It looks like the long-awaited return to market for GM is only weeks away. The listing could raise up to $20 billion, we’re told by a person with knowledge of the preparations. That would be quite a bit more than the $15 billion that has been talked about. But wait, there’s more!
With Congress already debating a sweeping overhaul of financial regulation, perhaps the most enduring regulatory stricture of the Depression era is again getting an airing in Washington. The venerable Glass-Steagall laws that barred large banks from affiliating with securities firms and engaging in the insurance business were repealed in 1999. Now, as the banks try to move on from the dreaded salary caps and the humiliation of TARP, lawmakers are wondering whether getting rid of Glass-Steagall was such a good idea.
For months, as he endured hearings on Capitol Hill and fought off a series of lawsuits, Bank of America CEO Ken Lewis trudged through a post-apocalyptic financial landscape against a steady drumbeat of questions about his future. The deal he had called “the strategic opportunity of a lifetime” — his purchase/salvage of Merrill Lynch — had swung from an act of patriotism, keeping the American way of banking from utter ruin, to a scandal over Merrill losses and bonuses.
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?
Perhaps the best that can be hoped for from the upcoming week of stress test anxiety is that once it is over, a modicum of uncertainty will be gone as well. Sometime today, we should know how heavy the yardstick used in the tests was. The banks either already know or will soon find out whether they passed, and on May 4, expect all kinds of whooping and hollering outside the Deans’ office when the results are officially posted. Of course, there is a pretty good chance that as the banks find out the test results, the news will find a way out, so May 4 may turn out to be somewhat anti-climactic.
It is amazing how the prospects of a grilling in Washington can make Wall Street’s CEOs behave. Until a little while ago, these were the masters of the masters of the universe. An elite group of highly paid stars who rarely showed signs of vulnerability, who rarely seemed to doubt their place at the top of the heap. But take a look at the testimonies they have prepared for today’s hearing at the House Committee on Financial Services and it looks like they have begun to embrace the new era, the new religion.
Citigroup may be too big to fail, but is it big enough to close a deal? Soon after losing its bid for Wachovia to Wells Fargo, Citi turned it sights on Chevy Chase Bank, which while not as mighty as Wachovia, was at least closer to its east coast power base. This morning, Capital One Finance said it had agreed to buy the mid-Atlantic lender, right out from under Citi’s nose.
JP Morgan Chase had also been interested in Chevy Chase, a smallish, unlisted lender. The deal announced by Capital One was for $520 million – hardly the kind of blockbuster that makes or breaks a battered Wall Street monolith.
It will be interesting to see if Citi, brimming over with TARP funds that the Treasury has all but begged it and others to spend on lending, stays on the prowl. Bank of America took its TARP money and boosted its stake in a Chinese lender, so there is some precedent for Citi to spend the funds on a deal.
But with Citi’s wallet stuffed with taxpayer cash, the impetus for growth may be less imperative. If it decides against bidding for the deposits of another regional bank, Citi will find itself with only financial assets to sell — in a seller’s market.
It agreed to sell its German retail business, which it put on the block over the summer with a price tag of around $8 billion, and at the end of November reports emerged it would try to sell its trust bank unit in Japan for more than $400 million.
Deals of the day: