Banking

Biden OCC pick draws internal flack; Gorman tops Dimon in CEO pay

Receiving Wide Coverage …

Top dog

Morgan Stanley CEO James Gorman has edged out JPMorgan Chase CEO Jamie Dimon as the highest paid executive at a major U.S. bank, the Wall Street Journal reported. Gorman was paid $33 million last year, “a 22% raise for a year in which the Wall Street firm generated record revenue, announced two multibillion-dollar acquisitions and avoided the worst of the pandemic-induced recession.” That was $1.5 million more than Dimon, “who had been the highest-paid big-bank boss for several years running.”

Gorman received “about $24 million in company stock and about $9 million in cash, including a nearly $8 million bonus. Two-thirds of Mr. Gorman’s stock award is tied to how well the bank performs over the next few years. For his work in 2019, Mr. Gorman received a compensation package valued at $27 million.”

“Morgan Stanley’s stock rose 34% last year, as market volatility boosted trading results and falling interest rates fueled investment banking activity,” the Financial Times said. “JPMorgan’s shares fell slightly for the year, and Mr. Dimon’s pay was unchanged from 2019. The two banks are the only major Wall Street firms to announce chief executive pay to date.”

Crypto blues

Bitcoin “lost a tenth of its value [last] week, putting it on course for its worst run since a steep sell-off in September, as global regulators turn their gaze towards the controversial cryptocurrency. Despite a mini-rally on Friday, bitcoin was trading around $32,000 by late afternoon in London — on track for a second consecutive weekly drop after a dramatic rally through the turn of the year.”

Meanwhile, the future of Ripple, the creator of the cryptocurrency XRP, “hinges on a judge’s ruling in a civil lawsuit filed in December by the Securities and Exchange Commission.”Ripple was poised to rebuild the infrastructure for cross-border trades” between banks, but its planned IPO was pulled last year.

“At the heart of the SEC’s suit is a debate about XRP, a bitcoin-like digital asset created by Ripple’s founders that would grow to become the world’s third-largest cryptocurrency. It was designed to be part of a network that would help banks cut expenses in cross-border transfers. The related software, however, never gained traction, the SEC alleges, leaving XRP without a clear purpose, other than to funnel sales to Ripple.”

Wall Street Journal

Warning signal

The recent plateauing of homeowners resuming mortgage payments is raising concerns that a once “promising sign of a bounce back in the pandemic-ravaged economy has stalled. The proportion of homeowners postponing mortgage payments had been falling steadily from June to November, an indication that people were returning to work and the economy was beginning to recover. But the decrease has largely flattened since November, when the current wave of coronavirus cases surged in communities across the country.”

“For roughly the past two months, that group of homeowners has flatlined at about 5.5%, according to the Mortgage Bankers Association. Though that is down from a peak of 8.55% in June, some economists are concerned about the stalling forbearance rate—and worry that it could even start climbing if the economy further sheds jobs.”

Working together

The “shared experience and economic views” of Federal Reserve chair Jerome Powell and his predecessor at the Fed, Janet Yellen, President Biden’s presumed Treasury secretary, “set the stage for the closest working relationship between their institutions since the 2008 financial crisis.”

Financial Times

Harsh light

European bank CEOs “will be the subject of intense scrutiny” when their banks report earnings this week. “Across the continent, executives are struggling to shake off lingering regulatory probes, shareholder pressure and boardroom bust-ups that could lead to further upheaval among the industry’s power players.”

Changing interchange

Mastercard plans to increase interchange fees “more than fivefold” on British shoppers that use a debit or credit card to buy from an EU-based company, sparking alarm among companies that rely on online payments and concern among MPs over higher consumer prices. The increase will benefit British banks and other card issuers, rather than Mastercard itself.”

“The EU introduced a cap in 2015 after concerns the hidden fees were leading to hundreds of millions of euros in costs for companies and higher prices for consumers. But Mastercard has told merchants that the cap no longer applies to some transactions post-Brexit, because payments between the U.K. and European Economic Area are now deemed ‘inter-regional.’ Starting October 15, Mastercard will charge 1.5% of the transaction value for every online credit card payment from the U.K. to the EU, up from 0.3%. For debit card payments, the fee will jump from 0.2% to 1.15%.”

Deutsche misdoings

Deutsche Bank “is investigating whether its staff mis-sold sophisticated investment banking products to clients in breach of EU rules and then colluded with individuals within these companies to share the profits. Deutsche believes that some of its staff knowingly sold inappropriate or unsuitable products to customers who may not have been able to understand and shoulder the risk they were taking with these positions. The German lender is not just looking at a few isolated cases, but at what appears to be a broader pattern of misconduct over several years.”

Separately, Deutsche Bank “supervisory board member Alexander Schütz has disposed of his shares in Germany’s biggest bank, ending an investment that was first held by Chinese conglomerate HNA. The news of Mr. Schütz’s exit from Deutsche’s shareholder register comes a week after he drew stinging criticism from the bank for urging former Wirecard chief executive Markus Braun to ‘do in’ [the FT] over the newspaper’s critical coverage of the German payments company.”

Deutsche Bank said “the content and the attitude of the quoted statement are unacceptable,” and Schütz subsequently apologized for his remarks.

Wirecard arrests

Speaking of Wirecard, police in Vienna “have arrested two men — a former senior official of the Austrian secret service and a former rightwing MP — who are accused of having organized the escape of Wirecard’s former second-in-command Jan Marsalek to Belarus last summer. Mr. Marsalek absconded in June 2020, shortly after he was suspended from Wirecard and days before Munich prosecutors issued an arrest warrant against him.”

Marsalek, Wirecard’s former COO, “is seen as a mastermind of an accounting fraud that brought down Wirecard last year. Prosecutors suspect that the 40-year-old Austrian citizen, who is on Interpol’s most-wanted list, personally embezzled hundreds of millions of euros. Mr. Marsalek’s whereabouts are still unknown.”

Fooled

Felix Hufeld, the president of BaFin, Germany’s financial watchdog, “suggested Wirecard might be the victim of an elaborate plot by short sellers even after the company discovered that €1.9 billion of its stated cash was missing,” the FT said.

New York Times

Touchy subject

President Biden’s expected nomination of Michael S. Barr to head the Office of the Comptroller of the Currency has sparked an “internal fight among Democrats about how far left the party should lean. The prospect has dismayed many progressive groups that would prefer Mehrsa Baradaran, a law professor who has written about how banks treat Black people and the poor.”

“On Friday, one supporter of Ms. Baradaran emailed the entire Biden transition team announcing that he would go on a hunger strike if Mr. Barr was confirmed. The unfolding drama reflects the high stakes around regulation of the banking industry.”

Quotable

“With the waning recovery, and more applications for unemployment claims, we’re likely going to see increased demand for forbearance.” — Ralph McLaughlin, chief economist at home-finance startup Haus, commenting on the recent stalling of homeowners resuming mortgage payments.



 

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