This Month In Finance: Feb 2010

Wall Street

• Bob Kelly, chairman and CEO of Bank of New York Mellon, joined a growing chorus of Wall Street executives late last month by speaking out against a tax proposed by U.S. President Barack Obama that would target banks, insurance companies and thrifts with more than $50 billion in assets. During the bank’s recent earnings call, Kelly said the tax would put U.S. banks at a disadvantage in regions without a similar fee. Additionally, he hinted the tax could force banks to cut staff to avoid passing on fees. “I always worry about the unintended consequences of really material actions,” he said. The tax would also affect the bank’s aggressiveness in pursuing mergers and acquisitions. “There are a lot of things that need to be thought through here that are not good for the industry or the country.”

—Wall Street Letter

• Republican Scott Brown’s recent Senate election victory increases the chances of deadlock on U.S. financial regulatory reform legislation. Capitol Hill watchers agreed that with filibusters once again possible, any bill will first have to be passed by the Senate and, without changes, by the House. One Washington analyst says that even if the White House, contrary to recent statements, permits a Senate deal that knocks the Consumer Financial Protection Agency out of the bill to get Senate GOP votes, it will then slam into a wall on the House side. “The CFPA is the cornerstone of what House liberals want. What is the quid pro quo [Senate Banking Committee chairman Christopher] Dodd can give them in return? It’s not that obvious,” the congressional specialist observed.

—Wall Street Letter

信贷和衍生品

• Asset managers predict the rate of credit defaults will ease over the next 12 months, the first bullish result in two years from the International Association of Credit Portfolio Managers survey. More than 50 percent of the 80 members surveyed predicted corporate and retail defaults would sink in the coming year, and 49 percent see real estate defaults continuing. Nearly half of the managers surveyed said credit spreads will tighten this year. “It’s a clear indication from this group of people who are acting on their beliefs,” says Som-lok Leung, executive director at the IACPM. “They believe default rates have turned.”

—Derivatives Week

Real Estate

• U.S. Senator Bob Corker says that Congress is backing off from threats to pass substantial legislation aimed at regulating the commercial real estate industry. Instead, he sees growing support among elected officials for allowing the market to correct itself and enabling the winding down of governmental programs. “I don’t see us doing anything as it relates to commercial real estate,” the Tennessee Republican said. Indeed, Corker, a member of the Senate Banking Committee, told attendees at the annual Commercial Mortgage Securities Association meeting in Washington that he favors the current exemption for commercial-mortgage-backed securities in the draft financial regulatory reform bill. The bill considers third-party investors as sufficiently retaining a degree of the risk in new transactions. “The public is over us being involved,” he explained, adding, “Uncertainty from Congress is messing up business.”

—Real Estate Finance & Investment

Alternatives

• GLG Partners has launched a fund to take advantage of an expected upturn in mergers and acquisitions activity this year. The new fund, managed by Kaveh Sheibani and Julian Harvey Wood, was launched last November with firm capital, and is now being made available to investors. It will focus on merger arbitrage, balance-sheet restructuring and opportunistic event-driven investments. The fund will draw from Sheibani and Harvey Wood’s previous strategy at London-based boutique Pendragon Capital, where both had worked before joining GLG early last year. Specifics about the new fund were not available, and GLG declined to comment.

—Total Alternatives

Wealth Management

b•略多于一半的富人elieve the recession has altered the way their children will manage money. That’s prompting them to discuss money management with their children at a much earlier age, according to a PNC Wealth Management wealth and values survey. “The recession made everyone look internally and carve out the essence of what’s truly valuable,” said senior wealth planner Jennifer Immel. Wealthy individuals are also reexamining how they’re raising their children; 35 percent are concerned that their children may be too spoiled by money. This number is significantly up, from 22 percent in 2007. The study surveyed 1,046 high-net-worth individuals throughout the U.S.

—Private Asset Management

Finance industry news briefs compiled by Institutional Investor’s Newsletters division.