Also Noted: Spotlight On... Regulations hit hedge funds hard News From the Fierce Network:
Today's Top News1. Banks fare well with deposit growth
The Occupy Wall Street movement was either a pain in the neck or a profound social movement that defined an era. One could argue this every which way; the answer really depends on your view of the industry. Most big bank executives, of course, would argue for the former. The most forward-thinking, however, would also acknowledge that the movement was a wake-up call of sorts, one that they could ill afford to ignore. To lend some perspective to the debate, we can turn to FDIC data showing that the top banks are now carving out a greater share of the consumer deposits market. Total deposits rose 5 percent to $9.4 trillion in the year for 12 months that ended June 30. The six banks with the largest deposit totals saw their deposits rise at a much faster rate, 9 percent. The biggest six consumer banks -- led by Bank of America with $1.1 trillion -- held 30 percent of deposits. So what to make of this? Has the Occupy moment ended? It's a complex situation requiring a lot more in terms of metrics. But it's fair to say that banks aren't quite the villains they were just a few years ago. In fact, their reputations seem to be on the mend. That said, for credit unions and smaller institutions, the moment was not at all a waste. They adroitly marketed the issues in ways that generated lots of interest in what they have to offer, and they no doubt won a lot of smaller accounts. Another issue is whether consumers are better off. That's an equally complex issue. For more:
Read more about: Deposits
2. Prosecutors wise to not to charge JPMorgan for crimes of others
JPMorgan Chase appears willing to pay $13 billion to settle a raft of accusations of various mortgage-related frauds. It's even willing to admit guilt if the charges are carefully worded. And it's willing to strike this deal, even with the threat of a separate criminal prosecution in California hanging over its head. Some are therefore tempted to say that the government fared well in the high-powered negotiations between Attorney General Eric Holder and JPMorgan Chase CEO Jamie Dimon. At the same time, it's hard not to sympathize with the argument put forward by Dimon that many of the charges related to activity by Bear Stearns and Wachovia. These two troubled institutions that JPMorgan Chase purchased at the height of the financial crisis, partly at the request of federal regulators, who were desperate to strengthen the financial system. True, the bank got sweetheart deals, but the analysis at the time certainly didn't factor in future enforcement action. In fact, the bank thought that by buying the banks, they were guaranteeing lenient treatment. In the end, that's exactly what the bank got. The conventional wisdom, perpetuated by the bank itself, was that JPMorgan was indeed paying for the sins of the other banks. But in the final deal, the bank will pay nothing for crimes committed by those banks. It will pay $2 billion in penalties for its own crimes. This is a wise move by the government. As noted by the Financial Times, "The scale of the fines will need to be justified by something other than the desire to make a political point. Were the government to prosecute JPMorgan for the behaviour of Bear Stearns or WaMu before the deals, it would risk sending a signal that potential rescuers of troubled banks should steer clear. One would hope that no bank will have to play the rescue role JPMorgan played in 2008. Alas we cannot be certain. In these circumstances, Washington should be wary of humiliating JPMorgan." It may be that big banks are no longer too big to fail and that the system in place now makes buy-ins more likely than buy-outs. Still, the need for a bailout via a private sector deals may be necessary someday, and would-be rescuers will need assurances on future enforcement actions. For more: Read more about: Enforcement Action, JPMorgan Chase 3. SAC Capital investors to keep profits
Recall the extreme measures that the trustee in the Bernard Madoff case went to in his quest to recover ill-gotten gains from the massive Ponzi scheme. Irving Picard was perhaps thorough to a fault, alienating many. But when it comes to the SAC Capital insider trading case, a different picture has emerged. As SAC Capital founder Steven Cohen prepares to pay $1.4 billion to settle criminal insider trading charges against his firm, it's very doubtful that any of the limited partners will be asked to return any funds, notes the New York Post. This makes sense on some levels. In the Madoff fraud, virtually 100 percent of the gains were the result of a massive fraud. In the case of Steven Cohen, however, that cannot be said. Indeed, it would be very difficult to somehow separate the gains that stemmed from tainted trades from the more legitimate gains. It strikes some as unjust. "If an investor knew or had reasonable basis on which to believe that an enterprise is corrupt and the gains they were enjoying were ill-gotten, there are at least theoretical bases on which [prosecutors could] pursue their ill-gotten gains," the general counsel at a multibillion-dollar hedge fund was quoted. "But it's hard to establish." In the end, this is still a wakeup call for limited partners. They cannot afford to sit back and assume that their top performers are legitimate. For more: Read more about: insider trading, SAC Capital 4. Bank of America case wraps up
It's in the hands of the jury. After a six-week trial, it's verdict time for Bank of America, which was forced to defend against charges that its Countrywide unit knowingly sold defective mortgages to the big housing GSEs, Fannie Mae and Freddie Mac. The case stem from a move by the Justice Department to join a whistle-blower action against Bank of America filed by Edward O'Donnell, a former Countrywide executive who took the stand. He stands to make millions if the government prevails via the False Claims Act, under which he brought an action. He is now a Fannie Mae employee. It's surprising that the trial never generated much media interest, even though it was the first and only trial of a bank accused of selling defective mortgages. The trial featured a lone Countrywide executive on trial---Rebecca Mairone, a former chief operating officer of Countrywide's Full Spectrum Lending Division, which ran the so-called Hustle program aimed at generating more prime mortgage originations. To some, she is the equivalent of Fabrice Tourre at Goldman Sachs and Brian Stoker, of Citigroup. All were the single personal defendant in enforcement actions that might have targeted many others. Mairone spent time on the stand, proclaiming her innocence. It will be interesting to see how this turns out. Bank of America can ill afford a big judgment. For more: Read more about: Bank of America, mortgage backed securities 5. JPMorgan eyes another settlement
It would be easy to conclude right now that JPMorgan Chase is making an all-out push to put the bulk of its legal woes behind. You can hardly blame the executive staff for wanting to clear the decks, which explains the massive all-but-inked $13 billion settlement of an array of federal enforcement actions. But there is another settlement that has cropped up. Media reports hold that the bank has held various talks about a settlement with private MBS holders, the likes of BlackRock and Neuberger Berman. No agreement has been struck, but the holders are apparently seeking at least $5.75 billion to recover losses on allegedly tainted MBSs. These putbacks would cover the losses suffered due to allegedly faulty misrepresentation of the creditworthiness of these securities during the sales process. The same investor group, represented by the same law firm (Gibbs & Bruns), inked a deal with Bank of America in 2011 for $8.5 billion. Recall that the deal was reviled by other bond holders, led by AIG and others, as a deal unnecessarily generous to Bank of America and as a deal that was spawned by a conflicted trustee, Bank of New York Mellon. That settlement led to other suits, as the other bondholders tried to scuttle the original deal. The issue has yet to be resolved fully, but people would be surprised if the $8.5 billion deal were to survive. It remains to be seen how the current negotiations involving JPMorgan Chase will play out. But it's fair to say that any deal risks the wrath of "other" bondholders, some of whom may want more than the Gibbs & Brun-led group is willing to accept. The only certainty is that the litigation will stretch on. For more: Read more about: lawsuit, mortgage-backed securities Also NotedSPOTLIGHT ON... Regulations hit hedge funds hard So has the regulatory environment hit hedge funds hard? The discussion for years was dominated by talk about Dodd-Frank requirements, mainly Form PF and Form ADV Part 2. But the discussion deserves to be broadened, as "an avalanche of acronyms is threatening to overwhelm the industry's gentrified enclaves of Connecticut and Mayfair: from AIFMD to Mifid via Fatca and Ucits," notes the Financial Times. It notes a report from KPMG that annual operating costs have increased about 10 percent on average due to new compliance costs. Article
Company News:
| |||||||||||||||||||||||||||||||||||
Wednesday, October 23, 2013
| 10.23.13 | JPMorgan eyes another settlement
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment