Tarp Plan B, Another ‘Nay on Pay,’ Everybody Loves Goldman

Receiving Wide Coverage ...

Treasury's Bad-News Blog: How do you get out word that you're throwing in the towel on the Troubled Asset Relief Program and conceding that unloading stakes in hundreds of bailed-out small banks is going to cost taxpayers real money? In the case of the U.S. Treasury, the answer as of yesterday was to get an underling to blog about it. The federal agency let word fly Thursday that most of the small banks bailed out by Uncle Sam during the financial crisis likely will not be able to repay the Treasury Department—something the Financial Times described with terms like "conceded" and "admission." In contrast to the government's profitable investments in big banks—including Citigroup (NYSE:C), JPMorgan Chase (JPM) and Goldman Sachs (GS)—it has received back only $8.5 billion of the $15 billion invested in smaller institutions, the FT notes. Its new strategy for recouping losses: "Make it the private sector's problem," according to the New York Times. Until now, small banks looking to exit Tarp did so by trying to raise outside capital. However, the 343 banks that remain mired in Tarp are finding ever fewer willing investors. As a result, the Treasury does not expect the majority that are still partly owned by American taxpayers to manage in the next 12 to 18 months to repurchase the preferred stock that Treasury received in exchange for bailing them out. Enter Plan B. It started with recent public auctions, essentially test-runs, when Treasury sold preferred stock in six banks to private investors. As part of its new-and-improved divestment strategy, Treasury will pursue restructurings and sales of its holdings, including combining ownership stakes in various banks into pools that will be sold as securities. Treasury does not expect to recoup the face value of its investments; it has already reduced the value of many of its holdings to below par. "The government shouldn't be in the business of owning stakes in private companies for an indefinite period of time," blogged Timothy G. Massad, assistant Treasury secretary for financial stability. "Replacing temporary government support with private capital is an important part of continuing to restore financial stability." Financial Times, New York Times, American Banker

UBS is Latest 'Nay on Pay' Victim: Bank shareholders just aren't the complacent rubber-stampers they used to be. Swiss banking giant UBS became the latest financial institution to face a stinging rebuke from them this week when its owner/investors produced a resounding thumbs-down vote on the company's pay and corporate governance proposals. UBS failed to secure the necessary two-thirds majority to issue new shares for employee options, while only 60% of the capital represented at the annual meeting approved plans in a "say on pay," the Financial Times reports. "In an even sharper rebuff, more than 39 per cent opposed the formal approval of the board and top management for 2011, with only 53 per cent backing the 'discharge,'" it adds. Another focus of frustration was a "golden hello" pay package UBS extended to incoming chairman, and a former Bundesbank president, Axel Weber. "Big banker pay hasn't been tamed at all. It's as though UBS hasn't learnt any lessons at all from the past crises," said shareholder Brigitta Moser-Harder during her turn at the podium. "The atmosphere here at the annual meeting showed we have a lot of work ahead of us," deadpanned chairman Weber. "UBS shareholders have suffered more than $50bn of write-offs in the credit crisis, massive dilution and a $2.2bn 'unauthorised trading incident' in London last year, stretching even Swiss patience," the FT wrote. Citing "significant opposition," Kaspar Villiger, who is stepping down as chairman, said UBS was in the process of "rethinking and reworking the remuneration criteria" for senior executives. The UBS slapdown is the latest in a string of high-profile "nay on pay" votes at banks and elsewhere, notes the Wall Street Journal. Back in Europe, Barclays (BCS) suffered an unfavorable vote. In the U.S., Citigroup is coping with a similar high-profile setback. Still, the jury remains out on whether the nay on pay votes represent the beginning of a bankers' version of the Arab Spring or merely a bit of residual financial crisis disgruntlement. As American Banker's Say On Pay Scorecard indicates, the vast majority of U.S. banks have this spring received from their shareholders votes that are highly supportive of their pay proposals. Wall Street Journal, Financial Times, New York Times, Bloomberg, American Banker

Wall Street Journal

Bank of America's Brian Moynihan just can't seem to catch a break. Things have finally started looking less bad for the bank, its long-suffering shareholders and PR machine. Now out pops word that BofA is looking to cut a deal with more than 1,000 former Merrill Lynch brokers that could cost it hundreds of millions of dollars and raise doubts about its good faith. The bank has been holding talks with lawyers for former members of Merrill's thundering herd who left after the 2009 takeover by BofA under circumstances now in dispute. They are demanding deferred compensation, which BofA insists it doesn't owe them. In stark contrast to that claim, more than 100 of the ex-brokers have alleged in arbitration proceedings that the company schemed to cheat them out of deferred compensation worth between tens of thousands and several million dollars apiece. That's according to a Wall Street Journal report citing "people familiar with the matter," which often means loquacious plaintiffs lawyers in spin mode. The ex-brokers and their attorneys have been emboldened by an arbitration ruling last month that ordered BofA to pay more than $11 million to a pair of former brokers with related complaints. In the April 3 ruling, the panel said that "Merrill Lynch directly and indirectly through its senior management…intentionally, willfully and deliberately engaged in a systematic and systemic fraudulent scheme." This could hurt.

It wasn't a breach but more like a takeover. That's how things are looking in the case of Global Payments Inc. (GPN), the electronic payments processor that disclosed in March it had suffered a major hack-attack. At least seven million card accounts are now considered potentially vulnerable, according to the Journal, citing "people familiar with the matter." The increase largely reflects new information that shows thieves may have had access to customer data since last spring. The data breach's wider scope underscores how hard it is to assess the damage that follows hacker attacks, the Journal opines. "Hard" is the operative word here: Banks and merchants have tied few suspicious transactions to the breach, according to the Journal's sources.

New York Times

Goldman Sachs is so misunderstood. That's seems to be the gist of a new charm offensive underway at the investment bank the world most loves to hate. Last week, Goldman's chief executive, Lloyd C. Blankfein, gave rare back-to-back televised interviews to CNBC and Bloomberg Television, in which he emphasized the company's focus on clients, the Times reports. Wednesday found Blankfein addressing a lesbian, gay, bisexual and transgender conference called "Out on the Street." In recent weeks, Goldman execs have been chatting up reporters with unusual frequency. Having interviewed Blankfein, and having found him humorous, self-deprecating and personable, this Scan scribe believes Goldman is on the right track. Of course, the road is long from vampire squid to teddy bear.