Posts from Friday Jan 22 2010

Dumas on Volcker

Here’s Charles Dumas of Lombard Street Research with an aggressively “pro” take on the Volcker rule…

Obama-Volcker on target, avoid Glass-Steagall Read more

Beating up Bernanke

This is Barbara Boxer, the latest Senate Democrat to have turned against Ben Bernanke’s re-confirmation as Fed chairman.

While Bernanke’s has the president’s direct support, the democrats need 60 votes in the Senate – and getting those votes is suddenly down to the wire. The deadline is January 31. Read more

The Volcker effect on PE

As speculation over the impact of the Volcker vagaries on banks’ ownership of private equity assets continues, the Private Equity Council in New York has done a quick tally-up of banks’ direct investment in PE funds.

As you’d imagine, from the perspective of the PE industry itself, the numbers are not pretty: Read more

More from the ‘save our leverage’ coalition

As reported earlier on FT Alphaville, the CFTC is cracking down on the US retail forex market in a big way.

As well as publishing proposals to license all off-exchange retail operators — which the industry broadly accepted as ‘fair enough’  — the regulator unexpectedly announced it wanted to curtail leverage extended to clients to 10:1. That’s compared to a market norm of as much as 200:1. Read more

The special (regulatory) relationship

A bit academic perhaps, given the newsflow, but FDIC chairman Sheila Bair and Bank of England governor Mervyn King have been doing the diplomatic shuffle.

In fact they’ve got a memorandum of understanding! Read more

They think it’s all over…

… it is now. Presenting the pricing details for the Manchester United’s senior notes offering.

Emphasis ours. Read more

This may sound a touch heretical, but…

Gluskin Sheff economist David Rosenberg on Thursday proffered some contrarian thoughts about fiscal deficits.

Highlights below, emphasis FT Alphaville’s: Read more

The market-maker problem

Reuters uber-columnist John Kemp has penned some thoughts about the ‘Volcker rule’, and according to him the biggest problem facing the implementation of the prop trading ban will be differentiating internal speculative business from market-making activity.

That’s because there is a blurry line between the two, in part due to the proliferation of algorithmic technology and the practice of banks taking on internal speculative positions, or simply opposite positions, to aid their market-making operationsRead more

The Volcker rule, our bet it goes through… (MWAG)

…and it will not be pretty for banks or consumers.

So says Meredith, ‘superstar banking analyst’, Whitney of the Meredith Whitney Advisory Group LLC (MWAG). Read more

Lunch Wrap

On FT Alphaville Friday morning,

- The Volcker rule, the US analysts react (part I). Read more

That Goldman hit

Goldman Sachs, and others, say proprietary trading accounts for circa 10 per cent of net revenues – though that may vary considerable from quarter to quarter. Here, however, is an interesting datapoint.

From the Office of the Comptroller of the Currency’s third quarter 2009 reportRead more

Obama the communist!

Oh dear, oh dear.

Some members of the right-leaning American punditariat are not best pleased with Obama’s Glass-Steagallesque ‘Volcker rule‘ announcement at allRead more

Gold backwardation fears revisited, uh oh!

It’s been a while since the gold bugs had a tasty scare-story to feed on.

But those frustrations can now be dispelled. Read more

Markets Live transcript 22 Jan 2010

Live markets commentary from FT.com 

Grεεk cοrpοrαtε cοntαgiοn

Is Greek CDS getting out of hand?

On Wednesday, the cost of insuring debt of the Hellenic Republic rose to a record 353.5bp, according to CMA DataVision. Which means the country’s CDS chart looks something like this: Read more

What does the Aussie mining tax really mean?

Mining stocks were among the biggest fallers in Thursday’s sell-off. One of the factors driving the sector lower was news of a new mining tax being proposed by Australian Treasury Secretary, Ken Henry.

According to the Sydney Morning Herald individual state royalty taxes would be scrapped and replaced with a national resources tax (the Henry Tax ) that would be levied on profits. Read more

Some CMBS datapoints

Titan Europe 2006-3 — part of a CMBS deal put together by Credit Suisse — has been mentioned on FT Alphaville before.

The deal pooled commercial properties in France, Germany, the Netherlands, Belgium and Luxembourg, but some of Titan’s borrowers hit an event of default in 2008. Read more

2010: Obama’s year of the market-maker?

The ‘Volcker rule’ may be bad news for big speculative investment banks.

It might even be bad news for the inter-dealer brokers like Icap and Tullett Prebon, much of whose business is dependent on offsetting client-risk the big banks can’t internalise themselves. Read more

The Volcker rule, the impact on IDBs (part III)

And completing our mini series of analyst reaction — some commentary on what Glass-Steagall III means for inter-dealer brokers.

To begin with here’s Philip Middleton of BofA Merrill Lynch on Icap: Read more

The Volcker rule, the European analysts react (part II)

Next up on our compendium of analyst reaction — some commentary from the European analysts.

And, as with the US banks, it’s notable that opinion is also rather divided about the potential impacts of Obama’s financial reform proposals on European banks. Read more

The Volcker rule, the US analysts react (part I)

And how.

We’ve got a range of analyst opinion for you on Friday morning, in reaction to President Barack Obama’s sweeping proposals to reform Wall Street. Opinion is still rather divided however. Read more

Further reading

Elsewhere on Friday,

On the Obama bank proposals, Read more

Pink picks, Obama and the banks edition

Comment and analysis on Obama’s radical new restrictions on banks:

Editorial comment: Obama declares war on Wall St
Obama’s political team is running to catch up. On the day Goldman Sachs announced Q4 earnings of $4.95bn, the US president set out broad new measures on financial regulation, the most significant of which is a radical shift – and a mistake. Read more

Snap news

Breaking pre-market news on Friday,

- Rusal raises $2.2bn in Hong Kong IPO – BloombergRead more

Overnight markets: Down

Asian stocks fell for a fifth consecutive day on Friday and commodities slumped on concern China will raise interest rates and proposed US banking curbs will dent a US recovery, reports Bloomberg. The yen rose to a nine-month high against the euro and the risk of corporate defaults climbed.

Asian markets
Nikkei 225 down -237.32 (-2.18%) at 10,631
Topix down 16.74 (-1.75%) at 939.29
Hang Seng down -530.16 (-2.54%) at 20,333 Read more

Obama hammers Wall Street banks

The global banking industry was thrown into turmoil on Thursday after President Barack Obama proposed the most radical overhaul of Wall Street since the 1930s. In reforms that could force the top names in US finance to restructure, Obama – flanked by Paul Volcker, the former Fed chairman, who has advocated the move for months – called for banks to be banned from proprietary trading and owning or directly investing in hedge funds and private equity groups. See FT Alphaville’s “Markets Live” Obama special here, and FT.com’s in-depth report, here.

US rules could boost Europe banks

Bankers said on Thursday that European groups such as Credit Suisse, UBS, Deutsche Bank and Barclays could benefit over US rivals from US bank trading rules announced Thursday. The rules would hit foreign banks with proprietary trading operations. But some foreign banks believe they could escape the ban by switching some operations from Wall Street to London or continental Europe. Many European banks say pure prop trading amounts to only 1-2% of revenues, against more than 10% for Goldman.

Tories hail US lead on banks

The UK’s Conservatives are likely to follow US President Barack Obama’s lead and introduce similar trading curbs for banks if elected, George Osborne, the shadow chancellor, said on Thursday night. The opposition party warned financial institutions that the Obama crackdown on proprietary trading was something that “needs to be done”. UK officials meanwhile said they would look “very closely” at the US proposals though would not automatically follow suit.

Goldman winds down GEO fund

Goldman Sachs has moved to wind down its Global Equity Opportunities Fund – once the flagship of its in-house hedge funds. The bank’s asset management division closed the fund at end-December, say insiders. The move higlights growing pressure on banks to curb in-house trading activities. At its peak, GEO managed more than $7bn but became one of the first blow-ups and bail-outs of the financial crisis when it lost nearly $1.5bn in August 2007.

Goldman’s Q4 caps record year

Goldman Sachs on Thursday reported a quarterly profit that beat analysts’ expectations, as lower compensation costs helped counter a late-year drop in trading revenue. The Q4 results capped a record year for Goldman, whose 2009 net income surged to $13.4bn as stocks rallied and debt markets thawed. Its shares later fell 4% on concerns that President Barack Obama’s plan to curb bank trading would force Goldman to unravel one of Wall Street’s most successful money machines. See report (below) on Goldman’s bonuses.