Showing posts with label Merrill Lynch. Show all posts
Showing posts with label Merrill Lynch. Show all posts

Tuesday, September 22, 2009

US Rep Towns: Bank Of America To Provide More Documents


SEPTEMBER 22, 2009, 7:01 P.M. ET


US Rep Towns: Bank Of America To Provide More


By Michael R. Crittenden
Of DOW JONES NEWSWIRES


WASHINGTON (Dow Jones)--Bank of America Corp. (BAC) has agreed to provide some additional documents to congressional investigators and may be forced to hand over more in the future, a top Democrat said Tuesday.

Rep. Edolphus Towns, D-N.Y., who chairs the House Committee on Oversight and Government Reform, said Bank of America agreed at a Tuesday afternoon meeting to hand over documents requested by investigators last month regarding the firm's acquisition of Merrill Lynch & Co.

Not all of the documents requested by the Oversight committee will be turned over. Towns said for documents where Bank of America has asserted attorney-client privilege the bank will be required to provide investigators with a "privilege log" that the panel will review. If the panel determines the documents are still necessary, they could again be requested from the bank or subpoenaed.

"The meeting today with Bank of America was constructive," Towns said in a statement.

Bank of America's decision to hand over some documents is the latest step in the Oversight panel's ongoing investigation into the Merrill Lynch acquisition and the federal government's decision to provide billions to help ensure the acquisition went through in January. Bank of America CEO Kenneth Lewis testified before the committee earlier this year.

The current dispute over the documents arose after Bank of America responded to an Aug. 6 request from Towns by refusing to turn over some documents because of attorney-client privilege. Other documents provided included pages that were partially or fully redacted, and what Towns said in a letter to Lewis were "hundreds of pages of unrelated, extraneous information."

Towns noted in the Sept. 18 letter to Lewis that Congress has the right to refuse an assertion of attorney-client privilege.

Bank of America missed a Monday deadline to turn over the information to the Oversight panel, prompting the meeting Tuesday between Towns and Anne Finucane, the bank's chief strategy and marketing officer.

-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com





.

Thursday, July 30, 2009

Bank Bonus Tab: $33 Billion

JULY 31, 2009

Nine Lenders That Got Government Aid Paid at Least $1 Million to 5,000 Employees

By SUSANNE CRAIG and DEBORAH SOLOMON



Andrew Cuomo






Nine banks that received government aid money paid out bonuses of nearly $33 billion last year -- including more than $1 million apiece to nearly 5,000 employees -- despite huge losses that plunged the U.S. into economic turmoil.

The data, released Thursday by New York Attorney General Andrew Cuomo, provide a rare window into the pay culture of Wall Street, where top employees typically make 90% or more of their compensation in year-end bonuses.

The $32.6 billion in bonuses is one-third larger than California's budget deficit. Six of the nine banks paid out more in bonuses than they received in profit. One in every 270 employees at the banks received more than $1 million.

Overall compensation and benefits at the nine banks fell 11%, to $133.5 billion in 2008 from $149.3 billion in 2007, the Cuomo report said. But with net revenues falling, the percentage of the firms' revenues dedicated to compensation rose to 45% last year from 41% in 2007.

The report reignites long-simmering anger, on Capitol Hill and beyond, over big Wall Street payouts. The nine firms in the report had combined 2008 losses of nearly $100 billion. That helped push the financial system to the brink, leading the government to inject $175 billion into the firms through its Troubled Asset Relief Program.

The chairman of the U.S. House investigative panel, New York Democrat Edolphus Towns, called the pay figures "shocking and appalling" and announced a hearing into compensation practices at banks.

The White House was more muted. "The president continues to believe that the American people don't begrudge people making money for what they do as long as...we're not basically incentivizing wild risk-taking that somebody else picks up the tab for," said White House Spokesman Robert Gibbs.

More
Read the full report from the New York Attorney General's office.
Deal Journal
What Are Your Chances of Being a Millionaire?
Bonus Breakdown From Cuomo's Report



"These pay packages are pretty outrageous," said Michael Baldock, a partner at Stamford, Conn.-based boutique bank Ondra LLP, who has worked at a number of big investment banks. "But if you generate $10 million in revenue a year, another firm will always want that revenue and be willing to pay for it."

In releasing the report now, New York Attorney General Cuomo is vaulting ahead of federal efforts to assess and curb excessive pay. The office has been among the first to investigate and bring charges on several Wall Street abuses this decade.

The House of Representatives is preparing to vote as early as this week on a bill that would give shareholders nonbinding say on pay packages and give regulators more tools to prohibit risky pay practices at banks and other regulated financial firms. The Senate isn't expected to vote on the legislation until the fall.

The Obama administration, meanwhile, is preparing to vet pay at firms receiving "exceptional assistance" from the government. Institutions have until Aug. 13 to submit proposed compensation details for the 100 highest-paid employees at each. The proposals will be reviewed by the Treasury Department's pay czar, Kenneth Feinberg.

Andrew Williams, a Treasury spokesman, said Mr. Cuomo's report "focuses on strengthening the link between pay and performance -- a goal that we share."

Mr. Cuomo said Thursday he hopes his report will prompt the financial firms themselves to significantly overhaul their pay system to reward long-term performance rather than short-term gains. His report didn't release names of individual bonus recipients because of privacy concerns.

"The banks say they pay for performance," Mr. Cuomo said of the data. "Yet in 2008 there was no performance and they still continued to pay out huge sums of money."

Wall Street has shown little sign of slowing down the pay train this year. Goldman Sachs Group Inc. and Morgan Stanley recently disclosed that they have set aside $11 billion and $6 billion in compensation and benefits respectively for their employees so far this year. Goldman's second quarter was among its best ever. Morgan Stanley lost money for its third straight quarter.

Goldman and Morgan Stanley declined to comment on the report.

Meanwhile, some big banks that received government bailouts, including Citigroup Inc. and Bank of America Corp., are offering handsome pay packages to lure stars. Citigroup -- which received about 25% of the aid going to the nine banks -- has the No. 1 pay recipient. Andrew Hall, the trader who heads Citigroup's energy-trading unit Phibro LLC, received $98.9 million in 2008, according to a government official. Citigroup CEO Vikram Pandit, by comparison, received more than $38 million last year.

An early test for Mr. Feinberg will be the pay of Mr. Hall, whose profit-sharing contract with the bank could again entitle him to as much as $100 million, say people familiar with the matter.

James Forese, Citigroup co-head of global markets, cited Phibro's "consistent track record of profitability" and said its contracts directly align compensation with performance. "That said, we are sensitive to the need for a full review of compensation practices in our industry," he said. "We are evaluating the best way forward for stakeholders."

The group of nine's No. 2 bonus for last year, according to a government official, was the $39.4 million that went to Bank of America's Thomas Montag. In 2008, Mr. Montag was sales and trading chief at Merrill Lynch, which got crushed by billions of dollars in mortgage-related losses and was sold last year to Bank of America. Mr. Montag's pay package included stock grants, which since have fallen in value.

Bank of America said bonuses for Merrill Lynch were shared among 30,000 employees and Bank of America's figures cover more than 200,000 employees.

The study found that pay at the banks remained near previous levels despite revenue declines. Merrill's net revenue fell by $23 billion in 2008, leading to a huge net loss. The firm's pay and benefits dropped by $1.1 billion, or 7%, according to the study. At Citigroup, revenue fell by $28 billion, or 34%. Pay and benefits dropped $2 billion, or 6%.

Similarly, at Goldman and J.P. Morgan Chase & Co., pay fell less sharply than revenue in 2008. Both firms have paid back the government loans they received under TARP.

J.P. Morgan declined to comment on the report.

Goldman, Morgan Stanley and Merrill, Wall Street's three largest securities firms in 2008, paid nearly $13 billion in bonuses last year, the report says. That was roughly one-third of their total pay and benefits of $38 billion, according to securities filings.

J.P. Morgan topped other banks in the number of employees receiving $1 million or more -- 1,626 out of its 224,961 employees. This figure includes bonus, salary and options; the numbers of other banks in the study includes bonuses only.

J.P. Morgan's top earner collected $29 million, more than James Dimon, the firm's chief executive, who received $19.7 million in total compensation last year.

Goldman paid the most per employee, about $160,000 each for more than 30,067 staffers. Some 212 Goldman bankers made $3 million or more. Goldman, which weathered the credit crisis better than most rivals and made $2.3 billion in 2008, also produced the most revenue per employee, $77,228.

Goldman has said that no partner got a bonus of more than $222,500 in cash. The rest was paid in deferred stock, with an extra year of service required for any of it to vest.

Morgan Stanley had 428 employees who received bonuses of $1 million or more. In addition, 10 people received bonuses of $10 million or more, for a combined $146.8 million.

Wells Fargo & Co., Bank of New York Mellon Corp. and State Street Corp. round out the nine banks. Each declined to comment.

—Aaron Lucchetti, Daniel Fitzpatrick and Robin Sidel contributed to this article.
Write to Susanne Craig at susanne.craig@wsj.com and Deborah Solomon at deborah.solomon@wsj.com

Printed in The Wall Street Journal, page A1





Source: http://online.wsj.com/article/SB124896891815094085.html

78
P.S. What do people expect?
.
The whole Bail-Out concept is a fraud and a travesty of law.
Who lends the Treasury the BILLIONS, so they can in turn lend it to the Banks?
.
It's the Federal Reserve, right?
.
Well, who is the Federal Reserve? A conglomerate of Banks. Some of which are the same banks to whom the billions of Bail-Out Dollars went to.
Such as JP Morgan Chase, CitiCorp, etc.
.
It's like the snake swallowing its tail. It's a win-win propositon.
.
Except, that in this case the taxpayers are left holding the bag, in debt with astronomical figures for ages to come.
No Bail-Out's for them, no BILLIONS, just bills for ever!
.
Meanwhile, the Banks "laugh all the way to the bank".
What a sham! What a scam!
.
Yet, they say: Make mine Bud-Light!
..
YEAH, VERY LIGHT, INDEED.
I'M BEGINNING TO SEE, THE LIGHT!
.
.

Wednesday, October 08, 2008

Oil prices: Buckle up for a wild ride


Outlook for crude depends largely on the health of the global economy. Analyst predictions range from a fall to $50 or a surge to $150 a barrel.

By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: October 8, 2008: 1:48 PM ET


NEW YORK (CNNMoney.com) -- Expect nothing but volatility for oil prices over the next year or two - with the fate of the global economy largely dictating whether crude will fall to $50 or shoot up to $150 a barrel.
The global economy is teetering on the edge, and no one really knows if it will muscle through this credit crunch or succumb to a pronounced recession.
With crude prices so closely linked to the health of the economy - unemployed people tend to drive a lot less - oil analysts don't really know where oil prices are headed either.
The case for $50
Oil prices have fallen over 40% since July and are currently trading around $86 a barrel, but if the $700 billion government bailout for financial sector doesn't work and the world's economy plunges into a serious recession prices could still fall further - as low as $50 a barrel.
With the U.S. stock market's steep losses following the approval of the economic bailout plan, and bank failures in Europe prompting a $350 billion-plus bailout in Britain and talk of more to come across the Continent, it's a scenario that shouldn't be quickly discounted.
"Should we enter a synchronous global recession...oil prices could fall further to $50 a barrel next year," Francisco Blanch, head of global commodities research for Merrill Lynch, wrote in a recent research report.
Blanch doesn't think such a recession is likely, nor does Citigroup futures analyst Tim Evans.
But in the event of a deep global recession, Evans also said "The market would find value at $50 a barrel."
The global recession scenario only exaggerates the trend of falling demand seen recently.
In the United States it's been quite dramatic. Oil demand fell over 6% in July, according to the Department of Energy. Europe has also witnessed a drop in demand, while in the red hot economies of China and India oil use is growing slower than previously thought.
Evans said the main causes for the U.S. decline weren't the slowing economy, but government policies promoting biofuels and greater fuel efficiency, as well as consumers buying more efficient cars and driving less.
"This is not a token shift," he said. "There is hard work that goes into decreasing demand by that extent."
Plus, this decline in demand is coupled with an expected increase in supply.
Merrill estimates new OPEC investments will boost production capacity by 3 million barrels a day - or nearly 4% of current world output, over the next 18 months.
This picture of falling demand and rising supply - coupled with a strengthening dollar and investor flight from oil futures - has led to oil's rapid decline in price over the last couple months.
The case for $150
Now, if the bailout works and a global recession is averted and the world's economies come roaring back to life, dreams of $50 oil will certainly be dashed.
Crude would once again run into the same supply and demand scenario that helped push it to nearly $150 a barrel this July - namely, growing demand from the billions of people in China and India gaining middle class lifestyles butting against a global oil industry that struggles to produce much more than the current 85 million barrels a day.
It's this scenario that caused oil bulls like Goldman Sachs and Boon Pickens to to declare as recently as July that we'll likely see $150-$200 a barrel oil in the next year.
Even post credit crunch, Goldman is still predicting oil to average $110 a barrel in 2009.
"Investors appear to be placing greater weight on the demand concerns rather than the supply shortfalls," Goldman said in a research note.
If the U.S. goes through a mild recession, but the world economy chugs along and eventually heats up, oil is likely to trade back in the triple digits at some point in the next couple of years, according to Merrill's Blanch.
The bank bailout is likely to cause higher inflation as massive amounts of cash enters the market - pushing up oil prices as investors buy it as a hedge.
But again, analysts turn back to strong demand and tight supplies once economies pick up speed.
"As economic activity starts to recover in the emerging markets, their energy demand will likely start to strengthen again," wrote Blanch. "Energy and commodity demand growth is a secular investment theme that probably has decades to run."
The middle road
With so much uncertainty, it's not surprising that most analysts are taking a middle-of-the-road approach, predicting prices somewhere in the $70 to $100 range for 2009.
This is predicated on the expectation of a middle-of-the-road performance for the economy.
Most economists see the U.S. economy slumping into an official recession in the later part of 2008 and the first part of 2009 before recovering, and see global growth slowing but not contracting.
Citi's Evans thinks $70 to $80 is a reasonable range for the next year, low enough to not draw the ire of consumers but high enough to satisfy OPEC and encourage new production and alternative sources.
Merrill also lowered its 2009 oil price forecast from $107 a barrel to $90.
Deutsche Bank recently reduced it's late 2008/early 2009 oil price forecast to $85 a barrel, citing a weak global economy.
"We believe crude oil prices have further downside as the fall-out of the financial crisis spreads into the real economy and ultimately global oil demand," Adam Sieminski, the bank's chief energy economist, wrote in a recent research note.
Sieminski also noted how credit-related trouble in Europe, exemplified by this week's sharp selloff in European shares, is boosting the dollar and lowering oil prices.
"For the past few days, European equities have been underperforming their U.S. counterparts," he said, "possibly signaling the markets concerns that European authorities may find it more difficult than the US to coordinate a rescue package in the event of a large-scale banking failure."
First Published: October 8, 2008: 12:31 PM ET

Source: http://money.cnn.com/2008/10/07/news/economy/oil_prices/?postversion=2008100813

Sunday, September 14, 2008

Weekend talks seek buyer for Lehman

With files from Reuters

WASHINGTON -- Two more large U.S. financial institutions, Lehman Brothers Holdings Inc. and Washington Mutual Inc., are scrambling to find buyers this weekend and avoid collapse as the worst U.S. banking crisis since the Depression continues unabated.

The government's dramatic seizure this week of mortgage giants Fannie Mae and Freddie Mac was designed to stabilize financial markets.

Instead, the rescue has merely shifted focus to the next weakest links in the chain of beleaguered financial service companies, putting renewed pressure on a U.S. government that appears reluctant to sink any more taxpayer money into the industry.

"Anyone hoping the Treasury's takeover of Fannie Mae and Freddie Mac would somehow mark the bottom of the credit crunch is likely sorely disappointed," said John Silvia, chief economist at Wachovia Corp. "There are still formidable financial challenges ahead for the economy."

Treasury Secretary Henry Paulson has reportedly told key industry players that he isn't prepared to bankroll any more deals, including a takeover of Lehman, one of the biggest players in the mortgage bond market.

Bank of America Corp., the largest U.S. bank by market value, was considering a joint bid for Lehman along with private equity investor J.C. Flowers and sovereign wealth fund China Investment Co., according to published reports. Lehman has declined to comment.

Senator Richard Shelby, the top Republican on the Senate banking committee, told CNBC that the Treasury and the U.S. Federal Reserve Board were trying to work a deal that involved no U.S. government money. But he said he couldn't guarantee it wouldn't be needed at some point to prevent Lehman from collapsing.

"I'm hoping that some big firm will want them more than the Fed wants them," Mr. Shelby said.

The investment bank is struggling to find a solution to the worst crisis of its 158-year history. Lehman, the No. 4 U.S. broker, wrote down its assets by $5.6-billion (U.S.) in the third quarter, triggering a second successive quarterly loss of $3.9-billion.

Lehman has so far failed to attract investors to shore up its capital position, weakened this year by its outsized exposure to commercial real estate and residential mortgage assets hard hit by the continuing credit crunch.

Meanwhile, JPMorgan Chase & Co., which swallowed Bear Stearns earlier this year with the help of a $29-billion loan from the Fed, is in "advanced talks" to acquire Seattle-based Washington Mutual, the country's largest savings-and-loan company, Reuters reported, citing a source close to the discussions.

Lehman shares fell to a 14-year low yesterday, shedding 13.5 per cent of their value. Washington Mutual tumbled by 3.5 per cent. Investor fear has also spread to other institutions, including leading brokerage Merrill Lynch & Co. Inc. and American International Group Inc., a major insurer.

"The Fed, and now Treasury, have essentially installed a take-a-number machine on their front door steps, and the lineup is getting longer by the week," Bank of Nova Scotia economist Derek Holt said in a research report.

Mr. Holt pointed out that growing credit spreads suggest the crisis isn't nearly over.

A long list of companies, from banks to auto makers, is now making the case to Washington that they too are too big to fail.

U.S. auto makers, for example, have hired lobbyists to push for $25-billion in federal loan guarantees to help them modernize and build more fuel-efficient cars.

We are witnessing the "socialization of American capitalism," and there's more coming, Mr. Holt predicted.

"The state's role in the U.S. economy was already among the greatest in the industrialized world, and it is now on the verge of running a far bigger swath ... which may further distort long-run incentives and moral hazard," he said.

Merrill Lynch economist David Rosenberg warned that it will take "some time" for the credit crunch to work its way through the supply chain.

"It started between banks, migrated into mortgages and is now working its way through to the rest of consumer credit," he said.

LEHMAN (LEH)

Close: $3.65, down 57¢

WASHINGTON MUTUAL (WM)

Close: $2.73, down 10¢

***

CREDIT CRUNCH

SAVING LEHMAN BROTHERS

Year of the bear

for banks

Lehman Bros -94.42

Washington Mutual -79.9

Merrill Lynch -68.2

Wachovia -62.5

Legg Mason -44.8

Citigroup -38.9

Percentage losses in share value in 2008

$1.21-trillion

The market cap the S&P 500 financials index has shed since its Oct. 5, 2007 high of 483.87, or about 42 per cent.

$125-billion

Amount the failure of about 700 savings and loans cost U.S. taxpayers in the late 1980s and early 1990s.

Last weekend it was Henry Paulson, the U.S. Treasury secretary leading a monumental bailout of mortgage lenders Fannie Mae and Freddie Mac. The move was greeted with a wave of relief, but within days two other lenders were brought to their knees as Washington Mutual and Lehman Brothers, the storied 158-year-old investment bank, saw their shares collapse.

This weekend, the Treasury will be joined by Federal Reserve officials and top bankers from Wall Street and around the world, including China to work up a plan to save the banks. In the rescue of Bear Stearns, the federal government agreed to absorb as much as $29-billion (U.S.) in potential losses. With Fannie-Freddie, it's been estimated it could have to inject up to $100-billion. But on Friday, the message coming from sources at Treasury was that officials were pushing for a deal, possibly with multiple suitors, that would not involve government money. A key concern is that another rescue would trigger even more bailouts.

Source: http://www.theglobeandmail.com/servlet/story/LAC.20080913.RLEHMAN13/TPStory/Business

Merrill now in shorts' sights as Lehman crumbles

Fri Sep 12, 2008 5:51pm EDT
Photo

1 of 1Full Size


By Elinor Comlay

NEW YORK (Reuters) - The crisis of confidence in Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) has led to fallout throughout the financial sector -- especially for larger rival Merrill Lynch & Co Inc (MER.N: Quote, Profile, Research, Stock Buzz).

The problem for Merrill is that short-sellers regard it as the next weakest investment bank after the crumbling Lehman and the crumbled Bear Stearns, which was sold at a firesale price in March.

"People are saying, 'Who's next on the list?'" said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor in Cincinnati.

The result in the market was clear. Merrill Lynch shares lost about a third of their value this week, while peers Citigroup Co (C.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) only lost 2 percent and 4 percent, respectively.

A Merrill Lynch spokesman declined to comment.

Like Lehman and Bear, Merrill has holdings of structured debt that are triggering write-downs and calling into question its overall capital position.

Merrill Lynch has been one of the hardest hit firms over the course of the year-old credit crisis, posting well over $40 billion in write-downs and credit losses and selling valuable assets to raise capital.

In the second quarter, Chief Executive John Thain sold the bank's prized 20 percent stake in news company Bloomberg LLP and arranged to sell a banking administrator company to balance out $9.4 billion in losses and write-downs.

Investors are bracing for more bad news in the third quarter, after Thain arranged to sell $30 billion in complex debt securities to a private equity firm in July, taking more than $5 billion in write-downs at the same time.

Merrill also provided financing to Dallas-based private equity firm Lone Star Funds and sold those securities at 22 cents on the dollar. While the Lone Star deal removed a large, toxic weight from Thain's shoulders, there are still problem assets on Merrill's books, according to analysts.

"There's concerns they still have commercial mortgage exposure and people feel that's worsening," said Albert Yu, portfolio manager and analyst at Clover Capital Management, which does not have a position in Merrill.

Looming large among investors' worries about Merrill are mortgage-backed securities and other structured debt held at two of its banking subsidiaries -- Merrill Lynch Bank USA and Merrill Lynch Bank & Trust Co.

In the second quarter, structured debt held by these subsidiaries was responsible for losses of $1.7 billion. That could worsen in the third quarter as sales of these securities has set a low market price.

One hedge fund manager who is short Merrill said he sees these banks, which hold loans and deposits made through Merrill's network of financial brokers, needing more capital, which will have to be provided by the parent.

"Merrill's in a box, but people don't realize it," he said.

According to the most recent data from the New York Stock Exchange, short interest in Merrill Lynch increased 5.31 percent, to 44.5 million on August 29, compared with 42.3 million on August 15. Over the same period, short interest on average across the NYSE slipped 0.5 percent.

Merrill has a free float of 1.49 billion shares.

THE SHORT MENTALITY

The difficulty for Merrill Lynch is that it has valuable assets that aren't reflected in its share price.

According to a research report from Citigroup on Friday, Merrill's stake in investment manager BlackRock is worth about $9 a share and its wealth management franchise -- the largest by number of brokers and by assets -- is worth $16 per share. Citi analysts attributed an additional $15 per share to the bank's institutional business.

"Merrill Lynch has some very valuable assets, but the same is true of most Wall Street companies," said John Stein, co-founder of FSI Group in Cincinnati, which doesn't own Merrill Lynch shares.

"Shorts have made a lot of money of late, and one thing about Wall Street is when something works, they tend to keep doing it," he added.

As Merrill shares decline, it makes raising any further equity more expensive, noted Stein.

"It may force a strategic decision on to Merrill," he said, noting Lehman was prompted to raise capital following Bear Stearns' takeover, but it came too late to the idea of a strategic partnership.

"I think what's going on with Lehman will likely force Merrill to look for partners sooner rather than later."

(Reporting by Elinor Comlay, additional reporting by Dan Wilchins; Editing by Gary Hill)

Source: http://www.reuters.com/article/newsOne/idUSN1220665620080912?sp=true