Tag Archives: News event

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Investors mixed on Bank of America settlement

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Depending on whom you ask, the $8.5 billion settlement between Bank of America and 22 institutional investors is a great way for them to move on or a terrible idea. The two-year-old lawsuit has been in hearings for the past eight weeks.

The Financial Times led with the unhappy investors, who are in the minority on claiming the settlement should be rejected:

Bank of America’s plan to pay $8.5bn to compensate 22 institutional investors for soured mortgage-backed securities is a “Frankenstein settlement”, and should be rejected, a lawyer for a dissenting group of investors told a New York judge Tuesday.

The claim came as lawyers for investors locked in combat over the proposed settlement made their last pitches after eight weeks of hearings.

BofA and a group of investors that includes BlackRock, MetLife and Pimco, agreed to the $8.5bn deal more than two years ago to resolve claims on mortgage-backed securities issued by Countrywide, the troubled bank it rescued in 2008.

But a contingent of investors, led by American International Group and representing less than 7 per cent of the outstanding claims, is fighting the June 2011 settlement, which must be approved by Judge Barbara Kapnick of the New York state’s Supreme Court.

“This monster is a Frankenstein settlement . . . They [the creators] were not willing to give life to this settlement, instead they brought it to you,” Daniel Reilly, AIG’s lawyer, told Judge Kapnick.

If she finds the deal is acceptable, the dissenting investors will be bound by it. If not, BofA could face new claims and further litigation. It is not clear when she will rule.

The bank is already on the hook for around $50bn in settlements, not including this one, stemming from the financial crisis. It is also under investigation by at least three US attorneys’ offices – California, New Jersey and Atlanta – and the DoJ for various MBS securities deals. BofA says it has set aside money to cover the $8.5bn.

Reuters had this story on Monday about the investors in favor of the settlement:

A lawyer for an investor group on Monday urged a judge to approve Bank of America Corp’s proposed $8.5 billion settlement over mortgage-backed securities that soured in the financial crisis, noting that not one investor testified against the deal in a nine-week proceeding.

Kathy Patrick, a lawyer for a group of institutional investors who entered into the settlement, was summing up the case in New York state court in Manhattan.

Bank of America agreed to the settlement in June 2011 to resolve claims over shoddy mortgage-backed securities issued by Countrywide Financial Corp, which the bank acquired in 2008.

Bloomberg added this context about the settlement and why Bank of America is eager to put this behind them:

The settlement is part of an effort by Brian Moynihan, chief executive of Charlotte, North Carolina-based Bank of America, to resolve liabilities tied to faulty mortgages that have cost the company about $50 billion in legal claims, including those the bank inherited with the purchase of home lender Countrywide Financial Corp. in 2008.

The accord, which includes more than $3 billion in servicing improvements, resolves claims over mortgages packaged into securities. It settles allegations the loans backing the bonds didn’t meet their promised quality.

BNY Mellon, as trustee for more than 500 residential mortgage-securitization trusts, filed a petition in June 2011 seeking approval of the settlement under a state law that allows trustees to seek judicial consent for their actions.

While the settlement was backed by a group of more than two dozen investors including BlackRock Inc. (BLK) and Pacific Investment Management Co., almost four dozen investors objected, including AIG. Only 15 objectors opposed to the settlement remained as closing arguments began, Ingber said.

The closing arguments cap a hearing that started in June, stretched over eight weeks and included testimony from almost two dozen witnesses and evidence from more than 200 documents.

Bank of America declined to participate in mediation talks proposed by AIG and other opponents of the settlement after Kapnick urged the parties to consider using a mediator to resolve their objections during a break in the hearing.

The arguments before the judge comes as JPMorgan Chase works through a $13 billion civil settlement with the Justice Department. Banks are trying to put the financial crisis behind them and remove some of the overhang from litigation risk. At least once settlements have been approved then it removes the doubt from stock market valuation. It might not be best in the short-term but should be a good way for the industry to move forward.

Talking Biz News Today

Talking Biz News Today — Nov. 19, 2013

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Some of Tuesday’s top stories:

Reuters

Nokia shareholders approve sale of mobile business to Microsoft, by Ritsuko Ando and Jussi Rosendahl

JPMorgan $13 billion mortgage settlement expected Tuesday: sources, by Aruna Viswanatha and David Henry  

CNNMoney

Tech firms now hiring more women than men, by Annalyn Kurtz

Maria Bartiromo leaving CNBC, by James O’Toole

Bloomberg

Credit-driven China glut threatens surge into bank crisis, by Jun Luo, Jasmine Wang and Aipeng Soo

Bill Gates met with ‘a lot’ of Microsoft CEO candidates, by Dina Bass

Fortune

Bitcoin’s tipping point, by Nin-Hai Tseng

Businessweek

Best Buy and the holiday retail prisoner’s dilemma, by Kyle Stock

Today in business journalism

Fear and anxiety at Bloomberg Television

The evolution of Bloomberg News

An ode to NYT’s biz desk editor Keith Leighty

Kelly Evans is winner at CNBC with Bartiromo departure

Walmart store holds food drive for employees

This date in business journalism history

2007: Rocky Mountain News starts new business blogs

2011: WSJ/Dow Jones editor says goodbye

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Walmart store holds food drive for employees

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In a revelation that has reignited the debate over low wages, many outlets reported today than an Ohio Wal-Mart was holding a food drive for employees in need.

Here’s the story from the Cleveland Plain Dealer:

The storage containers are attractively displayed at the Walmart on Atlantic Boulevard in Canton. The bins are lined up in alternating colors of purple and orange. Some sit on tables covered with golden yellow tablecloths. Others peer out from under the tables.

This isn’t a merchandise display. It’s a food drive – not for the community, but for needy workers.

“Please Donate Food Items Here, so Associates in Need Can Enjoy Thanksgiving Dinner,” read signs affixed to the tablecloths.

The food drive tables are tucked away in an employees-only area. They are another element in the backdrop of the public debate about salaries for cashiers, stock clerks and other low-wage positions at Walmart, as workers in Cincinnati and Dayton are scheduled to go on strike Monday.

The CNN Money story had this response from a Wal-Mart spokesman. Note that he “wouldn’t be surprised” if other stores were holding similar drives:

Wal-Mart spokesman Kory Lundberg said that particular store has held similar food donation drives for several years. The food supports workers who are facing “an unforeseen hardship,” such as a spouse losing a job. Some of the food collected last year went to a mother whose child support benefits had stopped, so it helped provide her children a holiday meal, he said.

“I spoke to workers at the store today and they said that they’re going to continue to look after their folks who have realized a hardship recently,” Lundberg said.

He wasn’t aware of similar drives at any of its 4,000-plus stores nationwide, but he said he wouldn’t be surprised if they were.

The food drive plays into claims that Wal-Mart does not pay its workers a living wage.

In September, Bill Simon, president and chief executive officer of Wal-Mart U.S., said that less than half of the company’s U.S. employees make more than $25,000 per year. The federal poverty level for a family of four is $23,500.

A few months earlier, a report released by Congressional Democrats showed that the cost of these low wages are transferred to taxpayers, since employees then rely on public assistance programs. The report, put out by the Democratic staff of the House Committee on Education and the Workforce, estimated that one Wal-Mart supercenter alone employing 300 workers could cost taxpayers at least $904,000 annually.

The Plain Dealer quotes the same spokesman as saying the move was “in-line” with company policy of helping those in need:

Kory Lundberg, a Walmart spokesman, said the food drive is proof that employees care about each other.

“It is for associates who have had some hardships come up,” he said. “Maybe their spouse lost a job.

“This is part of the company’s culture to rally around associates and take care of them when they face extreme hardships,” he said.

Lundberg said holding the food drive at the Canton Walmart was decided at the store level. However, the effort could be considered in line with what happens company-wide. The Associates in Critical Need Trust is funded by Walmart employee contributions that can be given through payroll deduction. He said employees can receive grants up to $1,500 to address hardships they may encounter, including homelessness, serious medical illnesses and major repairs to primary vehicles. Since 2001, grants totaling $80 million have been made.

ABC News had yet another defensive quote from Lundy, defending the initiative:

Kory Lundberg, a spokesman for Walmart, said this store of about 300 employees has been hosting a holiday food drive for a few years.

“Quite frankly, a lot of people in that store are frustrated and offended that this is reported in a way besides other folks rallying around each other,” Lundberg said.

Last year, he said there were about 12 people who benefited from the program.

“I couldn’t be prouder of people in that store helping in a tough situation,” he said.

“They set the tub up for associates and managers to donate items for associates for things beyond their control,” Lundberg said. “It shows these associates care for each other. This isn’t every day run of the mill stuff — maybe a spouse has lost a job or lost a loved one, or maybe a natural disaster has hit.”

But the Plain Dealer quoted an employee of the store calling the move “demoralizing” and “kind of depressing.” But what’s also terrible is that Wal-Mart isn’t talking about raising wages, just about their foundation to help those in need. It’s hard to imagine Bank of America or Gap employees holding food drives for each other in bank branches or malls across America. The plight of those making lower wages is especially prevalent around the holidays. As we all scramble for deals, the real cost of low prices can be seen in food drives for the underpaid.

Talking Biz News Today

Talking Biz News Today — Nov. 18, 2013

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Some of Monday’s top business stories:

Reuters

Washington Post Co to change name to Graham Holdings Co, by Sagarika Jaisinghani

U.S. home builder sentiment stabilizes in November: NAHB, by Richard Leong

Bloomberg

U.S. stocks fluctuate as S&P 500 index climbs above 1,800, by Alexis Xydias, Nick Taborek and Nikolaj Gammeltoft

CNNMoney

Chinese markets cheer bold reform plan, by Sophia Yan

Businessweek

A supreme reckoning for securities class actions, by Paul M. Barrett

Forbes

Can hedge fund billionaire Paul Tudor Jones save America’s public education system? by Monte Burke

Fortune

Disaster relief’s chicken-egg problem, by Claire Zillman

Today in business journalism

Reuters losing chief operating officer Karle

The women who invented personal finance coverage

Is Bloomberg seeing the bad end of the bargain?

Bloomberg News to lay off 50 staffers

Financial reform heats up

This date in business journalism history

2010: NBC unit launches work and finance beta site

2011: Bizjournals.com redesign aimed at showcasing the best of local papers

Talking Biz News Today

Talking Biz News Today — Nov. 15, 2013

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Some of Friday’s top stories:

Reuters

NY factories slow down in November in bad sign for U.S. economy, by Luciana Lopez and Jason Lange

Bloomberg

Forbes Media is working with bankers to sell company, by Alex Sherman, Jeffrey McCracken and Edmund Lee

The human hack: How to fight an internet risk technology can’t fix, by Olga Kharif

New York Times

Facebook amends privacy policies, by Vindu Goel

Businessweek

Spirit Airlines stays low-fare, low-brow with a classy crack joke, by Kyle Stock

Why Obama can’t just uncancel all those insurance plans, by John Tozzi

Today in business journalism

Forbes CEO’s memo to staff on possible sale

Forbes parent exploring a sale

Union to Reuters journalists: Give yourself a rave review

Harper’s publisher doubts Bloomberg’s honesty and courage

Merry and bright?

This date in business journalism history

2007: Financial Times believes WSJ changes will help it succeed in U.S. 

2012: USA Today names new Money editor, tech editor

Talking Biz News Today

Talking Biz News Today — Nov. 14, 2013

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Some of Thursday’s top stories:

New York Times

JPMorgan’s fruitful ties to a member of China’s elite, by David Barboza, Jessica Silver-Greenberg and Ben Protess

Rejecting billions, Snapchat expects a better offer, by Jenna Wortham

Bloomberg

Yellen says economy performing ‘far short’ of potential, by Joshua Zumbrun and Jeff Kearns

Wal-Mart trims forecast as economy restrains shoppers, by Renee Dudley

Reuters

Boeing machinists reject labor deal on 777X by 67 percent, by Alwyn Scott and Jonathan Kaminsky

CNNMoney

Will Google Docs kill off Microsoft Office? by Adrian Covert 

Businessweek

One World Trade Center is about half vacant – so what? by Devin Leonard

Today in business journalism

Business Insider passes CNBC in traffic

Business Insider to open West Coast office

Large increase in students in CUNY biz journalism program

CNBC’s Regan engaged on the air

Ex-Reuters editor grilled about moving journalists to India

Previewing Yellen’s confirmation hearing

This date in business journalism history

2006: Washington Post cuts stock, mutual fund listings

2012: Marketwatch.com launches section on retirement

Fed

Previewing Yellen’s confirmation hearings

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Janet Yellen prepares to face senators during her confirmation hearing as chairman of the Federal Reserve Borad on Thursday, but the business media was busy Wednesday previewing what she might say and some of the questions she may receive.

The Financial Times took a straightforward lead saying Yellen will face “hostile questions” during her appearance:

Janet Yellen will face hostile questioning at a high-stakes confirmation hearing on Thursday where she will make crucial first impressions as the nominee for chair of the US Federal Reserve.

“I think tomorrow’s hearing will be really, really important for Janet Yellen because in effect she’ll be introducing herself to the American people,” said Stephen Oliner, a former Fed official now at the American Enterprise Institute. “Tomorrow, I think, is a bit of a coming-out party for her.”

Ms Yellen is known for her meticulous preparation, but it will be her first time defending the Fed itself in Congress, making for a big test of her political and communications skills. It will set the template for years of appearances if she is confirmed to the top job and takes over at the end of January.

Ms Yellen has an unusual challenge because she is already a senior member of the Fed’s leadership – most past chairs were nominated from outside the institution – so she has to find a way to communicate her own economic philosophy without giving away too much about current policy.

Unlike in a Fed chair’s semi-annual testimony to Congress, Ms Yellen will be speaking only for herself and not for the Federal Open Market Committee, so she is likely to give fairly brief opening remarks that focus on her priorities rather than the economic outlook or how the Fed might react to it.

The New York Times decided to start their story talking about Yellen’s view that more clear information and direction from the Fed would help markets:

Janet L. Yellen, President Obama’s choice to lead the Federal Reserve over the next four years, has championed the idea that the Fed can stimulate the economy simply by speaking clearly.

Her confirmation by the Senate is regarded by most Democrats and Republicans as all but inevitable.

But even before she takes over, the questions she will begin to confront on Thursday, as she appears before theSenate Banking Committee, are whether the Fed under her leadership can communicate more clearly than it has managed to do in recent months — and whether that is the best the Fed can do to lift the economy from its enduring malaise.

Ms. Yellen, the Fed’s vice chairwoman since 2010, has been a key architect of the push to more fully explain to the public the Fed’s actions, its reasoning and its plans. The theory is that the Fed can exert greater influence over investors, by enlisting them to hold down longer-term interest rates at a time when the Fed has cut short-term rates practically as low as they can go, by detailing an itinerary rather than sending occasional postcards.

She is widely expected to double down on this strategy, assuming she is confirmed as chairwoman.

The Wall Street Journal’s coverage started with talking about the Fed’s role in creating jobs and stabilizing the economy:

When senators question Janet Yellen on Thursday during her confirmation hearing to be the next leader of the Federal Reserve, she will likely turn their attention to the central bank’s “dual mandate” of maximum employment and stable prices.

Ms. Yellen has made this mandate the centerpiece of her argument for the Fed’s unconventional easy-money programs aimed at spurring a stronger economic recovery and lowering unemployment, a point her recent comments suggest she will seek to reinforce.

“While we have made progress, we have further to go,” Ms. Yellen said of the Fed’s role in helping the economy when President Barack Obama named her as his pick last month. “The mandate of the Federal Reserve is to serve all the American people, and too many Americans still can’t find a job and worry how they’ll pay their bills,” she said, adding that the Fed can also ensure inflation doesn’t undermine “the benefits of a growing economy.”

The Fed’s dual mandate was established in 1977, when Congress wrote into the Federal Reserve Act that the central bank must pursue both maximum employment and stable prices.

It is a controversial requirement in political circles because some Republicans think the employment component has taken the Fed’s focus off the more important and achievable mission of low inflation. It is also unlike the mission of many other central banks, for which controlling inflation is the sole focus.

The Bloomberg story started with Yellen’s comments on helping the economy improve:

Janet Yellen, nominated to be the next chairman of the Federal Reserve, said the economy and labor market are performing “far short of their potential” and must improve before the Fed can begin reducing monetary stimulus.

“A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,” Yellen, the Fed’s vice chairman, said in testimony prepared for her nomination hearing tomorrow before the Senate Banking Committee. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”

The remarks show Yellen is committed to the central bank’s strategy of attempting to boost the economy and lower 7.3 percent unemployment, more than four years after the economy began to recover from the longest and deepest recession since the Great Depression. She also signaled support for capital and liquidity rules to help reduce the perception that some banks are too big to fail.

All different leads and all valid points that Yellen will have to answer during her confirmation hearing. It will be interesting to see how far she is able to go without giving away the Fed’s current thinking. She will likely face some tough questions, but it will remain to be seen how many she will be able to answer.

Talking Biz News Today

Talking Biz News Today — Nov. 13, 2013

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Some of Wednesday’s top stories:

New York Times

Johnson & Johnson said to agree to $4 billion settlement over hip implants, by Barry Meier

Bloomberg says news service did not kill articles on China, by Ben Sisario

Starbucks to pay Kraft $2.75 billion, ending broken-deal dispute, by Stephanie Strom

Reuters

Apple under investigation in Italy for tax fraud: source, by Manuela D’Alessandro

Macy’s sales rise more than expected; shares jump, by Phil Wahba

Fortune

The biggest loser in US Airways-American deal? You. by Cyrus Sanati

Businessweek

Microsoft kills its hated stack rankings. Does anyone do employee reviews right? by Joshua Brustein 

Today in business journalism

NY Times biz desk adds three staffers

South Florida Business Journal editor leaving for magazine company

PaidContent is shutting; content moves to GigaOm

Bloomberg TV’s Eisen moving to CNBC

Massad picked to lead CFTC

This date in business journalism history

2008: China ends limits on biz news firms

2012: Tech media firm sold to cloud company 

CFTC

Massad picked to lead CFTC

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President Barack Obama nominated Timothy Massad, who ran the Troubled Asset Relief Program at the Treasury Department, to head the Commodity Futures Trading Commission. The move comes after Gary Gensler said he would leave once a successor was appointed.

Here’s some of the background from the Wall Street Journal:

Among Mr. Massad’s biggest challenges will be securing additional funds for an agency whose mandate has outgrown its budget. The CFTC, which oversees the $600 trillion derivatives industry, is operating with a budget of about $194 million, far short of the $315 million Mr. Obama has requested for the agency. Derivatives are financial instruments that allow investors, companies and others to hedge against risk.

Mr. Obama called on Congress to boost the CFTC’s budget, saying the agency is “undermanned, they are outgunned, they are working overtime.” He said the agency’s budget had fallen victim to opponents of the 2010 Dodd-Frank financial overhaul, who have “tried to starve funding for the agencies charged with carrying it out.”

The five-member CFTC has been operating with just four commissioners since Republican Jill Sommers stepped down earlier this year. Another commissioner, Democrat Bart Chilton, last week announced plans to leave before year-end. The Senate has yet to confirm Republican J. Christopher Giancarlo to succeed Ms. Sommers, and the pending departures of Messrs. Gensler and Chilton could leave the CFTC with just two commissioners—Republican Scott O’Malia and Democrat Mark Wetjen. Senate aides have said they expect Congress to simultaneously move the nominations of Mr. Giancarlo and whomever the White House nominated to succeed Mr. Gensler.

It isn’t clear how Mr. Massad, 57 years old, a onetime corporate lawyer, will approach some of the biggest issues facing the CFTC, including the push to ensure that U.S. banks operating abroad adhere to U.S. derivatives rules. Mr. Massad, who worked at law firm Cravath Swaine & Moore LLP for 25 years, focused primarily on securities matters while at the firm, though he also has “extensive knowledge” of the derivatives market the CFTC oversees through his corporate legal practice, the official said.

The New York Times detailed the CFTC’s expanding role in regulating Wall Street and its products:

Some consumer advocates also remain skeptical of Mr. Massad, a former corporate lawyer who spent more than two decades at Cravath, Swaine & Moore. They wonder whether he will strike as aggressive a tone as Mr. Gensler did.

Under Mr. Gensler, the agency has received plaudits for its crucial role in putting in place new rules on derivatives and futures trading as part of the government’s Dodd-Frank financial overhaul. In the face of Wall Street lobbying, the agency created dozens of new rules since Congress passed the overhaul in 2010.

The Dodd-Frank Act gave the agency new authority to regulate the exchanges, and the derivatives and futures contracts traded on those exchanges, expanding the scope of the agency’s jurisdiction. Mr. Gensler was an unapologetic supporter of the law, pushing the agency to tighten rules that Wall Street sought to loosen.

Derivatives tied to mortgages were the main accelerator of the financial crisis, helping to pump up a real estate bubble that led to a bust and the worst financial crisis since the Depression.

Since then, the agency has also imposed record fines on financial institutions. Among its most notable actions was a wide-ranging crackdown on the manipulation of benchmark interest rates, which reeled in major banks including Barclays and UBS.

The Associated Press story (via Time) pointed out that Massad would have to finish the rule-making process, meaning he’ll need to be tough on Wall Street:

Obama is expected to use Massad’s nominating ceremony to call on Congress to fully fund the CFTC, one of the smallest and most thinly funded U.S. agencies. The 2010 financial overhaul law gave the CFTC the task of laying down rules for oversight of derivatives, the complex instruments traded in a $700 trillion worldwide market that has been unregulated.

The agency has now completed 43 of the 60 rules it was charged with putting into motion under the overhaul law. By comparison, other regulators, including the Securities and Exchange Commission, have adopted roughly a third of their rules.

Massad would take over the task of implementing the remaining rules. For many, a key question is whether he will exercise independence from the administration and the banks, as Gensler often did.

Gensler, who had worked for nearly 20 years on Wall Street, surprised many by being a tough regulator of banks. He pushed for stricter rules that banks had lobbied against. And he wasn’t afraid to take positions that clashed with the Obama administration.

Massad has worked for the Treasury since Obama took office in 2009 and has been an advocate for the administration’s policies.

“The question is whether he has the guts, independence and commitment … to stand up to Wall Street,” said Dennis Kelleher, the president of Better Markets, a group that advocates strict financial regulation. “It’s a dramatically difficult job at an independent agency at a critical time.”

That’s always the biggest questions with regulators and how they’ll do their jobs. Here’s hoping that independence and fairness prevail at the CFTC.

Talking Biz News Today

Talking Biz News Today — Nov. 12, 2013

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Some of Tuesday’s top stories:

New York Times

Suit charges 3 credit ratings agencies with fraud in Bear Stearns case, by Peter Lattman

Insurers press for way around Healthcare.gov, by Reed Abelson, Sharon LaFraniere and Susanne Craig

Reuters

News Corp. revenue slumps in first standalone quarter, by Jennifer Saba

Dish subscriber count beats expectations, by Chandni Doulatramani

CNNMoney

Wal-Mart Thanksgiving deals start at 6 p.m., by Emily Jane Fox

Bloomberg

Gluten takes a beating from fad dieters and grain giants, by Matthew Boyle

Triangle Business Journal

Carolina Inn chooses Chapel Hill hotel veteran as its new general manager, by Amanda Jones Hoyle

Today in business journalism

Louisville biz paper hires new reporter

Bloomberg News at a crossroads

Winkler email to Bloomberg editorial staff regarding China

FT sees big drop in print circulation

Amazon and U.S. Postal Service strike Sunday deal

This date in business journalism history

2007: Financial Times web site appoints first video chief

2012: FT accused of jacking up cover price