Former Federal Reserve Board Gov. Susan Schmidt Bies isn't sure she wants to see banks barred completely from proprietary trading, but she wouldn't mind seeing them assessed for it.
In a speech Wednesday to the Global Association of Risk Professionals, Bies, who now serves on the board of Bank of America Corp., suggested that firms with prop investments pay into a new fund that would bolster the system in times of crisis — sort of a broader version of the Federal Deposit Insurance Corp. system.
"What you either have to do is expand the FDIC and expand fees on all liabilities — not just deposits — or you create another organization" that would assess fees on the likes of Goldman Sachs & Co. and other firms that, under such a scenario, perhaps ought not continue under the bank holding company umbrella, Bies said.
The idea might not be as radical as the one offered by former Fed Board Chairman Paul Volcker, who wants commercial banks banned from proprietary trading. But Bies, asked about her thoughts on the so-called Volcker rule, said she wholeheartedly supports at least one aspect of his proposal — the part that would prevent banks from investing directly in one another.
That's a practice that can hasten systemic rot, because it enhances capital ratios for individual banks, allowing them to lever up even more, without increasing capital for the system as a whole, she said.
"I do agree that when one financial institution holds equity in another that you should deduct, dollar for dollar, that amount from regulatory capital," Bies said.
Hedging on the Side
Speaking of risk management: Some of Wall Street's big earners apparently are looking at ways to hedge exposure to their own bonuses, now that many of the awards are being paid in stock with multiyear vesting schedules. A prudent move, perhaps, but not exactly what government officials had in mind when they pushed for a curbing of cash bonuses.
"You haven't accomplished very much" if employees are shorting their employers' stocks, said Robert J. Jackson Jr., deputy special master over executive pay at recipients of the Troubled Asset Relief Program. And yet "boards are taking seriously the idea that executives might do that," Jackson said in the keynote address this week in at the risk professionals' conference in New York.
The acknowledgement helped Jackson, a lawyer who assists Tarp Special Master Kenneth R. Feinberg in advising the Treasury Department, to drive home the main theme of his speech to its intended audience. "Whatever the role of risk professionals was in the boardroom and in the compensation committee before the crisis," he said, "they will be absolutely critical" now.
Guard the Henhouse
Huntington Bancshares Inc., which has pledged to hire 150 business bankers, has already begun bulking up in Michigan — at the direct expense of a rival.
The Columbus, Ohio, company said Monday that it had lured eight commercial bankers from Comerica Inc., led by Brian Marshall. The team will operate in southeastern Michigan and report to Jim Dunlap, the president of Huntington's businesses across the state.
Later in the week the bigger picture became clear. Huntington, which has assets of $52 billion, said Thursday that it plans to make $4 billion in small-business loans over the next three years and that it will hire bankers to serve in all of its markets. Huntington operates in Ohio, Michigan, West Virginia, Pennsylvania, Indiana and Kentucky.
Changing the Guard
Bank of America said Thursday that Steele Alphin, a longtime chief administrative officer and former right-hand man to ex-CEO Ken Lewis, is retiring.
Alphin, 58, will leave the company following an indefinite transition period, though he has already been succeeded by Andrea Smith. Alphin has worked at the Charlotte company for 33 years.
Smith, 42, had been the senior human resources executive for a number of businesses, including commercial banking and wealth and investment management.
The move is the latest managerial shake-up for Brian Moynihan, who replaced Lewis as CEO on Jan. 1.
Last month, Moynihan tapped Bruce Thompson to replace Greg Curl as chief risk officer and moved Joe Price from chief financial officer to president of consumer, small-business and card banking.
The company is still looking for a permanent CFO.