Summit Notebook

Private bankers must show restraint in Europe

Private bankers remain in demand in some key European markets, but they will have to live with lower salaries if they want to continue to be part of this business. Top wealth managers told the Reuters Global Private Banking summit that they have stopped offering the huge packages seen in the run up to the financial crisis of 2008-2009. “We are not offering packages that are outlandish. And I do not see the other banks doing that either,” said Samir Raslan, General Manager of Citibank (Switzerland). Raslan said the structure of banker’s salaries had also changed. Relationship managers who form the backbone of a private bank’s workforce were getting higher fixed salaries than before, but no more huge bonuses. “We see more rational hiring, rather than aggressive, open cheque-book hiring,” said Raslan.

That’s rich. I meant the wine.

What do gold and wine have in common?

Price.

Well, too high of a high price, according to Jeffrey Rubin, director of research at Birinyi Associates, the stock market research and money management firm.

Rubin told the Reuters Investment Outlook Summit on Tuesday that he thought gold prices were “certainly a little frothy” at current levels and that he would rather be a buyer of the gold miners such as Newmont Mining Corp, Barrick Gold Corp, or Freeport-McMoRan Copper and Gold Inc. Gold hit an all-time high  above $1,250 an ounce on Tuesday as investors piled in due to fears that European credit contagion could lead to a double-dip recession.

Rubin isn’t expecting a double-dip U.S. recession, saying the chances are slim. He also felt stock prices were likely near a bottom. Not so for the price of a wine? A good year is already priced in, so to speak.

In the spirit of austerity, we asked Rubin what personal spending he might curtail. For a wine collector with a 1,500 bottle collection, the answer was bitter.

Ritholtz: I zig when everybody zags

The U.S. economy is experiencing an ongoing but slow recovery, says Barry Ritholtz, director of equity research at Fusion IQ. But that’s not stopping him from enjoying discounted prices in a low-inflation environment, at least when it comes to his personal spending habits. The world is on sale if you’ve got the money to spend, he told the Reuters Investment Outlook summit in New York when asked, for example, if he might spend less while on a vacation or forego a purchase or two.

“I am an enormous counter-cyclical spender. At the top of the bull market I don’t want to buy anything. I am a seller into a bull market. We have been buying a ton of stuff over the past year. We got two new cars long before the May…. so we picked up two new cars. We’re doing work on the house. We’re adding a kitchen. I got my wife a very lovely birthday gift. She got me a very lovely birthday gift. We’ve been buying artwork. We’ve buying jewelry. I love to buy stuff when it is on sale. I hate to buy top dollar for it.

“So, we just were in the Cayman Islands on vacation some time ago. We were in Aruba back in December. I’m heading to Vancouver in July and probably take a week or two in the Hamptons. I’m thrilled to spend money in this environment.

“I got an e-mail from a client in the heart of ’08 saying the advise and commentaries have been great but you’re just so relentlessly negative in ’08, you’ve got to say something that makes me not want to commit suicide.

“I said stuff is on sale, go buy stuff. Go buy collectible automobiles, artwork, jewelry. If you want to buy real estate, you are probably early, but if you find a unique property, and as we have seen with some of these so-called trophy properties they’ve come down in price but they don’t plummet the way some condo in Miami is going to plummet. If you find something you really want to get, buy it now. Don’t be afraid to make low-ball bids on artwork. If it is $15 million up from $8 million, bid six and you might get surprised by what happens.

“In this environment I’m happy to tell people, if you can afford it, don’t go out and borrow against the house, don’t leverage yourself, but if you have the ability to go out and spend money and there are things you want and they are significantly discounted from where they were three, four, or five years ago, why the hell not? I would much rather spend when things are cheap than pay up when things are expensive.

Angelides: People make mistakes, take Alan Greenspan and Captain of Titanic

Phil Angelides, Financial Crisis Inquiry Commission chairman, says he’d rather see some taking of responsibility than hear another “I’m sorry.”

“Personally I don’t see my role as … to obtain apologies. What I don’t hear is a sense of responsibility and self-assessment about what occurred. There seems to be a disconnect between the practices that people undertook and the financial collapse,” he said at the Reuters Global Financial Regulation Summit.

“I’m struck by the extent to which all fingers point away generally from the person testifying,” Angelides said.

And it’s not just Wall Street executives that he’s talking about.

“When Alan Greenspan came in front of us he said he’d  been 70 percent right, 30 percent wrong. Well, you know, the captain of the Titanic was probably 99 percent right and one percent wrong. It’s the enormity of the mistake that matters,” he said.

(He is of course referring to the former chairman of the Federal Reserve who could do no wrong until the financial crisis hit, sinking his star along with the markets).

Was Greenspan asleep at the wheel?

Where disaster and compensation intersect you’ll find Kenneth Feinberg

You can call him mediator, or you can call him negotiator, but don’t call him pay czar.

Kenneth Feinberg says he doesn’t like the shorthand title that’s used to describe his role as the administration’s supervisor of compensation practices at firms that received money under the government’s Troubled Asset Relief Program.

“A very unfortunate term,” he said at the Reuters Global Financial Regulation Summit. “Pay czar implies that I’m issuing some sort of imperial edicts, arbitrary edicts on pay, without regard to consensus or the input of the beneficiaries of these decisions.”

Au contraire. Feinberg says he tries to develop consensus with the companies. “I’m the pay mediator, I’m the negotiator.”

Although with his next breath he does acknowledge having the power. “I must say the statute ultimately gives me final authority so if you don’t work something out I’m obligated by law to make the decision. But I’m not looking to impose my will on these companies.”

But one of the wonders of Feinberg is that he seems to end up in the middle of the crossroads of money and disaster, sometimes trying to make unthinkable equations as when he had to determine payments to the families of  September 11 victims or distributions from a  fund setup in the aftermath of the Virginia Tech shootings.

So why does he keep ending up at that intersection?

Shunning bankers

Banker bashing has become a bit of an international sport — and fraud allegations against Wall Street giant Goldman Sachs and a U.S. class-action suit against Germany’s Deutsche Bank has added more grist to the mill. So it’s small wonder that a bank lobby group struck a wistful note at the Reuters Global Financial Regulation Summit in London on Tuesday.

“No politician, for the next couple of years, is going to be close to a banker, hug a banker, be friendly to a banker,” said Mark Austen, the acting chief executive of AFME (Association for Financial Markets in Europe). “They (banks) are seen as institutions that have caused a crisis … We are still faced with a public’s anger to the banking community … It will take time to rebuild that trust.”

“The only thing we can do is be as constructive and neutral as we can possibly be.”

But some lawyers note bank lobby groups appear as powerful as ever. From a starting point last year, in the wake of the financial crises, where regulators discussed breaking up big banks, discussions are now centering on higher capital and liquidity buffers, living wills and bank levies. “Regulators and governments in major financial jurisdictions have really backpedalled over the last year,” says one.

Written by Kirstin Ridley in London.

Eliot Spitzer loved politics, so will he run again?

This much is clear — Eliot Spitzer loved politics, he loved being New York governor, he loved being New York attorney general.

So will he run for public office again?

Well here it gets a little bit like watching a tennis ball going back and forth over the net.

Asked at the Reuters Global Financial Regulation Summit whether he was considering running for office again, Spitzer replied “No.”

But had he ruled it out? The answer from the Democrat was not quite as precise.

“I’m not yet ready to throw in the towel,” he said, joking (we think) that it’s like the goal of winning Wimbledon.

“You never quite give up on anything and rule things off the map. And so have I said I’m never running for office again? No. Have I said am I thinking about it at this moment? No. Did I love politics? Yes. Did I grow up at the age of 2 saying it’s the only thing I want to do with my life? No.”

Against high Hill drama, SEC chief mum on Goldman

First of all, Securities and Exchange Commission Chairman Mary Schapiro would not talk about Goldman Sachs.

There was no drawing her out. The head of the agency that filed a civil fraud lawsuit charging that Goldman misled investors would not say a word about the case.

Quite the opposite from the high-drama being played out at the same time on Capitol Hill where Goldman Sachs executives were facing the fusillade at a Senate hearing, where one senator kept repeating “shi–y deal.” (There are two t’s missing from that word).

Schapiro in an interview at the Reuters Global Financial Regulation Summit just was not going to go there. “I’m not going to comment on Goldman,” she said before one reporter even got the question out.

Even while responding to a tangential question, she began by saying “put the Goldman case aside,” careful to make sure her answer would not be linked to the investment bank.

Asked whether this could be seen as the start of the SEC’s war on Wall Street, Schapiro replied: “Well first of all, I’m not going to comment on Goldman.  There is no war on anybody.”

She went on to say: “I guess what I would like to see is people take a big step backward and think about who are we here to serve, and how do we best serve them?”

FDIC Chair Bair: think before you point that finger…

The latest blame game circulating in Washington on financial regulation may end up with those who point fingers  finding that they have three fingers pointing back.

During the debate on tightening financial regulations, there have been some backhanded jabs at regulators with the implication that perhaps they were asleep at the wheel. Just this morning on NBC’s “Today” show, Democratic Senator Claire McCaskill said Wall Street had been creating things just to bet on — “they were like the casino, but they had less regulation than Las Vegas.”

Well hold on. Who’s fault is that?

We asked Sheila Bair, chairman of the Federal Deposit Insurance Corp.

She said when it comes to regulating many of the complex over-the-counter derivatives, the blame actually fell into the lap of Congress which decided against putting them under the oversight of the SEC or CFTC or insurance regulators. And in fairness to Congress, the Federal Reserve and Treasury condoned that action, she said.

“On derivatives, Congress did that,” Bair said at the Reuters Global Financial Regulation Summit. “That’s all history now.”

The CFTC does regulate exchange-traded derivatives  such as futures and options, but it’s the over-the-counter stuff that’s unregulated.

What if there were no “too big to fail”? Fed’s Hoenig has a vision

Democrats and Republicans alike on Capitol Hill say they want to toss out the concept of “too big to fail” in the financial regulation reform they are tussling over. That way if a financial firm is going to go under, it will go under, with no thought for a taxpayer handout.

Since the concept of “too big to fail” has yet to be erased by law, and its demise yet to be tested by a failing financial institution, it was interesting to hear how Kansas City Federal Reserve Bank President Thomas Hoenig envisioned the financial industry without that concept to lean on.

Looking back in time — “If you had a clear resolution process, and you had clear rules on leverage,” a domino-like string of large bank failures may have been less likely.

“And if the other institutions were sound but only had liquidity problems, the discount window could have been and would have been used in those instances,” he said at a Reuters Global Financial Regulation Summit.

“So, I don’t know the counter-factuals, but I know there’s a reasonable case to say if the market knows the rules are firm, that the resolution process is under the rule of law, that you will be held accountable, and here are the steps we’re going to take, would you have had the same outcome?”

“If you cannot say that we can address this, then you need to break them up,” he said.

Hoenig sees financial regulation reform as a measure of prevention that will mitigate another banking crisis. “But no one can guarantee anything. But I do know that if we don’t address it, then I know exactly what the outcome is.”