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Today's Top Stories
1. Bank of America shakes up Merrill Lynch
2. Fomer Goldman Sachs employee charged with insider trading
3. More banks push customers to credit cards
4. Fine line between prop trading and market making
5. Zvi Goffer gets harsh term
Also Noted: IBM
Spotlight On... Another shot at a mortgage settlement?
UBS CEO fights for job; Discover tops estimates and much more...
News From the Fierce Network:
1. Where banks fit in the NFC digital wallet race
2. Intel unveils new security approach
3. Proxy access fizzles as SEC gives up on court case
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Today's Top News
| By Jim Kim |  Comment |  Forward |  Twitter |  Facebook |  LinkedIn |
Management turmoil is not going to go over well with the Thundering Herd at Bank of America. The loss of Sallie Krawcheck was a blow. But there will likely be more change coming down the pike as CEO Brian Moynihan ponders how to wring every ounce of value from wealth management unit Merrill Lynch.
At some point, Bank of America will have to settle on a team and a strategy, as incessant tinkering simply will not be tolerated. More changes have just been announced. To further streamline management and move authority closer to end clients, the bank has developed a new structure based on 11 regional operating units. Previously, the group comprised 4 units. These units will encompass all private banking and wealth management activity, and each will be led by an executive who reports up to John Thiel.
According to the company, the 11 new market leaders include: Brett Bernard, for the mid East region; Chris Dupuy, Pacific Northwest; Linda Houston, New England; Paul Lambert, mid-America; Bill Lorenz, mid-Atlantic; Jeff Markham, Greater Texas; Sabina McCarthy, New York City metro; Don Plaus, south Atlantic; Jeff Ransdell, Southeast; Jodi Rolland, heartland; and Chandler Root, southwest.
This shift has been in the works for months and was likely set in motion initially during the Krawcheck era. It makes sense on paper, but results can never be guaranteed.
For more:
- here’s a summary
Related articles:
Is the Thundering Herd restive?
Bank of America CEO Moynihan convenes execs, will face angry shareholders
At some point, Bank of America will have to settle on a team and a strategy, as incessant tinkering simply will not be tolerated. More changes have just been announced. To further streamline management and move authority closer to end clients, the bank has developed a new structure based on 11 regional operating units. Previously, the group comprised 4 units. These units will encompass all private banking and wealth management activity, and each will be led by an executive who reports up to John Thiel.
According to the company, the 11 new market leaders include: Brett Bernard, for the mid East region; Chris Dupuy, Pacific Northwest; Linda Houston, New England; Paul Lambert, mid-America; Bill Lorenz, mid-Atlantic; Jeff Markham, Greater Texas; Sabina McCarthy, New York City metro; Don Plaus, south Atlantic; Jeff Ransdell, Southeast; Jodi Rolland, heartland; and Chandler Root, southwest.
This shift has been in the works for months and was likely set in motion initially during the Krawcheck era. It makes sense on paper, but results can never be guaranteed.
For more:
- here’s a summary
Related articles:
Is the Thundering Herd restive?
Bank of America CEO Moynihan convenes execs, will face angry shareholders
| This week's sponsor is ANX. | |
 | A Risk Management Approach to Information Security Top Six Essentials to Your Risk Management Strategy Expanding regulatory environment and greater business complexities have transformed the way organizations are viewing information security. Download our Whitepaper, to learn how a risk-based, business-aligned and integrated IT Risk Management approach can lead to enhanced security, improved productivity and increased savings. |
| By Jim Kim | Comment | Forward | Twitter | Facebook | LinkedIn |
In an interesting civil action, the SEC has charged a former Goldman Sachs trader with insider trading, alleging that he tipped of his father to some impending ETF re-balancing activity that allowed them to generate a roughly $57,000 illicit profit. The trades were made in the name of another family member at a brokerage firm.
This may seem like small potatoes. But the SEC is intimating that this is merely a portion of a large puzzle it is seeking to crack. An agency official told the Financial Times: "We are aggressively working to identify and prosecute illegal insider trading across multiple markets and derivatives products."
This is very interesting. It seems to suggest that non-stock market insider trading cases are on the agenda, which could conceivably lead to an even bigger surge in prosecutions. There are vast areas that must have struck some ethically challenged traders as ripe territory. There is no technology-greased surveillance of most markets beyond equities. I would not be surprised if we see more ETF-oriented and perhaps some CDS-oriented cases before too long. This announcement coincides with the news of a rogue trader at UBS who structured ETF transactions for big clients. It would not surprise me if prosecutors have had their eyes on this market for a while now.
For more:
- here's the FT article
Related articles:
Goldman Sachs hedge fund tumbles again
Expert networking employee guilty of insider trading
Insider trading at S&P? SEC opens probe
This may seem like small potatoes. But the SEC is intimating that this is merely a portion of a large puzzle it is seeking to crack. An agency official told the Financial Times: "We are aggressively working to identify and prosecute illegal insider trading across multiple markets and derivatives products."
This is very interesting. It seems to suggest that non-stock market insider trading cases are on the agenda, which could conceivably lead to an even bigger surge in prosecutions. There are vast areas that must have struck some ethically challenged traders as ripe territory. There is no technology-greased surveillance of most markets beyond equities. I would not be surprised if we see more ETF-oriented and perhaps some CDS-oriented cases before too long. This announcement coincides with the news of a rogue trader at UBS who structured ETF transactions for big clients. It would not surprise me if prosecutors have had their eyes on this market for a while now.
For more:
- here's the FT article
Related articles:
Goldman Sachs hedge fund tumbles again
Expert networking employee guilty of insider trading
Insider trading at S&P? SEC opens probe
| By Jim Kim | Comment | Forward | Twitter | Facebook | LinkedIn |
With the effects of the Durbin Amendment still dawning on the card industry, we're seeing a shift by some banks to once again emphasize credit cards over debit cards. Bank credit card issuance has grown markedly recently.
According to Equifax, the number of new bankcards issued increased 27 percent from May 2010 to May 2011. During January-May 2011, almost 15 million new bankcards have been issued, a 3-year high. But that's not all that much compared to the 28.5 million credit cards issued in the January-May 2007 period. Interestingly, the surge is being powered by more issuance to subprime borrowers.
The WSJ notes that banks have kicked into overdrive in terms of direct mail solicitations. Citi alone sent more than 346 million card offers to North American residents. "That is more than one for every man, woman and child in the U.S." American Express, JP Morgan Chase and Bank of America have also been active.
In some cases, banks are pushing certain customers who want to hang onto debit card rewards to credit cards. Are we set for a new boom in credit card use? The consumer economy continues to limp along, and a double dip in the economy is possible. But the credit card metrics are improving at most banks, and the need for more fee revenue is acute. Debit cards have been devalued just a bit in the mind of some bank executives thanks to the reduced interchange fees that the Durbin Amendment ushered in.
For more:
- here's a release
Related articles:
Diebold's bold new card security feature
The biggest credit card system in the world
Citigroup's Simplicity card aims for high credit scores
According to Equifax, the number of new bankcards issued increased 27 percent from May 2010 to May 2011. During January-May 2011, almost 15 million new bankcards have been issued, a 3-year high. But that's not all that much compared to the 28.5 million credit cards issued in the January-May 2007 period. Interestingly, the surge is being powered by more issuance to subprime borrowers.
The WSJ notes that banks have kicked into overdrive in terms of direct mail solicitations. Citi alone sent more than 346 million card offers to North American residents. "That is more than one for every man, woman and child in the U.S." American Express, JP Morgan Chase and Bank of America have also been active.
In some cases, banks are pushing certain customers who want to hang onto debit card rewards to credit cards. Are we set for a new boom in credit card use? The consumer economy continues to limp along, and a double dip in the economy is possible. But the credit card metrics are improving at most banks, and the need for more fee revenue is acute. Debit cards have been devalued just a bit in the mind of some bank executives thanks to the reduced interchange fees that the Durbin Amendment ushered in.
For more:
- here's a release
Related articles:
Diebold's bold new card security feature
The biggest credit card system in the world
Citigroup's Simplicity card aims for high credit scores
| By Jim Kim | Comment | Forward | Twitter | Facebook | LinkedIn |
The Kweku Adoboli scandal at UBS has highlighted once again the tricky nature of proprietary trading versus market making.
In the U.K., there is no Volcker amendment that bans proprietary trading. Proprietary trading as part of market making operations continues to thrive, especially as part of Delta One desks, where Adoboli worked. Obviously, Adoboli gamed the system somehow and was able to bypass risk management checks. But there's no law against proprietary trading as clients are serviced. Delta One desks are so profitable right now in part because of this trading.
One might hold up the Volcker Amendment as an example of good regulation in the aftermath of the financial crisis, suggesting that this sort of rogue trading will not be possible under the amendment. But that's not quite true just yet. The final rule set has yet to be determined, and there's a lot of debate about how prop trading and marketing making can best be separated. At an aggregated level, distinguishing the two will be difficult given that banks engage in so many different types of trading in so many different types of securities.
But most likely, individual banks will be asked to come up with their own compliance processes and develop their own metrics in a few areas: Revenue based, revenue-to-risk, inventory and customer flow. The Financial Stability and Oversight Council has put forward some recommendations that many think will ultimately be adopted. It would seem at this point that separating prop trading from marketing is possible, but the ultimate solutions remain elusive.
For more:
- here's a Reuters overview
Related articles:
UBS rogue trader Kweku Adoboli: Shades of Jerome Kerviel
Delta One desks, ETFs and the UBS fiasco
In the U.K., there is no Volcker amendment that bans proprietary trading. Proprietary trading as part of market making operations continues to thrive, especially as part of Delta One desks, where Adoboli worked. Obviously, Adoboli gamed the system somehow and was able to bypass risk management checks. But there's no law against proprietary trading as clients are serviced. Delta One desks are so profitable right now in part because of this trading.
One might hold up the Volcker Amendment as an example of good regulation in the aftermath of the financial crisis, suggesting that this sort of rogue trading will not be possible under the amendment. But that's not quite true just yet. The final rule set has yet to be determined, and there's a lot of debate about how prop trading and marketing making can best be separated. At an aggregated level, distinguishing the two will be difficult given that banks engage in so many different types of trading in so many different types of securities.
But most likely, individual banks will be asked to come up with their own compliance processes and develop their own metrics in a few areas: Revenue based, revenue-to-risk, inventory and customer flow. The Financial Stability and Oversight Council has put forward some recommendations that many think will ultimately be adopted. It would seem at this point that separating prop trading from marketing is possible, but the ultimate solutions remain elusive.
For more:
- here's a Reuters overview
Related articles:
UBS rogue trader Kweku Adoboli: Shades of Jerome Kerviel
Delta One desks, ETFs and the UBS fiasco
| By Jim Kim | Comment | Forward | Twitter | Facebook | LinkedIn |
Zvi Goffer is not much of a gambler.
He rolled the dice by taking his insider trading case to trial, where his best defense efforts went down in flames. He gambled again when he threw himself at the mercy of the court after the jury convicted him. In a striking letter to the judge, he waived his right to appeal and flatly admitted his guilt. This was seen as especially odd in that he had been defending himself arduously at trial. He was making a blatant bid for lenient sentence, but guess what? He was sentenced to 10 years of hard time, a sentence close to his prosecutors' recommendations. That ranks as one of the longest sentence ever imposed for insider trading-not what Goffer had in mind.
The New York Times quoted the judge: "This will be used to send a message to Wall Street. These crimes are not going to be tolerated."
Winifred Jiau, a bit player who should never have taken her case to trial, got 4 years, which was below the six to eight years prosecutor's recommended. All this sets the stage for the sentencing of Raj Rajaratnam, the convicted insider trading master mind around whom the likes of Goffer and Jiau revolved.
My sense is that Judge Richard Holwell will lower the boom with a sentence of perhaps 15 to 20 years. That would be below the prosecutor's recommendations. It's doubtful he'll buy the idea that insider trading is a victimless crime and therefore does not require harsh penalties. When he sentenced Danielle Chiesi, he was quoted as saying, "The message to Wall Street needs to be loud and clear: If you trade on inside information, you will be caught, convicted and sent to prison."
For more:
- here's the article
Related articles:
Zvi Goffer pleads for mercy, says he has changed
Zvi Goffer, two others found guilty of insider trading
Wiretaps--a short-lived advantage for prosecutors
He rolled the dice by taking his insider trading case to trial, where his best defense efforts went down in flames. He gambled again when he threw himself at the mercy of the court after the jury convicted him. In a striking letter to the judge, he waived his right to appeal and flatly admitted his guilt. This was seen as especially odd in that he had been defending himself arduously at trial. He was making a blatant bid for lenient sentence, but guess what? He was sentenced to 10 years of hard time, a sentence close to his prosecutors' recommendations. That ranks as one of the longest sentence ever imposed for insider trading-not what Goffer had in mind.
The New York Times quoted the judge: "This will be used to send a message to Wall Street. These crimes are not going to be tolerated."
Winifred Jiau, a bit player who should never have taken her case to trial, got 4 years, which was below the six to eight years prosecutor's recommended. All this sets the stage for the sentencing of Raj Rajaratnam, the convicted insider trading master mind around whom the likes of Goffer and Jiau revolved.
My sense is that Judge Richard Holwell will lower the boom with a sentence of perhaps 15 to 20 years. That would be below the prosecutor's recommendations. It's doubtful he'll buy the idea that insider trading is a victimless crime and therefore does not require harsh penalties. When he sentenced Danielle Chiesi, he was quoted as saying, "The message to Wall Street needs to be loud and clear: If you trade on inside information, you will be caught, convicted and sent to prison."
For more:
- here's the article
Related articles:
Zvi Goffer pleads for mercy, says he has changed
Zvi Goffer, two others found guilty of insider trading
Wiretaps--a short-lived advantage for prosecutors
Also Noted
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The hope of a comprehensive settlement between banks and states over mortgage and foreclosure practices has been dashed as of late. But a movement is underway to try and revive the negotiations. A small group of states, including California and Iowa, are slated to meet with the likes of Bank of America, JP Morgan Chase and Ally Financial to try and salvage a global deal. The issue is the extent to which the deal will give banks immunity from lawsuits over various mortgage practices. Some states want to preserve the right to go after the banks in court. Article
Company News:> UBS CEO fights for job. Article
> Goldman Sachs stock swoons. Article
> Bank of America as a penny stock. Article
> JP Morgan sues CIBC. Article
> JP Morgan spars with fed on capital rules. Article
> Jefferies sells stake to bank. Article
> Goldman Sachs names new M&A head for Europe, Asia. Article
> Discover tops estimates. Article
> Meaning of Deutsche Bank swaps ruling. Article
Industry News:
> 10-year Treasury yields hit new low. Article
> Mortgage rates stay low. Article
Regulatory News:> Are Basel rules leveling the field? Article
And Finally...Why people marry the wrong person. Article
> Goldman Sachs stock swoons. Article
> Bank of America as a penny stock. Article
> JP Morgan sues CIBC. Article
> JP Morgan spars with fed on capital rules. Article
> Jefferies sells stake to bank. Article
> Goldman Sachs names new M&A head for Europe, Asia. Article
> Discover tops estimates. Article
> Meaning of Deutsche Bank swaps ruling. Article
Industry News:
> 10-year Treasury yields hit new low. Article
> Mortgage rates stay low. Article
Regulatory News:> Are Basel rules leveling the field? Article
And Finally...Why people marry the wrong person. Article
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