Four prominent Wall Street executives testified on Capitol Hill yesterday (Wednesday) about errors they committed during the financial crisis. But no amount of contrition or case making will be able to spare the financial services industry from the wrath of public opinion and a new tax to be imposed by President Barack Obama.
The bigwigs from Goldman Sachs Group Inc. (NYSE: GS), JP Morgan Chase & Co. (NYSE: JPM), Morgan Stanley (NYSE: MS), and Bank of America Corp. (NYSE: BAC) were called on yesterday (Wednesday) to explain themselves to the U.S. Congress' Financial Crisis Inquiry Commission (FCIC) - the ten-member commission appointed with goal of investigating the causes of the financial crisis.
"Over the course of this crisis, we as an industry caused a lot of damage," Brian Moynihan, chief executive of Bank of America, said before a standing-room only crowd in the House Ways and Means Committee room, The Wall Street Journal reported.
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Why You Should Mark January 13 on Your Calendar
Next Wednesday, Jan. 13, won't be just another hump day. It's a key date for regulators in both the United States and Europe who are preparing to launch the largest overhaul of global financial regulation since The Great Depression.
On that day, at least two seminal events are scheduled to take place:
On that day, at least two seminal events are scheduled to take place:
- The U.S. Congress' Financial Crisis Inquiry Commission (FCIC) - the ten-member commission appointed with goal of investigating the causes of the financial crisis - will begin its first public hearing.
- And the European Parliament will hold a confirmation hearing for Michel Barnier - the French politician who has been appointed to oversee the regulation of the European Union's (EU) financial services sector.
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Total Forms Joint Venture with Chesapeake; Manufacturing Index Jumps; Cold Snap Drives Oil Higher; Car Sales Surge in December; Kraft Advances Bid for Cadbury; New BofA CEO Optimistic for U.S. This Year, But Krugman Shows Caution; WSJ: Banned Chinese Companies Continued to Do Business With U.S. Firms
Total Forms Joint Venture with Chesapeake; Manufacturing Index Jumps; Cold Snap Drives Oil Higher; Car Sales Surge in December; Kraft Advances Bid for Cadbury; New BofA CEO Optimistic for U.S. This Year, But Krugman Shows Caution; WSJ: Banned Chinese Companies Continued to Do Business With U.S. Firms
- Total SA (NYSE ADR: TOT) will pay up to $2.25 billion for a 25% stake in Chesapeake Energy Corp.'s (NYSE: CHK) assets in the Barnett Shale natural gas field in North Texas, Total said yesterday (Monday). Total will pay $800 million for the stake, and up to $1.45 billion for as long as six years by funding 60% of Chesapeake's costs in the field. The Barnett Shale field is the biggest producer of natural gas in the United States and accounted for 52% of Chesapeake's third-quarter output.
Is Incoming Bank of America CEO Moynihan "More of the Same?"
Bank of America Corp.'s (NYSE: BAC) decision to appoint Brian Moynihan as its next president and chief executive officer puts the pressure on Moynihan and the bank's board of directors to prove to investors that the company is serious about changing direction.
Moynihan joined Bank of America via its 2004 merger with FleetBoston Financial and has held several positions since. While technically an insider, Moynihan sits outside BofA's executive circle in Charlotte, N.C.
"This is a real break with the past," Tony Plath, a finance professor at the University of North Carolina and a close follower of BofA's many executive "tribes" told The Wall Street Journal. "It signals to the market that the FleetBoston guys are in charge of the bank now."
Moynihan joined Bank of America via its 2004 merger with FleetBoston Financial and has held several positions since. While technically an insider, Moynihan sits outside BofA's executive circle in Charlotte, N.C.
"This is a real break with the past," Tony Plath, a finance professor at the University of North Carolina and a close follower of BofA's many executive "tribes" told The Wall Street Journal. "It signals to the market that the FleetBoston guys are in charge of the bank now."
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France and Britain Take the Lead on Executive Pay Restrictions
Executive pay has been a delicate issue in the United States where the Obama administration's "Pay Czar," Kenneth Feinberg, has been asked to keep bonuses for top financial managers disciplined without driving off top talent.
However, French President Nicolas Sarkozy and British Prime Minister Gordon Brown have been more blunt about exacting a toll on the financial firms that required taxpayer bailouts.
The United Kingdom on Wednesday announced plans to levy an immediate 50% tax on discretionary bonuses greater than 25,000 pounds, or about $40,000. The U.K. Treasury estimates the tax will affect 20,000 bankers and bring in about 550 million pounds, or about $894,000,000. However, some bankers have suggested the tax would reap about 4 billion pounds, or $6.5 billion, if firms press ahead with large bonus payouts regardless of the tax, the Financial Times reported.
However, French President Nicolas Sarkozy and British Prime Minister Gordon Brown have been more blunt about exacting a toll on the financial firms that required taxpayer bailouts.
The United Kingdom on Wednesday announced plans to levy an immediate 50% tax on discretionary bonuses greater than 25,000 pounds, or about $40,000. The U.K. Treasury estimates the tax will affect 20,000 bankers and bring in about 550 million pounds, or about $894,000,000. However, some bankers have suggested the tax would reap about 4 billion pounds, or $6.5 billion, if firms press ahead with large bonus payouts regardless of the tax, the Financial Times reported.
Citi's Pandit is the Right Man For the Job – at Bank of America
Bank of America Corp.'s (NYSE: BAC) search for a new boss to succeed the deposed Kenneth D. Lewis had ground to a complete halt. Nobody was willing to take the job for the compensation the Obama administration's "Pay Czar" was willing to authorize.
Now Bank of America is repaying its Troubled Asset Relief Program (TARP) funds in order to get out from under the pay czar's tyranny, in the hope the big bank can attract a worthy chief executive officer. That's a good strategy, and it just might help BofA attract the most obvious candidate of all: Vikram S. Pandit, the embattled (and $1-a year) CEO of Citigroup Inc. (NYSE: C).
Pandit got the Citigroup job after 11 years at Morgan Stanley (NYSE: MS) and founding the Old Lane hedge fund, which Citi bought for $800 million - only to shut down less than a year later.
Now Bank of America is repaying its Troubled Asset Relief Program (TARP) funds in order to get out from under the pay czar's tyranny, in the hope the big bank can attract a worthy chief executive officer. That's a good strategy, and it just might help BofA attract the most obvious candidate of all: Vikram S. Pandit, the embattled (and $1-a year) CEO of Citigroup Inc. (NYSE: C).
Pandit got the Citigroup job after 11 years at Morgan Stanley (NYSE: MS) and founding the Old Lane hedge fund, which Citi bought for $800 million - only to shut down less than a year later.
Bank of America Hopes to Lure Top Shelf Talent by Paying Back TARP Loans
Bank of America Corp. (NYSE: BAC), the nation's biggest lender, reached an agreement to repay $45 billion of Troubled Asset Relief Program (TARP) bailout funds, removing government imposed restrictions on executive pay that have hindered its search for a new CEO.
The Charlotte, N.C., bank will become the first bank to return a large, or "exceptional," taxpayer-funded bailout. Bank of America initially received $25 billion of TARP funding in October 2008 as government officials raced to stabilize the U.S. financial system. The government injected the bank with an additional $20 billion in January to mitigate losses associated with its takeover of securities firm Merrill Lynch & Co. (NYSE: MER).
The bank will use $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities to repay the TARP funds according to a statement issued late Wednesday.
The repayment will clear the way for the bank to intensify its efforts to replace Chief Executive Officer Kenneth D. Lewis, who announced in September he would retire at the end of this year.
The Charlotte, N.C., bank will become the first bank to return a large, or "exceptional," taxpayer-funded bailout. Bank of America initially received $25 billion of TARP funding in October 2008 as government officials raced to stabilize the U.S. financial system. The government injected the bank with an additional $20 billion in January to mitigate losses associated with its takeover of securities firm Merrill Lynch & Co. (NYSE: MER).
The bank will use $26.2 billion of “excess liquidity” and $18.8 billion from the sale of securities to repay the TARP funds according to a statement issued late Wednesday.
The repayment will clear the way for the bank to intensify its efforts to replace Chief Executive Officer Kenneth D. Lewis, who announced in September he would retire at the end of this year.
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