Global Investing

Regulate Us? We’re Hurt.

Obama advisor Paul Volcker wants more regulation.

Obama advisor Paul Volcker wants more regulation.

The popular image of Wall Street institutions involve swagger: the ability to absorb the competition’s blows, taking no prisoners, raking in the money… until it seems like the government could force them to rein in their excesses. It’s at that point that Wall Street’s tough guys suddenly sound wounded.

In Tuesday’s Wall Street Journal, an article about the derivatives legislation being considered in Washington has this comment from Bank of America spokesman James Mahoney—the bank is “concerned that we won’t be able to provide our customers with financial products they need to manage risk and grow and that foreign banks will step in and take that business.”

There are several layers of bruised egos at work here – the assertion that America’s economic future is imperiled by the regulation of derivatives, and the boogeyman specter of a “foreign bank” that will take over. Add the obligatory reference to customers (which recalls the braying from various corners about how the threat to BP’s dividends are really an attack on “pensioners” and “retirees”), and there’s a lot of guilt being laid on in the statement.

Our question: Is Bank of America right? Every time the government gets ready to regulate any business, members of those communities warn of doom, apocalypse, you name it, and start using buzzwords like “risk appetite” and “free markets,” no matter how stifling those things can be if left completely unchecked.

Kevin Flynn of Avalon Asset Management put it well in his commentary this past weekend: “Talk of regulating any derivatives market, and the players immediately get on the phone to the press and politicians, feeding them lurid tales of vanishing liquidity and withering markets, killing all hope of economic recovery.”

from DealZone:

Stress-Test Expertise

NEWYORK-SPITZER/It seemed only a bit odd that media star Arianna Huffington was the guest host on CNBC the day the all-important stress test results were due. Not to play down her credentials in media or commentary circles, but where were the celebrated bank analysts, the corporate chieftains and the investment gurus who so routinely enjoy a dose of the limelight on America's Business Channel?

Wasn't this the perfect day for a newsmaker rather than a news talker? The Huffington Post founder has been a good reality check on market cheerleaders who live on CNBC, but on Stress-Test Thursday, the less-than-casual viewer expects insiders with insight. It tasted like something strange and exotic had made its way into the DealZone coffee machine.

Then disgraced former New York Governor and Attorney General Eliot Spitzer joined the fray, and the slightly odd became surreal. Spitzer, who casually noted he was invited to the show (hint, hint), gave a spirited view from the nosebleed seats, far back from the federal policymakers' bench.

Bank stocks’ best day in 23 years

The U.S. Treasury’s unveiling of its toxic asset plan sent stocks soaring on Monday, and none more so than in the banking sector. The KBW Bank index rose 18.6 percent, its best one day gain since at least 1993, driven by a 26 percent gain in Bank of America, a 25 percent advance in JPMorgan Chase and a 20 percent gain in Citigroup.

Merrill Lynch is seventh largest bank acquisition ever

Bank of America’s planned $44.3 billion acquisition of Merrill Lynch is the seventh largest bank acquisition ever announced, according to Thomson Reuters Deals Intelligence.  Bank of America is the fourth largest bank globally and the top US bank with a market value of US$153.9 billion.

In the big picture: M&A targeting of the banking sector has reached $187.2 billion so far in 2008. Activity in the third quarter stands at a 5 quarter high of $87.3 billion.

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–Research from Matthew Toole, Daily Deals Insight