Opening Bell: 10.12.11 - Dealbreaker

Opening Bell: 10.12.11

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Wall Street Sees 'No Exit' From Financial Woes (Bloomberg)
“I don’t think it’s a time to make money -- this is a time to rig for survival,” said Charles Stevenson, 64, president of hedge fund Navigator Group Inc. and head of the co-op board at 740 Park Ave. The building, home to Blackstone Group LP Chairman Stephen Schwarzman and CIT Group Inc. Chief Executive Officer John Thain, was among those picketed by protesters yesterday. “The future is not going to be like a past we knew,” he said. “There’s no exit from this morass.” [...] “I wouldn’t shed too many tears for Wall Street,” Neil Barofsky, 41, the former special inspector general for the Troubled Asset Relief Program who is now teaching a class on the financial crisis at New York University School of Law, wrote in an e-mail. “The systemic advantage that the too-big-to-fail banks enjoyed in the lead-up to the financial crisis may be diminished in the near term, but the structure is still essentially the same and will almost certainly help catapult them to record profits and bonuses once the good times return.” Wilbur Ross, 73, said Wall Street’s “inherent ingenuity” shouldn’t be discounted and that “the history of the investment community shows that it will find ways to profiteer.”

Chanos, Gross Understand Wall Street Protest (Bloomberg)
Chanos said New Yorkers don’t appreciate the impact government bank bailouts have had on other U.S. citizens. Gross said that wage earners are fighting back after three decades of class warfare against them. “Class warfare by the 99%? Of course, they’re fighting back after 30 years of being shot at,” Gross said on Twitter...John Paulson criticized the movement. His townhouse was among those targeted by marchers who left a fake tax-refund check made out for $5 billion on his doorstep, which was barricaded by police.

Informant Surfaces In BNY Mellon Probe (WSJ)
For a decade, Grant Wilson toiled on a small trading desk at Bank of New York Mellon Corp. in Pittsburgh, buying and selling currencies for the bank's biggest clients. Mr. Wilson also had another job: For the last two of those years he was a secret whistleblower, assisting currency-trading investigations of BNY Mellon, according to people familiar with the matter. His input culminated with the filing last week of separate civil lawsuits by the Justice Department in federal court and New York attorney general in state court alleging that BNY Mellon systematically overcharged investors on billions of dollars of currency trades, defrauding or misleading them for a decade.

AIG Offers Reputation Insurance (WSJ)
Chartis, the property-casualty subsidiary of the New York insurer, is offering a new type of coverage to help companies offset the cost of bringing in outside experts when a public-relations crisis hits. Dubbed ReputationGuard, the insurance will pay for policyholders to seek the counsel of two crisis-communications firms, Burson-Marsteller and Porter Novelli, even before a possible crisis becomes public.

Gingrich: Fire Bernanke and Geithner (AP)
Asked if Wall Street financiers should go to jail for the economic problems, Gingrich says political leaders in Washington are more responsible for the downturn and cited Bernanke and Geithner for firing.

Rick Perry Mixes Up Dates Of American Revolution (ABC)
“Our Founding Fathers never meant for Washington, D.C. to be the fount of all wisdom. As a matter of fact they were very much afraid if that because they’d just had this experience with this far-away government that had centralized thought process and planning and what have you, and then it was actually the reason that we fought the revolution in the 16th century was to get away from that kind of onerous crown if you will,” Perry said.”

Republicans Stretch Truth In Debate Salvos On Jobs, Taxes (Bloomberg)
Following are examples of assertions that didn’t stand up to fact-checking by Bloomberg and Post reporters and analysts. The Claim: Romney said “median income in America has declined by 10 percent during the Obama years.” The Facts: Figures from the U.S. Census Bureau show that median household income fell by 2.9 percent from the end of 2008 to the end to 2010 after taking inflation into account. A report released this week by two former census officials who made their own estimates put the drop at 9.8 percent from December 2007 to June 2011. That covers a period before Obama took office in January 2009 and also takes inflation into account, something Romney didn’t mention. The Claim: Romney said Obama’s health-care law raised spending by $1 trillion. The Facts: The law increases spending by $788 billion over 10 years, while achieving $931 billion in savings over the same time for a net deficit reduction of $143 billion, the Congressional Budget Office estimated in March 2010. The Claim: U.S. Representative Ron Paul of Texas said Federal Reserve Chairman Ben S. Bernanke has compounded the problem of inflation in the U.S., and that “he’s inflating twice as fast as Greenspan was,” referring to Bernanke’s predecessor Alan Greenspan. The Facts: The Labor Department’s consumer price index, one of the most common inflation measures, has climbed 2.2 percent on average per year during Bernanke’s 5 1/2 years in office, less than the average 3 percent rate during Greenspan’s 18 1/2 years. The M2 money supply, which includes currency, bank deposits and money market mutual funds, rose 4.9 percent a year under Greenspan and has increased an average 6.4 percent annually under Bernanke. By other, less conventional measures of inflation, such as the price of gold in dollars or the amount of monetary base created by the Fed, there would be considerably higher rates of inflation under Bernanke’s chairmanship.

Euro Rescue Could Start Without Slovakia, Austria Says (Reuters)
The euro zone could launch its European Financial Stability Facility safety net for struggling members even if Slovakia fails to ratify a beefed-up EFSF, Austrian Foreign Minister Michael Spindelegger said in a radio interview on Wednesday. "If Slovakia does not approve then we have to reevaluate. That means we either we install the safety net nevertheless — we have to see if that is possible legally. I personally would favor this."

Soros: Don't Let Faulty Euro Destroy Financial System (Reuters)
In an open letter published in the Financial Times on Wednesday, the "concerned Europeans" conceded the euro was "far from perfect", but added euro zone leaders needed to "fix its faults rather than allowing it to undermine and perhaps destroy the global financial system."

Bankers Charged In Tax-Evasion Case (WSJ)
The indictment, filed in U.S. District Court in Manhattan, criminally charged two client advisers, Daniela Casadei and Fabio Frazzetto, with allegedly conspiring with about 180 U.S. taxpayers to hide more than $600 million in offshore accounts and to evade paying U.S. taxes on the funds. The two are described as client advisers for a Swiss bank, which wasn't named in the indictment.

Man accused of phony breast exams strikes deal with prosecutors (Orlando Sentinel)
A Coconut Creek man accused of posing as a doctor and offering free door-to-door breast exams has reached a deal with prosecutors, lawyers told a Broward judge on Tuesday. Phillip Winikoff, 81, was accused in April 2006 of carrying on the ruse with women at an apartment complex in the 3200 block of Northwest 40 Street in Lauderdale Lakes. Investigators said two women took Winikoff up on the offer, allowed him into their apartments and realized something was amiss only after the exams started.

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Opening Bell: 10.15.12

Global Finance Chiefs At Odds (WSJ) At the annual meetings here of the International Monetary Fund and World Bank, European officials bickered about the damage caused by austerity; this week they head into a major euro-zone summit with no clear rescue plan for Greece. A territorial row between China and Japan, the world's second- and third-largest economies, bled into the conference with no sign of resolution, highlighting a new risk to growth. And many top finance officials pointed fingers at the U.S. for casting a new cloud over global markets by failing to make progress on the budget mess in the world's largest economy. Thousands March In Spain To Protest Austerity (Reuters) Several thousand anti-austerity protesters in Spain marched down a major street in the capital banging pots and pans Saturday. Many protesters also blew whistles as they blocked part of the Castellana boulevard Saturday carrying placards saying "We don't owe, we won't pay." "None of us pushed the banks to lend huge sums of money to greedy property speculators, yet we are being asked to pay for other's mistakes," 34-year-old civil servant Maria Costa, who was banging an old pot along with her two children, said. Bernanke Defends Fed From Claims It Is Being Selfish (NYT) Critics say the Fed’s unorthodox policies weaken the dollar and bolster the currencies of developing countries, hurting their ability to export. “It is not at all clear that accommodative policies in advanced economies impose net costs on emerging market economies,” Mr. Bernanke said at an event sponsored by the Bank of Japan and the International Monetary Fund. The Fed last month announced a program of open-ended bond purchases that will be continued until there is substantial improvement in labor market conditions, barring a sustained and unexpected spike in inflation. To start off, the central bank will buy $40 billion in mortgage-backed securities each month. “This policy not only helps strengthen the U.S. economic recovery, but by boosting U.S. spending and growth, it has the effect of helping support the global economy as well,” Mr. Bernanke said. Fischer Backs Fed QE3 as World ‘Awfully Close’ to Recession (Bloomberg) While there has been “a lot of progress made” to improve the global economy, its impact hasn’t materialized, Fischer said in an interview in Tokyo with Bloomberg Television airing Sunday. He signaled that by deciding not to set an end date or total amount to its third program of bond buying, the Fed is easing worries it will run out of ammunition before achieving its goals. Can Morgan Stanley's Gorman Save Wall Street? (BV) Gorman’s strategic moves are enough to convince one natural born skeptic, Mike Mayo, a financial-industry research analyst at Credit Agricole SA (ACA), to recommend Morgan Stanley’s stock for the first time in years. “The stock is valued as if it is a Greek or Spanish bank but its risk is far less,” he wrote in an e-mail to me. For Morgan Stanley to return to its glory days, he said, margins need to be improved in asset management, fixed-income trading needs to be further slimmed down and the core investment-banking franchise needs to be maintained and reinvigorated. Good advice. A firm built around lower risk-taking and lower overall pay while still providing clients with the advice and capital they need to innovate and expand is what we need on Wall Street. It’s the vision of one man taking seriously his responsibility to make the capital markets safe and productive for economies all over the world, instead of just some casino gone haywire where the house absorbs the losses and the profits go to the gamblers. The question is whether other leaders on Wall Street will follow Gorman’s example. Sex Life Was ‘Out of Step,’ Strauss-Kahn Says, but Not Illegal (NYT) More than a year after resigning in disgrace as the managing director of the International Monetary Fund, Dominique Strauss-Kahn is seeking redemption with a new consulting company, the lecture circuit and a uniquely French legal defense to settle a criminal inquiry that exposed his hidden life as a libertine...In France, “Libertinage” has a long history in the culture, dating from a 16th-century religious sect of libertines. But the most perplexing question in the Strauss-Kahn affair is how a career politician with ambition to lead one of Europe’s most powerful nations was blinded to the possibility that his zest for sex parties could present a liability, or risk blackmail. The exclusive orgies called “parties fines” — lavish Champagne affairs costing around $13,000 each — were organized as a roving international circuit from Paris to Washington by businessmen seeking to ingratiate themselves with Mr. Strauss-Kahn. Some of that money, according to a lawyer for the main host, ultimately paid for prostitutes because of a shortage of women at the mixed soirees orchestrated largely for the benefit of Mr. Strauss-Kahn, who sometimes sought sex with three or four women. German finance chief Wolfgang Schaeuble says Greece won't default or exit (Telegraph) "Greece has to take a lot of very serious reforms" and "everyone is trusting that the Greek government is doing what is necessary", he said at a meeting with business leaders in Singapore on Sunday. Mr Schaeuble said an increasing majority of Greeks understand that being in the euro "is in the best interest of Greece" and said did not think there would be a ‘staatsbankrott’ - or state bankruptcy. He said he did not see “any sense to speculate on Greece leaving the euro” because it would be very damaging for both the country and the region. High-Speed Trading No Longer Hurtling Forward (NYT) Profits from high-speed trading in American stocks are on track to be, at most, $1.25 billion this year, down 35 percent from last year and 74 percent lower than the peak of about $4.9 billion in 2009, according to estimates from the brokerage firm Rosenblatt Securities. By comparison, Wells Fargo and JPMorgan Chase each earned more in the last quarter than the high-speed trading industry will earn this year. Titanic Tycoon Plans Stake Sale Talks for $8 Billion Gas Project (Bloomberg) Australian mining magnate Clive Palmer, who’s planning to build a modern replica of the Titanic, aims to start talks next year to sell stakes in a potential $8 billion natural gas project in Papua New Guinea. “We’ve had interest from major petrochemical companies who want to joint venture” including Exxon Mobil Corp. and Chinese companies, Palmer said in an interview. “We will talk to them at the appropriate time,” likely mid-2013 when field work is scheduled to be completed, he said. Occupy Supporters Stage Protest in London (AP) Several supporters of the anti-corporate Occupy movement chained themselves to the pulpit of St. Paul’s Cathedral during a service on Sunday in an action for the anniversary of its now-dismantled protest camp outside the London landmark. The dean of St. Paul’s, David Ison, said he was conducting an evening prayer service when “four young women dressed in white” chained themselves to the structure. Dutch make massive cocaine bust in fruit shipment headed for zoo, arrest five (AP) A major cocaine seizure in Europe turned out to be good news for the animals at Rotterdam’s zoo. The drugs were hidden among boxes of bananas, and the fruit went to the monkeys and other creatures at the Blijdorp zoo. Dutch prosecutors said Friday more than eight tons of cocaine was hidden among the bananas on a ship from Ecuador. The drugs were seized Monday in the Belgian port of Antwerp, while the bananas were allowed to continue on to Rotterdam – the shipment’s final destination. Dutch police arrested a Belgian truck driver and four Dutch men on Tuesday.

Opening Bell: 06.08.12

Capital Rule Is One Size Fits All (WSJ) The Federal Reserve shocked bankers Thursday by approving a proposal that would force even the smallest lenders to comply with the elaborate international bank-capital standards known as Basel III. The draft requirements would apply to all 7,307 U.S. banks, according to a proposal circulated by the Fed. Many bankers had expected regulators to exempt some small lenders from the new rules, which are aimed at shoring up the biggest global banks whose troubles fueled the financial crisis. While the core Basel III rules will apply to all banks, other aspects of the new regime single out the biggest, most complex banks for tougher treatment than their smaller peers. The Fed, for instance, has embraced slapping a handful of the biggest U.S. banks with a capital surcharge of between 1% and 2.5%. The Fed has yet to introduce the specific proposal. Europe's Vulnerable East Braces for Possible Greek Exit (WSJ) Government officials and central bankers in the European Union's eastern wing say they are in better shape to weather any storm than they were four years ago when the collapse of U.S. investment bank Lehman Brothers sparked a global financial crisis. But they are still vulnerable. Investors fearful that Greek elections next week will spark Athens's disorderly departure from the euro have already been selling Polish, Hungarian, Romanian and Czech assets, hitting local currencies and stock markets. Hungarian Prime Minister Viktor Orban, whose heavily indebted country is considered especially at risk, said "work has begun" on strengthening defenses "so that such a quake doesn't bring Hungary down on one knee." Euro Breakup Precedent Seen When 15 State-Ruble Zone Fell Apart (Bloomberg) The 1992 Soviet experience tells us “an exit like this is messy and leads to loss of income and inflation, and people are right to be scared of it,” said Harold James, a professor of history at Princeton University. 'Bargain' Bid as Warren Buffett Lunch Auction Goes Into Final Day (CNBC) With just over 24 hours to go, the high bid for lunch with Warren Buffett is just over $200,000. That's around 8 percent of last year's record $2,626,411 winning bid by Ted Weschler, who is now working for Buffett as a Berkshire Hathaway portfolio manager. Ted also won the previous year's auction with a bid of $2,626,311. Bear Stearns Accord Turns Another Page (WSJ) Former top executives at Bear Stearns Cos., including James E. Cayne and Alan "Ace" Greenberg, have agreed to a $275 million settlement of a shareholder lawsuit over the demise of the Wall Street firm four years ago. The deal with investors led by the State of Michigan Retirement Systems puts to an end the last major dispute surrounding the demise of Bear Stearns, whose near-collapse in March 2008 marked the beginning of the worst period of the financial crisis. Mr. Cayne, a former CEO, and Mr. Greenberg, who was Mr. Cayne's mentor and predecessor, and the other former top executives named in the lawsuit won't have to pay any of the settlement, according to people close to them. The money will come from a $9 billion fund set aside by J.P. Morgan Chase. for litigation and other expenses in 2008, when it bought Bear Stearns in a cut-price deal blessed by the government. Woman who allegedly ran down boyfriend after he damaged her iPhone says she still loves him (NYP) Jasmine Diaz told her Bronx Central Booking cellmate that she is still in love with Franklyn Hernandez, her 17-year old boyfriend who she's accused of running down with an SUV after he accidentally damaged her iPhone. “She says she loves him and she feels like s ---t, ” the 21-year-old cellmate, Michelle Rodriguez, said after being released on a shoplifting charge. Diaz, 25, was held without bail after her arraignment on manslaughter and leaving the scene of an accident for allegedly mowing down Hernandez early Wednesday morning a block away from his home on Morris Ave and E. 165th St. “Franklyn jumped in front of the vehicle and I just kept going,” she told investigators, a prosecutor said in court. Wearing a matching blue jean jacket and pants, Rodriguez said Diaz was pensive while awaiting her turn to see the judge. Bernanke Sees Risks To Economy From Europe To U.S. Budget (Bloomberg) Bernanke also warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law -- the so-called fiscal cliff -- would, if allowed to occur, pose a significant threat to the recovery.” Prosecutors Hone Gupta Case (WSJ) Using a variety of charts and graphs, Mr. Barnacle described a repetitive, and potentially damning, pattern: Mr. Gupta would call into meetings by the boards or committees at Goldman or Procter & Gamble Co, where he was also a director, and shortly thereafter a call from one of his associated phone lines would reach out to Mr. Rajaratnam. Harvard Professor: 'Greece Is Beyond Repair' (CNBC) “The best situation for Greece is to leave the euro zone, devalue a new currency, and be able therefore to grow again,” he said. “Letting Greece go will be painful in the short run but will be better for Greece, and for Europe, in the long-run,” said Feldstein, who is also president emeritus of the U.S. National Bureau of Economic Research, and also served as chief economic advisor to President Ronald Reagan. Lightbulb eating record holder charged in string of bank robberies (NYP) R.J. Williams, 22, who holds the world record for wolfing down a light bulb in 33 seconds, was busted yesterday after a failed bank robbery attempt in Brooklyn, cops said. Williams, who lives on the Upper West Side, allegedly scored nearly $14,000 after knocking off seven branches in Manhattan, Brooklyn, Queens and the Bronx. He was nabbed when he fled an Apple Bank yesterday in Midwood. Williams had begun to write a note to a teller on a deposit slip at one of the counters when employees started staring at him, police said, because he previously tried to rob the bank on Friday.