Last man standing: David Solomon is now the sole heir apparent to Goldman Sachs CEO Lloyd Blankfein after his main rival and co-president, Harvey Schwartz, resigned. The firm’s decision to choose Solomon, an investment banker, over Schwartz, a trader, to possibly succeed Blankfein “amounts to a bet that the coming decade will look little like the last one, as Goldman continues to evolve from a secretive trading powerhouse into a more entrepreneurial place,” the Wall Street Journal says. Solomon “is known less as a superstar deal maker than a strong manager, able to prune dead weight, motivate strivers and marshal Goldman’s resources behind big initiatives.” Wall Street Journal, Financial Times here and here, New York Times here and here, Washington Post
David Solomon, co-president and co-chief operating officer of Goldman Sachs Group Inc., speaks during a Bloomberg Television interview at the Goldman Sachs Technology and Internet Conference in San Francisco, California, U.S., on Wednesday, Feb. 14, 2018. Solomon discussed M&A activity, tax reform and the recent market volatility. Photographer: David Paul Morris/Bloomberg
David Paul Morris/Bloomberg
Could it be Kudlow?: Larry Kudlow, a veteran cable TV economic analyst and a former economic adviser in the Reagan administration, is reportedly being considered to replace Gary Cohn as director of the National Economic Council. Wall Street Journal, Washington Post
Wall Street Journal
Wide margin: CEO Brian Moynihan earned 250 times as much as the median Bank of America employee last year, the bank disclosed Monday. The employee-pay disclosure was mandated by the Dodd-Frank Act, and B of A is the first large bank to disclose the figure. Moynihan made $23 million in 2017, compared to the median $87,115 compensation at the bank.
Financial Times
Clean up your act: The U.K.’s financial regulator, the Financial Conduct Authority, is calling for banks and other financial services firms to reform in a report that blames “bad culture, rather than individuals, for conduct failings since the financial crisis.”
At the same time, the Banking Standards Board, a private-sector body founded following the U.K. Parliamentary Commission on Banking Standards’ 2013 report on the Libor rigging scandal, has published a statement of principles that challenges firms “to make a strategic commitment to strengthening professionalism across their organizations and provides a practical blueprint for doing so.”
Don’t jump: The Bank for International Settlements is warning that central bankers risk destabilizing the global financial system by “jumping on the bitcoin bandwagon” or creating their own digital currencies. “A central bank digital currency could allow for ‘digital runs’ towards the central bank with unprecedented speed and scale,” the BIS says.
Digital currencies are “poor imitations of money,” and “policymakers are rightly worried about consumer and investor abuses, as well as illicit use,” write Benoît Coeuré, chair of the BIS Committee on Payments and Market Infrastructures, and Jacqueline Loh, chair of the Markets Committee, in an op-ed. But “they might be an early sign of change, just as Palm Pilots paved the way for today’s smartphones. Cash will not be king forever, even though it still rules in many parts of the world.”
New York Times
Big Vision: SoftBank is looking to create an asset management firm that would go head-to-head against private equity giants like Blackstone Group, Kohlberg Kravis Roberts and Carlyle. Though not yet formally established, the firm will be called SoftBank Financial Services, with Fortress Investment and the Vision Fund as its main engines. The firm will be based in London and headed by Rajeev Misra, who now heads the Vision Fund.
Washington Post
Loophole: The Senate bill that would roll back parts of Dodd-Frank includes a “little-known” section that “would weaken the government’s ability to enforce fair-lending requirements, making it easier for community banks to hide discriminationagainst minority mortgage applicants and harder for regulators to root out predatory lenders,” the paper claims. The bill, which is expected to pass this week, would exempt 85% of banks and credit unions from reporting “more detailed lending data so abuses could be spotted.”
Quotable
“This is showing the direction where Goldman wants to go. Investment banking, corporate lending; this is more appropriate for [David] Solomon’s background.” — Brian Kleinhanzl, an analyst at Keefe, Bruyette & Woods.
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
