Opening Bell: 10.28.11

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Calling Bankers’ Bluff, Merkel Won Europe a Debt Plan (NYT)
For hours, negotiators had been trying to persuade the banks to accede to a “voluntary” 50 percent loss in the face value of their Greek bond holdings. The banks, which had already agreed to a 21 percent write-down, had dug in their heels. They knew how badly the European leaders needed a deal, and how much financial experts feared a disorderly, involuntary default. That could set off a “credit event,” throwing world financial markets into turmoil, much as the collapse of Lehman Brothers did in the fall of 2008. But Mrs. Merkel called the bankers’ bluff, said officials present at the discussions. Accept the 50 percent write-down, she told the bankers, or bear the consequences of default. In effect, she was willing to risk a credit event, and to place the blame for any fallout on them.

Big Banks Blink on New Card Fees (WSJ)
Following eight months of consumer testing, J.P. Morgan Chase & Co. has decided that it won't charge customers who use their debit cards to make purchases, according to a person familiar with the bank's plans. The New York bank's Chase retail unit is one of the largest U.S. consumer banks, with 26.5 million checking accounts and 5,300 branches. J.P. Morgan joins U.S. Bancorp, Citigroup Inc., PNC Financial Services Group Inc., KeyCorp and other large banks that have said in recent days that they won't impose monthly fees on debit cards. None of those banks said they made their decisions because of the outcry over Bank of America's fees.

EFSF head optimistic of China’s support (FT)
The chief of the eurozone rescue fund said he was confident China would continue to support the European financial stability facility ahead of meetings with the finance ministry and central bank in Beijing on Friday. But both Klaus Regling, the head of the EFSF, and Zhu Guangyao, a Chinese vice-finance minister, said that nothing concrete had been agreed yet, although the door was open to deeper financial co-operation between the two.

Italy 10-Year Auction Yields Hit New Euro Lifetime High (CNBC)
Italy paid the most since joining the single currency to sell new 10-year debt on Friday in the first euro zone bond auction after European leaders agreed new steps to tackle the debt crisis. The auction yield on Italy's March 2022 BTP bond rose to 6.06 percent from 5.86 percent a month ago. The Treasury managed to sell 7.94 bln euros of medium and long term paper, versus a target range of between 5.25 billion and 8.5 billion euros.

Wachtell Switched Sides in United Technologies-Goodrich Deal (Deal Journal)
Wachtell, Lipton, Rosen & Katz was a longtime legal adviser to Goodrich Corp., and its work included helping Goodrich as it weighed a possible sale to United Technologies starting last year. But after working with Goodrich on the deal for months, the law firm — one of the most prominent firms in corporate M&A — switched sides and began working with United Technologies, according to a regulatory filing released today.

Raj and Rajat Go Hollywood (CNBC)
A New York production company says it is in pre-production for "Billion Dollar Raja," billed as "an investigative financial mafia drama," to be written and directed by New York filmmaker Nayan Padrai, who says he hopes to begin filming next fall. No word yet on the cast.

Lazard and Evercore Log Gains Despite a Slowdown in Deals (DealBook)
Lazard reported Thursday that revenue from its mergers and acquisitions advisory business rose 24 percent in the third quarter, to $199.1 million. And Evercore reported that its investment banking revenue rose 38 percent in the quarter, to $138.4 million. ... Known for putting together mergers and acquisitions, Lazard is often seen as an indicator of the health of the deal economy, and the firm sounded a note of caution. Its third-quarter results show that deal activity persisted despite market volatility, even as stock offerings had slowed. “This is certainly a challenging environment,” Matthieu Bucaille, Lazard’s chief financial officer, said in an interview. “We have to remain cautious, but our business model is well positioned.”

Chanos Says China Property Is Slowing, Still Shorting Banks (Bloomberg)
China is on “a bigger and faster treadmill” than ever as property sales slow, said Jim Chanos, the hedge-fund manager who’s shorting banking stocks on a bet the market will crash. “The Chinese are beginning to realize that property prices can go down as well as up and this is going to be a very, very troubling development for the Chinese property market,” Chanos, president and founder of $6 billion hedge fund Kynikos Associates Ltd., said in a Bloomberg Television interview from Singapore with Susan Li today.

Erste Bank Sharply Cuts CDS Portfolio; To Close It (CNBC)
Austrian bank Erste announced on Friday that it had drastically reduced its credit default swaps (CDS) portfolio and that it would close it by the end of the year, after valuing it based on what it would be worth in the market - known as marking to market - earlier in the month. ... "Following our pre-announcement for the third quarter on 10 October, concerns were raised in relation to our CDS exposure," Erste Group CEO Andreas Treichl said in a statement. "We have reacted to this and reduced our portfolio from 5.2 billion euros at the end of September to 0.3 billion yesterday, with no additional negative [profit and loss] effect," Treichl added.

Centuries-old rule of primogeniture in Royal Family scrapped (Telegraph)
Female members of the Royal Family are to be given equality with men in the rules of succession to the throne, meaning if the Duke and Duchess of Cambridge's first child is a girl, she can become Queen even if subsequent children are sons. ... Speaking before the meeting in Perth, the Prime Minister said the rules are “outdated and need to change”. He said: “The idea that a younger son should become Monarch instead of an elder daughter, simply because he is a man just isn’t acceptable any more. Nor does it make any sense that a potential Monarch can marry someone of any faith other than Catholic. “The thinking behind these rules is wrong. That’s why people have been talking about changing them for some time. We need to get on and do it.

Experiencing Las Vegas, in Queens (NYT)
The [new Resorts World casino opening at Aqueduct today] imitates the glitz and frenzy of Caesars Palace or Bally’s without running afoul of state laws and regulations that allow electronic gambling, but not human dealers, at the tracks. The baccarat tables feature real cards shuffled and dealt by robotlike mechanical arms. “We have a situation in which elected state officials are breaching the Constitution,” said the Rev. Jason McGuire, executive director of New Yorkers for Constitutional Freedoms, a conservative Christian political group. “A robotic arm dealing cards is just as insidious as a human being.”

Related

Opening Bell: 06.21.13

U.S. Weighs Doubling Leverage Standard for Biggest Banks (Bloomberg) The standard would increase the amount of capital the lenders must hold to 6 percent of total assets, regardless of their risk, according to four people with knowledge of the talks. That’s twice the level set by global banking supervisors. ... "The 3 percent was clearly inadequate, nothing really,” said Simon Johnson, an economics professor at the Massachusetts Institute of Technology and a former chief economist for the International Monetary Fund. “Going up to five or six will make the rule be worth something. Having a lot of capital is crucial for banks to be sound. The leverage ratio is a good safety tool because risk-weighting can be gamed by banks so easily.” China steps back from severe cash crunch (FT) China pulled back from the brink of a severe cash crunch on Friday, with money rates falling after reports that the People’s Bank of China, the central bank, had acted to alleviate market stresses. Nevertheless, interbank conditions remained tight and analysts said the PBoC would continue its hard line of recent days to compel financial institutions to pare back their leverage. Sprint Beats Dish’s Latest Bid for Clearwire (DealBook) Sprint Nextel raised its bid for Clearwire to $5 a share on Thursday, hoping to knock out a rival offer from Dish Network. The new offer, which values Clearwire at about $14 billion, is 47 percent higher than Sprint’s last proposal. It is also higher than Dish’s most recent bid of $4.40 a share. Banks Race to Increase Salaries to Beat EU Bonus Caps (IBT) Banks are racing to overhaul their remuneration structures by bumping up fixed salaries ahead of European Union-imposed bonus caps in 2015. According to a prominent employment partner at law firm Pinsent Masons, banks are stuck between having to overhaul remuneration procedures by a certain deadline but without concrete rules, which is likely to result in across-the-board increases in salary. FAA to Relax Rules for Gadgets in Flight (WSJ) The Federal Aviation Administration is expected to relax the ban on using some types of personal-electronic devices at low altitudes, allowing passengers leeway during taxiing and even takeoffs and landings, according to industry officials and draft recommendations prepared by a high-level advisory panel to the agency. For fliers, the new rules would likely mean an end to familiar admonitions to turn off and stow all electronic devices. Cellphone calls are expected to remain off limits, however. War of words erupts after wedding guests gift bride 'cheap and embarrassing' food hamper containing marshmallow fluff and croutons Kathy Mason from Hamilton, Ontario, and her boyfriend, who wished to remain anonymous, decided to create a food hamper for their friends' same-sex marriage and packed it with a mix of 'fun' treats including pasta, olive oil, croutons, biscuits, Marshmallow Fluff and Sour Patch Kids. They attached a carefully worded card to the parcel which read: 'Enjoy . . . Life is delicious.' However, the European newlyweds were less than impressed with the gesture and contacted the couple the next day via text message to ask if they had the receipt so they could get the money back instead. ... 'You ate steak, chicken, booze, and a beautiful venue . . . If anything you should be embarrassed for being so cheap and embarrassing,' the brides said in one message. Creeping mistrust stops euro zone banks lending to peers across bloc (Reuters) In a trend that could reignite fears about the euro and its banks, European Central Bank data shows the share of interbank funding that crosses borders within the euro zone dropped by a third, to just 22.5 percent in April from 34.5 percent at the beginning of 2008. Banks are now lending to other banks across euro zone borders at only about the same rate as when the single currency was first launched, 15 years ago. Greek markets rattled by political disarray (FT) The benchmark 10-year bond yield of Greece rose 75 basis points to 11.6 per cent by late morning in London, while the Athens stock exchange index fell 2.9 per cent to its lowest level since early April. ... Investor sentiment towards Greece is not helped by uncertainty over how to plug a funding gap in the country’s bailout programme. The FT reported on Thursday that the International Monetary Fund might suspend aid to Greece next month unless the eurozone stepped in. Losses loom for investors enmeshed in U.S. mortgage chaos (Reuters) A review of loan documents, property records and the monthly reports made available to investors show that mortgage servicers are reporting individual houses are still in foreclosure long after they have been sold to new buyers or the underlying mortgages have been paid off. ... In one case, Reuters found that Bank of America Corp had been collecting a monthlyservicing fee of $50.73 from investors on a loan that had been paid off nearly two years ago, investor reports show. Bank of America filed a document at a local county office on July 22, 2011 showing that the $162,400 loan on a cream-colored duplex in Greenacres, Florida, owned by a drywall hanger named Roman Pino, had been satisfied and "cancelled." But investors in Pino's loan and more than 6,700 other similar mortgages that are bundled together in a subprime mortgage bond still have not been informed that the loan no longer exists, according to the last investor report in May. Good and Evil Battle Volatility on Summer Solstice (CNBC) "Summer Solstice is upon us: the longest day of the year in the northern hemisphere where some religions in the western world believe the sun defeats the forces of evil." Also it's triple witching. Oracle to Leave Nasdaq for the Big Board (DealBook) Oracle, one of the most prominent technology companies listed on the Nasdaq, is defecting to a rival exchange. The company, which has been traded on the Nasdaq since 1986, has applied to be listed on the New York Stock Exchange, it said in a filing on Thursday. The transfer, among the largest ever between the exchanges, represents a significant gain for the Big Board, which has been trying to bolster its technology credentials. FINRA beefs up policing of arbitrators (Reuters) The Financial Industry Regulatory Authority's policy change comes after Reuters asked questions about the background of Demetrio Timban, a Medford, New Jersey-based arbitrator who has become a central figure in a lawsuit between Goldman Sachs Group Inc and a wealthy investor. Timban was indicted by the state of New Jersey for practicing law without a license, although charges were later dropped under a state program to deal with non-violent offences. He was also reprimanded by a Michigan regulator for the New Jersey incident and passing $18,000 in bad checks. Timban said in an interview he had closed his New Jersey office and the check-writing incident was "accidental," as a family member was supposed to wire funds to cover the check. But FINRA said it did not learn of the New Jersey indictment for five months and that Timban failed to tell it about the Michigan problems altogether, while he arbitrated the Goldman case. Brooklyn framer accuses former boss of firing him for being too fat (NYP) The owner of a picture-framing shop in Brooklyn fired a worker because he was too fat to fit in the aisles, a lawsuit claims. Seth Bogadanove, 52, of Bath Beach, is suing Frame It In Brooklyn, in Sunset Park, and owner Jerry Greenberg, claiming he was canned after gaining weight because of medication. “Oh, my God! What happened to you? You got so fat!” the suit says Greenberg told Bogadanove after he returned from a leave. ... But Greenberg told The Post he never hired Bogadanove back, only gave him an opportunity to work from home. He called Bogadonove’s story “ridiculous.” “He was sweating, and he couldn’t make it up stairs,” Greenberg recalled. “But that would never come out of my mouth in my wildest dreams.” Video shows woman tossing perceived rival off cliff (CBS) Surveillance video caught a brutal fight between a woman and her perceived romantic rival in Arequipa, Peru, but it's pretty one-sided. A woman caught her husband walking with a younger woman while they were out on a stroll by a cliff back in January. She is seen grabbing the younger woman by the hair and dragging her off a cliff, where she reportedly plunged about 20 feet. She is okay after the fall - she only sustained some cuts and bruises, was treated at a hospital and released.

Opening Bell: 02.07.13

Credit Suisse Returns To Profit (WSJ) In the fourth quarter, Credit Suisse's net profit was 397 million francs, compared with a net loss of 637 million francs a year earlier when restructuring charges weighed on earnings. Revenue, which includes interest income, fees and trading proceeds, rose 29% to 5.8 billion francs. Analysts had expected a profit of 563 million francs and revenue of 6.14 billion francs. State Lawsuits Could Add To S&P Exposure (WSJ) On Tuesday, the Justice Department sued S&P for allegedly causing some banks and credit unions to lose $5 billion after relying on the company's ratings of mortgage-linked securities. However, the $5 billion claim, which S&P has dismissed as "meritless," is only part of the legal battle being fought by the world's largest credit-ratings firm by number of deals rated. Thirteen states and the District of Columbia have followed in the Justice Department's footsteps, filing separate lawsuits against S&P on Tuesday. The California attorney general alone is suing S&P for about $4 billion to recover funds for two of the country's largest public pension funds, according to its lawsuit. Other states, such as Colorado and Arkansas, are demanding S&P give back the revenue it earned on precrisis ratings of hundreds of securities. State prosecutors allege S&P presented its ratings as based on objective and independent analysis but actually were inflated to cater to the banks that helped arrange and sell the securities. S&P Hires Top Defense Attorney for $5 Billion Lawsuit (Reuters) Standard and Poor's has hired John Keker, one of the country's top white-collar defense attorneys, to help fight the $5 billion lawsuit brought by the U.S. government this week. Keker, who is based in San Francisco and has represented everyone from cyclist Lance Armstrong to Enron's Andrew Fastow, was hired at the recommendation of Floyd Abrams, a prominent New York attorney who also represents the ratings firm. RBS Settles Rate Charges (WSJ) CFTC enforcement chief David Meister said Wednesday that the trading floor was "laden with conflicts of interest," where RBS traders "seized the opportunity to ask colleagues sitting in the next chair for false rate submissions." From mid-2006 to the end of 2010, traders at RBS tried hundreds of times to rig the London interbank offered rate, or Libor, sometimes succeeding, said U.S. and U.K. regulators as they announced a $612 million settlement with the British bank. ‘Historic Winter Storm’ Moving Toward U.S. Northeast (Bloomberg) A “potential historic winter storm” and blizzard may dump 2 feet of snow on Boston and eastern Massachusetts, potentially causing power outages and leaving 10 inches in New York City. Eighteen to 24 inches (46 to 61 centimeters) of snow may fall in Boston, and the city has an 85 percent chance of receiving at least 12 inches from the storm that is expected to arrive in two days, according to the latest forecast from National Weather Service in Taunton, Massachusetts, published at at 4:25 a.m. Eastern Standard Time. “Heavy snow and gusty winds will bring the potential for blizzard conditions. The worst of the storm will be Friday night into the morning,” the weather service said. The storm arrives on almost the 35th anniversary of the Blizzard of 1978, which killed 99 people, destroyed 2,000 homes, drove 10,000 residents into shelters and paralyzed eastern Massachusetts and northern Rhode Island for a week, according to the weather service. Ireland Moves Toward Debt Deal (WSJ) Under Ireland's new proposal, the government will provide a long-term bond to the Irish central bank that replaces the note, the Irish finance ministry said. IBRC will be liquidated and its remaining commercial property assets will be dispatched to Ireland's so-called bad bank, the National Asset Management Agency. Mr. Noonan told lawmakers early Thursday that there was still "no deal," but he needed to announce new powers to liquidate IBRC—the first step toward potentially striking such a debt agreement—to protect the country from unspecified legal challenges. Man Claims IRS Agent Coerced Him Into Sex (CBS) An Oregon man is suing the U.S. Government and a female IRS agent he alleges pressured him into sex, by threatening a tax penalty. Vincent Burroughs, of Fall Creek, Ore., says the harassing relationship began in August of 2011 when Dora Abrahamson, an agent with the Internal Revenue Service, called him and said he would be audited, CBS affiliate KVAL reports. Burroughs says he didn't know Abrahamson, and that he hadn't met her before those calls - nor had he heard that he was being audited by the IRS. "She was sending me texts that she wanted to come out, give me massages because she needed to help me relax," Burroughs said in a phone interview with KVAL News. Over the next two months, Burroughs alleges that Abrahamson sent him several flirtatious text messages - offering to give massages, asking to meet him, and sending racy photos of herself to his cell phone. "She said she knew more than my mother knew about me," said Burroughs. In the lawsuit, Burroughs says in September 2011 Abrahamson came to his home wearing provocative attire. "Next thing I know, she's at my gate, honking...so I opened my gate, she came into my property dressed exactly like [when] she texted me," Burroughs said. The lawsuit states: "She said that she could impose no penalty, or a 40% penalty, and that if he would give her what she wanted, she would give him what she needed." E-Mails Imply JPMorgan Knew Some Mortgage Deals Were Bad (NYT) When an outside analysis uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an easy fix. Rather than disclosing the full extent of problems like fraudulent home appraisals and overextended borrowers, the bank adjusted the critical reviews,according to documents filed early Tuesday in federal court in Manhattan. As a result, the mortgages, which JPMorgan bundled into complex securities, appeared healthier, making the deals more appealing to investors. The trove of internal e-mails and employee interviews, filed as part of a lawsuit by one of the investors in the securities, offers a fresh glimpse into Wall Street's mortgage machine, which churned out billions of dollars of securities that later imploded. The documents reveal that JPMorgan, as well as two firms the bank acquired during the credit crisis, Washington Mutual and Bear Stearns, flouted quality controls and ignored problems, sometimes hiding them entirely, in a quest for profit. Harvard’s Gopinath Helps France Beat Euro Straitjacket (Bloomberg) When French President Francois Hollande unveiled a plan in November for a business tax credit and higher sales taxes as a way to revive the economy, he was implementing an idea championed by economist Gita Gopinath. Gopinath, 41, a professor at Harvard University in Cambridge, Massachusetts, has pushed for tax intervention as a way forward for euro-area countries that cannot devalue their exchange rates. “Fiscal devaluation” is helping France turn the corner during a period of extreme budget constraints, former Airbus SAS chief Louis Gallois said in a business- competitiveness report Hollande commissioned. Gopinath’s support for the theory took shape through her years teaching at Harvard and the University of Chicago and particularly as a Ph.D. student at Princeton University under the guidance of Kenneth Rogoff, Pierre-Olivier Gourinchas and Ben Bernanke, now chairman of the Federal Reserve. While her earlier work on current accounts and balance of payments garnered praise, it is her recent focus on the 17 euro nations that has national leaders paying action. John Thomas Financial Said To Draw Regulatory Probe (NYP) Wall Street brokerage firm John Thomas Financial, owned by flamboyant founder and CEO Tommy Belesis — who gained more than 15 minutes of fame from his role in Oliver Stone’s “Wall Street: Money Never Sleeps” — is being probed by the brokerage industry, the Securities and Exchange Commission and the FBI, The Post has learned. Agents from the FBI’s New York office have been knocking on doors of people associated with the firm, asking questions about JTF’s business practices, including cold calling by brokers and Belesis’ overseas accounts, sources told The Post. Fewer Workers Filed Claims for U.S. Jobless Benefits Last Week (Bloomberg) Applications for jobless benefits dropped 5,000 to 366,000 in the week ended Feb. 2, Labor Department figures showed today. Economists forecast 360,000 claims, according to the median of 53 estimates in a Bloomberg survey. Big Mac Prices Show Which Euro Zone States Best at Belt-Tightening (Reuter) Economist Guntram Wolff took the data and found that the price rise in Greece, Portugal and Spain has been less than the euro zone average, while in Ireland the price actually fell. These are the main countries undergoing deep economic reform due to the debt crisis. This contrasts with price rises above the euro zone burger average in Germany. Wolff concludes from this that economic adjustment is working. For example, In Ireland, which has made spending cuts after receiving international aid, the burger price has fallen from 3.80 euros to less than 3.50 euros. There is one notable exception, however. Heavily-indebted Italy is the most expensive country in the euro area to buy a Big Mac - 3.85 euros - while it costs just 3.64 euros in Germany. PETA: Naked chicken corpses aren't sexy (CM) The American founder of People for the Ethical Treatment of Animals, president Ingrid Newkirk, criticised a newspaper for running a picture of a raw chicken. "We don't want to see any chickens on display, but instead want them to live natural, happy lives with their families. Sexily displaying the corpse of a chicken who has been bred to grow so big, so quickly, that many collapse under their own weight, is just additionally offensive."