Monday, September 12, 2011
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Receiving Wide Coverage ...
Remembering 9/11: Of special interest to this audience, the Times' "Dealbook" interviews several financial services executives who were working at the World Trade Center the day of the attacks: a security officer for the NYSE, a Merrill Lynch trader, a Cantor Fitzgerald tech officer and a CFTC lawyer.
It also seems appropriate this morning to remind readers of the recent profiles of financial firms that were located in the Trade Center and have come back strong since the tragedy: Keefe Bruyette & Woods (in the Journal), Cantor Fitzgerald (in the Times) and Sandler O'Neill (in Fortune).
Dimon Speaks: JPMorgan Chase Chief Executive Jamie Dimon is all over the Financial Times. In the story with the big headline quote, he calls the Basel III capital rules "blatantly anti-American" and suggests U.S. regulators should pull out of the group of officials that write the international capital standards. In a second, longer story, he elaborates on why he considers Basel "a miscarriage of justice" toward his country. In a nutshell, it's regulatory arbitrage. For example, mortgage servicing rights, an asset unique to the U.S., are heavily discounted in Basel III, and Ginnie Mae mortgage-backed securities are treated less favorably than European covered bonds. Quoth Dimon: "There are plenty of countries out there that are happy with the changes being implemented in the U.S. They realize that they can be huge beneficiaries of this. I'm talking about China, India, Singapore, Japan. I wouldn't want to see, 20 years from now, the U.S. asking, 'what happened? How come the winners in the marketplace are all outside the U.S.?'" If you still want more, there's also a brief Q&A in which Dimon demonstrates he has no sacred cows by taking a shot at Paul Volcker.
Dodd-Frank Deluge, Part Deux: Speaking of the generally-beloved former Fed chairman, regulators are likely to miss the Oct. 18 deadline to put into practice Dodd-Frank's Volcker rule, which limits proprietary trading and equity investments by banks. The agencies haven't even agreed on a draft proposal, though one might come out as soon as this week.
Surely by now you've heard a colleague make a crack about how the Dodd-Frank Act has been "the full-employment law for the lawyers" or somesuch. In this "Dealbook" story, a Democratic member of the Commodity Futures Trading Commission makes a similar comment, but in all earnestness, and predicts the regulatory overhaul will energize hiring in the financial and tech sectors. "The possibilities for economic growth and competition here are mind-boggling," Bart Chilton says. "I have no doubt that these new regulations, instituting new types of clearing, trading and reporting platforms, will foster a landslide of hiring in the financial sector. … All of this new trading activity, with new regulatory oversight requirements, will mean the development of new technologies, both in the private and public sectors." Free-marketeers who just spat out their coffee: Don't take another sip. Chilton made his remarks in a building named after Ronald Reagan. If you read the speech you'll see the irony's not lost on him.
Big Day for B of A: A Times story rounds up all the recent drama surrounding Bank of America and tees up CEO Brian Moynihan's speech, to be given Monday at an investor conference, in which he will lay out the strategy of the "New BAC." "Anything less than a bold new blueprint," the story says, "is likely to leave already frustrated investors grumbling. 'He's got to say something new, otherwise it'll be a real dud,' said Chris Kotowski, an analyst with Oppenheimer. 'There's a lot of cynicism. People are going to be skeptical of any numbers they put out.'" No pressure or anything, Brian. Meanwhile, the Journal's "Ahead of the Tape" advises investors to pay attention to what other banks say at the conference about earnings forecasts, and then summarizes the issues facing the broader banking sector (net interest margin compression, the European debt crisis, weak U.S. loan demand, and diminishing returns from releases of loan-loss reserves).
Wall Street Journal
Elaborating on a comment in President Obama's speech Thursday night, the Federal Housing Finance Agency said it's looking at expanding the two-year-old Home Affordable Refinancing Program so more homeowners could take advantage of current superlow rates. But how many homeowners, exactly? The Journal reports that "the administration reached out to bond dealers on Friday to dismiss any speculation that it is considering a massive new refinance initiative for high-rate loans, which have roiled mortgage-bond markets in recent weeks," suggesting to us that even an expanded HARP will have limitations. Under HARP so far, "Just 838,000 borrowers have refinanced, short of the hoped-for four million to five million."
If the Fed goes ahead with the much-discussed "Operation Twist," bankers' profits would be further constricted, a Journal story notes, as lowering long-term rates would squeeze net interest margins. We might add that the contortion puns are going to get old really fast.
The Fed seems to be worried that Capital One's proposed acquisition of ING Direct might make the buyer too big to fail. In questions the regulator reportedly never asked in merger applications previously, the Fed wants to know "the nature and dollar volume" of businesses both banks are in, and it asked Capital One to describe businesses where either bank is a "market maker" and report exposure to counterparties. The paper reports Capital One defended the deal and said it was not involved in businesses that would create systemic risk.
Wells Fargo may be a bidder for KBL European Private Bankers, a business Belgium's KBC Group needs to sell under a restructuring agreement it made with the European Commission.
New York Times
Columnist Gretchen Morgenson is disappointed in the enforcement record of the Sarbanes-Oxley Act's clawback provision. It took five years after the law was passed in 2002 for the SEC to bring its first case under this section, and in total only 31 executives at 20 companies have been asked to return pay. One of those cases involved the ATM maker Diebold; another centered on the failed subprime mortgage lender New Century. Morgenson contrasts the six-figure sums executives from these companies gave back with the much higher amounts they collected.
A story rounds up all the recent drama surrounding Bank of America and tees up CEO Brian Moynihan's speech, to be given Monday at an investor conference, in which he will lay out the strategy of the "New BAC." "Anything less than a bold new blueprint," the story says, "is likely to leave already frustrated investors grumbling. 'He's got to say something new, otherwise it'll be a real dud,' said Chris Kotowski, an analyst with Oppenheimer. 'There's a lot of cynicism. People are going to be skeptical of any numbers they put out.'" No pressure or anything, Brian.
The Times interviews (by email) "Comodohacker," who's been wreaking havoc by hacking digital "certificate authority" companies, and thus finding ways to break encryption of data. Charming fellow, you'll find.
, with contributions from Katherine Kane, Andy Peters and Gary Siegel.