosecution contends that both men met with Madoff at one point to extort money out of him. He ended up giving them $100,000 each and allowed them to set their own bonuses and salary increases. The defense says the two "courageously confronted" Madoff after growing uncomfortable with their roles. All in all, this could be quite interesting, albeit long. For more: Read more about: Bernard Madoff
2. Bank of America trial balloon: no overdraft accounts
The regulatory and consumer environment over the past few years---specific changes to Reg E and public uproars over various proposed fees---has prodded big banks to radically rethink their checking account services. Many have moved to impose new fees, arguing that "free" checking, if it ever truly existed, was a concept that can no longer survive. So what will be the new model? Bank of America continues to experiment. It recently threw up a trial balloon, floating the idea for an account that would prevent customers from overdrawing their accounts. Presumably, customers will get a choice. They can agree to have the bank cover overdraft in exchange for a fee, or they can choose an account that does not allow overdrafts. It's unclear what the fee structure will be for accounts that do not allow overdrafts. The latest move follows another move to a few years ago that no longer allows customers to overdraw accounts via debit cards. To be sure, overdraft fees are still quite lucrative for big banks. Offering a choice, but at the same time marketing aggressively the benefits of an account with overdraft protection may be one way to preserve as much of this revenue as possible. At some point, if taken to a logical extreme, the choices could get pretty granular. For example, would a bank be willing to offer customers a choice of how the bank should handle overdrawn checks, prioritizing them by dollar amounts, which is more profitable for the bank, or chronologically. For more: Read more about: Checking Accounts, fees 3. Big JPMorgan settlement coming soon
Attorney General Eric Holder broke precedent by directly negotiating a massive settlement with JPMorgan Chase CEO Jamie Dimon. The talks have been heated for at least a week, with both sides pressing their final points. Apparently, the two have broken a recent impasse, and a deal appears imminent. According to media reports, the bank will pay $13 billion, a staggering sum, to settle an array of federal charges related to dubious sales and marketing practices of soured mortgages. The deal calls for the bank to pay about $9 billion in penalties and about $4 billion to provide relief to homeowners per a specific deal with the FHFA. The $13 billion eclipses what the bank was previously willing to pay. "Until now, JPMorgan was offering about $11 billion in total. And it was refusing to increase its offer until the Justice Department dropped a parallel criminal investigation into the bank's sale of troubled mortgage securities to investors," notes DealBook. But the Justice Department prevailed on one big issue: it is free to pursue a separate criminal inquiry into the bank. The move by the bank represents a massive effort to put a load of litigation behind it all at once, a worthy endeavor from the shareholder point of view. In the end, the bank had little choice. It argued long and hard that many of the enforcement action was unfair because much, but not all, they stem from activity at Bear Stearns and Wachovia, which JPMorgan bought at the urging of federal regulators. The point is moot now, however. For more: Read more about: Enforcement Action, JPMorgan Chase 4. Bank event marred by pole dance
BNP Paribas has unfortunately come up with some good ways to ruin an otherwise nice dinner for top employees. The latest example comes from a dinner that kicked off an offsite event that was supposed to be motivational for the bank's top 50 fixed income staff, which had been suffering a tough stretch. "The dinner, which reportedly took place in mid-September at a London art gallery reportedly began pleasantly enough with a string quartet and free flowing champagne," notes eFinancial. "During the dessert, however, attendees report that a woman in a tutu appeared on stage. This tutu was whipped off and the woman, clad only in a 'scanty leotard,' began to gyrate around a pole seemingly put there for that purpose." One attendee was quoted: "She showed her crotch and bottom and stuck out her boobs and gyrated her body up and down… It was very tacky and the audience was very shocked and sat there in complete silence." The dancer apparently came as a surprise, as "the act had reportedly been billed as a Swan Lake style ballet with Cirque Du Soleil overtones." The bank apparently has apologized to attendees and opened an internal investigation. My bet is that internal events staffer will be reprimanded. The incident follows another gaffe the previous year, when a motivational video portrayed a banker from rival Deutsche Bank as Hitler. Somebody has to start vetting these events for appropriate entertainment and content. For more: Read more about: workplace 5. Bank of America to also settle FHFA charges?
Does JPMorgan Chase's massive $13 billion settlement have any implications for other banks? The $4 billion it will pay to the Federal Housing Finance Agency seems to be something of a precedent setter for the agency's negotiations with Bank of America and possibly other banks. Recall that the FHFA sued 17 banks and mortgage companies charging that they violated securities laws when they sold various defective MBSs to the big housing GSEs, Fannie Mae and Freddie Mac. By dint of its Countrywide purchase, Bank of America has the largest exposure, its securities worth more than $57 billion compared with $33 billion at JPMorgan, according to the Financial Times. The FHFA is "demanding even more from Bank of America, as it ratchets up pressure on other big banks." It apparently wants $6 billion to settle charges. That would appear to be about right. Other banks also have to deal with FHFA charges at some point. "Royal Bank of Scotland has a $30bn notional exposure and also faces a multibillion-dollar fine unless it manages to win the case in court. Credit Suisse, Goldman Sachs and Barclays are among the institutions with smaller claims against them. The settlement between the FHFA and JPMorgan is expected to be made public this week, the latest marker for banks that have so far declined to settle their claims. UBS, Citigroup and General Electric have already settled." Bank of America would be wise to follow the lead of JPMorgan Chase and seek a global deal to clear up its enforcement woes all at once. For more: Read more about: Bank of America, FHFA Also NotedSPOTLIGHT ON... VC firm aims for transparency Bloomberg Beta, a new VC firm launched earlier this year with financial backing from information giant Bloomberg, would like to usher in a new era of transparency in an otherwise opaque industry. Fortune notes that it recently posted its '"internal operating manual" online. "Included is everything from how to best pitch the firm, what it wants to know from references and its typical investment terms." In the words of a top executive: "As we thought about it, more and more of those advantages to secrecy — at least in the world of startups — seem like mirages. We started asking ourselves why startups and investors generally keep the terms of their investments confidential. We didn't have a great answer. We think that more shared data on funding startups will make us all better at it." Article Company News:
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Monday, October 21, 2013
| 10.21.13 | Jamie Dimon's strong argument
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