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 Everythintg Financial

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PostSubject: Re: Everythintg Financial   Wed Feb 03, 2010 7:37 pm

MS restructuring baby...

============================================
Morgan Stanley Hires Goldman Sachs Veteran Tony Lauto (Update1)
By Christine Harper

Feb. 3 (Bloomberg) -- Morgan Stanley hired Anthony “Tony”
Lauto, who rose from clerk to partner during a 35-year career at
Goldman Sachs Group Inc., to help lead the firm’s equity-trading
business.
Lauto, 53, is joining the owner of the biggest brokerage
firm as a managing director in New York, according to a memo to
employees of Morgan Stanley’s equity division that was obtained
by Bloomberg News. Morgan Stanley spokeswoman Mary Claire
Delaney confirmed the contents of the memo, which was dated
today.
Morgan Stanley Chief Executive Officer James Gorman, who
succeeded Chairman John Mack as CEO at the start of this year,
is hiring to improve the firm’s performance in sales and
trading, where Morgan Stanley lags behind rivals including
Goldman Sachs. Lauto will become a member of Morgan Stanley’s
Equity Operating Committee to help guide strategy and develop
new leaders, according to the memo from Ted Pick, global co-head
of equities.
Lauto, born in the New York City borough of Brooklyn, began
working at Goldman Sachs in 1975 after one year as a math major
at Wagner College on New York’s Staten Island. He started as a
clerk operating an AutEx machine, which brokerages used to
indicate their interest in doing block trades.
Lauto went to Pace University at night, earning an
associate’s degree in applied science in 1978. He worked his way
up at Goldman Sachs to trading utility stocks in the 1980s and
later served as a senior manager on the firm’s block trading
desk.
Lauto became a partner in October 1998, just before the
firm went public in May 1999. He was in the same partner class
as Goldman Sachs executives such as Richard J. Gnodde, who is
now co-CEO of Goldman Sachs’s European division, Goldman Sachs
International, and Ed Forst, now a senior strategy officer.
In 2006, Lauto purchased a $7.99 million Manhattan
condominium near Lincoln Center from Henry Paulson, his former
boss and then-U.S. Treasury Secretary.
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PostSubject: More news from Morgan   Thu Feb 04, 2010 1:07 pm

Banking Models evolving before our eyes... don't forgot what i posted about MS hiring hundreds of new traders the other day...

-------------
Morgan Stanley 'Evaluating' Hedge Fund Biz


Morgan Stanley is said to be "evaluating" its hedge fund platform, Bloomberg reported Wednesday.


Chief Executive Officer James Gorman did not spell out what the Wall
Street firm had in store for its business, Bloomberg reported.

Gorman, who just succeeded John Mack as CEO, was speaking at an investor conference in London.


Morgan Stanley has full- or part-ownership in Avenue Capital Group,
FrontPoint, Lansdowne and Traxis. In 2006, the Wall Street firm went on
a shopping spree, gaining a presence in the hedge fund industry via
acquisition.

Paul Volker has introduced a proposal to ban a Wall Street firm like
Morgan Stanley from owning a hedge fund or private equity business.
Citi is reported to be speeding up its sale of its hedge fund and
private equity businesses in anticipation of the proposal becoming a
rule.


The Morgan Stanley press office could not provide comment by press time.
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PostSubject: Re: Everythintg Financial   Mon Feb 08, 2010 2:16 am

Corporate Bond Spreads Rise Most Since November: Credit Markets

By Sapna Maheshwari and John Detrixhe

Feb. 8 (Bloomberg) -- Corporate borrowing costs are rising
at the fastest pace in more than two months on concern that
worsening government finances will slow the global economy and
make it harder for companies to meet debt payments.

The extra yield investors demand to own corporate bonds
instead of government securities widened 4 basis points last
week to 169 basis points, the most since the period ended Nov.
27, according to the Bank of America Merrill Lynch Global Broad
Market Corporate Index. Spreads widened for three weeks, the
longest stretch in about a year, while those for U.S. high-
yield, high-risk companies expanded by the most since August.
Optimism over the recovering economy that made January the
best start to a year since 2001 for the corporate bond market is
fading as finances in Greece, Spain and Portugal deteriorate,
Japan struggles to emerge from recession and concerns grow that
emerging-market valuations are too high.

BES Investimento do Brasil pulled an international bond offering of as much as $350
million, capping a week of canceled sales from India to Korea.
“The potential impact of spill-over into other markets has
gotten folks to look at risk assets of all types, and you’re
seeing a pullback across the globe,” said Andrew Karp, a
managing director on Bank of America Corp.’s investment-grade
syndicate desk in New York.


Slowing Returns
Returns are slowing, with company debt gaining 0.12 percent
this month, after adding 1.83 percent in January including
accrued interest, the Merrill Lynch index shows. Treasuries have
returned 0.41 percent this month, after handing investors 1.58
percent last month, another Merrill Lynch index shows. U.S.
corporate bond sales are down 11 percent this year to $147.4
billion, from $165.6 billion in the same period of 2009,
according to data compiled by Bloomberg.

Declining issuance and widening spreads may continue as
borrowers monitor how government deficits are managed in Europe,
Karp said.

Elsewhere in credit markets, emerging-market bond spreads
are the widest since November, the cost to insure corporate debt
against default is the highest in two months, and prices of
securities backed by U.S. government agencies Fannie Mae and
Freddie Mac with relatively high coupons are at record highs.
At their meeting in Iqaluit, Canada, the Group of Seven
finance ministers pledged to press ahead with economic stimulus
measures even as investors intensify their focus on mounting
budget deficits. Canadian Finance Minister Jim Flaherty told
reporters that “we need to continue to deliver the stimulus to
which we are mutually committed and begin looking at exit
strategies to move to a more sustainable fiscal track.”

‘Running a Gauntlet’
“They are running a gauntlet, hemmed in between debt
crisis on the one side and a double-dip recession on the
other,” said T.J. Marta, chief market strategist at Marta On
The Markets LLC, a financial-research firm in Scotch Plains, New
Jersey. Marta is also a former fixed-income and currency
strategist at RBC Capital Markets and Citigroup Inc.
Sovereign debt concerns are overshadowing positive economic
news, Deutsche Bank AG fixed-income strategists Mustafa
Chowdhury in New York and Ralf Preusser and Francis Yared in
London wrote in a note to investors.

The U.S. unemployment rate fell to 9.7 percent in January,
the lowest level since August, from 10 percent the prior month,
even as payrolls fell by 20,000, the Labor Department said Feb.
5. White House economic adviser Lawrence Summers said the nation
is not “too far” from the start of a rebound in jobs.


Credit-Default Swaps

Credit-default swaps on the Markit CDX North America
Investment-Grade Index, linked to 125 companies and used to
speculate on creditworthiness or to hedge against losses, traded
at the highest in more than two months, increasing 9.5 basis
points over two days to 101.75 basis points as of Feb. 5,
according to broker Phoenix Partners Group.
In London, the Markit iTraxx Europe Index of companies with
investment-grade ratings climbed to the highest in almost four
months, rising 5.75 basis points on Feb. 5 to 92.25 basis
points, JPMorgan Chase & Co. prices show.

A credit swaps index linked to 15 Western European
countries including Greece, Portugal, Spain and Italy jumped to
the highest last week since it was introduced in September.
The Markit iTraxx SovX Western Europe Index of credit-
default swaps on the debt of 15 governments surged almost 18
basis points to 106.5 basis points, after reaching a record
106.75 basis points on Feb. 4, CMA DataVision prices show.


Junk Bond Losses

Credit swaps pay the buyer face value if a borrower
defaults in exchange for the underlying securities or the cash
equivalent. A basis point is 0.01 percentage point, and equals
$1,000 a year on a contract protecting $10 million of debt.
“The concern is, if you have a sovereign default, who is
exposed?” said Joe Jackson, head of credit research at St.
Petersburg, Florida-based Eagle Asset Management, which invests
about $18 billion. “It looks like people are aggressively
trying to buy protection against Greece, which leads you to
think there’s probably a lot of exposure out there.”
Speculative-grade corporate bond spreads widened 35 basis
points last week, the fourth straight increase and the biggest
jump since the week ended Aug. 14 when they expanded 37 basis
points, according to the Bank of America Merrill Lynch U.S.
High-Yield Master II index.

The bonds have lost 0.62 percent this month, after rallying 1.52 percent in January.
U.S. investment-grade credit spreads widened 5 basis
points, the biggest weekly increase in yields relative to
Treasuries since the period ended Oct. 2, when they rose 8 basis
points, according to Bank of America Merrill Lynch’s U.S.
Corporate Master index.


Emerging-Market Bonds

Emerging-market bonds have been among the hardest hit, with
the difference between yields on the bonds and government debt
reaching 3.2 percentage points on average at the end of last
week, up from the low this year of 2.95 percentage points on
Jan. 8, according to JPMorgan’s EMBI+ index.

BES Investimento do Brasil postponed its offering because
it would have been more expensive given “market volatility,”
Paulo Augusto Saba, managing director for global markets, sales
and fixed-income trading in Brazil, said in a telephone
interview. BES was planning to issue five-year bonds, he said.
BES is a unit of Lisbon-based Banco Espirito Santo SA.
“If we were to do the issuance now, we would have to pay
much more, and we didn’t need to do so,” Saba said from Sao
Paulo. “I want to do a beautiful deal. I don’t want to do a
Frankenstein deal in the market.”

India’s Bank of Baroda canceled a bond sale denominated in
U.S. dollars, and Korea Hydro & Nuclear Power Co., a unit of
state-run Korea Electric Power Corp., delayed a foreign-currency
debt offering until after March, said people familiar with the
matter who declined to be identified because the decisions
hadn’t been publicly announced.


Kraft Bonds Rally

Bonds issued last week by Kraft Foods Inc., the maker of
Oreos and Cheez Whiz, rose in secondary trading. Northfield,
Illinois-based Kraft sold $9.5 billion of debt in a four-part
issue after increasing the size of the sale from $4 billion and
boosting the spreads offered to investors.
The food maker’s 5.375 percent notes due in 2020 gained 1.3
cents on the dollar from 99.176 cents to yield a spread of 176.7
basis points, according to Trace, the bond-price reporting
system of the Financial Industry Regulatory Authority. The debt
sold at a spread of 190 basis points, Bloomberg data show.
“It has performed really well,” said Jackson of Eagle
Asset Management. “You start to get concerned if you see these
deals go really poorly. So far we haven’t seen that.”


Not Panicking

New bonds from Sacramento, California-based McClatchy Co.
also rose, in a sign investors weren’t panicking, money-manager
Martin Fridson wrote in an e-mail. The newspaper publisher’s
$875 million of 11.5 percent notes sold at a spread of 866 basis
points, and rose to 99 cents on the dollar on Feb. 5 from an
issue price of 98.824 cents.

“The newspaper business isn’t one of the strongest sectors
of the economy,” wrote Fridson, chief executive officer of New
York-based Fridson Investment Advisors. “One would not have
expected the offering to fare as well as it did if institutional
investors were in a frantic selling mode.”


Mortgage bonds with higher coupons and guaranteed by
Washington-based Fannie Mae and Freddie Mac in McLean, Virginia
climbed to records as benchmark Treasury notes gained and
monthly reports showed prepayments slowing last month.
Fannie Mae’s 30-year fixed-rate securities with 6 percent
coupons have climbed 1.2 percent since Dec. 28, to a new high of
107.2 cents on the dollar, Bloomberg data show. Similar bonds
with 4.5 percent coupons, whose returns vary less with changes
in prepayments because they trade closer to face value, have
fallen 1.2 percent after reaching their second-highest level
ever on Nov. 30, to 101.4 cents.


The data released by Fannie Mae and Freddie Mac suggested
that the government-supported mortgage companies continued to
buy loans out of the bonds they guarantee after the loans are
modified, as required by the debt’s contracts, according to
JPMorgan and Barclays Capital analyst reports.
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PostSubject: Re: Everythintg Financial   Mon Feb 08, 2010 3:03 am

I read this rumor about a month ago but nothing came of it...I cannot believe Thain was chosen to lead a company of CIT's importance to the U.S. economy. He did well at Goldman and NYSE EuroNext. However he showed is true colors at Merrill. But then again, I guess everyone deserves a second chance....

=================================


Thain back from wilderness to head CIT

By Greg Farrell in New York
Published: February 8 2010 02:09 | Last updated: February 8 2010 02:09

John Thain has been named chief executive of the CIT Group,
the troubled middle- market financial company that emerged from
bankruptcy in December under the control of its primary creditors.For Mr Thain, 54, the appointment is an opportunity to rehabilitate his career after a one-year stint as chief executive of Merrill Lynch resulted in a last-minute sale of the 94-year-old company to Bank of America, followed by his own dismissal a short time later. EDITOR’S CHOICE

“I’m excited about this,” Mr Thain told the Financial Times. “This is an
opportunity to be part of a company that is key to the US economic
recovery and the creation of jobs.”CIT, which provides financing
to small businesses and middle-market companies, enjoyed several years
of robust growth and expansion under the leadership of Jeffrey Peek,
but proved to be unprepared for the collapse of the US housing market
in 2007 and subsequent credit crisis.

By the end of 2008, with delinquent loans soaring, CIT applied for and received $2.3bn in funds
from the troubled asset relief programme (Tarp). It faltered again last
July, when more than $5bn in loans came due and the federal government
refused to inject more Tarp money.

In Mr Thain, CIT gets a marquee name, albeit one that was tarnished last year after leaving
BofA, amid strong losses at Merrill and revelations that he had spent
$1.2m of company funds to refurbish his office in 2008.After Mr
Thain took the helm of Merrill in December 2007,
he helped it raise more than $30bn in fresh capital and rid it of $31bn
in collateralised debt obligations, but was unable to preserve its
independence and agreed to sell to BofA after a frenzied weekend of
negotiations in September 2008.

At CIT, Mr Thain faces multiple challenges. The recapitalised company
carries an expensive debt load he will try to renegotiate. He will have
to work closely with the Federal Reserve and the Federal Deposit
Insurance Corporation to bring it into compliance on a variety of
issues.

Asked if he had learned any lessons from Merrill, Mr
Thain said: “Fixing these kinds of financial problems is generally more
difficult and takes more time than you think, because you keep
uncovering new problems.” Mr Thain will be paid a salary of
$500,000 and receive 180,000 shares of restricted stock, worth $5.5m at
current prices, that vest over several years.
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PostSubject: Goldman beats its record for $100m-plus day   Tue Mar 02, 2010 5:42 pm

By Justin Baer in New York
Published: March 1 2010 20:40 | Last updated: March 1 2010 22:31

Goldman Sachs made at least $100m in net trading revenues on 131 days last year – equivalent to once every other trading day, according to a filing with the Securities and Exchange Commission on Monday. Goldman managed the result even as it took greater trading risks in 2009 than in the previous year. Its daily “value at risk” (VAR) – the most that the bank estimates that its traders could lose on a given day – was $218m in 2009, up from $180m during the previous fiscal year, which closed in November 2008.

Goldman earned a record $13.4bn in 2009 as net revenues more than doubled to $45.2bn and the bank reined in compensation costs amid a furore about bonuses earlier in the year.


Goldman’s 131 $100m-plus trading days in 2009 shattered its previous high of 90 days, set in 2008. In last year’s 263 trading days, the bank lost money 19 times, Goldman said in the filing. Its daily losses never exceeded $100m. “It’s impressive, but it’s not unexpected,” David Hendler, an analyst with CreditSights. “They were one of the few games in town in 2009.” Goldman’s performance came during a year when the demise of several rivals left it and fellow survivors better able to capitalise on the flurry of debt and equity trading that followed the financial crisis. The controversy over banks’ profits and compensation policies, and an uncertain outlook for both the markets and financial services regulation, could make it difficult for it to approach 2009’s performance any time soon, Mr Hendler said. And competitors had regained their footing. “It may have been a high-water mark.”

Trading and principal investments, which includes Goldman’s merchant banking activities, account for more than 75 per cent of its total net revenue. The rise in Goldman’s daily VAR was “principally due to an increase in the interest rates category” as spreads widened, and a “reduction in the diversification benefit across risk categories”, the bank said. The bank’s VAR tied to commodities trading declined as energy prices fell. The bank reports daily VAR at a 95 per cent confidence level, representing the one-day trading loss that it would expect to exceed only 5 per cent of the time. Goldman shares finished 0.12 per cent higher at $156.54 in New York trading.



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PostSubject: Bank of China’s Profit Soars as Writedowns Decline (Update2)   Tue Mar 23, 2010 2:57 pm

By Bloomberg News

March 23 (Bloomberg) -- Bank of China Ltd., the nation’s third-largest lender by market value, posted a more than fourfold increase in fourth-quarter profit, helped by a credit boom and lower impairment losses on assets. Net income climbed to 18.8 billion yuan ($2.8 billion) from 4.42 billion yuan a year earlier, based on subtracting nine- month profit from full-year earnings reported by the Beijing- based lender today. Profit beat analysts’ estimates. Bank of China and larger rivals Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. benefited from a loan surge last year that helped boost economic growth. Bank of China plans to sell as much as 40 billion yuan in bonds and may raise more from issuing shares after record lending ate into financial buffers. “Bank of China was quite aggressive in grabbing share in the lending market last year and that has paid off decently,” said James Liu, a Shanghai-based analyst at Sinopac Financial Holdings Co. “The second half of this year might be the turning point for the banking industry because non-performing loans will
start to emerge.” Shares of Bank of China, led by Chairman Xiao Gang, have dropped 3.8 percent in Hong Kong this year, compared with a 4 percent decline in the city’s benchmark Hang Seng Index. The stock, trading at 9.4 times estimated 2010 profit, rose 1.8 percent to HK$4.04 today before the release.


Exceeding Estimates
Fourth-quarter profit at Bank of China exceeded the 16.47 billion yuan average estimate of analysts surveyed by Bloomberg, based on subtracting nine-month net income from 15 projections for 2009 earnings. Full-year profit rose 26 percent to 81.1 billion yuan, Bank of China said today.

Chinese banks are under pressure to raise money after an unprecedented 9.59 trillion yuan of new loans last year weakened their capital and the industry regulator imposed tougher guidelines for financial buffers. The credit boom raised concerns about asset bubbles and bad loans, prompting Premier Wen Jiabao to warn of “latent risk” among local banks. Bank of China needs almost $12 billion of new equity to keep its so-called core capital adequacy ratio at 9 percent, Nomura International HK Ltd. estimated in January.


General Mandate
Bank of China last week won shareholder approval to raise as much as 40 billion yuan in a convertible bond sale to shore up capital. Investors also granted the lender a general mandate to sell shares equivalent to as much as 20 percent of outstanding stock in Hong Kong or Shanghai or in both markets. The lender is working on the H-share share plan and aims to complete the offering this year, President Li Lihui told reporters in Hong Kong today. ICBC, the world’s largest lender by value, and Construction Bank are scheduled to report earnings later this week and will likely defend their status as the world’s two most profitable banks, according to analysts’ estimates. The nation’s policy makers aim to avert asset bubbles and restrain inflation by limiting new credit at 7.5 trillion yuan this year. China’s growth accelerated to 10.7 percent in the fourth quarter and property prices jumped the most in almost two years last month.

Bank of China’s net interest income, the difference between revenue from lending and credit costs, fell 2.5 percent to 158.9 billion yuan in 2009. Non-interest income from services such as trade finance and distribution of insurance policies increased 12 percent to 73.7 billion yuan.


Impairment Losses
Bank of China’s net interest margin, a measure of lending profitability, narrowed to 2.04 percent last year from 2.63 percent in 2008. Impairment losses on assets fell to about 15 billion yuan, from 45 billion yuan a year earlier. The bank lost more on overseas mortgage investments than all other Chinese lenders combined as the U.S. collapse sparked a credit seizure in 2007 and 2008. As of Dec. 31, Bank of China held 28 billion yuan of
investments in subprime mortgage-related securities, securities backed by so-called Alt-A home loans and other “non-agency” mortgage investments. The lender wrote back 854 million yuan of earlier charges on those holdings in 2009.
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PostSubject: Re: Everythintg Financial   Tue Apr 13, 2010 4:26 pm

Are The Bailouts Working?
Author: Andrew Ross Sorkin
NYTimes

What if, after all that panting over Washington’s bailout of the financial system, we learned that it actually worked?
Enlarge This Image

Chris Rank/Bloomberg News
Joseph Stiglitz, the Nobel-prize winning economist at Columbia University, said the bailout would never really be repaid.
And what if, after all that vitriol over the government’s risking hundreds of billions of dollars to rescue Wall Street from disaster, it turned out that taxpayers might actually lose nothing, or even make a profit?

Could it be? Really?

Every couple of months the Treasury Department takes a moment to strategically leak some good news about the bailouts. It happened again on Monday, when a Treasury official told The Wall Street Journal that America’s coffers would be only $89 billion lighter after all accounts were settled from the rescues, down from an earlier estimate of $250 billion.

It’s enough to make us all feel rich, isn’t it?

Inside the Obama administration, there are whispers of even greater optimism, with some officials suggesting that if the economic recovery continues apace, the bailout program could eventually turn from red to black.

That may seem far-fetched to anyone who remembers the dire predictions about banks like Citigroup, but the numbers tell a different story. The government’s $45 billion investment in Citigroup alone is on track to make a profit of nearly $11 billion, plus $8 billion or so in interest and other fees.

People inside the administration no longer refer to Citigroup as the “Death Star”; now it is a “profit center.”

Of course, we’re still expected to lose $48 billion on the government’s rescue of the American International Group. But two people close to the board suggested to me that as the company recalculates the value of assets in its portfolio that were once considered “toxic,” the government could actually claw its way back to even on that investment, if it holds on to its stake long enough.

A year ago, by the way, these same people told me they expected the government to take a “$100 billion bath” on its investment in A.I.G.

And then there are the banks that have settled up with Uncle Sam, like Goldman Sachs, Morgan Stanley and Bank of America. We’ve gotten all our money back from them, along with several billion dollars in interest.

Of course, there’s a small problem with all this happy Washington math: it doesn’t take into account the piles of cash we’re likely to lose on Fannie Mae and Freddie Mac, the huge mortgage finance companies. The Congressional Budget Office estimates that figure to be about $320 billion. That would wipe away any gains made elsewhere.

The overall math also doesn’t account for the more than $1 trillion the Federal Reserve pumped into the system through loans to Wall Street that were virtually interest-free.

But if you can put that aside for a moment — and I know that’s difficult to do — do any of these numbers persuade you, the skeptical public, that we might one day declare the bailouts a victory? After all, at this point in the recovery, a fair observer could be forgiven for thinking we were, at minimum, saved from an economic nuclear winter. Newsweek declared on its cover this week that “America’s Back.”

None of this math is likely to lead the American public to declare Mission Accomplished. Outside of Wall Street and Washington, the numbers will never look good enough, because to most people it’s not about justifying the bailout but about avoiding another financial mess in the future. It’s about moral hazard. It’s about right and wrong.

You may recall that during the most perilous months of 2008 and early 2009, there was a vigorous debate about how the government should fix the financial system. Some economists, including Nouriel Roubini of New York University and The Times’s own Paul Krugman, declared that we should follow the example of the Swedes by nationalizing the entire banking system.

They argued that Wall Street was occupied by the walking dead, and that no matter how much money we threw at the banks, they would eventually topple the system all over again and cause a domino effect worldwide.

So were they wrong after all?

Joseph E. Stiglitz, the Nobel-winning economist who was among the doomsayers, still isn’t willing to declare victory, and he probably never will.

“I think this is disingenuous and a real attempt to distract people,” Mr. Stiglitz, the author of “Freefall: America, Free Markets, and the Sinking of the World Economy,” said of the latest claims.

Mr. Stiglitz, who has made a career of seeing every glass as half-empty, said we’re looking at the numbers wrong. Even if we get our money back, he says, that doesn’t tell the full story. To calculate the real cost, he insists, we need to add in the lost interest on the money spent.

“Did we get back anything commensurate with the risk?” he asked almost rhetorically, before answering his own question. “Clearly the answer is no.”

Even at this feel-good moment, Mr. Stiglitz refuses to share in the love fest. Like many of us, he is still upset that the government didn’t attach more strings to the bailouts. He also warns of the moral hazard that was created when the government made clear that it wouldn’t let certain big banks fail. This, he says, will inevitably encourage more recklessness on Wall Street.

The next and perhaps final question is whether the government should hold on to its investments in companies like Citigroup rather than sell them off right away.

The Treasury has signaled that it plans to wind down its Citigroup stake. But what if Citigroup’s shares continue to rise, and the government misses out on an even bigger gain? Had the government not let Goldman Sachs and JPMorgan Chase pay their bailouts so early, taxpayers would have made out with even more money.

But as the old Wall Street disclaimer goes, past performance is no guarantee of future results. I suspect that most taxpayers would be happy to take the advice of Kenny Rogers and quit now, while there are still chips to count.
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PostSubject: Goldman Sachs CDO Labeled ‘Shi**y Deal’ by Montag in E-Mail   Tue Apr 27, 2010 7:03 am

April 27 (Bloomberg) -- Thomas Montag, the former head of sales and trading in the Americas at Goldman Sachs Group Inc., called a set of mortgage-linked investments sold by his firm “one shi**y deal,” according to an excerpt from internal e-mails released by Senate lawmakers.

The transaction was Timberwolf Ltd., a $1 billion collateralized debt obligation holding pieces of other CDOs, according to a statement from the Permanent Subcommittee on Investigations. The CDO also included optimistic side-bets on the performance of CDOs, derivatives in which the firm took the opposite pessimistic side in “many” cases, the panel said.

“Boy that timberwo[l]f was one shi**y deal,” Montag, who is now Bank of America Corp.’s president of global banking and markets, said in a June 22, 2007, e-mail to Daniel Sparks, who ran Goldman Sachs’s mortgage business at the time, according to the statement yesterday. Within five months of Timberwolf’s debut, the CDO had lost 80 percent of its value, and it was liquidated in 2008, according to the panel.

The CDO was among securities that Goldman Sachs sold to clients after deciding the New York-based firm needed to reduce its mortgage holdings, Carl Levin, a Michigan Democrat who leads the panel, said in the statement. Chief Executive Officer Lloyd Blankfein and six other current and former executives will testify today in front of the panel about practices in mortgage securities markets before they collapsed.

Truncated Text

The committee, which began to release documents before today’s hearing, didn’t release the full text of the e-mails. A person briefed on the Timberwolf e-mail confirmed that Montag was the author.

Montag, now 53, didn’t respond to a request for comment and Bank of America spokeswoman Jessica Oppenheim had no immediate comment. Blankfein, 55, will tell the panel his firm didn’t wager against clients, according to a prepared text of his remarks.

“We respectfully disagree with Chairman Levin’s statement,” according to an e-mail from Goldman Sachs spokesman Lucas van Praag. “We did not have a big bet against the housing market, as our performance in residential mortgages demonstrates, and we believe we at all times worked appropriately with our clients. We did try to manage our risk, as our shareholders and regulators would expect.”

The Timberwolf CDO was issued in March 2007, following a Goldman Sachs quarter that ended February 2007 in which one department of the bank shifted from $6 billion of bets that mortgage bonds would perform to $10 billion they would default, according to Bloomberg data and information the panel released.

Cioffi Buys

Bear Stearns Asset Management, the manager of two hedge funds overseen by Ralph Cioffi whose collapse in June 2007 roiled global markets, was among the buyers, purchasing about $300 million, according to the committee.

Sparks, who left the bank in 2008, in one e-mail urged “personnel working on a potential Korean sale to ‘[g]et ‘er done,’ and sent a mass e-mail to the sales force promising ’ginormous credits’ for selling” the debt, according to Levin’s statement. “A congratulatory e-mail was sent to an employee who sold a number of the securities: ‘Great job … trading us out of our entire Timberwolf Single-A position,’ ” the panel said, potentially referring to $36 million of A-rated notes.

Montag’s Career

Montag retired from Goldman Sachs in December 2007, and was recruited in April 2008 by then Merrill Lynch & Co. CEO John A. Thain to his firm. Merrill Lynch was bought by Bank of America in a government-assisted deal at the start of 2009.

Montag started his career at Goldman Sachs in 1985 as an associate in the bank’s fixed-income, currencies and commodities department. Blankfein said in a memo when he left that “since that time, Tom has played a leading role in the development of the firm’s derivatives businesses in Europe and Asia.”

CDOs repackage pools of assets such as mortgage bonds, bank capital notes and buyout loans into new securities with varying risks. While Timberwolf was initially intended to be about half invested in mortgage-bond CDOs and half invested in collateralized loan obligations tied to company debt, the bank sold many of its “best-performing” CLOs separately after a rebound in their values, Levin’s statement said.

Levin’s committee also released e-mails with references to Hudson Mezzanine 2006-1, Anderson Mezzanine 2007-1 and Abacus 2007-AC1, the CDO at the heart of a Securities and Exchange Commission suit filed April 16 against Goldman Sachs.

CDO Managers

The U.S. claims Goldman Sachs misled investors by failing to disclose that hedge fund Paulson & Co. -- which was betting against the U.S. mortgage market -- helped the Abacus CDO manager select securities to include in the portfolio. Goldman Sachs has called the SEC’s lawsuit “completely unfounded.” Paulson wasn’t accused of any wrongdoing.

CDO managers select the collateral going into the vehicles, and sometimes reinvest as the underlying positions pay down and trade in and out of holdings.

In Timberwolf’s case, the manager was Purchase, New York- based Greywolf Capital Management LP. The firm’s partners included the late Greg Mount, who joined in 2005 after nine years at Goldman Sachs, where he helped build its CDOs business, according to the prospectus and the firm’s website.

Greywolf, which focuses on corporate debt and says on its Web site it manages $848 million, planned to buy $41 million of the CDO’s junior-most tranches, according to the prospectus. In January 2007, Goldman Sachs underwrote a $502 million CLO managed by Greywolf tied to high-yield company loans, according to Bloomberg data.

Conflicts Disclosed

The conflicts of interest section of Timberwolf’s prospectus said that Greywolf might “take into consideration research and other brokerage services” from investment banks in its decision-making for the CDO and also make separate investments with “interests different from or adverse to” the CDO’s collateral.

“Under the terms of the Collateral Management Agreement,” Greywolf “will be permitted to take whatever action is in the Collateral Manager’s best interest regardless of the impact on the Collateral Assets,” according to the prospectus.

Mount died last April, the company said in a statement at the time. Shawn Pattison, a spokesman for Greywolf, declined to immediately comment. On Goldman Sachs’s role, the prospectus said the firm would act as the sole counterparty for the bullish derivative bets on CDOs that the vehicle was making through so-called credit- default swaps, “which creates concentration risk and may create certain conflicts of interest.”

The Goldman trader responsible for managing Timberwolf’s issuance later characterized the day that the CDO was created as “a day that will live in infamy,” according to part of an e-mail released by the panel.
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PostSubject: Fortis Prime Brokerage Sold to CS   Tue May 11, 2010 7:02 pm

HFN:

Fortis Prime Brokerage Sold to CS

Fortis has sold its prime brokerage to Credit Suisse Group, ending a six-month-long negotiation. Credit Suisse announced it had completed its purchase Monday. It did not reveal how much it cost to acquire the business. No one from its press office in New York returned a telephone call from HedgeFund.net.

Credit Suisse and Fortis began discussing a possible deal in December. Philip Vasan, head of prime brokerage for Credit Suisse, called it a "strong fit" for his company in the announcement. Vasan had said he is "very selective" about what kind of hedge fund he is willing to take on as a prime brokerage client. Fortis reported it had $325 million in hedge fund capital under administration in its prime brokerage in 2007. The company has not revealed its most recent total.

Prime brokerage has undergone consolidation as well as a rebalancing of power. Bear Stearns, Goldman Sachs Group and Morgan Stanley had until 2008 controlled the bulk of the prime brokerage market. But Bear Stearns as well as Lehman Bros., a mid size prime broker, have collapsed and JPMorgan Chase became a leading prime broker when it bought Bear Stearns.

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Some things to keep in mind for the future Basketball
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PostSubject: Bank of America Employees Sue Lender Over Hourly Pay in 5-State Complaint   Sat Jun 05, 2010 3:15 pm

(Bloomberg)- By Diane Carroll and Andrew M. Harris - Jun 5, 2010

Bank of America Corp. fails to pay overtime to employees, violating laws in at least five states, according to a lawsuit filed in federal court in Kansas City, Kansas. The complaint, filed yesterday, consolidates a dozen
separate employee lawsuits filed against the biggest U.S. bank by assets in California, Florida, Texas, Washington and Kansas. “BOA’s policy and practice is to deny earned wages, including overtime pay, to its non-exempt hourly employees at its retail branch and call center facilities throughout the country,” the workers said in their 44-page filing. The federal Judicial Panel on Multidistrict Litigation in April ordered the cases to be aggregated in Kansas City, Kansas. The Charlotte, North Carolina-based bank had asked the panel to combine the matters for pretrial proceedings in California, where workers’ wage cases were brought in the U.S. courthouses at Santa Ana and Los Angeles. Shirley Norton, a San Francisco-based spokeswoman for the bank, said the company would defend itself vigorously in court.

“Bank of America has comprehensive policies, practices and training for both managers and associates designed to ensure full compliance with all federal and state wage and hours laws,” she said in an e-mail. Current and former tellers and other hourly workers who were employed by the bank within the last three years claim the lender violated either the federal Fair Labor Standards Act or state wage and hour laws. Instead of paying overtime when employees worked more than 40 hours in a week, the plaintiffs said, the bank gave them compensatory time off or told them not to record more than 40 hours worked and -- in some instances -- modified the tellers’ recorded hours by eliminating incurred overtime.

Class-Action Status
The plaintiffs are seeking back pay, attorney fees and other related damages. Plaintiffs’ lawyer Brendan Donelon said he planned to ask U.S. District Judge John Lungstrum for national class-action, or group, status later this year. If granted, the workers’ claims could be worth more than $100 million and as many as 180,000 employees at the bank’s branches and call centers across the country could gain the option to either opt in or opt out of the lawsuit, he said in a phone interview. The case is In re: Bank of America Wage and Hour Employment Litigation, 10MD2138, U.S. District Court for Kansas (Kansas City).
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PostSubject: Re: Everythintg Financial   Mon Jun 07, 2010 10:15 pm

Goldman loves to play games...


=========================================================

Goldman accused of hindering crisis probe

FT: By Tom Braithwaite in Washington and Francesco Guerrera in New York

The US Financial Crisis Inquiry Commission accused Goldman Sachs on Monday of an “abysmal” response to requests for information and said it had issued a subpoena to compel the bank to provide documents and executives for interviews. Phil Angelides, commission chairman, said Goldman had failed to answer some questions while providing an indigestible 5 terabytes of data – equivalent, he said, to 2.5bn pages – in response to others. “We did not ask them to pull up a dump truck to our offices and dump a load of rubbish,” he said.

Goldman, which emerged from the financial crisis in better shape than most rivals, is now facing a tide of criticism from around the world – including China’s state-controlled media – as well as civil fraud charges filed by the Securities and Exchange Commission. The FCIC was set up by Congress to study the causes of the financial crisis and has been equipped with broad legal powers. Mr Angelides, a former California state treasurer, is the Democratic chairman; Bill Thomas, former head of the House ways and means committee, is the Republican vice-chairman.

Mr Angelides and Mr Thomas said Goldman had been asked to provide information similar to that sought from other big banks but was an “outlier” in its “abysmal” response, which they described as an attempt to “stonewall” and “obfuscate” over months of “mischief making”. Mr Thomas said: “The type and the volume of requests we’ve made to Goldman was not inordinate compared to at least half a dozen banks. The other banks complied.”

Goldman said: “We have been and continue to be committed to providing the FCIC with the information they have requested.” The bank has denied SEC charges that it misled investors in a mortgage-related security the bank created in the early stages of the financial crisis. Mr Thomas said it was unlikely he would call Lloyd Blankfein, the bank’s chief executive, to testify in public again after he appeared – without a subpoena – in January. “I’m not interested in providing him with the public forum to sound reasonable when in fact his behaviour has not been,” he said. “I think we can . . . do more damage to them in the public media over their unwillingness to be co-operative.”

Mr Blankfein; David Viniar, chief financial officer; Craig Broderick, chief risk officer; and Gary Cohn, chief operating officer; will be compelled to attend private interviews with FCIC staff.

Goldman shares fell 2.4 per cent on Monday and are down nearly 18 per cent this year.
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PostSubject: Morgan Stanley Raises $4.7 Billion for Real Estate   Fri Jun 11, 2010 10:03 pm

June 11 (Bloomberg) -- Morgan Stanley, once the biggest property investor among Wall Street banks, raised $4.7 billion for a new global real estate fund, less than half its target before the financial crisis. Some of the New York-based firm’s largest institutional clients didn’t put money in the new fund after market losses. The Washington State Investment Board, which placed $880 million in two prior Morgan Stanley property funds, decided against committing new capital.

“We will not be investing in the new fund because it is global including U.S. and we already have a large U.S. concentration,” Liz Mendizabal, spokeswoman for the Olympia- based pension board, said in an e-mail today. Many investors have shied away from real estate deals amid falling property values and scarcer debt financing. Morgan Stanley had hoped to raise $10 billion for the fund, according to minutes from a June 2008 meeting of the Contra Costa County Employees’ Retirement Association. Still, the fund is the largest to close since 2008. Morgan Stanley Real Estate Fund VII will invest in the U.S. and internationally, said company spokeswoman Alyson Barnes, noting that the firm supplied less than 10 percent of the capital.

‘Significant’ Opportunities

The real estate fund will “take advantage of the significant investment opportunities this part of the real estate cycle presents to us,” Morgan Stanley said in a statement. Wall Street firms may be barred from owning and investing in hedge funds and private equity under the so-called Volcker rule, part of the Senate’s financial reform bill. Lawmakers from the House and Senate are merging bills passed by the two chambers into a single measure for President Barack Obama’s signature. Morgan Stanley, which managed $46.4 billion of real estate assets for clients as of March 31, suffered losses in its last fund. The firm told investors this year that it expects to lose $5.4 billion of an $8.8 billion real estate fund from 2007, a person familiar with the situation said in April.

Concord, California-based Contra Costa County Employees’ Retirement Association rescinded its decision to invest $75 million in the new fund in February 2009, citing market risk and staff departures at Morgan Stanley. New Jersey’s pension fund also decided not to pursue a $150 million potential investment.

John Klopp

To bolster its real estate effort, Morgan Stanley named John Klopp as head of investing in Americas real estate and global property debt in February, and its Alternative Investment Partners fund of funds business raised $370 million for a fund focused on private-equity real estate funds. Morgan Stanley recorded about $4.4 billion in real estate losses in 2008 and 2009. In April, the firm booked a $932 million loss on its investment in Revel Entertainment Group LLC, the developer of an unfinished casino resort in Atlantic City, New Jersey. In November, Morgan Stanley agreed to hand over Crescent Real Estate Equities to Barclays Capital, ending its obligation on a $2 billion loan.

The firm sent a fourth-quarter update to clients of its Morgan Stanley Real Estate Fund VI International showing it was likely to recover $3.4 billion of its investments, the person said in April. The California State Teachers’ Retirement System’s $440 million investment in the fund has declined 86 percent as of Sept. 30, 2009, according to figures provided by spokeswoman Sherry Reser.
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PostSubject: Re: Everythintg Financial   Mon Jun 14, 2010 5:42 pm

We are seeing big big outflows outta the mutal funds in May! I look forward to the HFN monthy report on HF flows, Hoping to get better insight of where all this money is going? Bonds? Equities? Emerging markets? Is this more risk averse or more risk taking?


------------


Published on Global Fund Wire (http://www.globalfundwire.com)
Home > US mutual funds see net outflows of USD7bn in May
US mutual funds see net outflows of USD7bn in May

By Emily.perryman
Created 13/06/2010 - 15:03

Despite the return of extreme volatility to financial markets, US mutual fund investors withdrew a net of only USD7bn from stock and bond mutual funds in May 2010, according to Strategic Insight.

May’s modest redemptions contrasted the nearly USD170bn of net inflows to stock and bond funds in the first four months of 2010, the bulk of which went to bond funds.

Besides alarming stock market declines – the average stock fund investor lost eight per cent in May – investors faced European debt and currency worries.

These factors, not surprisingly, triggered net redemptions of USD16bn from equity funds in May, according to Strategic Insight’s Simfund database. Such redemptions amounted to just 0.3 per cent of equity fund assets. Stock fund redemption activity slowed to a trickle by month-end. .

Bond funds experienced net inflows of USD8bn in May. Inflows persisted among many bond funds used for cash management. Other kinds of bond funds, such as high yield and global income where price deterioration occurred due to economic uncertainty or Euro depreciation, experienced modest outflows.

“In the context of nearly USD7trn in stock and bond fund assets, May’s outflows are moderate. This speaks to the loyalty that long-term investors have to the mutual fund vehicle,” says Avi Nachmany, Strategic Insight’s director of research. “Given global economic worries, risk-aversion should continue to trigger bond-fund demand. Yet some investors may see the price pullback as a buying opportunity.”

Separately, Strategic Insight estimated that investors put net USD3.5bn into US exchange-traded funds in May. Because of the month’s market declines, US ETF assets dropped to USD793bn from USD843bn at the end of April. Fixed income ETFs – especially lower-volatility taxable bond ETFs – accounted for the bulk of May’s net inflows, while gold and emerging markets equity ETFs also saw inflows.

“The diversity of the ETF market supports continued net inflows to these increasingly mainstream vehicles,” says Loren Fox, a senior research analyst at Strategic Insight.

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Copyright ©️ 2009 Hedgemedia Ltd. All Rights Reserved
Source URL: http://www.globalfundwire.com/2010/06/13/50358/us-mutual-funds-see-net-outflows-usd7bn-may
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PostSubject: JPMorgan Shuffles Senior Executives as Part of Succession Plan   Tue Jun 22, 2010 1:20 pm

Jamie Dimon the next Treasury Secratary?

========================================

JPMorgan Chase & Co. named Heidi Miller to the new post of president of JPMorgan International as Chief Executive Officer Jamie Dimon shuffled senior managers to train a successor who could eventually run the company.

Miller, 57, who had been executive vice president for Treasury and Securities Services, will be replaced by Chief Financial Officer Michael Cavanagh, 44. Doug Braunstein, 49, head of Investment Banking Americas, will succeed Cavanagh as CFO, the company said in a statement today.

“In developing great leaders and building a strong company, we focus on continually broadening the experience of our executives and working to deploy their talents and expertise across the organization,” Dimon said in the statement. “Today’s moves reflect our goal of building on our team’s experience and providing them with new opportunities to make our company even better.”
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PostSubject: Forum: Hedge Funds/Private Equity Will Drive Innovatio   Thu Jun 24, 2010 6:36 pm

Vikram knows best....

===================================================================
HFN:

Medium-sized hedge fund and private equity firms will have a lot more to do with restoring innovation to American business than big financial institutions, one fund manager said at an international conference. Richard Robb, the chief executive officer of Christofferson Robb & Co., a London-based private investment firm, said investing in new ventures involved "judgment and decision-making that can't easily be justified to institutional investors or regulators."

"When we're talking about financing innovation, that comes from widely distributed individuals, private equity and hedge funds and some venture capitalists," Robb said. Robb appeared on a panel discussion Wednesday at the New York Forum, an international business conference focused on the problems of the global economy. His comments were in contrast to those of Citigroup CEO Vikram Pandit, who said the problem with the global economy was that uncertainty about capitalization requirements and other proposed financial regulations were keeping banks from lending to small and medium-sized businesses.

"The irony is that the largest companies can get at capital because they can go to the capital markets," Pandit said. Pandit also noted the contrast between developed and emerging markets. The emerging markets, he noted, have less debt, less uncertainty and the cost of doing business is lower. "It's no longer about the U.S. and Europe," he said. Speaking to regulation of the private investment industry, Robb said regulation of hedge funds in the U.S. was fairly benign, while Europe was the opposite.

"They will turn every small manager into a mutual fund which means they can't make bets on innovation," he said. Robb also cautioned against private investment firms getting too large, which could expose them to the kind of restrictions that are being posed on financial institutions that are deemed to be a systemic risk
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PostSubject: Morgan Stanley May Hire 500 Private Bankers in Lending Push    Thu Jul 01, 2010 10:41 am

Morgan Stanley, owner of the world’s largest brokerage, hired 100 private bankers and may quintuple their numbers by the end of 2011 to offer more products such as jumbo mortgages and structured loans to Morgan Stanley Smith Barney clients, a person with knowledge of the strategy said.

The firm is building a private bank to squeeze more revenue from clients and encourage them to hold deposits at the company. Morgan Stanley’s wealth management group had $191 million of interest income in the first quarter, a fraction of the $1.1 billion at Bank of America Corp.’s Merrill Lynch unit.

“There is always this hidden opportunity of cross-sell,” said Steve Stelmach, an analyst at FBR Capital Markets in Arlington, Virginia. “Merrill Lynch has been successful in offering mortgage products to their retail customers, so the precedent is there.”

Morgan Stanley joins Bank of America and Wells Fargo & Co. in encouraging customers to do more business with the banks as the weak economy and new regulations make it harder to earn money from loans and investment banking. Bankers have pushed cross-selling for decades, often with little to show for it, to expand their business without having to sign up new customers.

The unit, Morgan Stanley Private Bank N.A., registered with the Federal Reserve in April. The private bank is headed by Cece Stewart, 52, whom Morgan Stanley hired in 2008 from Wachovia Corp., where she had risen to executive vice president from branch manager over three decades. The firm started hiring the private bankers last year.

Boosting Loan Balances

The private bank plans to as much as triple its loan balances to between $50 billion and $60 billion by the end of 2014, said the person, who declined to be named because the plans haven’t been made public. The bank now has about $19 billion in loans largely from its previous lending efforts, which mostly focused on agency mortgages, the person said.

The private bank will also offer deposit products to clients who hold more than $1.6 trillion of assets in the brokerage. Morgan Stanley considered buying a banking franchise before deciding to build its own private bank in the first half of 2009, the person said. That was the same year that Morgan Stanley formed its brokerage, which has more than 18,000 advisers, when it bought a controlling stake in the joint venture with Citigroup Inc.

Citigroup has hired about 15 private bankers since March and will add another 115 over the next several years, spokesman Mark Costiglio said in an interview last month.

Bank of America is trying to persuade its 12 million customers to move funds from rival brokers to Merrill Lynch and wants Merrill Lynch clients to transfer some of the $500 billion they have at other banks, according to a May 10 presentation. Wells Fargo is focused on 3 million customers who keep more than $250,000 for investments at other companies, according to Senior Executive Vice President David Carroll.

‘Aggressive’ Rates

It’s often difficult to gauge how successful efforts to sell clients new products are because banks rarely provide data on their cross-selling efforts, said Stelmach, the FBR analyst.

Morgan Stanley is now offering jumbo mortgages, home-equity lines and securities lending, said Armando Cabo, a private banker who joined from JPMorgan Chase & Co. this year. The bank plans to offer some commercial loans to clients later this year, Cabo said. It’s offering mortgages of up to $5 million and home- equity lines up to $2.5 million, spokesman Jim Wiggins said.

The private bankers will work with financial advisers to arrange lending options for clients, with the advisers remaining the primary contact. Cabo said he’s working with about 80 to 90 advisers.

The firm has been offering “aggressive” interest rates to win clients, said Shawn Rubin, a Morgan Stanley Smith Barney financial adviser in New York. Lending and managing clients’ liabilities will probably be the highest-growth revenue source of his business this year, Rubin said.

Liability Management

“The markets have been very challenging for a while, and clients are sort of used to the markets not doing a whole lot for their net worth,” Rubin said. “So they are really focused on the other avenues of wealth management, whether that’s risk management or liability management.”

Record low home-loan rates may prompt some clients who had loans with other banks, including Citigroup’s private bank, to refinance, providing a chance for Morgan Stanley to gain market share, Rubin said. Rates for 30-year fixed loans declined to 4.69 percent in the week ended June 24, mortgage-finance company Freddie Mac said last week. That’s below the previous record of 4.71 percent, set in the week ended Dec. 3.

Compensation Ratio

Jumbo mortgages are larger than the ones that government- supported Fannie Mae and Freddie Mac can finance, now from $417,000 to $729,750 in high-cost areas. About 10.3 percent of U.S. prime jumbo mortgages which backed securities were at least 60 days late in May, according to Fitch Ratings. That’s up from 10.2 percent in April, marking the 36th straight increase for “serious delinquencies.”

Morgan Stanley’s wealth-management unit had revenue of $3.11 billion in the first quarter, down from $3.14 billion in the fourth. Chief Executive Officer James Gorman, who led the unit before succeeding John Mack in January, said in a letter to shareholders this year that the joint venture will play “an increasingly important role in our growth and profitability.”

The effort is likely to lower the wealth-management unit’s compensation ratio over time, according to two people briefed on the matter. The division’s ratio of compensation costs to revenue was 64 percent in the first quarter, compared with 41 percent in the institutional securities business, which includes the trading and investment banking units.

“We’re making huge investments on the lending front, because Morgan Stanley did not do things like non-conforming mortgages and structured or tailored loans, and we had that through Citi’s private bank,” Charles Johnston, president of Morgan Stanley Smith Barney, said in an interview in April. “There’s a huge opportunity there, and we’ve got that now, we’ve built that.”
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PostSubject: Banks Offer Loans to Help Win Bond Underwriting Deals    Wed Jul 07, 2010 11:55 am

This reminds me of old school investment banking when The underwriters would take a cut of the bond issuance themselves as the fee for lining up buyers. During the last 2 decades, the notion of being hands on with industry became dirtied. Industry companies are definitely benefiting from the lack of Financial Sponsors business. Thus, revolving credit facilities and syndicated loans are coming with underwriting deals.

I feel for those young college graduates participating in bake-offs with so many other banks. Their compensation will surely reflect this unfortunate circumstance. Maybe Investment Banking will finally became unattractive due to the over-crowded business environment. Engineering may become popular again. scratch

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July 7 (Bloomberg)-- The world’s biggest banks are offering loans to help them win places on companies’ bond deals as a 39 percent drop in sales this year, the most since at least 1998, shrinks fees. Citigroup Inc. offered a loan with Credit Suisse Group AG and 12 other lenders to join a bond sale by Virgin Media Inc., the U.K.’s second-largest pay-television company, said Treasurer Richard Martin. Citigroup also gave Spanish builder Obrascon Huarte Lain SA 50 million euros ($63 million) of loans to join a 700 million-euro bond issue, said four people familiar with the matter, who declined to be identified as the talks were private.

Borrowers are obtaining credit from banks competing for a pool of bond deals that dropped to $1.18 trillion in the first half from $1.92 trillion a year earlier as Europe’s sovereign debt crisis pared sales, according to data compiled by Bloomberg. The number of banks on each high-yield deal has almost tripled since 2000, cutting fees by an average of 57 percent per firm. “We’ve been very clear with our banking business partners that we’ll take care of those who are good to us,” said Martin of London-based Virgin, which enlisted a record 14 banks to sell debt in January. “If you want to be in the bond, we need you to give us your balance sheet as well.”

Martin included Credit Suisse, Citigroup, Barclays Capital and HSBC Holdings Plc in Virgin Media’s bond offering, along with 10 other managers, after they agreed to join a 1.925 billion-pound ($2.9 billion) credit facility. The four banks, whose spokesmen declined to comment, ultimately weren’t needed on the loan.

‘Eggs in One Basket’

“Banks and corporate treasurers don’t want to put all their eggs in one basket,” said Tom Jenkins, a credit analyst at Jefferies International Ltd. in London. More than half of this year’s 321 high-yield bond offerings were handled by three or more underwriters, compared with 32 percent in 2007 and 3 percent in 2000, Bloomberg data show. About 20 percent of the issues were managed by a single bank, compared with about 66 percent a decade ago. High-yield, or junk, bonds are rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. “The era of the sole-book-managed deal is long gone,” said Malcolm Stewart, the former head of European leveraged capital markets at Merrill Lynch and Citigroup who’s now the London-based managing partner at North Sea Partners LLC, a closely held investment bank.

48 Hours

Citigroup, the third-biggest U.S. lender by assets, provided Obrascon with a loan 48 hours before the bond sale was announced and after managers Banco Santander SA, Credit Agricole SA, RBS and Societe Generale SA had done six months of work, said the people familiar with the financing. Citigroup convinced the builder that the bond offering would be more successful with a U.S. firm, according to the people involved in the deal. Because of the financial crisis, “issuers of new bonds may be more amenable to looking for a relationship with a strong lender,” said Kathleen Shanley, a senior bond analyst at independent debt-research firm Gimme Credit LLC in Chicago. “Before the credit crisis, many issuers may have thought they could rely exclusively on the capital markets to cover financing needs,” she said. Obrascon’s bond issue in April “could have gone out with two or three banks, but we decided to add two additional banks,” said Francisco Melia, deputy chief financial officer at the Madrid-based company. “It’s more important than ever since the credit crisis that banks support us with other operations such as lending.”

Spokesmen at the banks declined to comment.

Lower Fees

The number of banks managing each high-yield bond averages 3.1, the highest ever, while the typical fee on so-called junk bond sales fell to 1.82 percent this year from a six-year high of 1.98 percent in 2009, according to Bloomberg data. That’s 0.59 percent for each underwriter, down from 0.71 percent in 2005 and 1.38 percent a decade ago. Underwriters’ share of fees have dwindled along with high- yield sales, which plunged in May to the least since March 2009. Companies sold $10.5 billion of debt globally last month in 24 offerings, the fewest since April 2009, following 27 deals worth $8.61 billion in May, according to Bloomberg data. That compares with an average 68 bond sales totalling $32.4 billion in the previous four months.

Syndicated loan borrowings in Europe and the U.S. rose to $734.2 billion in the first half, from $528.7 billion a year earlier, Bloomberg data show. Virgin Media included the 14 underwriters when it sold $2.4 billion of bonds in dollars and pounds in January to boost participation in the loan, Martin said. “We decided to defer a portion of the bond fees until we understood the participation in the bank loan,” he said. “Ultimately, we didn’t need all 14 banks for the bank loan, we only needed 10 to fill out the syndicate, but it helped create competitive tension.”
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PostSubject: Citi Expands Energy Biz Team    Tue Jul 13, 2010 4:55 pm

Zacks Equity Research, On Tuesday July 13, 2010, 12:44 pm:

In an effort to boost its energy business in Asia, Citigroup Inc. (NYSE: C - News) is recruiting a minimum of five additional employees, including two traders, as per a Reuters report. Citi has already hired Rob Biro as the head of its Asia oil products team. Rob Biro was a long-serving trader with the unit of Goldman Sachs Group Inc.’s (NYSE: GS - News) J'Aron, in Singapore.

Citi is also seeking to expand the team of traders. In addition to its current team of two oil traders – a trading manager and a naphtha trader, Citi is also looking to employ a distillates trader and a fuel oil trader. Citi has already appointed Robert Bayley in Singapore in January this year as the new Asia-Pacific head for commodities. He replaces Ananth Doraswamy. The initiatives to expand its energy and commodities business in Asia is a strategic fit with the actions taken by a number of other banks. This includes Credit Suisse Group (NYSE: CS - News), Société Générale, Macquarie and Australia and New Zealand Banking Group Ltd.

Asia has become an attractive region for business growth. Countries such as China and India, which are experiencing an economic boom and deregulations compared to the slowing economies and stringent regulations in the West as well as the debt crisis in Europe, are compelling banks to strengthen their business in this region. Following the global financial crisis, Citi has been expanding its energy business team in this region. It has already forayed into physical oil trading in the past one year. With a widespread network in the Asia region, the company is expected to reap the benefits of this expansion in the coming years.

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PostSubject: Deutsche Bank Profit Rises 6.4%, Helped by Consumer Banking    Tue Jul 27, 2010 8:42 am

July 27 (Bloomberg)--Deutsche Bank AG, Germany’s largest bank, said second-quarter profit rose 6.4 percent, beating analysts’ estimates, as gains in retail and transaction banking helped offset a decline in sales and trading. Deutsche Bank rose as much as 3.6 percent in Frankfurt trading after saying net income increased to 1.16 billion euros ($1.51 billion), surpassing the 1.05 billion-euro median estimate of analysts surveyed by Bloomberg. Sales and trading at the investment bank, run by Anshu Jain, fell 15 percent from a year earlier and 42 percent from the first quarter, tracking declines at competitors including Credit Suisse Group AG and Goldman Sachs Group Inc. The so- called stable businesses of global transaction banking, consumer banking and asset and wealth management posted their highest combined pretax profit in two years.

“The stable businesses made very pleasant progress in the second quarter,” said Manfred Jakob, an analyst at SEB AG in Frankfurt. “The slump in trading is largely due to the euro crisis.” Deutsche Bank was up 1.9 percent to 51.34 euros by 9:18 a.m. in Frankfurt. UBS AG, Switzerland’s biggest bank, rose as much as 7.6 percent in Swiss trading after reporting a third consecutive quarterly profit, beating analysts’ estimates on higher-than-expected trading revenue.

Consumer, Transaction Banking

Earnings from Deutsche Bank’s retail unit rose more than four-fold to 233 million euros, the most since the collapse of Lehman Brothers Holdings Inc. in 2008, helped by mortgage lending and a decline in loan defaults. Pretax profit from transaction banking more than doubled to 478 million euros, boosted by the purchase of parts of ABN Amro Bank NV’s commercial lending activities in the Netherlands and trade finance. Asset and wealth management returned to a profit of 45 million euros in the quarter. Chief Executive Officer Josef Ackermann has been seeking to reduce dependence on the investment bank by making acquisitions, including the ABN Amro operations, private bank Sal. Oppenheim Group, and a stake in Deutsche Postbank AG. The investment- banking unit generated more than 90 percent of overall earnings in the first quarter. Pretax profit at the division fell 5.3 percent to 779 million euros in the second quarter from a year earlier and 70 percent from the previous three months. Earnings missed the 1.12 billion-euro estimate of analysts.

Trading Slump

Credit Suisse of Zurich, New York-based Goldman, Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley, as well as Bank of America Corp. of Charlotte, North Carolina, on average reported a 34 percent drop in trading revenue in the second quarter from the first, company reports show. Investment banking revenue for the group declined 27 percent. “In a quarter which was characterized by increased investor uncertainty and higher market volatility, Deutsche Bank’s investment banking business followed the industrywide trend of weaker profitability,” Ackermann, 62, said in today’s statement. Sales and trading revenue from debt and other products fell to 2.13 billion euros from 2.32 billion euros a year earlier, the company said. Analysts had forecast 2.36 billion euros. Equity trading revenue decreased to 642 million euros from 927 million euros, missing the estimate of 757 million euros.

Profit Goals

Deutsche Bank aims to double pretax profit at its operating businesses to 10 billion euros by 2011 from 2009 levels, helped by gains in investment banking and Asia. About two-thirds of the target is slated to come from the corporate banking and securities unit and the rest from transaction and retail banking and asset and wealth management. Deutsche Bank’s pretax profit in the second quarter rose 16 percent to 1.52 billion euros, compared with analysts’ estimate of 1.53 billion euros. Deutsche Bank set aside 243 million euros for loan defaults, down from 1 billion euros in the year-earlier period, helped by an economic recovery. German business confidence unexpectedly surged to a three-year high in July after exports boomed and economic growth accelerated, the Ifo institute said last week.

Deutsche Bank booked gains of 309 million euros related to ABN Amro and its own debt, which were outweighed by costs of 507 million euros from Ocala Funding LLC, a commercial paper vehicle, and the Cosmopolitan Resort & Casino in Las Vegas, markdowns from the credit crisis and the U.K. payroll tax, the bank said.
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PostSubject: Goldman: Fed May Announce New Asset Purchases in November    Tue Sep 14, 2010 5:13 pm

More rumors from the Journal....

=========================

By Luca Di Leo

The U.S. Federal Reserve could announce a new program of asset purchases to support a weak economy as early as November, according to Goldman Sachs Group Inc.

“We don’t expect this at the Sept. 21 meeting, but in November or December there’s certainly a possibility that it will be announced,” Jan Hatzius, chief economist at the bank, said Tuesday. He added the Fed is likely to buy U.S. Treasurys worth around $1.0 trillion to kick-start the economy.

To fight the financial crisis in 2008 and 2009, the Fed bought $1.7 trillion in mainly mortgage-backed securities, a move that helped to keep mortgage and other long-term borrowing rates low. That program ended in March. But with the recovery slowing, the Fed said Aug. 10 that it would reinvest the proceeds of mortgage bonds into U.S. Treasurys to prevent its portfolio of securities from shrinking. The question now is whether the central bank will start a new program of asset purchases that would increase the size of its $2.0 trillion balance sheet further.

Goldman Sachs expects this to happen soon given the weakness in the U.S. economy as a result of lower business inventory accumulation and a fading fiscal stimulus. The bank expects the U.S. unemployment rate to creep back up to 10% by early 2011 from 9.6% in August and to stay around that level for most of the year.

U.S. inflation is predicted to continue slowing to 0.5% by the end of next year from around 1.0% currently. That would be well below the Fed’s informal target of between 1.5% and 2.0%.

The upcoming meetings of the Fed’s policy-setting committee this year are Sept. 21, Nov. 2-3 and Dec. 14.
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PostSubject: Wall Street’s Profit Engines Slow Down   Tue Sep 21, 2010 2:34 am

NYT:

Inside the great investment houses on Wall Street, business has taken a surprising turn — downward. After an unusually sharp slowdown in trading this summer, analysts are rethinking their profit forecasts for 2010. The activities at the heart of what Wall Street does — selling and trading stocks and bonds, and advising on mergers — are running at levels well below where they were at this point last year, said Meredith Whitney, a bank analyst who was among the first to warn of the subprime mortgage disaster and its impact on big banks. Worldwide, the number of stock offerings is down 15 percent from this time last year, while bond issuance is off 25 percent, according to Capital IQ, a research firm. Based on these trends, Ms. Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.

While the numbers will not be known until after the third quarter ends and financial companies begin reporting earnings in October, the pace of trading this summer was slow even by normal summer standards. Trading in shares listed on the New York Stock Exchange was down by 11 percent in July from 2009 levels, and August volume was off nearly 30 percent. “What’s happened in the third quarter is that after a very slow summer, people expected things to come back,” said Ms. Whitney. “But they haven’t, and the inactivity is really squeezing everyone.” The downward slide on Wall Street parallels a similar shift in the broader economy, which has slowed considerably since showing signs of a nascent recovery this spring. And if banks come under pressure, all but the safest borrowers may struggle to get loans.

With less than two weeks to go in the third quarter, companies will be hard-pressed to fulfill earlier, more optimistic expectations. “It’s like the marathon: if you’re five miles behind, you can’t make that up in the last 10 minutes of the race,” said David H. Ellison, president of FBR Fund Advisers, a money management firm that specializes in financial companies. Many banks are barely scraping by in traditional Wall Street business. As a result, executives, portfolio managers and analysts say that even the mighty Goldman Sachs, which posted a profit every day for the first three months of the year, is unlikely to deliver the kind of profit growth that investors have come to expect.

Keith Horowitz, a bank analyst at Citigroup, said he expected Goldman Sachs to earn $7.8 billion in 2010, a 35 percent decline from the $12.1 billion it made last year. The drop in trading translates into lower commissions for brokerage firms, as well as a weaker environment for underwriting initial public offerings and other stock issues, traditionally a highly lucrative niche. Banks are also scaling back on making bets with their own money — known as proprietary trading — another huge profit source in recent years that will soon be forbidden under terms of the financial reform legislation passed by Congress this summer. Indeed, analysts have finally started to bring their forecasts in line with the new reality. On Sept. 12, Mr. Horowitz reduced his estimates for third-quarter profits at Goldman and Morgan Stanley.

Mr. Horowitz had predicted Goldman would make $1.75 billion in the third quarter, or $3 a share; he now expects Goldman’s profit to total $1.34 billion, or $2.30 a share. For Morgan Stanley, his revision was even steeper, with earnings expectations revised downward to $140 million, or 10 cents a share, from $726 million, or 53 cents a share. Mr. Horowitz’s estimates are considerably lower than the consensus among analysts who track the two companies. If the other analysts revise their estimates closer to his, they would put pressure on the shares. One of the rare bright spots for Wall Street recently has been the issuance of junk bonds, as ultra-low interest rates encourage investors to seek out riskier debt that carries a higher yield. But that will not be enough to offset the weakness elsewhere, said one top Wall Street executive who insisted on anonymity because he was not authorized to speak publicly for his company, and because final numbers would not be tallied until the end of the month.

To make matters worse, he said, many Wall Street firms increased their work forces in the first half of the year, before the mood shifted and worries of a double-dip recession arose. If activity remains anemic, firms could soon begin cutting jobs again. “I think the summer was horrible for everyone, and no one expected it to be as bad as it was,” he said. “It’s coming back a little bit in September but nowhere near enough to make up for what happened in July and August.” The profit picture is brighter for diversified companies like JPMorgan Chase and Bank of America, which have larger commercial and retail banking operations in addition to their Wall Street units, but some analysts say earnings expectations for them could come down as well.

“Estimates still seem a little high, and the revenue story for all the banks is not a good one,” said Ed Najarian, who tracks the banking sector for ISI, a New York research firm. With interest rates plunging, banks are making less off their interest-earning assets like government bonds and other ultra-safe securities. At the same time, demand for new loans remains weak. One wild card will be the credit card portfolios at major banks like JPMorgan, Bank of America and Citigroup. As delinquencies ease, Mr. Najarian said, credit losses are likely to decline. That trend helped earnings at JPMorgan in the second quarter, and could be crucial again in the third quarter.

Ms. Whitney says the gloomy short-term predictions foreshadow a series of lean years in the broader financial services industry.
Indeed, she said the Street faced a “resizing” not seen since the cutbacks that followed the bursting of the dot-com bubble a decade ago. “We expect compensation to be down dramatically this year,” she wrote in a recent report. She predicts the American banking industry will lay off 40,000 to 80,000 employees, or as many as 1 in 10 of its workers. That may be extreme, but Ms. Whitney argues that the boom years are not coming back anytime soon. As both consumers and companies cut back on debt, and financial reform rules put the brakes on profitable niches like derivatives and proprietary trading, the engines of earnings growth for the last decade will continue to sputter.
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PostSubject: Goldman Trades Where Morgan No Longer Treads With Gap Widening    Mon Sep 27, 2010 3:12 pm

(Bloomberg)--Morgan Stanley executives have been trying to prove since the financial crisis that they run a different type of company than Goldman Sachs Group Inc. Investors may be finally starting to believe them. The correlation between the two firms’ daily share-price movements, a measure of how closely securities move in tandem, is down 17 percent this year from the average over the last decade. The correlation in the third quarter so far dropped to the lowest for any quarter since 2003. Goldman Sachs is down 12 percent in 2010 and Morgan Stanley 15 percent, both trailing the Standard & Poor’s 500 Index, which is up 4.5 percent.

The change reflects how the two longest-surviving major investment banks have chosen different directions. Morgan Stanley Chief Executive Officer James Gorman, 52, has pushed his firm toward a lower-risk model, expanding into retail brokerage and leaving Goldman Sachs as the only firm among the 25 largest U.S. financial companies to get more than 60 percent of its revenue from investment banking and trading. “There’s definitely been a divergence in the business emphasis of Morgan Stanley and Goldman Sachs as a result of the financial crisis,” said Jordan Posner, senior portfolio manager at New York-based Matrix Asset Advisors Inc., which manages more than $1 billion and owns Morgan Stanley shares. “While there are a number of industry variables that will be in common between Goldman Sachs and Morgan Stanley, as well as JPMorgan and other firms, there is now a choice in what kind of business model you want to invest in.”

Resembling Merrill

After pursuing a strategy that emulated Goldman Sachs’s trading-centric model before confidence in financial institutions collapsed in 2008 -- prompting Morgan Stanley and Goldman Sachs to be approved by the Federal Reserve as deposit- taking institutions -- Morgan Stanley now has a revenue breakdown more closely resembling that of Merrill Lynch & Co., where Gorman worked from 1999 to 2005. Goldman Sachs has largely maintained the model that made it the most profitable U.S. securities firm in Wall Street history.

Morgan Stanley has cut the proportion of its revenue that comes from investment banking and trading to 54 percent over the 12 months ending June 30 from 65 percent in 2006. During that time, Goldman Sachs’s trading and investment-banking revenue has climbed to 80 percent of the firm’s total, from 75 percent. That compares with 27 percent at JPMorgan Chase & Co.

‘Mix of Business’

Morgan Stanley made its shift last year when it purchased a controlling stake in a joint venture with Citigroup Inc.’s Smith Barney brokerage. Gorman, who led the brokerage before taking over as CEO this year, said in a letter to shareholders in April that the unit “is going to play an increasingly important role in our growth and profitability.”

Goldman Sachs, led by former trading chief Lloyd C. Blankfein, 56, posted record profit in 2009, when 84 percent of its revenue came from trading and investment banking. The firm set a fixed-income-trading revenue record in the first quarter of 2010. “Our mix of business is not necessarily driven by the management or the board sitting back and saying, ‘OK, we’d like to have x percent in this and y percent in this,’” Goldman Sachs Chief Financial Officer David Viniar said on a conference call in July. “A great portion of the way our mix of business unfolds is driven by what our clients want.”

Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did Melissa Daly, a Goldman Sachs spokeswoman.

Correlation Coefficient

“Goldman has always traded at a premium,” said Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York. “If Goldman continues to generate quarter to quarter of superior growth, they’ll get more of their premium back, and they can outperform.” The correlation coefficient between the two firms’ daily share-price movements this year as of Sept. 24 was 0.66, down from 0.85 in 2009, according to data compiled by Bloomberg. That’s lower than Morgan Stanley’s correlation with New York- based JPMorgan and the same as Goldman Sachs’s with JPMorgan. The coefficient in the third quarter was 0.58.

The correlation coefficient is a ratio that measures the association between stock movements and can range from 1 to -1. Smaller values indicate less of a relationship, while negative values show an inverse relationship. Investors often use the correlation between securities to determine which stocks fit best in their portfolios and which firms are peers of others. Among the 80 companies in the S&P 500 Financials Index, Morgan Stanley has had the highest correlation with Goldman Sachs every year since the end of 1999, the year Goldman Sachs went public. This year, Goldman Sachs is Morgan Stanley’s 17th- most correlated.

Regulatory Risk

The correlation between the rolling monthly returns of the stocks over the last year is 0.88, according to data compiled by St. Louis-based Argent Capital Management LLC. That measure lessens the effect of a single day’s share-price movement.

While the daily movements are mirroring each other less, the two stocks have performed similarly for the year. Goldman Sachs is down 12 percent so far in 2010, closing at $147.28 on Sept. 24. Morgan Stanley has fallen 15 percent to $25.15. “If you line up both of those businesses, you’re probably going to get 70 percent-plus overlap, so you should still have a relatively high correlation, but they are less similar than they were a couple years ago,” said James Ellman, a former Merrill Lynch bank-stock portfolio manager who is now president of San Francisco-based Seacliff Capital.

Volcker Rule

Some of the difference in share-price movement comes from a view that Goldman Sachs had greater legal and regulatory risk after the Securities and Exchange Commission accused the bank of fraud related to a collateralized debt obligation it sold in 2007, investors said. Goldman Sachs dropped 13 percent the day the SEC announced the suit, while Morgan Stanley fell 5.6 percent. Goldman Sachs rose 4.4 percent the day it paid $550 million to settle the case, while Morgan Stanley shares were up 0.2 percent. “Goldman has been to some degree a victim of its own success,” Ellman said. “Morgan Stanley, while in the same boat as Goldman, is not seen as the same regulatory lightning rod as Goldman. That’s something that’s going to cause a different level of volatility.”

The daily correlation declined in the third quarter after Goldman Sachs’s second-quarter earnings missed analysts’ estimates for the first time in six quarters, while Morgan Stanley beat estimates for the third time in seven quarters. The firms’ shares had a higher daily correlation in the first quarter, 0.82, as they both fell more than 8 percent over two days after President Barack Obama proposed the Volcker rule, which bars proprietary trading by banks and limits investments in private equity and hedge funds.

Gorman’s Strategy

The decline in the correlation between the two firms’ shares comes even as the broader equity markets have traded largely in lockstep, reacting to economic data and questions about whether the U.S. recovery is sustainable. The median correlation between stocks in the S&P 500 and the index itself is 0.72 this year, the second-highest level this decade.

Gorman’s strategy differed from that implemented when John Mack took over as CEO in 2005. Mack, who is still chairman of the firm, bought stakes in hedge funds, started a private-equity business, expanded mortgage and real estate holdings and took on more risk in principal trading. That backfired when $9.4 billion of mortgage-holding writedowns led to Morgan Stanley’s first quarterly loss as a public company in 2007, and it reported $4.4 billion in real estate losses in 2008 and 2009. “Morgan Stanley has deliberately rebalanced our institution away from our proprietary investing and proprietary trading,” Gorman said at a banking conference in Frankfurt this month. “We were doing this before the Volcker rule was put in place. We are doing it for good business. If you’re managing shareholder capital, third-party capital, investing on your own behalf is not what a large, public company should be doing.”

‘Poor Man’s XYZ’

A lower correlation over time may generate interest in Morgan Stanley from investors who previously chose just one investment-banking stock, said Kenneth Crawford, a senior portfolio manager at Argent. Goldman Sachs shares have outperformed Morgan Stanley’s every year this decade. “If you think you’re buying a poor man’s XYZ stock, then you obviously have to be buying it at a discount,” said Crawford, whose firm manages about $900 million. “If that is no longer or just less of a discussion point for a company, then there are other things you’re looking at, and if you’re pressing the ‘B’ button, those different things must get you excited.”

To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net.
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PostSubject: Hedge Fund Shorts BAC on $74B in Bad Mortgages    Tue Oct 19, 2010 2:44 am

Very Bad news for the banks...

Via HFN:

Hedge Fund Shorts BAC on $74B in Bad Mortgages Hedge fund firm Branch Hill Capital claims Bank of America will likely have to repurchase problem mortgages worth $74 billion.

If that figure were discounted over five years, the total liability could come to as much as $59 billion, the hedge fund firm said in a report it prepared in August. Branch Hill said it had a short on the bank. As a long, the firm recommended an investment in the monoline insurers like MBIA or Assured Guaranty.

The report also said that there could be more than $200 billion in industry-wide losses as buyers of asset-backed securities, such as Fannie Mae, Freddie Mac, insurers and other buyers, demand that the banks make good on representations and warranties. Bank of America is in a particularly vulnerable position because of its purchases of Countrywide Financial and Merrill Lynch. Those two institutions were at the head of the pack when it came to issuing subprime mortgages during the housing boom.

Bank of America did not immediately respond to a call seeking comment on the report.

The Branch Hill report also mentioned the ongoing cost of litigation as part of what could make the subprime bill mount up at Bank of America and other banks. However, the report was finished before all 50 states' attorney generals signed onto a multi-state investigation into alleged foreclosure fraud by mortgage servicers. Banks across the nation called off foreclosures that were in process in response to the attorney generals' action, potentially adding to the overall cost of those loans.

San Francisco-based Branch Hill is in a special position to know the whys and wherefores of subprime mortgages. Cofounders Ron Beller and Manal Mehta were at London-based Peloton Partners, which liquidated in 2008 after it lost out on subprime mortgages. Beller and Mehta seeded their firm with $40 million of their own capital and launched Branch Hill last month.
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PostSubject: Re: Everythintg Financial   Tue Oct 19, 2010 9:53 am

Capital Markets Expansion:

I love seeing things like this, opportunity around the globe…. exciting times.


----

Published on Private Equity Wire (http://www.privateequitywire.co.uk)
Home > New Chinese rules to permit foreign investors in domestic private equity market
New Chinese rules to permit foreign investors in domestic private equity market

By Emily.perryman
Created 19/10/2010 - 05:45

New Chinese investment rules greatly expand investment opportunities in China for foreign investors and also allow for additional sources of capital for RMB-denominated funds, says law firm Debevoise & Plimpton.

Until now, sponsors raising RMB-denominated funds have practically been required to raise capital solely from Chinese investors. New proposed rules will change this.

Debevoise & Plimpton says it has confirmed with a source in Shanghai that the Shanghai Municipal Government has received approval in principle from China’s finance authorities to launch a pilot programme for qualified foreign limited partners to invest in China’s private equity and venture capital markets.

According to news reports, the Beijing and Tianjin governments have also applied to participate in the programme but have not yet received approval. Detailed rules implementing the programme are being drafted and are expected to be promulgated by early November.

Debevoise & Plimpton says that under the proposed terms of the programme, foreign institutional investors meeting certain criteria may, after undergoing an approval process and obtaining a currency conversion quota, convert foreign currency into RMB and make equity investments in Chinese domestic RMB-denominated funds.

According to the guidelines for the programme and subject to the implementing rules, the programme would allow domestic RMB-denominated funds with no more than 50 per cent (a percentage subject to final approval) of capital from QFLPs to be treated as domestic funds not subject generally to foreign investment restrictions or investment approval processes.

Article Tag:
Debevoise & Plimpton, China, private equity
Weekly Asia News (Friday)
Copyright © 2009 Hedgemedia Ltd. All Rights Reserved
Source URL: http://www.privateequitywire.co.uk/2010/10/19/64830/new-chinese-rules-permit-foreign-investors-domestic-private-equity-market
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