Wells contacts Bridgewater co-CEO; 1MDB suspect discussing plea deal
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Let's make a deal
Roger Ng, the former Goldman Sachs banker who was allegedly involved in the multibillion-dollar 1MDB scandal, "is engaged in plea negotiations," according to U.S. Magistrate Judge Peggy Kuo, "a development that could help prosecutors build a case against the bank and Goldman employees," the Wall Street Journal reports. Ng was extradited to the U.S. from his native Malaysia, arriving on Monday. After pleading not guilty to charges of bribery and money laundering in federal court in Brooklyn, he was released to house arrest on $20 million bail. Wall Street Journal, Financial Times, New York Times
The Federal Reserve stated its concern about leveraged loans, its second in the past six months, citing “rising sales of risky corporate debt as a top vulnerability facing the U.S. financial system.” The Fed’s semiannual Financial Stability Report says the market for nonfinancial corporate borrowing, particularly leveraged loans, grew by 20% last year to $1.1 trillion.
“Borrowing by businesses is historically high ... with the most rapid increases in debt concentrated among the riskiest firms amid signs of deteriorating credit standards,” the Fed report says.
“In the first three months of 2019, a record 40% of loans to highly indebted companies went to the most indebted of all,” the report says.
“With financial volatility easing since the end of last year, [the report] suggests stretched asset valuations and risky corporate debt merit continued vigilance against a backdrop of low- to moderate-vulnerabilities in the household and banking sectors,” said Lael Brainard, the Fed governor who chairs the financial stability committee.
“Defaults on these loans remain low, but the Fed warned that could change if the economy faltered,” according to the New York Times.
Wall Street Journal
Bridgewater Associates co-CEO Eileen Murray, the highest-ranked woman in the hedge fund industry, has been contacted by Wells Fargo about its vacant CEO role. “Wells Fargo representatives also called people close to Ms. Murray as part of that process,” the paper reports. “Ms. Murray subsequently tipped off the job possibility to others at Bridgewater.” Murray “has held repeated conversations inside and outside of the firm about leaving the world’s largest hedge fund,” the paper adds. The Wells search is still in its early stages.
Some bank insiders are lobbying to give interim CEO C. Allen Parker the job on a permanent basis.
Not safe yet
The biggest American banks are “steering clear” of getting behind the SAFE Banking Act, which would make it easier for companies in the cannabis business to open checking accounts and get business loans. “At issue is large banks’ government-mandated insurance and compliance obligations. Cannabis transactions are currently defined as illegal under federal money-laundering rules. Given the multibillion-dollar settlements for money-laundering violations that the financial sector has handed over to the Justice Department in recent years, big banks won’t take risks unless cannabis is fully legal in the U.S.”
You've had your chance
A group of Senate Republicans have come up with their own list of about a dozen candidates to fill the two remaining seats on the Federal Reserve Board after President Trump’s two previous picks withdrew from consideration. “The Republican caucus is looking to take a more hands-on role in the nomination process to avoid future embarrassment” and get the nominees confirmed by the end of the year.
“Any weakening of economic activity could boost default rates and lead to credit-related contractions to employment and investment among these businesses.” — The Federal Reserve Board’s Financial Stability Report on the growing total of leverage loans to risky businesses.