Big investors welcomed by Fed; Morgan Stanley shifts top woman executive
Receiving Wide Coverage ...
President Trump’s “political attacks on the Fed are hurting his own nominees,” as exhibited by Herman Cain’s withdrawal as a potential nominee, the Wall Street Journal argues. The president “made Mr. Cain’s nomination look like an attempt to undermine Fed independence rather than an attempt to put some fresh monetary thinking on the board. The same is true for our former colleague Stephen Moore, who is also on the receiving end of the left’s politics of personal destruction. Yet as long as Mr. Trump continues his Twitter campaign against Chairman Jerome Powell and the Fed, he’ll be hamstringing his own nominees and the broader case for more intellectual diversity at the Eccles building.”
Moore’s “writings helped him land a promised nomination to the Federal Reserve from President Trump, but they could hurt his chances at Senate confirmation, if Mr. Trump officially nominates him,” the New York Times says. “Mr. Moore’s long paper and video trail contains potential roadblocks to confirmation — particularly a history of writing about women in unflattering terms.”
Deutsche Bank is considering creating a “bad bank” that would “house unwanted assets and businesses that could be earmarked for closure, part of contingency planning under way should a possible merger with German rival Commerzbank fall through. Planning for a possible no-deal outcome has taken on greater urgency at Deutsche Bank as merger talks have proven more complicated than proponents originally expected.”
Separately, Deutsche Bank and UBS “are in serious talks” to merge their asset management divisions “in a deal that would create a new European champion in the investment industry. If completed, the merged asset manager would leapfrog France’s Axa and the UK’s Legal & General and create a rival to France’s Amundi, Europe’s largest money manager with just over €1.4 trillion under management.”
SoftBank plans to invest about €900 million ($1 billion) in the German payments company Wirecard. The Japanese technology conglomerate will buy five-year Wirecard bonds that can convert into a 5.6% equity stake. The investment “may be viewed as a vote of confidence” in Wirecard, which has been accused of accounting misconduct in Asia. Wall Street Journal, Financial Times
Meanwhile, SoftBank founder Masayoshi Son lost more than $130 million on bitcoin, buying at the peak “of the bitcoin frenzy in late 2017 after the digital currency had already risen more than 10-fold that year,” then selling “in early 2018 after bitcoin had plummeted.” He “made the investment at the recommendation of a well-known bitcoin booster, whose investment firm SoftBank bought in 2017. Mr. Son’s previously unreported loss shows that even some of the world’s most sophisticated and wealthiest investors got caught up in the frenzy.” Wall Street Journal, Financial Times
Wall Street Journal
Come on board
The Federal Reserve wants to “make it easier for private-equity funds and other investors to own large stakes in banks without triggering its oversight.” The Fed approved unanimously a proposal that “says investors with less than a quarter of voting shares in a bank could name several directors on its board—up from a maximum of two—without triggering control, as long as they limit business relationships and other ties. The plan could also make it easier for financial technology startups to obtain investment cash.” (American Banker's take here.)
Shelley O’Connor, co-head of Morgan Stanley’s wealth management division and “the only woman atop a major business line at the firm,” has been named chief executive of the bank’s two regulated bank entities, where it is pushing mortgages, deposit accounts and other Main Street products.” The move “holds clues for the race to succeed Chief Executive James Gorman and shows the firm leaning into the type of plain-vanilla banking activities it once avoided.”
Trouble with the curve
State Street stock fell 4% after it released its first-quarter results, “another sign of the pressure facing certain banks as long-term interest rates soften. Revenue at custody banks—like the broader banking industry—is being hurt by the yield curve, which inverted last month.”
Barclays CEO Jes Staley’s move to directly manage the bank’s investment banking unit and cut bonuses shows that the “polite demands” being made by activist investor Edward Bramson “look like they are being heeded.” It also “makes it more likely [Bramson] will lose his board vote on Thursday.”
Banks are using technology to reach more unbanked people in the Middle East and Africa, according to a special report on financial inclusion in the FT.
“Providing all stakeholders with clearer rules of the road for control determinations will responsibly reduce regulatory burden. As a result, it will be easier for banks, particularly community banks, to raise capital to support lending and investment.” — Fed Chair Jerome Powell announcing the Fed’s proposal to make it easier for investors to own large shares of banks without triggering Fed oversight.