Auction Rate

Recombining stock research and banking a good idea?

Jim Kim — Wed, 06 Aug 2008 13:49:15 -0400

You can bet Eliot Spitzer is not taking this well: Citigroup is mulling a move that would fold its once-maligned equity research unit into the institutional securities business. Recall that six years ago, in a high-profile victory for Spitzer, a so-called "global settlement" forced banks to separate the two and ended the practice of using analysts as tools of bankers. This may seem shocking. But the fact is that investment banking still pays for the research, the Financial Times notes. Citi execs tell the paper that rules separating the two functions will prevent any conflicts of interest. Which makes sense. But not all have great trust in Citi right now. It was just accused of destroying evidence in an auction rate security probe by the state of New York. Meanwhile, Mass. regulators accused Merrill Lynch execs of muzzling an analyst who was bearish on auction rate securities.

For more:
- here's the Financial Times article

New York sues UBS over auction rate securities

Jim Kim — Fri, 25 Jul 2008 07:59:21 -0400

UBS has once again found itself the target of federal charges. This time, New York Attorney General Andrew Cuomo has charged the Swiss bank with illegally promoting auction rate securities as safe investments when executives knew they were anything but. According to the AP, investigators have identified seven UBS executives who sold personal stakes in auction rate securities to the tune of $21 million. Their emails paint of picture of worried execs. "I want to get out of arcs. Let's talk Monday," one executive wrote to his investment adviser, after receiving a company email warning of potential problems in the market. This will likely be the first of several actions against banks. We'll see more than one state get involved. As usual, email will likely be the main evidence.

For more:
- here's the article

More Bear Stearns charges coming?

Jim Kim — Mon, 30 Jun 2008 11:35:57 -0400

NPR reports that there could be new indictments against Ralph Cioffi and Matthew Tannin, the two Bear Stearns execs who have already been charged with misleading investors. The new charges reportedly would deal with the funds relationship with the banks that provided credit and various guarantees. NPR notes that prosecutors already have spoken with Barclays, Merrill Lynch and Bank of America. Barclays sued Bear Stearns, though I'm not sure where that stands. Clearly, the government would like to make an example of these two men. There are a lot of probes going on. My sense is we're more likely to see more states take action sooner. The feds will pick their cases carefully. Consider the case by Massachusetts regulators against UBS over its auction-rate securities sales practices.

For more,
- here's the article

ALSO NOTED: Class action suit targets Bank of America's auction rate securities; Wells Fargo tightens home loan rules; and much

Tue, 27 May 2008 06:59:50 -0400

Company News:
> Wells Fargo tightens home loan rules. Article
> E*Trade looking better. Article
> Class action suit targets Bank of America's auction rate securities. Article

Regulatory News:
> SEC looks at Wachovia's auction rate securities. Article
> CT widens probe into missing banks data. Article
> Official: Credit crunch easing. Article

And Finally... More executives opt for hourly pay. Article

ALSO NOTED: Citigroup may sell Japanese consumer finance unit; Morgan Stanley closes infrastructure fund; and much more...

Tue, 13 May 2008 06:59:50 -0400

Company News:
> Morgan Stanley closes infrastructure fund. Article
> More on HSBC earnings. Article
> Citigroup may sell Japanese consumer finance unit. Article
> Soros on Bear Stearns. Video
> Evercore posts a 1Q loss. Article
> Ladenburg Thalmann posts loss. Article
> Bank of America to launch NASCAR commercial. Article
> Pandit flexes muscles. Article

Industry News:
> Analyst: REITs overvalued. Article
> Pearlstine to join Bloomberg. Article

Regulatory News:
> SEC looks at Wachovia and auction rate securities. Article
> Feds close a bank in Arkansas. Article

And Finally... 92-year old shareholder declares war on exec pay. Article

Citigroup works to keep advisers in house

Wed, 07 May 2008 06:59:56 -0400

Citigroup certainly got a lot of ink during the credit crunch. We read a lot about disgruntled shareholders, but not a lot about upset advisers. Investment News now reports that the bank is in overdrive trying to keep the really big producers--and their clients--on board. Executives are "reaching out to their advisers and clients via a flurry of personal phone calls and letters, conference calls, web casts, visits to branch offices and road shows." UBS is in a similar situation. Executives have a lot to explain away, from the subprime fiasco, to various hedge fund issues and, of course, the auction rate security mess. It's unclear how many of the big whales are set to leave. Citigroup at least needs to show signs of a turnaround fairly soon.

For more:
- here's the Investment News article

ALSO NOTED: Mayo: Lehman still under some pressure; Citigroup forms alternatives group; and much more...

Wed, 07 May 2008 06:59:50 -0400

Company News:
> When to bail on a money manager. Article
> Amex to slash staff? Article
> Citigroup forms alternatives group. Article
> Legg Mason joins crowd, will raise $1 billion. Article
> Wachovia's loss doubles. Article
> State Street office in Poland could employ 1,000. Article
> Mayo: Lehman still under some pressure. Article
> NYSE profits triple. Article
> Level 3 assets at Merill rise. Article

Industry News:
> Oil prices blast higher. Article

Regulatory News:
> Mortgage probe intensifies. Article
> Merrill cooperating with auction rate probe. Article

And Finally... 10 ways to avoid travel cancellation fees. Article

A way to end the auction rates securities mess?

Mon, 05 May 2008 06:59:56 -0400

It's so easy to forget about the auction rate securities mess. But the fact remains that more than $300 billion remains tied up in this near-frozen market. Issuers, lots of municipalities and nonprofits cannot forget about any of this. A New York Times column notes that Wall Street firms have a lot of conflict in this market. They rake in management fees, even when rate-setting auctions fail (as they have done lately). They collect fees when issuers redeem the securities and unwind the related derivatives. One answer would be to sell some of this paper at a discount via a nascent secondary market. But Wall Street firms, the Times says, are still asking issuers to redeem at par. Anything less could stick the issuer and the underwriter in arbitration.

For more:
- here's the New York Times article

Citigroup earnings worse than expected

Fri, 18 Apr 2008 06:59:58 -0400

Citigroup lost $1.02 per share, lagging behind the average estimate of 95 cents a share. This is one of those downside surprises that somehow is not all that surprising. The bank wrote off $12 billion in subprime-related debt, bond insurer exposure, leveraged loan commitments, auction rate securities and--a mild surprise--consumer credits. In the fourth quarter, it wrote down $18 billion. The first-quarter results seem in line with those who argue Citigroup will be forced to raise more capital this year. It already has raised about $20 billion over the last five months. Some perspective on the woes at the bank: Revenues were $13.2 billion in the quarter. A year ago--hard to believe now--revenues were $25.5 billion. Welcome to the new era.

For more:
- here's a CNNmoney.com article

ALSO NOTED: Analyst: Morgan Stanley holds the most risk; Creative financing at Lehman Brothers?; and much more...

Mon, 14 Apr 2008 06:59:50 -0400

Company News:
> Morgan Stanley lands underwriting deal in Saudi Arabia. Article
> Apollo struggles with Linens 'n Things. Article
> Lehman shorts scared by Bear probe? Article
> Creative financing at Lehman Brothers? Article
> Analyst: Morgan Stanley holds the most risk. Article
> Bear Stearns details financial condition. Article

Industry News:
> Individuals trapped in auction-rate securities. Article
> Small investor lost in the carnage? Article

And Finally... Can talking to yourself help you at work? Article