Two Goldman bankers charged; small banks await Fed ally

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Lost luster
Federal prosecutors charged two former senior Goldman Sachs bankers with bribery, stealing and laundering money from a Malaysian sovereign wealth fund, “putting the bank at the center of one of the biggest financial frauds in history.”

“For Goldman, the charges—as well as a continuing investigation into the bank’s own conduct—come at an inflection point,” the Wall Street Journal said. “Executives have spent years shining up a reputation sullied by the 2008 crisis and refashioning the elite firm as a Main Street bank.”

“The charges against senior employees of a major American bank, a rare move in the decade since the financial crisis, put enormous pressure on Goldman Sachs and its new chief executive, David M. Solomon,” the New York Times said. Also: Washington Post, Financial Times

Tough job ahead
Barclays named Nigel Higgins, a veteran Rothschild & Co. executive, as its next chairman, “with a mandate likely to include restoring investor confidence and improving the bank’s sunken share price. Mr. Higgins will step into a role seen as one of the toughest in global banking because of ongoing question marks around the bank’s strategy.” He will succeed John McFarlane, who confirmed he is leaving next May. Wall Street Journal, Financial Times

Wall Street Journal

The view from Main Street
Small and medium-size banks are expecting Michelle “Miki” Bowman to be their advocate when she joins the Federal Reserve Board, as expected, later this month. “Supporters say Ms. Bowman would bring a Main Street perspective that the Fed needs at a time when the regulation debate is dominated by issues related to big banks.”

Parting shot
Walmart has sued Synchrony Financial, its former longtime credit card issuer, for breach of contract, alleging that some of the company’s underwriting standards hurt the retailer. Walmart is seeking damages “in an amount to be proven at trial but estimated to be no less than $800 million.”

Risk or reward?
This week’s proposal by the Federal Reserve to restructure how it regulates large banks could free up as much as $77 billion that banks must currently hold in reserve. “Some see an economic boost where banks rededicate the cash to loans, long-term securities or other higher-yielding but riskier assets. Critics say the change won’t significantly boost lending, but that it will increase risk.”

Financial Times

Too much alike?
Separately, the head of supervision at the New York Fed is warning that the “growing homogeneity” of the largest American banks is creating a new set of risks to the financial system. “If firms expand, diversify and become more similar, each might become safer individually,” Kevin Stiroh said. But “if all firms are effectively the same, they could become systemic as a herd and susceptible to the same shocks in a way that leaves the aggregate provision of financial services more volatile.”

Behavior modification
UBS is launching a sexual harassment hotline and mandatory workplace behavior training after a former junior trader in London complained that the bank bungled her claim that she was raped by a senior employee.

Elsewhere

Early Christmas
Charlotte Observer: Bank of America will pay cash and stock bonuses to most of its employees next month following the bank’s record earnings in the third quarter. Employees earning $100,000 or less will get $1,000 cash bonuses while those making $100,000 to $350,000 a year will receive 200 to 500 restricted shares early next year.

Quotable

“This is all about being much more open to hear also the negatives. We need to be willing to take that dialogue. It is the most important thing going forward. It sounds easy but it’s also super hard.” — Danske Bank’s interim CEO Jesper Nielsen, announcing a new policy at the scandal-ridden Danish bank to encourage employees to report bad news.

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