Goldman Dances to the New Street Beat (WSJ)
The Wall Street company, which clung to its trading roots even after a regulatory overhaul drove rivals to change course, is now reining in riskier activities, shrinking its balance sheet and steering clear of trades that don't produce the double-digit-percentage returns its shareholders crave, Goldman executives and people familiar with the company's plans said...Goldman, which derives about half its revenue trading stocks, bonds and other securities, has begun moving away from trades that require it to set aside more capital. The company is demanding to be paid more from clients for the money it does commit. At the same time, it is shrinking the inventory of securities it holds for clients, a step that frees up capital and boosts its returns. The goal is to eke out more profit from its trading unit, which in recent quarters has struggled amid tepid client activity. The changes have been gradual, as Goldman waited for the regulations to take shape, and the company's overarching strategy remains intact.
Jury Still Out On SAC's Steinberg (NYP)
Jurors in the federal insider-trading trial of SAC Capital moneyman Michael Steinberg ended their first day of deliberations without a verdict. They will resume Wednesday at Manhattan federal court. Steinberg is the first of eight employees of Steve Cohen’s SAC Capital caught in the feds insider-trading probe to go to trial. Six others have pled guilty while the eighth, Mathew Martoma, is scheduled to go on trial in January.
Ex-SAC manager Martoma fails to end part of insider case (Reuters)
A federal judge on Tuesday rejected former SAC Capital Advisors LP portfolio manager Mathew Martoma's request to dismiss some insider trading charges because they were based on transactions not covered under U.S. securities laws. U.S. District Judge Paul Gardephe in Manhattan said Martoma's alleged trades in American depository receipts of Irish drugmaker Elan Corp (ELN.I) qualified as domestic transactions covered by U.S. securities laws. As a result, the judge rejected Martoma's request to dismiss one of two securities fraud charges, as well as related allegations in a conspiracy count. The defendant has pleaded not guilty to the three counts, and faces a January 6 trial.
UBS, Credit Suisse Payout Hopes Ebb as Regulators Tighten Leash (Bloomberg)
Prospects for fatter dividend payouts from Switzerland’s biggest banks are receding as Swiss authorities ratchet up capital demands. UBS AG (UBSN), the nation’s largest bank, was told to hold more capital for legal risks this quarter, while the finance minister said last month leverage rules might be tightened. Credit Suisse Group AG (CSGN), the No. 2 bank, is in talks with the regulator that may also lead to a demand for more capital, though it would be much smaller in scope than for UBS, a person with knowledge of the matter who asked not to be identified said this month.The tighter requirements, on top of stricter rules implemented over the past five years, arrived as the banks were preparing to start paying higher dividends. UBS Chief Executive Officer Sergio Ermotti, 53, pledged to pay out more than half of profits to shareholders once the company reaches a common equity ratio of 13 percent -- a level that probably would have been achieved this year without the fresh demands. “The message from regulators is very clear: ‘if you think you can pay dividends, forget it,’” Oswald Gruebel, who served as CEO of both Zurich-based UBS and Credit Suisse, said by phone. “They don’t want to let banks pay any dividend. It’s totally open how long this will last.”
Duck penis studies, lifecoaches for Senate staff: $30B in government spending questioned (NYP)
While the White House and Congress griped this year about the pain of automatic budget cuts, the federal government still managed to spend billions of dollars on seemingly frivolous projects – from a $384,989 grant for Yale University to study the duck penis to $1.9 million for “lifestyle” lessons for Senate staffers. Nearly $30 billion in questionable federal spending is detailed in the “Wastebook” that was released Tuesday by the Sen. Tom Coburn (R-Okla.), who annually compiles the report...Taxpayers also got stuck with the bills for: $17.5 million for special tax exemptions for Nevada brothels, including tax deductions for groceries, wages for prostitutes, rent and utilities...$630,000 spent by the State Department to buy followers on its Facebook and Twitter accounts...$325,525 for a National Institutes of Health study that found wives would be happier if they could calm down faster during arguments with their husbands...$150,000 to support the Puppets Take Long Island festival in Sag Harbor.
Bank of Canada sees less volatility from Fed tapering (Reuters)
Market volatility spurred by the U.S. Federal Reserve's plans to scale back its massive stimulus program is far less of a concern now than it was earlier this year, Bank of Canada Governor Stephen Poloz told Reuters on Tuesday. Investors understand the Fed's thinking much better than they did when Chairman Ben Bernanke first mentioned the possibility of tapering the U.S. central bank's $85 billion in monthly asset purchases on May 22, Poloz said. The market's huge one-way bets on the Fed continuing its so-called quantitative easing suddenly had to reverse at that time, causing market turmoil, but Poloz argued that the impact now will be much smaller.
Banks to Revamp Leveraged Muni Funds After Volcker Curbs (Bloomberg)
Wall Street banks are trying to prevent the Volcker Rule from forcing them to wind down funds that use borrowed money to bet on the $3.7 trillion municipal-bond market. The rule, named for former Federal Reserve Chairman Paul Volcker and approved by regulators last week, limits banks’ ability to run investments known as tender-option bond funds. The investments form a $70 billion segment of the local-debt market, according to the Securities Industry and Financial Markets Association. The funds issue short-term securities and use the proceeds to buy longer-maturity local-government obligations, profiting from the difference in interest rates. The purchases help lift demand for tax-exempt debt by giving investors a way to make leveraged bets on munis. Banks are searching for ways to restructure the funds to keep them in compliance with the law, which goes into effect in 2015.
SEC Brings Fewer Enforcement Actions, Slows Early-Stage Probes (WSJ)
As the agency pushes into a new era of enforcement not dominated by the financial crisis, it is bringing fewer cases, according to figures released by the SEC Tuesday. In addition, the rate at which the SEC is starting early-stage probes, known as matters under inquiry, has fallen to its lowest level in at least a decade, according to previously unpublished figures released separately to The Wall Street Journal. But the more selective approach presents risks for SEC Chairman Mary Jo White if she fails to win some blockbuster cases to support her get-tough rhetoric, legal experts said. Since taking over the top job at the securities regulator in April, Ms. White has promised more aggressive and wide-ranging enforcement, saying the agency should "be the kind of cop…[that] makes you feel like we are everywhere." Now, the agency is under pressure to bring more headline-grabbing actions to convince both Wall Street and Main Street that Ms. White's talk carries weight. "The only way to do that is to have a run of significant cases and get very good settlements or, when you go to trial, make sure you win—and, right now, they're not doing either one of those," said Thomas Gorman, a former SEC enforcement lawyer who is now a partner at the law firm Dorsey & Whitney LLP.
$1M in meth found in upscale Lake Nona home (WTFV)
Federal agents and deputies said they got a tip the drugs were stashed on Kristen Park Drive in Lake Nona, so they set up surveillance and made the bust last week...Inside, agents found 80 pounds of meth worth $1 million hidden in a closet under the stairs...In the driveway was a car with a stuffed Walter White toy. Actor Bryan Cranston played White on the television show "Breaking Bad." Fans of the show know White as the master "chef" who cooks crystal meth with his partner, Jesse Pinkston.