Goldman staffs new venture; Volcker unloads on banks
Receiving Wide Coverage ...
End of an era
More than 10 years after it bought the firm “in a fire sale in the heat of the 2008 financial crisis,” Bank of America is phasing out the Merrill Lynch name from some of its businesses, including its hallmark trading and investment banking units. It’s also rebranding most of its wealth management business as simply Merrill. “The rebranding marks the end of an era. Merrill Lynch had a long history on Wall Street. The change also reflects how times have changed at Bank of America. The bank was once too embroiled in various postcrisis problems to devote energy to renaming the major businesses it bought. But now it is minting steady, record profits, in part by encouraging its various units to work more closely together.”
“That the Merrill Lynch name has survived at all is a testament to the strength of the brand: Wall Street acquirers have a penchant for erasing the identities of their acquisitions, either immediately or after a decent interval," the Financial Times notes.
Not a fan
Former Federal Reserve Chair Janet Yellen said she doesn’t believe President Trump understands economic policy or the Fed’s mission. “I doubt that [Mr. Trump] would even be able to say that the Fed’s goals are maximum employment and price stability,” she said in an interview on the American Public Media radio program “Marketplace.” She also said the president’s past criticism of Fed policy could make it harder for the Fed to do its job.
Janet Yellen wasn’t the only former Fed chair making news on Monday. In a lengthy interview with Wells Fargo Securities bank analyst Mike Mayo, published on the CFA Institute’s website, Paul Volcker took the banking industry to task for becoming “too focused on incentives and not enough on customer service.” The former Fed chair “was unsparing in his views about the dangers coming from the focus on profits ahead of sound business practices.”
In a follow-up interview on CNBC, Mayo said he agreed with Volcker.
Ready to roll
Goldman Sachs has hired 100 people in its new corporate cash management business, “about a third of an initial 300-person target for the venture. Winning even a small market share from incumbents such as Citi and JPMorgan would advance Goldman’s quest of further diversifying earnings from its traditional — and volatile — base of investment banking fees and trading.”
At the same time, “Goldman is going after business it was once too snobby to chase,” meaning small and midsize corporations. But “will the smartest minds on Wall Street be content working on measly deals?”
Executives at leading British financial services companies say they are "now under almost constant fire from [cyber] attackers," validating a report that financial companies reported 145 data breaches to the U.K.'s Financial Conduct Authority last year, up from just 25 the year before. Investment banks reported the most incidents, at 34, up from three in 2017, while the number of attacks at retail banks jumped from one to 25.
The Bank of England said it will begin lending cash to banks on a weekly rather than a monthly basis beginning next month to prevent a possible shortage as the U.K. leaves the European Union. “The BoE is seeking to prevent any possibility that Brexit could be the trigger for a financial crisis or a squeeze on credit.”
New York Times
It doesn't add up
While the Germany government wants to “strong-arm Deutsche Bank into a merger with its Frankfurt crosstown rival Commerzbank, which also has major problems … analysts and investors warn that the sum of two ailing Frankfurt banks is not necessarily one healthy bank.” So would a merger “make any sense?” The paper takes an in-depth look at some of the major issues.
A lawyer who has worked closed with the payday lending industry helped “tilt academic research in its favor” which led to the Consumer Financial Protection Bureau’s recent decision to ease restrictions on the business, the paper says. The report sheds “new light on the extensive battle payday lenders have waged to influence and undermine federal regulations.”
“There have been increasing concerns about the culture of the financial system, banking in particular. The Holy Grail has been that the only thing that matters is how much profit the firm (and you) make. I am concerned. What’s the role of directors in keeping culture under control? Can the directors of a big bank really do an effective job of overseeing an institution? Or do they see their job as protecting the chief executive officer who they appointed? Or maybe the chief executive officer appointed them, so there is a certain amount of built in mutual interest in ducking emphasis on internal controls.” — Former Fed Chair Paul Volcker in an interview with Wells Fargo Securities bank analyst Mike Mayo for the CFA Institute.