Receiving Wide Coverage ...
The Blame Game: MF Global creditors have formed a committee to protect their interests in bankruptcy, the Post said. Meanwhile the "frantic search" continues for the $600 million missing from customer accounts. The Journal reports on allegations that JPMorgan delayed trade settlements by MF Global as it rushed to sell assets. Executives at MF believe that made it difficult to find a buyer, the paper says, and could have “caused” the $600 million gap. In his column, Francesco Guerrera offers three lessons to be learned from MF's failure. Still another Journal story looks at how MF investors are fairing, with their accounts frozen or moved to other firms.
Exiting Europe: Jefferies has "slashed its holdings of European sovereign debts by nearly half since Friday." The New York investment bank has been trying to "combat perceptions of any similarities to MF Global," according to the FT. The investment bank said it cut both long and short trading positions in the sovereign debt of Portugal, Italy, Ireland, Greece, and Spain by about $1.1 billion, with "no meaningful profit or loss," the Journal reported.
A Date With Judge Dread: A day before Citigroup is set to appear before Judge Jed S. Rakoff (lovingly known in financial circles as "Judge Dread") to review a $285 million settlement with the SEC to settle charges of fraud, the Times reports that a bank's promises to do no harm might not be worth the paper they're printed on. "An analysis of enforcement actions found at least 51 cases in which 19 Wall Street firms were accused of breaking antifraud laws they had agreed never to breach." Meanwhile, in court documents filed Monday, the SEC said investors in that deal lost more than $700 million, the Post reported. The agency asserted the settlement is "fair, adequate and reasonable," the Journal said, noting that the amount "reasonably reflects the monetary relief" a trial, if successful, would bring. According to a story in the FT, the agency said, "unlike in the Goldman case, it did not allege that Citigroup intentionally misled investors."
Bonus Bad: Bonuses from banks and securities firms are expected to be off as much as 30% this year, the Journal states. The average managing director will receive $900,000 instead of $1.2 million, according to projections. Over in the Times, Nassim Nicholas Taleb, a professor of risk engineering at New York University Polytechnic Institute, penned an op-ed opposing banker bonuses. His solution? Eliminate them. "It's time for a fundamental reform: Any person who works for a company that, regardless of its current financial health, would require a taxpayer-financed bailout if it failed, should not get a bonus, ever. In fact, all pay at systemically important financial institutions — big banks, but also some insurance companies and even huge hedge funds — should be strictly regulated." Taleb dips back in history for precedent to back up his case: "Nearly 4,000 years ago, Hammurabi's code specified this: 'If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.' This was simply the best risk-management rule ever."
The New Greece? In its print edition, the Post reports that Italy is becoming the new face of the European crisis, replacing Greece. Italy, in fact, may find it difficult to float debt, the Journal reports, noting that its recent 10-year bond issue yielded almost 7%. But it's a vicious cycle: the higher interest rates go, the more Italy will have to sell, the less banks, the prime buyers of the debt, will step up, which, of course, forces up the interest rate again. Euro-zone finance ministers met Monday, and created two bailout fund options: first set aside funds that could be sweetened by collateral for investors buying risky bonds; the second option is creating a "special investment vehicle" that would raise funds externally and use them to buy government bonds either directly from a troubled country or on secondary markets. The European Financial Stability Facility would make a junior investment to absorb losses before investors. Meanwhile, the Post says, Italian Prime Minister Silvio Berlusconi is scrambling to shore up his political support at home. The Journal adds that Berlusconi is meeting face-to-face with members of his coalition to prevent defections that would cost him his job. And Greece is having a tough time selecting a new prime minister, the Post said. Former European Central Bank Vice President Lucas Papademos was the leading contender, but the Journal noted there are some "roadblocks."
Wall Street Journal
The shedding of noncore assets at Bank of America continues, with word that it is selling its share of the largest Pizza Hut franchisee, and could also cut further its stake in China Construction Bank.
Gross derivative assets surged at big banks, but the banks claim that gross derivative liabilities grew just as quickly.
The SEC is proposing changes to money market funds, "Mary Schapiro, SEC chairman, told financial executives on Monday: 'There is a lingering concern about how money market funds will stand up in a significant financial crisis.'" Options on the table include: requiring a capital buffer, making it more difficult to withdraw cash and shifting to a floating measure of net asset value. The story said that "Both the Federal Reserve and the Treasury Department have been keen to reform money market funds because of fears that they are prone to the modern-day equivalent of a 'bank run' as investors pull out money once the funds 'break the buck'."
New York Times
For beneficiaries of the Recent Bank Transfer Day, and overall big-bank discontent, most of the focus has been on community banks and credit unions. But there's an old bank nemesis poised to cash in on consumers voting with their feet: Wal-Mart. Fronting the Times is a story recapping the giant retailer's efforts over the years to nudge its way into the banking sphere ("We're not a bank, but we can serve a lot of types of functions you would see someone go into a bank for," said Daniel Eckert, the head of Wal-Mart Financial Services), and the resistance it's gotten from banking groups ("It's the proverbial camel's nose under the tent," said Terry J. Jorde, senior executive vice president at the ICBA. "Once they get in and offer some financial services, they will continue to push for other products.")
A review of Bill Clinton's new book detailing his prescription for an economic recovery in America, "Back to Work," says that the former president skims over critiques of deregulatory policies that took effect during his watch. "Of his signing of the Gramm-Leach-Bliley Act repealing part of the Depression-era Glass-Steagall Act that prohibited commercial banks from engaging in the investment business, [Clinton] argues that it is not self-evident that 'the mortgage crisis was hastened and enlarged by the end of the division between commercial and investment banks.'" Clinton does cop to a degree of failure over effectively regulating derivatives -- "I can be fairly criticized for not making a bigger public issue out of the need to regulate" them -- but adds the rationalization that he "couldn't have done anything about it, because the Republican Congress was hostile to all regulations."
DC police are getting tougher as "Occupy" protesters get more confrontational. The police chief said it is "no longer a peaceful protest."
Justice has decided not to pursue a case against SEC general counsel David Becker, suspected of a conflict of interest in the Bernie Madoff case.
A brief in the Business section previews a report expected to show that small business lending totaled $607 billion in the first half, or just $45 billion shy of the full-year 2010 total.