Morning Scan
Wednesday, September 8, 2010
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Receiving Wide Coverage ...
Basel Near Accord on Bank Rules: The paper said the Basel Committee on Banking Supervision appears to be close to an agreement on tighter regulation. The Journal said new capital requirements for the world's largest banks could force financial institutions to maintain larger buffers than envisioned just a few weeks ago. It said banks could also face new limits on their ability to pay dividends to shareholders based on their financial footing. The Times said word of the tighter requirements prompted "renewed warnings from the banking industry that economic growth could suffer if institutions were required to raise more capital to insulate against market shocks." New York Times
Quote Stuffing: SEC Chairman Mary Schapiro said the agency is looking "quote stuffing," the practice of placing unusually large numbers of orders to buy or sell stocks in a fraction of a second, only to cancel them almost immediately, to assess whether it violates "existing rules against fraudulent or other improper behavior." Schapiro said the agency is considering requiring traders to hold orders open for minimum periods. A Bloomberg article published in the Post said "regulators are under pressure to show they have a grip on markets dominated by electronic trading." Wall Street Journal, New York Times, Washington Post
Business as Usual? Barclays confirmed that investment-banking boss Robert E. Diamond, Jr., will become the U.K. bank's chief executive next spring. The Journal said Diamond's "Wall Street pedigree suggests to some observers that he will cement Barclays's current reliance on corporate and investment banking as the company's primary profit engine, which some consider a vulnerability, given the volatility of investment banking." The paper's "Heard on the Street" column sounded a similar note, saying Diamond's promotion "is bound to lead to a change in management style. Whether that is something investors should welcome is less clear. Without Mr. Varley as a restraining influence, Mr. Diamond will be free to further increase Barclays's focus on riskier investment banking." The FT said Diamond's pay — he will have an annual salary of £1.35 million, and his annual bonus will be two and a half times his salary, "is likely to be a point of friction," — as Diamond "has come under attack before on remuneration levels." The Times also said Diamond has "received criticism as one of Britain's highest paid bankers." In the Times, "Breakingviews" said "It's not impossible that Mr. Diamond could one day make a shareholder-friendly argument that Barclays would be better off based in the United States. Such a move might require Barclays to spin off its British retail banking arm, but that is something Mr. Diamond might be more willing to contemplate than his predecessor was."
In other executive moves, HSBC Chairman Stephen Green left to take up the post of U.K. trade minister. The Journal said his sudden departure "has touched off a scramble to find his successor that could significantly reshape the bank's senior management team." It is also "likely to renew questions about whether HSBC will move its headquarters back to Hong Kong, where it was based until 1993." Wall Street Journal, New York Times
Wall Street Journal
EU finance ministers remained divided on a blocwide bank levy and a fresh tax on financial transactions, "indicating that neither measure is likely to materialize in coming months."
Ireland said it would extend certain government guarantees for its troubled banks in what the paper described as a bid to quash concerns about the health of the nation's financial sector.
Bank of America Merrill Lynch is expected to tap Nomura European M&A honcho Adrian Mee as its head of international M&A.
Goldman Sachs plans to enter a partnership with Chicago securities firm Incapital to sell municipal bonds to individual investors. The paper said the move allows Goldman "to branch out into a lucrative area of the fixed-income markets, a haven for retail investors scared off by volatility in the stock market and riskier corporate credit markets."
"Credit Markets" interviewed Harrisburg Mayor Linda Thomson about the city's decision to skip a municipal bond payment: "To disrupt [services] because we can't make a bond payment would just be unconscionable. And as a leader I couldn't do it … There are always ways to restructure our debt and work out with our debtors, but you can't have trash piling up in your neighborhoods. That's a health issue. You can't have chaos in your communities."
New York Times
A front-page story looked at the political ties that sheltered Kabul Bank for so long. "Now Kabul Bank sits at the center of a financial crisis that has exposed the shadowy workings of the country's business and political elite, and how such connections shielded the bank from scrutiny."
Another front-page story discussed how toxic Wall Street ties have become for political candidates. "As unpopular as Washington incumbents and Albany insiders have been this political season, nothing is so radioactive in the precincts of New York as the taint of Wall Street ties."
In "Economic Scene," David Leonhardt said he's taken a less bearish view of the housing market, seeing homeownership more as a luxury item than a staple like food and clothing. "If you believe housing resembles a luxury good, then you'll end up thinking house prices will rise nearly as fast as incomes in the long run and that houses today aren't terribly overvalued. If housing is a staple, though, prices will rise more slowly — with general inflation, as food tends to."
The company that helps make paper currency for 150 countries, De La Rue, is being investigated by British authorities for "'deliberately falsified' tests on paper used to make bank notes."
Britian's chancellor of the Exchequer endorsed new regulatory agencies that will supervise financial activities across the European Union. "In a sense, the move signaled the government's allegiance to the 27-country bloc, but [George Osborne] insisted that he had successfully defended Britain's fiscal sovereignty and shielded its financial sector from overly burdensome regulation."
A Bloomberg News story said high-profile analyst Meredith Whitney predicts securities firms will slash as many as 80,000 jobs in the next year and a half. She also said payouts will be "down dramatically."
Washington Post
Mahmoud Karzai, the brother of Afghanistan's President Hamid Karzai, made about $1 million on a Dubai property deal financed by Kabul Bank, according to a source familiar with the deal.
An editorial said President Obama's proposal to create a national infrastructure bank and accelerate infrastructure spending "would be good policy, both short- and long-term" although it won't speed up job growth.
, with contributions from Sara Lepro and Rachel Witkowski
