Feds locked in "Regulatory Limbo"?

Well, after a quiet end of summer at GlobalRiskJobs and the Blog, it's time to get back to business. I spent most of August in Europe, doing first hand due diligence on the effect of the weak dollar on American tourism. It really hit home in Switzerland, when I shelled out the equivalent of $11.00 for a Big Mac, fries and a Coke at rest area outside of Zurich. Ouch!

Back to the markets...

The summer was characterized by lots of talk but not enough action on the regulatory front. After nearly nine months of the Obama administration, we have been treated to lots of ideas about how the regulatory structure should/could/might look when the dust settles, but there has not been a ton of substantive change. It has been nearly a year since the collapse of Lehman Brothers, and the financial world is, admittedly, a different place. Real change on the regulatory front has not materialized, as efforts to remake the rules of finance have been stymied by infighting among regulators, pushback from banks, and opposition from lawmakers who are skeptical of increased government power and scope. Ironically, banks' appetite for risk has grown, with the Wall Street Journal reporting today that the daily VaR of the nation's top 5 banks was over $1B in the second Quarter of 2009, a record level. Geithner went to Capitol Hill with Obama's financial reform outline on March 26! There was a big sense of urgency at the time, but that was nearly six months ago. Geithner urged lawmakers to grant the authority for the government to take over failing financial institutions quickly, yet here we are. Is momentum for change fading? Or is the regulatory reform movement going to slowly and steadily work its way through the financial system...?

The links...

• Peter Wallison of the AEI says asking the Fed to monitor "systemic risk" is like asking a thief to police himself in this opinion piece from the WSJ.
• Goldman Chief Blankfein spoke in Frankfurt today and said anger over banker pay is justified, but overregulation would prove harmful to the markets.
• NY AG Cuomo is investigating the timing of Bank of America's firing of its former General Counsel, Timothy Mayopoulos.
• Dutch Banks (are there any left...?) agreed to bonus limitations.
  

Bank of America names Greg Curl CRO

Bank of America today replaced Chief Risk Officer Amy Woods Brinkley with Gregory Curl, a 31-year veteran of the Charlotte-based financial services giant. Curl most recently was global corporate strategic development and planning executive. He has been a key insider who has helped transform BofA from a regional bank to a global powerhouse. He had key roles in NationsBank's purchases of Bank of America (1998), Countrywide (2007), and Merrill Lynch (2008). Curl joined the NationsBank family when he was serving as vice chairman and COO of Boatmen's Bancshares which Nations acquired in 1996.

Brinkley, 53, has decided to retire, with the official line from BofA being that Ken Lewis and Brinkley "mutually decided that we needed a different approach to our risk management and it was a good time to change leadership." Brinkley has been a regular in lists of influential woman executives, and had made steady progression through the senior ranks at BofA. Brinkley joined NCNB in 1978 as a mangement trainee in the commercial credit department. She graduated Phi Beta Kappa from University of North Carolina at Chapel Hill.

Bank of "America First"

One of the news items that caught the attention of GlobalRiskJobs this weekend was a story in the FT about Bank of America pulling its job offers to foreign MBA students. In a field like risk management this is big news given the high number of professionals who have trained in advanced degree programs overseas. The Troubled Asset Relief Program prevents financial institutions that have received federal bailout money from applying for H1-B visas for highly skilled immigrants if they have recently made US workers redundant. Given that just about all of the big banks have already cut loose thousands of workers, it would appear this provision will have far-reaching impact in the coming months. Is this a "Buy American" initiative in an industry that, unlike manufacturing, hasn't seen much of that sentiment? Could this be dangerous for certain highly-skilled math and finance fields where the best and most qualified professionals are needed now more than ever? I guess it's symbolic that the Bank of America was the first to announce details of the pullback, but expect more news of this type to follow. And a story in today's Washington Post examines more evidence of budding jingoism in the midst of the global financial crisis. A US House panel is criticizing the Obama administration for not policing deals where TARP banks lent money overseas. The populist sentiment seems to be that banks getting federal funds should deploy those funds to help the domestic economy.

The links:

• Is Paul Volcker urging a return to Glass Steagall? It sure seemed like the Former Fed Chairman wanted to turn back the regulatory clock in a speech last week. BreakingViews' Hugo Dixon doesn't agree. He believes that improving risk management and tightening regulation across the financial industry is a better approach.
  
• BofA accused of obstructing Cuomo bonus probe. Yes, the comp saga continues...
  
• Robert Schiller examines the role of government in this FT piece about controlling the "animal spirits".
  
• The Nationalization debate continues...Alan Blinder gives his take in the NYT...BofA's Ken Lewis talks his own book in the WSJ as he seeks to set the record straight...Goldman's Blankfein thinks it's a bad idea as well...Senators McCain and Shelby preached tough love for the banks.
• Geithner needs help! The NYT reports that politics, among other things, has slowed the building of a team to deal with all the aspects of the crisis.
• And of course, the AIG firestorm continues. The WSJ reported this weekend who some of the major counterparties were that received federal money via AIG. BofA, Goldman, Deutsche, Merrill, Calyon, Barclays...
  

Big Week for Risk Managers

GlobalRiskJobs notes that GARP's (Global Association of Risk Professionals) 10th annual Risk Management Convention and Exposition begins this morning in New York City and runs through Thursday. It is a timely gathering with the global financial system in the spotlight. Today's agenda includes the Enterprise Risk Forum, which will focus on how leading global financial are harnessing enterprise risk data for competitive advantage. A highlight of the day will be a panel discussion entitled, "The Road Ahead: What We Should be Doing in the Next 12 Months". Panel members are GARP's Jaidev Iyer, the Fed's Roger Cole, BofA's Marta Johnson and SunGard's Jonathan York. Should be an interesting week given the backdrop of bank bailout details starting to emerge.

And a tour of the news:

• Goldman's Lloyd Blankfein slams Wall Street risk management practices and says mark-tomarket should be strengthened, not abandoned, in the FT. Read it here.
• Geithner delays the announcement of Obama's financial recovery plan as planners debate the disposition of toxic assets.
• Paul Krugman is not satisfied with the stimulus bill.
• The NYT looks at research analyst "Buy" recommendations.
• Stanford Professor John B. Taylor thinks government bears responsibility for the financial crisis.
• Sunday's NYT digs deeper into the Merrill - BofA merger. Due dligence failure or hubris?
• In People News, there's word that former federal prosecutor Robert Khuzami will be named the new head of enforcement the SEC. Khuzami is currently a top lawyer at Deutsche Bank AG in New York.
  

Washington Fiddles while Banks Burn

Bank of America and Citigroup seem to be running neck and neck in the race to be first to be nationalized by the federal government. Bank of America blasted through the $5 level yesterday - important because many funds are restricted from owning stocks less than $5, and is approaching $4 - a 25-year low - today as investors and traders speculate about nationalization. Citibank was quoted at $3.43 at 11:24 am.