Investment bankers are not generally lost for words. But as they surveyed the battered landscape of their industry this week, many were struggling to sum up the damage the latest financial storm has inflicted. In less than a fortnight, a business that emerged from the wreckage of the Great Depression to become the dominant force in financial markets has changed beyond recognition.
Two weekends ago, huddled inside the New York Federal Reserve headquarters in lower Manhattan, top bankers witnessed the disappearance of two of Wall Street's most famous names. Lehman Brothers, whose history stretched back 158 years, slid into bankruptcy after the US government refused to support a rescue, while the once mighty Merrill Lynch rushed into the arms of Bank of America.
The upending of the established order left many aghast. At Morgan Stanley, as its share price plummeted and the cost to insure its debt shot up, staff in the bank's US offices sneaked out of their cubicles to catch a glimpse of the news about their employer on television or newswires. Others stayed at their desks clicking the "refresh" button on news websites to find out what was happening. "We were staring into the abyss last week and it was tough not to know our fate," says one.
Source
Wednesday, October 29, 2008
Wednesday, October 22, 2008
Area may lose hundreds of jobs as result of Chase-WaMu deal
JPMorgan Chase & Co.’s acquisition of the failed Washington Mutual thrift will give the combined company a clear lead as Tarrant County’s biggest bank but also threatens hundreds of jobs in overlapping operations.
Chase was already the county’s leader in deposits and branches as of last year, according to the FDIC. It also has more than 4,000 local employees, including about 1,800 at a document-processing center just south of Dallas/Fort Worth Airport and 450 at a south Arlington call center that handles consumer accounts.
"There isn’t any question there will be consolidation," said Scott Macdonald, head of the Southwest Graduate School of Banking at Southern Methodist University in Dallas. "I’d say they want good coverage in areas of growth, but you definitely don’t need to be within a few blocks of another branch."
Source
Chase was already the county’s leader in deposits and branches as of last year, according to the FDIC. It also has more than 4,000 local employees, including about 1,800 at a document-processing center just south of Dallas/Fort Worth Airport and 450 at a south Arlington call center that handles consumer accounts.
"There isn’t any question there will be consolidation," said Scott Macdonald, head of the Southwest Graduate School of Banking at Southern Methodist University in Dallas. "I’d say they want good coverage in areas of growth, but you definitely don’t need to be within a few blocks of another branch."
Source
Wednesday, October 15, 2008
State loan agency MOHELA suffers first operating loss
For the first time in its nearly 30-year history, the Missouri Higher Education Loan Authority (MOHELA) has suffered an annual operating loss.
The state-chartered student loan agency lost $2.2 million in fiscal 2008, according to a preliminary financial report Ray Bayer, MOHELA’s executive director, presented to the agency’s board Friday.
The authority is feeling the squeeze of the credit crunch and the fallout from the auction-rate securities meltdown in February.
MOHELA also transferred $233.8 million to the controversial Lewis and Clark Discovery Initiative, a fund Gov. Matt Blunt created to devote some of the money that had been slated for loans toward the construction of campus buildings instead.
The payment was part of an agreement that calls for the authority to transfer $350 million over the next six years to the state college construction program. In June, the authority had to delay payment to the fund due to concerns the payment would strain the authority's weakened financial position.
Source
The state-chartered student loan agency lost $2.2 million in fiscal 2008, according to a preliminary financial report Ray Bayer, MOHELA’s executive director, presented to the agency’s board Friday.
The authority is feeling the squeeze of the credit crunch and the fallout from the auction-rate securities meltdown in February.
MOHELA also transferred $233.8 million to the controversial Lewis and Clark Discovery Initiative, a fund Gov. Matt Blunt created to devote some of the money that had been slated for loans toward the construction of campus buildings instead.
The payment was part of an agreement that calls for the authority to transfer $350 million over the next six years to the state college construction program. In June, the authority had to delay payment to the fund due to concerns the payment would strain the authority's weakened financial position.
Source
Wednesday, October 8, 2008
New York Plans to Sue Student Loan Company
The attorney general of New York is preparing a lawsuit against a student loan company, Goal Financial, charging that the lender broke state and federal laws by luring borrowers with iPods, cash and other gifts and that it misled consumers about loan terms and benefits, said a senior official in the office.
The attorney general, Andrew M. Cuomo, has been investigating the student loan industry since early last year and has uncovered an array of troubling practices. Separate from the Goal lawsuit, the office is close to agreements with about a dozen loan companies on what marketing tactics are appropriate, according to the official, who cited the investigation and the pending lawsuit as reasons he could not be identified.
“The hope is that those settlements will set a new industry standard when it comes to how direct-to-consumer lenders are operating,” the official said. Goal is being sued because it has failed to demonstrate a willingness to change its practices, he added.
Source
The attorney general, Andrew M. Cuomo, has been investigating the student loan industry since early last year and has uncovered an array of troubling practices. Separate from the Goal lawsuit, the office is close to agreements with about a dozen loan companies on what marketing tactics are appropriate, according to the official, who cited the investigation and the pending lawsuit as reasons he could not be identified.
“The hope is that those settlements will set a new industry standard when it comes to how direct-to-consumer lenders are operating,” the official said. Goal is being sued because it has failed to demonstrate a willingness to change its practices, he added.
Source
Wednesday, October 1, 2008
Banks in state report stability
Ken Cyree had plenty to do, but couldn't peel himself from watching the mayhem on Wall Street.
Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.
"I'm in shock," he said Monday morning. He wasn't the only one.
By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.
"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.
"The point is, you don't make great returns for free, not with the amount of risk that's involved."
Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.
But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.
"In general, banks in Mississippi are in good shape," he said.
One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.
Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.
"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."
Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.
"There is a distinction between Wall Street and Main Street," he said.
Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."
Too much debt
Taking on massive debt is not an ideal situation, because it is impossible to maintain the capital structure, and that's where companies like Lehman ran into problems - liquidity.
Said Cyree, "Lehman's was overleveraged - 30, 40, 50 to 1."
In fact, Lehman had $60 billion of bad real estate. It wasn't alone, however, as global banks have written off more than $300 billion in asset value since last year, according to The Associated Press.
And that's why banks doing business in Mississippi are doing just fine.
"Larger regional banks and community banks, too, also have something that those other banks don't, and that's stable deposits," Patterson said. "The bottom line is that Mississippi banks are stable, well-regulated and our deposits are safe."
Source
Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.
"I'm in shock," he said Monday morning. He wasn't the only one.
By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.
"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.
"The point is, you don't make great returns for free, not with the amount of risk that's involved."
Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.
But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.
"In general, banks in Mississippi are in good shape," he said.
One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.
Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.
"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."
Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.
"There is a distinction between Wall Street and Main Street," he said.
Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."
Too much debt
Taking on massive debt is not an ideal situation, because it is impossible to maintain the capital structure, and that's where companies like Lehman ran into problems - liquidity.
Said Cyree, "Lehman's was overleveraged - 30, 40, 50 to 1."
In fact, Lehman had $60 billion of bad real estate. It wasn't alone, however, as global banks have written off more than $300 billion in asset value since last year, according to The Associated Press.
And that's why banks doing business in Mississippi are doing just fine.
"Larger regional banks and community banks, too, also have something that those other banks don't, and that's stable deposits," Patterson said. "The bottom line is that Mississippi banks are stable, well-regulated and our deposits are safe."
Source
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