Friday, March 27, 2009
Friday, March 20, 2009
Bonus Tax Heads to Senate After House Passes 90% Levy
March 20 (Bloomberg) -- The Senate plans to vote next week on steep levies on employee bonuses after the House overwhelmingly approved a 90 percent tax on bonuses at American International Group Inc. and other companies receiving bailout funds.
Tuesday, March 17, 2009
Today in Poaching: Top UBS Bond Trader Heads to Goldman
A top bond trader at UBS is defecting to Goldman Sachs Group, part of a recent rash of exits from major financial institutions.
Eric Jayaweera, a managing director who headed the emerging-market credit trading desk for UBS in London, has left the firm and will join Goldman Sachs, according to people familiar with the situation. Two other senior traders on his team, Deep Ranjan and Paul Savini, are departing with him.
Eric Jayaweera, a managing director who headed the emerging-market credit trading desk for UBS in London, has left the firm and will join Goldman Sachs, according to people familiar with the situation. Two other senior traders on his team, Deep Ranjan and Paul Savini, are departing with him.
‘Outraged’ Senator Dodd Pledges to Recover AIG Bonus Payments
March 17 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd pledged to recover $165 million in bonuses from American International Group Inc. executives and called for the creation of a stronger federal insurance regulator.
“The American people are outraged, and I am as well,” Dodd, a Connecticut Democrat, said during a hearing today in Washington. “One way or another, we’re going to figure out a way to get these resources back.”
“The American people are outraged, and I am as well,” Dodd, a Connecticut Democrat, said during a hearing today in Washington. “One way or another, we’re going to figure out a way to get these resources back.”
Top Firm Said Cutting 5,000 'Management' Positions
Just a few days after new UBS CEO Oswald Gruebel hinted to staff that there probably would need to be another round of cost-cutting, Swiss weekly newspaper SonntagsZeitung says that the firm is to purge 5,000 senior jobs, including 2,500 'management' positions in the bank's wealth businesses.
Monday, March 16, 2009
AIG Faces Pressure From Obama, Subpoena From Cuomo on Bonuses
March 16 (Bloomberg) -- American International Group Inc., barraged by criticism on how it’s using $173 billion of taxpayer money, faces demands from President Barack Obama to rescind or repay $165 million in bonuses.
AIG also may get a subpoena from Andrew Cuomo, New York State’s attorney general, who wants a list of everyone who received the bonuses. The payments were part of a $1 billion plan by AIG to reward employees for staying with the crippled New York-based company, once the world’s biggest insurer.
AIG also may get a subpoena from Andrew Cuomo, New York State’s attorney general, who wants a list of everyone who received the bonuses. The payments were part of a $1 billion plan by AIG to reward employees for staying with the crippled New York-based company, once the world’s biggest insurer.
Monday, March 9, 2009
AIG ... Timeline
Following is a timeline detailing the insurer’s near collapse, AIG’s statements about its financial health and government efforts to shore up the New York-based company.
Sept. 9, 2008: AIG shares fall 19 percent to $18.37 on the New York Stock Exchange, the biggest drop the since the company went public in 1969, as investment bank Lehman Brothers Holdings Inc.’s failure to raise capital sparks doubts about the insurer’s ability to sell shares or bonds.
Sept. 15: AIG falls 61 percent to $4.76 after the insurer fails to present a plan to raise capital and prevent credit downgrades.
Sept. 16: The U.S. agrees to loan AIG as much as $85 billion in exchange for an 80 percent stake after a Standard & Poor’s downgrade forces the insurer to post collateral to banks that purchased credit-default swaps from the insurer. AIG drops to $3.75.
Sept. 18: Edward Liddy, who ran Allstate Corp. from 1999 to 2006, is approved by AIG’s board as chief executive officer and tells employees he intends to repay the two-year Federal Reserve loan early. The credit line, which entitles the U.S. to interest at the three-month London interbank offered rate plus 8.5 percentage points, is “enough” for AIG, Liddy says.
Oct. 3: Liddy announces plans to sell life insurance operations in the U.S., Europe, Latin America, South Asia and Japan and says AIG was contacted by “numerous” potential bidders.
“The values that we will receive from the assets we intend to dispose will be more than enough to repay the Fed facility,” Liddy says.
Oct. 7: AIG makes $18.7 billion in payments tied to credit- default swaps to banks including Goldman Sachs Group Inc. and Societe Generale SA in the three weeks after the bailout. A person familiar with the bailout outlines the payments in December, asking not to be named because the information is confidential.
Oct. 8: Liddy gets an expanded bailout from the government with authorization for an additional $37.8 billion in liquidity as AIG struggles to meet the demands of customers pulling out of its securities-lending program.
Oct. 22: Liddy tells PBS that the $122.8 billion already offered by the government “may not be enough” to stabilize AIG.
Nov. 7: AIG seeks to modify the terms of its government bailout, extending the duration and lowering the interest rate, according to a person familiar with the situation. Shares close at $2.11.
Nov. 10: Liddy wins a lower interest rate from the government and three extra years to pay back the loan. The rescue package grows to $150 billion and includes a $60 billion loan, a $40 billion capital investment and about $50 billion to buy mortgage-linked assets owned by AIG or guaranteed by the insurer through credit-default swaps.
The aid puts AIG “on the road to recovery,” Liddy tells investors. AIG posts a $24.5 billion third-quarter loss.
“We have great confidence in our ability to sell these remarkable assets,” Liddy tells analysts. “I can’t underscore enough, we have great demand for these various properties. We are probably dealing with, I don’t know, north of 75 or a 100 different people.”
Nov. 25: AIG sets Liddy’s salary at $1 and freezes pay and scraps bonuses for seven top executives.
Dec. 1: Liddy agrees to sell a bank unit serving clients in Asia and the Middle East for about $250 million. The sale is “nothing; it’s a blip” when compared with the loan the insurer must repay, former CEO Maurice “Hank” Greenberg tells CNBC.
Dec. 11: Liddy pledges to repay taxpayers “every single penny we owe them,” while saying the timetable of asset sales may change, citing “challenging times to undertake divestiture.” Shares close at $1.73.
Dec. 22: Liddy tells CNBC, the insurer “would like” to repay the government loan in 2009. AIG agrees to sell its Hartford Steam Boiler subsidiary for $742 million, about a third less than it paid for the unit eight years ago.
Jan. 12. 2009: AIG has enough assets to sell to repay the government loan, Federal Reserve Governor Elizabeth Duke says in a letter to Christopher Dodd, chairman of the Senate Banking Committee.
Jan. 21: AIG’s plane leasing unit is downgraded by Standard & Poor’s, prompting the government to cut lending to the business through the federal commercial-paper program.
Feb. 13: AIG says it sold interests in two contracts tied to natural gas and oil for $60.5 million, bringing the tally from divestitures to about $2.4 billion. AIG shares close at 85 cents.
Feb. 24: Liddy may scrap plans to fund repayment of the bailout through asset sales after failing to find enough promising bidders, according to two people with knowledge of the matter.
March 2: AIG posts a record $61.7 billion fourth-quarter loss and the Treasury agrees to spend as much as $30 billion more on preferred shares. The dividend on preferred stock, previously 10 percent, may fall, the Treasury says.
“Liquidity is not an issue for us now,” Liddy says. A restructuring of the firm “will take time and possibly further government support, if markets do not stabilize and improve,” the Treasury and Fed say in a statement.
March 3: Fed Chairman Ben S. Bernanke tells a Senate committee that having to rescue the insurer made him “more angry” than any other episode during the financial crisis.
“AIG exploited a huge gap in the regulatory system, there was no oversight of the financial-products division,” Bernanke says. “This was a hedge fund basically that was attached to a large and stable insurance company.” AIG closes at 43 cents.
March 5: Senate Banking Committee has a hearing scheduled on the insurer, called, “American International Group: Examining what went wrong, government intervention, and implications for future regulation.”
Sept. 9, 2008: AIG shares fall 19 percent to $18.37 on the New York Stock Exchange, the biggest drop the since the company went public in 1969, as investment bank Lehman Brothers Holdings Inc.’s failure to raise capital sparks doubts about the insurer’s ability to sell shares or bonds.
Sept. 15: AIG falls 61 percent to $4.76 after the insurer fails to present a plan to raise capital and prevent credit downgrades.
Sept. 16: The U.S. agrees to loan AIG as much as $85 billion in exchange for an 80 percent stake after a Standard & Poor’s downgrade forces the insurer to post collateral to banks that purchased credit-default swaps from the insurer. AIG drops to $3.75.
Sept. 18: Edward Liddy, who ran Allstate Corp. from 1999 to 2006, is approved by AIG’s board as chief executive officer and tells employees he intends to repay the two-year Federal Reserve loan early. The credit line, which entitles the U.S. to interest at the three-month London interbank offered rate plus 8.5 percentage points, is “enough” for AIG, Liddy says.
Oct. 3: Liddy announces plans to sell life insurance operations in the U.S., Europe, Latin America, South Asia and Japan and says AIG was contacted by “numerous” potential bidders.
“The values that we will receive from the assets we intend to dispose will be more than enough to repay the Fed facility,” Liddy says.
Oct. 7: AIG makes $18.7 billion in payments tied to credit- default swaps to banks including Goldman Sachs Group Inc. and Societe Generale SA in the three weeks after the bailout. A person familiar with the bailout outlines the payments in December, asking not to be named because the information is confidential.
Oct. 8: Liddy gets an expanded bailout from the government with authorization for an additional $37.8 billion in liquidity as AIG struggles to meet the demands of customers pulling out of its securities-lending program.
Oct. 22: Liddy tells PBS that the $122.8 billion already offered by the government “may not be enough” to stabilize AIG.
Nov. 7: AIG seeks to modify the terms of its government bailout, extending the duration and lowering the interest rate, according to a person familiar with the situation. Shares close at $2.11.
Nov. 10: Liddy wins a lower interest rate from the government and three extra years to pay back the loan. The rescue package grows to $150 billion and includes a $60 billion loan, a $40 billion capital investment and about $50 billion to buy mortgage-linked assets owned by AIG or guaranteed by the insurer through credit-default swaps.
The aid puts AIG “on the road to recovery,” Liddy tells investors. AIG posts a $24.5 billion third-quarter loss.
“We have great confidence in our ability to sell these remarkable assets,” Liddy tells analysts. “I can’t underscore enough, we have great demand for these various properties. We are probably dealing with, I don’t know, north of 75 or a 100 different people.”
Nov. 25: AIG sets Liddy’s salary at $1 and freezes pay and scraps bonuses for seven top executives.
Dec. 1: Liddy agrees to sell a bank unit serving clients in Asia and the Middle East for about $250 million. The sale is “nothing; it’s a blip” when compared with the loan the insurer must repay, former CEO Maurice “Hank” Greenberg tells CNBC.
Dec. 11: Liddy pledges to repay taxpayers “every single penny we owe them,” while saying the timetable of asset sales may change, citing “challenging times to undertake divestiture.” Shares close at $1.73.
Dec. 22: Liddy tells CNBC, the insurer “would like” to repay the government loan in 2009. AIG agrees to sell its Hartford Steam Boiler subsidiary for $742 million, about a third less than it paid for the unit eight years ago.
Jan. 12. 2009: AIG has enough assets to sell to repay the government loan, Federal Reserve Governor Elizabeth Duke says in a letter to Christopher Dodd, chairman of the Senate Banking Committee.
Jan. 21: AIG’s plane leasing unit is downgraded by Standard & Poor’s, prompting the government to cut lending to the business through the federal commercial-paper program.
Feb. 13: AIG says it sold interests in two contracts tied to natural gas and oil for $60.5 million, bringing the tally from divestitures to about $2.4 billion. AIG shares close at 85 cents.
Feb. 24: Liddy may scrap plans to fund repayment of the bailout through asset sales after failing to find enough promising bidders, according to two people with knowledge of the matter.
March 2: AIG posts a record $61.7 billion fourth-quarter loss and the Treasury agrees to spend as much as $30 billion more on preferred shares. The dividend on preferred stock, previously 10 percent, may fall, the Treasury says.
“Liquidity is not an issue for us now,” Liddy says. A restructuring of the firm “will take time and possibly further government support, if markets do not stabilize and improve,” the Treasury and Fed say in a statement.
March 3: Fed Chairman Ben S. Bernanke tells a Senate committee that having to rescue the insurer made him “more angry” than any other episode during the financial crisis.
“AIG exploited a huge gap in the regulatory system, there was no oversight of the financial-products division,” Bernanke says. “This was a hedge fund basically that was attached to a large and stable insurance company.” AIG closes at 43 cents.
March 5: Senate Banking Committee has a hearing scheduled on the insurer, called, “American International Group: Examining what went wrong, government intervention, and implications for future regulation.”
Saturday, March 7, 2009
Lloyds Cedes Control to Government, Insures Assets
March 7 (Bloomberg) -- Lloyds Banking Group Plc, Britain’s biggest mortgage lender, will cede control to Prime Minister Gordon Brown’s government in return for state guarantees covering 260 billion pounds ($367 billion) of risky assets.
The government’s stake will rise to as much as 75 percent, making Lloyds the fourth U.K. bank to slip into state control since the run on Northern Rock Plc in September 2007. Brown is using that leverage to force banks to increase lending to homeowners and businesses and spur an economy that is facing its worst recession since World War II.
The government’s stake will rise to as much as 75 percent, making Lloyds the fourth U.K. bank to slip into state control since the run on Northern Rock Plc in September 2007. Brown is using that leverage to force banks to increase lending to homeowners and businesses and spur an economy that is facing its worst recession since World War II.
Friday, March 6, 2009
Intercontinental to Clear Credit Swaps Next Week
March 6 (Bloomberg) -- The U.S. Securities and Exchange Commission granted an exemption for Intercontinental Exchange Inc. to begin guaranteeing credit-default swaps. The company said it would begin clearing next week.
U.S. and European regulators are developing separate plans to stabilize the derivatives market after American International Group Inc., once the world’s largest insurer, almost went bankrupt last year from its use of credit-default swaps.
Clearing Corp. shareholders including JPMorgan Chase & Co., Goldman Sachs Group Inc. and UBS AG, received $39 million in cash from Intercontinental in the acquisition, as well as the Clearing Corp.’s cash on hand and a 50-50 profit-sharing agreement with Intercontinental on the revenue generated from processing the swaps.
Members of the Intercontinental clearinghouse will have to have a net worth of at least $5 billion and a credit rating of A or better to clear their credit-default swap trades.
A clearinghouse acts as the buyer to every seller and seller to every buyer, reducing the risk of a counterparty defaulting on a transaction. In the over-the-counter market, where credit- default swaps are currently traded, participants are exposed to each other in case of a default. A clearinghouse also provides one location for regulators to view traders’ positions and prices.
Credit-swaps dealers have been working to revamp the terms and trading standards on which credit swaps trade in order to make them interchangeable, a necessity for clearinghouses.
Those changes, which primarily impact contracts on individual companies rather than the indexes, include making permanent the ability of investors who buy the guarantees to settle the contracts in cash, rather than physically delivering the bonds or loans insured.
The International Swaps and Derivatives Association said this week it will publish rules for that process on March 12.
U.S. and European regulators are developing separate plans to stabilize the derivatives market after American International Group Inc., once the world’s largest insurer, almost went bankrupt last year from its use of credit-default swaps.
Clearing Corp. shareholders including JPMorgan Chase & Co., Goldman Sachs Group Inc. and UBS AG, received $39 million in cash from Intercontinental in the acquisition, as well as the Clearing Corp.’s cash on hand and a 50-50 profit-sharing agreement with Intercontinental on the revenue generated from processing the swaps.
Members of the Intercontinental clearinghouse will have to have a net worth of at least $5 billion and a credit rating of A or better to clear their credit-default swap trades.
A clearinghouse acts as the buyer to every seller and seller to every buyer, reducing the risk of a counterparty defaulting on a transaction. In the over-the-counter market, where credit- default swaps are currently traded, participants are exposed to each other in case of a default. A clearinghouse also provides one location for regulators to view traders’ positions and prices.
Credit-swaps dealers have been working to revamp the terms and trading standards on which credit swaps trade in order to make them interchangeable, a necessity for clearinghouses.
Those changes, which primarily impact contracts on individual companies rather than the indexes, include making permanent the ability of investors who buy the guarantees to settle the contracts in cash, rather than physically delivering the bonds or loans insured.
The International Swaps and Derivatives Association said this week it will publish rules for that process on March 12.
Tuesday, March 3, 2009
Bernanke Says Insurer AIG Operated Like a Hedge Fund
March 3 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said American International Group Inc. operated like a hedge fund and having to rescue the company made him “more angry” than any other episode during the financial crisis.
The insurer will get as much as $30 billion in new government capital and relaxed terms on its bailout after posting the worst loss by any U.S. corporation yesterday.
The insurer’s fourth-quarter loss widened to $61.7 billion, or $22.95 per share, from $5.29 billion or $2.08 in the year- earlier period, the New York-based insurer said. The results brought AIG’s annual loss to almost $100 billion, prompting the U.S. to offer a package of equity, new credit and lower interest rates on existing loans designed to keep it in business and prevent a new shock to the world’s financial system.
The insurer will get as much as $30 billion in new government capital and relaxed terms on its bailout after posting the worst loss by any U.S. corporation yesterday.
The insurer’s fourth-quarter loss widened to $61.7 billion, or $22.95 per share, from $5.29 billion or $2.08 in the year- earlier period, the New York-based insurer said. The results brought AIG’s annual loss to almost $100 billion, prompting the U.S. to offer a package of equity, new credit and lower interest rates on existing loans designed to keep it in business and prevent a new shock to the world’s financial system.
Raising Salaries After Bonus 'Mutiny'
The New York Times reports that UBS is to increase the base salary of senior investment bankers as it strives to retain top talent in the wake of disappointing bonus payouts.
Losses over at the investment banking unit in 2008 saw the division's bonus pot cut by some 80%, and The New York Post reported last week that 'mutiny' was 'brewing' in the unit as senior bankers trained their sights on investment banking head Jerker Johansson, who they believe hasn't done enough to fight their corner. The so-called 'mutiny' is said to have culminated in an unruly conference call late last month which 'devolved into a shouting match'. Johansson is said to have got very defensive during the call, allegedly telling bankers that he was 'doing the best I can'.
The New York Times has now revealed that the salaries for some senior investment bankers (at Managing Director level and above) are likely to increase from £120,000 ($170,000) to £300,000 ($425,000).
Swiss newspaper NZZ am Sonntag has quoted new UBS CEO Oswald Gruebel saying that it could take up to 3 years to get the bank back into sustainable profit, and that there would have to be further reductions in UBS's cost base before this was achieved.
Losses over at the investment banking unit in 2008 saw the division's bonus pot cut by some 80%, and The New York Post reported last week that 'mutiny' was 'brewing' in the unit as senior bankers trained their sights on investment banking head Jerker Johansson, who they believe hasn't done enough to fight their corner. The so-called 'mutiny' is said to have culminated in an unruly conference call late last month which 'devolved into a shouting match'. Johansson is said to have got very defensive during the call, allegedly telling bankers that he was 'doing the best I can'.
The New York Times has now revealed that the salaries for some senior investment bankers (at Managing Director level and above) are likely to increase from £120,000 ($170,000) to £300,000 ($425,000).
Swiss newspaper NZZ am Sonntag has quoted new UBS CEO Oswald Gruebel saying that it could take up to 3 years to get the bank back into sustainable profit, and that there would have to be further reductions in UBS's cost base before this was achieved.
Sunday, March 1, 2009
HSBC May Sell $17 Billion of Shares to Boost Capital
March 1 (Bloomberg) -- HSBC Holdings Plc, Europe’s biggest bank by market value, may raise as much as 12 billion pounds ($17 billion) to bolster capital as bad U.S. loans erode earnings.
HSBC, unlike Royal Bank of Scotland, hasn’t been bailed out by the U.K. government. The company has, though, racked up $42.3 billion of bad-loan provisions since the start of 2006, chiefly at its U.S. unit. Banks and insurers worldwide have suffered more than $1.1 trillion of losses and writedowns amid the worst financial crisis since World War II.
HSBC, unlike Royal Bank of Scotland, hasn’t been bailed out by the U.K. government. The company has, though, racked up $42.3 billion of bad-loan provisions since the start of 2006, chiefly at its U.S. unit. Banks and insurers worldwide have suffered more than $1.1 trillion of losses and writedowns amid the worst financial crisis since World War II.
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