Tag Archives: Brian Moynihan

Top 10 Financial Failures of 2011

It’s the financial service web site FierceFinance.com who have put together the list of the biggest blunders in the industry during the past year. Personally, I might have put a few other issues on the list, but when it comes to the final top position I think we have a winner:

“Led by CEO Jon Corzine, formerly of Goldman Sachs, MF Global was a trading powerhouse back in 2010. That all came crashing down in late 2011, as the bank filed for Chapter 11 bankruptcy and lost track of $600 million in capital.”

FierceFinance

Yeah, losing $600 million is probably harder than earning them, and quite an achievement…

FireceFinance writes:

“The MF Global failure was a total unraveling involving poor management and risky investment. For what it’s worth, Corzine said he will not be seeking to collect his $12 million Golden Parachute severance package. But reports surfaced in The Telegraph speculating that MF Global employees in the U.K. may have received Q3 corporate bonuses, even with the firm on the brink of failure.”

Read more: MF Global coverage.

Here’e the rest of the list:

2. Bank of America imposes debit card fee.

“The backlash against the bank was severe. But CEO Brian Moynihan defended the bank’s right to make a profit, saying in a statement that he had “an inherent duty as a CEO of a publicly owned company to get a return for my shareholders.”

3.  Frustration sparks Occupy Wall Street protests.

“What originated as peaceful has become violent, as reports surfaced of police using tear gas on protestors along with attempts to force them out of encampments.”

4. S&P downgrades US credit rating.

“Even though S&P went on to be criticized for its debt rating practices (the issue of credit rating agency credibility looms large), the move was significant at a time when budget showdowns in Washington and a stagnant economy were constantly in the headlines.”

5. Raj Rajaratnam slammed for insider trading.

“The convicted insider trader dominated the news in 2011 and in many ways is seen as the pinnacle of success for federal prosecutors, who have been cracking down on offenders.”

6. Citi stumbles after major data breach.

“Citi was reluctant to publicly announce the breach, finally doing so only after being pressed on the subject by the media. Citi offered a public explanation of the incident and tried reassuring customers that the stolen data was insufficient to commit fraud and that social security numbers, dates of birth and card security codes remained secure.”

7. Bank of America forecloses on couple.

“One of the more bizarre stories of 2011 was when Bank of America accidentally foreclosed on a Florida couple. Although the bank eventually backed down, the couple hired a lawyer to recoup attorney’s fees. Five months passed without payment–this coming after a judge ordered the bank to pay up. So the couple and its attorney showed up to foreclose on a local Bank of America branch, declaring their intent to remove furniture, cash and other property.”

8. RSA suffers cyber attack.

“RSA’s SecureID tokens are used by 30,000 organizations worldwide. RSA remained open about the attack, offering tips and posting details describing the anatomy of the breach. But even transparency didn’t reverse the fact that banks were forced to rethink security and look for new options.”

9. Typo costs Goldman Sachs $45 million.

“A tip for everyone who deals with contracts: Double check all calculations. Goldman Sachs learned that lesson the hard way back in June when it issued four warrants relating to Japan’s Nikkei index. Buried in the depths of financial jargon was a serious formulaic mistake: A multiplication sign was inserted where there should have been a divide by sign.”

10. John Paulson‘s Sino-Forest bust.

“In all likelihood, 2011 will not be a great year for hedge fund manager John Paulson. Among his failures was selling 35 million shares of the Chinese company Sino-Forest at an estimated loss of $500 million.”

Related:

Comments Off on Top 10 Financial Failures of 2011

Filed under International Econnomic Politics, National Economic Politics

Credits: The Price of Accountability

Remember President Barack Obama’s pompous “BP-Will-Be-Held-Accountable”-speech? The president’s remarks on the oil spill dragged BP’s  share price right to the bottom and pushed the CDS’ straight through the roof. However, when The White House this week announced that US banks will be held accountable for any foreclosure violations, there was hardly any reaction in the financial markets at all.

“Whether investors chalked it up to part of mid-term election campaigning or simply could not discern the market impact is debatable.”

Otis Casey


Earlier this week, market price action seemed to suggest that investors were struggling to properly define the extent and impact of the potential foreclosure violations case. By the end of the week, however, I think they’ve started to see a more clear – not pretty – picture.

Bank of America, who had halted foreclosures in all 50 states, signalled on Tuesday that is was time to resume the foreclosure process. As for their process, CEO Brian Moynihan simply said; “Without question we’re doing it right.”

The day before Citigroup stated that their process was “sound”.

“While no one expected that the uncertainty in litigation risk could just disappear overnight, it at least appeared to be moderating a bit,” credit analyst Otis Casey writes in the weekly credit wrap from Markit Financial Information.

“There seemed to be a perception that the majority of the headlines would be read in the rear-view mirror – at least,” Otis Casey writes, but point out: “That sentiment was short-lived.”

WILL BE HELD ACCOUNTABLE?

Reminiscent of President Barack Obama’s “BP Will Be Held Accountable” speech, the White House announced this week that banks would be held accountable for any foreclosure violations.

This was not surprising, considering that a key part of the President’s communication strategy has been to side with “Main Street” against “Wall Street.”

“Whether investors chalked it up to part of mid-term election campaigning or simply could not discern the market impact is debatable, in any case the announcement did not have anywhere near the same market moving impact on CDS spreads the way that the BP speech did last spring on BP’s CDS spreads,” Casey notes.

YOU BUY – WE PAY

“Then some of the biggest investors in the world decided to react like it was “Wall Street vs Wall Street” (nevermind
that PIMCO headquarters is in Newport Beach),” Casey goes on.

Reports surfaced that indicated PIMCO, BlackRock and the Federal Reserve Bank of New York are looking for a way to force  Bank of America to repurchase bad mortgages that is a part of some $47 billion in bonds, packaged by its Countrywide Financial unit.

Other investors are expected to join this group.

“Furthermore, the tactic is expected to be repeated in other cases where investors believe that the quality of mortgages may have been misrepresented,” Casey adds.

CDS spreads on the major mortgage lending banks widened significantly on the news and set a negative tone for the corporate credit markets generally.

However, by the week’s end, the CDS spreads for the major US banks were tighter than where they were a week ago.

Wells Fargo reported record earnings despite lower revenues.

While Bank of America reported a third quarter loss, adjusted results beat analysts’ estimates.

Earnings results in general have given support in the last two sessions, which has helped improve sentiment and again shifted focus away from the foreclosure issues – at least in the news headlines.

MONEY CAN BE VERY EXPENSIVE

On the European side,  a bit more clarity emerged on the subordinated debt of Anglo Irish Bank.

The bank announced on Thursday that it was offering to exchange up to approximately 1.6 billion euro principal amount outstanding subordinated debt for new euro-denominated floating rate notes, due 2011, at an effective price of 20% of face value.

A separate offer for 300 million GBP, callable, subordinated notes at 5% of face value was also made.

“The exchange offers are “voluntary” but if holders choose not to participate, they could receive as little as 0.01 euro per 1,000 euro of principal amount,” Otis Casey writes.

The latest quotes are 10 points and 68 points upfront, for senior and subordinated protection, respectively.

Related by The Swapper:

Comments Off on Credits: The Price of Accountability

Filed under International Econnomic Politics, National Economic Politics