Receiving Wide Coverage ...
Stress Tests, Part II: Second round of results of the Federal Reserve's stress tests are in. The big items to note, per the headlines: Ally Financial and BB&T had their capital plans denied; JPMorgan Chase and Goldman Sachs received "conditional" approval for theirs since the Fed has concerns about their "ability to adequately estimate losses" when faced with a severe economic event (Both now have until September to resubmit capital proposals); and Citigroup and Bank of America — "two of the nation's most troubled banks during the crisis" — got the go ahead to reward their shareholders. The Journal has a nice round up of the banks' response to their results that outlines what their capital plans look like. Specifics about the Fed's decision regarding each bank are a bit harder to come by since, as the FT Alphaville blog puts it "the Fed wouldn't tell the banks how it arrived at its estimates, or say much that sounded like it might have come from a sentient being." General reaction to the results is mixed. The FT says the Fed's approval of about $30 billion of share buybacks represents "a vote of confidence in the strength of the U.S. financial system." The Journal cites analysts who believe the action "shows continuing unease with the risks posed by giant financial firms despite their capital raising in recent years." And Slate blogger Matthew Yglesias adopts an even more cynical stance. "This right here is the real bank bailout," he writes.
The Whale Report: More bad news from JPM broke late in the day Thursday when Carl Levin's Senate report on the London Whale was formally released. The report accuses the bank of trying to cover up its losses for three months by "overstating the value of its trading positions and ignoring red flags." It also suggests JPM CEO Jamie Dimon withheld details about the investment bank's daily losses from regulators and that former CFO Doug Braunstein "may have misled investors." Levin was also critical of the OCC, noting at a press conference that there were "serious shortfalls" in its oversight. In fact, the only person emerging from the report relatively unscathed — some might even say as "the hero" — is the London Whale himself, former JPM trader Bruno Iksil. Internal communications obtained as part of the Senate investigation indicate Iksil objected to many of his superiors' directives and did warn them that the trades were getting "idiotic," reports the Guardian's Heidi Moore. A round up of these emails is available on Dealbook and the full report was uploaded by Bloomberg News. More details may emerge at the hearing, set to take place today at 9:30 a.m. "Jamie Dimon going to get an earful from Senate PSI [tomorrow] l, I tell you what," tweeted Politico chief economic correspondent Ben White. "Oh wait no he won't because he won't even be there." Those interested in a play-by-play of the Senate hearing can follow American Banker's Rob Blackwell, who will be live-tweeting the event, on Twitter @ABWashbureau.
The Geithner Chronicles: Former Treasury Secretary Timothy Geithner has scored a deal with Crown Publishers, a unit of Random House, to write a memoir due out in 2014. According to Crown, the book will be "a 'play book' that future policy makers can draw on and that the public can use to understand how and why governments act in crisis." Wall Street Journal, New York Times
UBS is stirring the executive pay pot over in Switzerland after revealing it paid Andrea Orcel, the head of its investment bank, almost $26.2 million to poach him from Bank of America last summer. These types of bonuses are going to be difficult for Swiss companies to give out in the future. Recall, Swiss voters recently backed a plan that places severe limits on how companies pay their executives and directors, that, among other things prohibits bonuses from being awarded to executives joining or leaving a firm.
New York Times
Steven Barg, the co-head of Goldman Sachs' investment banking unit in South East Asia, has been tapped to lead the firm's mergers and acquisitions capital markets in New York.