Wednesday, March 14, 2012
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Receiving Wide Coverage ...
The Muppet Show: Greg Smith is leaving Goldman Sachs today, and oh man is he going out with a bang. In an incendiary op-ed/open resignation letter in the Times, Smith, who was an executive director and head of equity derivatives for Europe, the Middle East and Africa, laments that the firm’s “moral fiber” has deteriorated. “I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.” In addition to reporting the use of standard trader slang like “ripping eyeballs out” and “hunt[ing] elephants” (wasn’t that one in Oliver Stone’s original Wall Street movie?), Smith reveals that his former colleagues have coined a wryly condescending name for their unwitting clients: “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail.” In response, Goldman Sachs is telling reporters: “We will only be successful if clients are successful. This fundamental truth lies at heart of how we conduct ourselves.” The op-ed is naturally generating a great deal of blogosphere buzz this morning. There’s already a parody on the U.K. humor site The Daily Mash, entitled “Why I am leaving the Empire, by Darth Vader.” Speaking of Goldman’s treatment of clients, the CFTC has fined the firm $7 million “for failing to diligently supervise accounts that it carried for a brokerage client.”New York Times, Wall Street Journal, Financial Times, Reformed Broker, Business Insider, The Daily Mash.
Stress Relief (Mostly): Most of the 19 megabanks passed the stress tests. Some will raise their dividends. (Here’s a scorecard from the Times.) Notable exception: Citi, one of the four that failed the tests. The Fed rebuffed the bank’s plan to return capital to shareholders, embarrassing CEO Vikram Pandit after he “had spoken confidently in recent months about … the bank's ability to return capital in 2012,” the Journal’s “Heard on the Street” column says. “Pandit looks like this year's version of Bank of America chief Brian Moynihan, who in 2011 overpromised on capital returns only to be shot down by the Fed.” (A separate “Heard” item takes a deep dive into another issue weighing on Citi’s stock valuation: its deferred tax asset.) The FT says there’s still a lot of criticism of the Fed’s stress test process, both from industry representatives who say it’s too harsh and from financial-reform advocates who say it’s too lax. The results “were rushed out two days early after the Fed said it was concerned about information leaking,” according to another FT article. The Journal reports that JPMorgan, one of the firms that passed the tests, irritated its peers by announcing its results — and plans to raise dividends and repurchase shares — 90 minutes before the Fed put out its release. Banks had been told by the Fed to wait for the regulator before making individual announcements. An anonymous “senior Fed official” tells the paper that JPM inadvertently jumped the gun because of “miscommunication between the Fed and J.P. Morgan.” The “Lex” column in the FT tells this part of the story a little differently: “JPMorgan’s move to increase dividends by a fifth and authorise a $15bn buyback came after being given the all-clear by the Fed, which was later forced to release all the results.” Hmm…
The Paper Chase: And speaking of JPMorgan Chase, American Banker’s scoop that the OCC’s been investigating the bank’s credit card collection processes got picked up by a number of major news outlets. After declining to comment for AB’s story, JPMorgan eventually began giving reporters a statement acknowledging it had discovered procedural issues but declaring that “in the overwhelming majority of cases, the amount collected from customers was correct.” CBS News, Businessweek, Rolling Stone, ThinkProgress, Consumerist, Naked Capitalism
Wall Street Journal
PayPal has softened (or “clarified,” as the company puts it) a controversial policy restricting use of its service to pay for potentially obscene digital books.
New York Times
Columnist Joe Nocera, disappointed that prosecutors did not charge Lehman’s Dick Fuld or Countrywide’s Angelo Mozilo, says it would be even worse for public confidence in the system if no one at MF Global is called to account.
, with contributions from Katherine Kane.