Receiving Wide Coverage ...
The Signs Are Bad …: The market volatility of the summer is beginning to take its toll on results at the large diversified banks (we have taken a vow to avoid as much as possible that apple-and-orange smoothie of a catchphrase, "Wall Street"). JPMorgan Chase executive Jes Staley warned investors at the Barclays conference in New York that trading revenue will probably slip 30% for the third quarter, the Financial Times reported. Banks that have investment-banking operations, including JPMorgan Chase, Bank of America and Citigroup, are expected to post poor results for the third quarter on lower trading volume and weaker income from providing advice for stock and debt offerings, according to the New York Times.
Thy Wills Better Be Done …: The Times covered the FDIC's adoption of its living-will rules for the largest banks, noting that the banking industry pressured regulators to phase in the due dates for submitting the living wills. The Journal said the plans, which need to be in place by next summer, will allow regulators to "create private blueprints for how they would dismantle the firms outside normal bankruptcy procedures." Wall Street Journal, New York Times
Wall Street Journal
The paper revisited charges against Bank of New York Mellon's currency trading for pension funds and its analysis found some of the trades were executed "in a way that could trigger higher costs."
It appears that reassuring investors their money is safe is more important than promising them profits. At a conference sponsored by Barclays Capital, Morgan Stanley Chief Financial Officer Ruth Porat used the word "stable" and "stability" more than twice as much as "growth." It must have worked, while she was speaking, Morgan Stanley shares rose about 30 cents, although it did give up those gains later in the day.
Finra reminded firms that they can't issue positive research reports in an effort to win investment-banking business.
An SEC review of mortgage REITs could explain why the deals have disappeared in the past few months after being one of the hottest sectors. The SEC will determine whether the REITs are covered under the Investment Act of 1940. "If the SEC determines that mortgage REITs shouldn't qualify for exemption, the companies will lose the ability to use hefty amounts of leverage, or borrowed capital, to boost returns and provide high dividends."
How big was Lehman Brothers in real estate? So big that even three years after its demise it still plans to recover more than $13 billion from real estate sales in the next three years.
New York Times
DealBook columnist Steven M. Davidoff compares two big bank mergers of September 2008 — Bank of America's purchase of Merrill Lynch, and Barclays' buy of Lehman Brothers. Barclays, hands down, is the winner in his analysis as it got Lehman for a good price, and the purchase significantly boosted the British bank's presence in the U.S. Barclays also avoided assuming Lehman's toxic assets. Not true for B of A, which took on tens of billions of dollars of liabilities tied to Merrill's exposure to the mortgage crisis.
Barclays chief Bob Diamond gave a "surprisingly warm welcome" to the so-called Vickers report, which recommended that the U.K. erect firewalls between retail and investment banking to rival those the U.S. built in the 1930s and dismantled in the 1990s. He called the independent commission's blueprint "a welcome step towards the greater clarity that banks need to be able to operate with confidence." It was all the more noteworthy as the first public response to the plan from a U.K. bank CEO.
The "Lex" column considers Bank of America's options for Asia, the company's fastest-growing market, as it downsizes overall. In wealth management, there's no need to make a lot of cuts; "the reality is that anything consumer-facing stands a better chance of success in Asia than in B of A's home market. " But in investment banking, the decisions are not as cut-and-dried; the business is competitive in Asia and demands scale as it does anywhere, and the company ranks low in the league tables if at all. "B of A must aim for top three, or nothing at all."
"The agreement on the table is nothing short of a sweetheart deal" writes columnist Katrina vanden Heuvel, regarding the proposed settlement between the state attorneys general and mortgage servicers over the robo-signing scandal. She sings New York Attorney General Eric Schneiderman's praises for being one of the few state AGs to reject it. He told her: "The key is that you don't settle claims you haven't investigated." She says, "the kind of genuine investigation Schneiderman is fighting to undertake...could result in a full accounting of what really happened, and it could mean a different level of accountability for banks."
And Lastly ...
"Not Too Big to Fail": No, this isn't a parody of the HBO movie. It's a website created by Mike Perry, the former CEO of IndyMac (which regulators seized in July 2008), to rebut "unwarranted and false, public allegations" made against him by the SEC and FDIC in civil suits, by the Inspector General at Treasury in public audits, and by private litigants. As the title implies, Perry makes much of the fact that only months after IndyMac collapsed, the government bailed out "bigger, and far more diversified financial institutions, that were built by generations of management over many decades. ... These institutions and their CEOs also benefited from 'Too Big to Fail' credit ratings and cost of funds … and despite this advantage … all of them needed government help to survive this crisis." You'll also find a number of reader comments, most of them apparently posted by former IndyMac employees, including one who copied and pasted Walt Whitman's "O Captain! My Captain!" in its entirety.