DealZone

from Financial Regulatory Forum:

Financial regulation scorecard

A House-Senate conference committee must find a middle ground between financial regulation bills passed by the two chambers. The committee's final report could differ from earlier versions.

Once approved by both chambers, the compromise legislation will go to President Barack Obama to sign it into law. That could happen by July 4, analysts say.

Here's a look at the status of major points in the House and Senate financial regulation bills. Item Objective House Bill Senate Bill Current Status Volcker Rule Ban risky trading unrelated to customers' needs at deposit-insured banks whose federal backing enables them to borrow money more cheaply than rivals. Not Present Under the Senate bill, the Volcker rule would be adopted, but regulators would write its details, possibly weakening it. Some form of the rule is expected to be in the final measure. Banks will push to kill it or water it down. Derivatives Institutes federal oversight of these financial instruments by putting most through a clearinghouse and prices most on an open market. Present, but weaker than Senate Senate bill regulates derivatives more harshly than House bill as it includes an amendment from Sen. Blanche Lincoln forcing banks to spin-off most of their swap-trading desks. Wall Street firms that dominate the market are lobbying hard against changing the rules. Higher capital requirements for banks and financial firms Tries to ensure that banks have enough capital to withstand financial shocks and lessen the chance that excessive leverage brings down financial firms. Present but lacking detail. The Senate bill would make bank holding companies adhere to the same capital standards as bank subsidiaries. It would also bar bank holding companies from counting certain kinds of hybrid securities in meeting a key measure of strength. Bank lobbyists will work hard in conference to kill this additional Senate provision. But its author, Senator Susan Collins, was one of only four Republicans to vote for the Senate bill, so she could have an edge. Ending “Too Big to Fail” Tries to ensure that federal bank bailouts funded by taxpayers are a thing of the past. House bill sets up a pre-paid fund of $150 billion funded by banks, with an extra $50 billion able to be borrowed from the U.S. Treasury if needed. Senate bill sets up an “orderly liquidation” process that lets regulators seize large financial firms in distress and wind them down so as to avoid another Lehman Brothers-type event. The Senate version taxes banks after the fact to pay for bank rescues. The House's prepaid fund idea looks likely to die in committee, with the Senate plan prevailing. Oversight of the Fed Tries to ensure the Fed is not taking on too much risk and tries to make it more transparent. The House bill subjects Fed monetary policy for the first time to new scrutiny by a congressional watchdog. Senate bill calls for a one-time audit of the Fed's emergency lending during the most recent financial crisis. House and Senate negotiators are expected to back away from measures for the Fed that would expose the central bank's monetary policy to scrutiny and make one of its top officials a political appointee. Consumer protection Create a government watchdog for consumers to regulate mortgages and credit cards. House bill creates an independent consumer protection bureau but exempts many businesses from oversight. Senate bill puts agency in the Federal Reserve and contains fewer exemptions. Most industry lobbyists and Republicans bitterly oppose any watchdog proposal and will push to block an independent agency, carve out exemptions for a range of businesses and restrict its powers. Credit Rating Agencies Eliminate perceived conflicts of interest in the industry which led to poor-quality assets like subprime mortgage bonds to receive high ratings. House version makes it easier to sue agencies that issue misleading ratings and removes the requirement that government agencies use their ratings. The Senate version created a new government clearinghouse that would assign debt to ratings agencies on a semi-random basis. The committee agreed to kill the Senate provision that would upend the industry's business model in favor of regulators addressing the conflicts of interests at the largest rating agencies.

from Summit Notebook:

Tax evaders on the run

  By Neil Chatterjee
    The U.S. has promised it will hunt down tax evaders.
    And it seems tax evaders are on the run.
    DBS bank, based in the growing offshore financial centre of
Singapore, told Reuters it had been approached by U.S. citizens
asking for its private banking services. But when told they would
have to sign U.S. tax declaration forms, the potential clients
disappeared.  
    Swiss banks also approached DBS on the hope they could
offload troublesome U.S. clients to a location that so far has
not been reached by the strong arms of Washington or Brussels.
    DBS said no thanks. In fact many private banks and boutique
advisors now seem to be avoiding U.S. clients.
    Will this spread to other nationalities, as governments
invest in tax spies and tax havens invest in white paint?
    Is this the end of offshore private private banking?

UPDATE-BA’s convertible bond flies off the shelves

*This post was updated after the bond priced*

British Airways unveiled a $1 billion fundraising aimed at securing its future earlier on Friday, including $540 million in bank loans that had been earmarked for its pension funds as a safety net against the airline going bust.

The fundraising also included a 350 million pound ($570.5 million) convertible bond, which was over 7 times covered, pointing to healthy investor appetite.

Convertible bonds have become an increasingly important source of finance for firms in Europe. The instrument allows companies to raise capital paying less interest than standard bonds, while avoiding an immediate dilution of earnings per share because investors look to gains in share prices over a medium term.

GE’s Immelt’s subtle defense

General Electric Co Chief Executive Jeff Immelt went to Michigan, the bleeding heart of the U.S. industrial heartland, on Friday to call for a resurgence in American manufacturing.Jeffrey R. Immelt, Chairman and CEO of General Electric, speaks after being honored by the national non-profit group "A Better Chance" in New York
But even as he warned against relying too heavily on the financial industry to drive economic growth, he subtly set up a defense of the largest U.S. conglomerate’s hefty finance arm.

Analysts and investors are worried that the Obama administration’s proposed overhaul of U.S. financial regulations could force GE to spin off GE Capital, which has businesses ranging from leasing jet planes to investing in commercial real estate.

“We also need a financial system that is built around helping industrial companies to succeed,” Immelt told the Detroit Economic Club. “GE is an important part of this financial services approach. We plan to focus GE Capital on financing small- and medium-sized customers in industries that we know the best.”

Agrium CEO makes a plea for kindness

Agrium CEO Mike Wilson“Be kind in your article. I read this morning I wasn’t going to get the deal across,” said Agrium CEO Mike Wilson, referring to an article in Canada’s Globe and Mail about his company’s hostile bid for rival fertilizer maker CF Industries. “What the hell is that?”

Speaking on the sidelines of a BMO Capital Management agriculture, protein & fertilizer conference,  Wilson said he was frustrated by CF’s unwillingness to discuss his company’s bid, but “frustration won’t make us go away.”

Agrium bumped its cash-and-stock bid for CF to around $85 a share on Monday, increasing its previous bid more than 6 percent.

First Reserve’s deal war-chest expands

oilFirst Reserve is sitting on another $9 billion of spending money for energy deals after finishing raising its latest buyout fund, Fund XII. The private equity giant, which specialises in energy investments, said the fund is the largest ever raised in the energy sector and exceeds its previous fund, Fund XI, which raised $7.8 billion in 2006. 

The fund appears to be lower than target, however. London-based private equity intelligence firm Preqin said in a recent report that the fund had a $12 billion target.

“Energy remains a large, dynamic and complex industry where change creates new, attractive investment opportunities,” said William Macaulay, Chief Executive Officer of First Reserve in the press release (below).

Taxpayer dollars losing appeal?

CashWhen the U.S. government started handing out taxpayer dollars to banks under TARP last fall, hundreds of banks lined up. To many, government money was cheaper than the terms they were getting in private and public markets.

“That really, in effect for several months, put a lot of our discussions with issuers really on hold,” said John Duffy, CEO of investment bank KBW, which specializes in the financial services sector.

Now, the pendulum may be swinging away from the government.

The Obama administration has made it clear that the recipients of more capital will have to live under dictates on what they can and cannot do with the money — dividend restrictions, executive compensation caps and such.