Breaking News This Morning ...
$2.4B to Make It Go Away: Bank of America agreed to pay $2.43 billion to settle a class-action lawsuit brought by investors who claimed, among other things, that the bank misled them about the health of Merrill Lynch, which B of A was in the process of buying. B of A denies the allegations, but said it just wanted to put the dispute to rest. "Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders," said CEO Brian Moynihan. New York Times, Wall Street Journal
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Receiving Wide Coverage ...
What Will Wheatley Do?: Top British regulator Martin Wheatley is set to formally discuss his plans to overhaul the London interbank offered rate later today and, according to reports from major news outlets, he won't pull any punches. Wheatley's recommendations for a full Libor makeover, are pretty much in line with what the Journal predicted earlier this week: the British Bankers' Association, the benchmark's current overseer, would be replaced with a new third-party administrator (Thomson Reuters, which already collects Libor data from banks, and Bloomberg, which has publicly thrown its hat in the ring, are listed among the likely candidates). This administrator will be closely regulated by the U.K.'s forthcoming Financial Conduct Authority (or the soon-to-be-phased out Financial Services Authority, depending on the paper you read), which will be have the ability to penalize individuals that try to manipulate the system. Some of the less expected items on Wheatley's recommendation list include phasing out the versions of Libor in the Australian, Canadian, New Zealand, Danish and Swedish currencies (which he believes are based on too few banks to be effective) and imposing a three-month lag time on when banks' submissions are reported in an effort to dissuade manipulation (the idea here being that the rates won't readily reflect the financial institution's health). These changes, which require adjustments to British law, would be instituted over the next twelve months. The FT reports the British government plans to incorporate the recommendations into the financial reform bill currently moving through parliament.
Wheatley's attempt to repair Libor, which he will discuss in depth during a speech later today, is not without its critics. This Dealbook article makes a point of noting, "Despite the changes, analysts worry that Libor may still be easy to manipulate," while a separate Times op-ed, written prior to, but in anticipation of, the complete plan being unveiled, calls Wheatley's belief the system can be fix overly optimistic. "Libor is, and is likely to remain, a fiction," writes columnist Floyd Norris. "You can maintain the fiction, or you can embrace a much less palatable reality."
Pay to Play Gets Goldman: Goldman Sachs has agreed to pay $12 million to settle Securities and Exchange Commission and attorney general charges that one of its investment bankers violated existing pay-to-play rules prohibiting municipal-bond dealers from making significant contributions to state and local officials. According to the Journal, former Goldman employee Neil M.M. Morrison allegedly drummed up business for the investment bank while working on former Massachusetts state treasurer Tim Cahill's unsuccessful 2008 to 2010 campaign for governor. The Times says the SEC has grown increasingly interested in pay-to-play violations over recent years, going so far as to add "a specialized unit that examines corruption in government bond offerings and bringing actions against banks and public officials." Per the usual discourse, the accusations were resolved without Goldman admitting or denying guilt. The SEC is expected to pursue charges against Morrison as well. His lawyers are declining to comment.
Being Ben Bernanke: Despite Libor madness, Fed chairman Ben Bernanke can't seem to stay out of the news cycle. The Journal has an article analyzing how Bernanke got his team of central bankers to agree to the recently announced unlimited QE3. According to the paper, following his speech at Fed's annual retreat in Jackson Hole, Wyo., Bernanke made "dozens of private calls on days, nights and weekends, trying to build broad support for an unusual bond-buying program he wanted approved during the Fed's September meeting." The article goes on to describe each of these phone calls in great detail. Meanwhile, Slate blogger Matthew Yglesias is taking issue with Bernanke's fondness for pro athletes, mostly, because the long-term contracts these sports stars sign are for fixed nominal sums, and while the amounts the earn won't be affected by the Fed's monetary policies, their real earnings, which take into account inflation, will be.
Wall Street Journal
Prudential Financial has agreed to buy the individual life-insurance business of Hartford Financial Services for $615 million in cash, which will allow Hartford to "to free up almost $1 billion in capital it held to support the business." The deal is expected to close early next year.
Financial Times
Brussels is pushing forward with a probe designed to determine whether the biggest investment banks are blocking rivals from establishing derivatives trading platforms.
Sergey Aleynikov, the former Goldman Sachs programmer charged with stealing the investment bank's proprietary training code, has rejected a no-jail time plea with New York prosecutors.
New York Times
Standard Chartered woes persist. The bank "may be at risk of losing money on a $1 billion loan to an Indonesian mining company to make an investment that has since soured."
Former chief financial officer of Lehman Brothers Erin Callan is selling her $3.95 million house in the Hamptons. She "now plans to live in Florida, where she recently bought a modest house."
