PrefBlog

Here’s an amusing – and perhaps inevitable – consequence of preferential ballotting:

The number of parties registered to contest an upper house election due by Nov. 30 has more than doubled to 54 since 2010, with the electoral commission ordering magnifying glasses for voters to read ballot papers more than 1 meter (3 feet, 3 inches) long. A preferential voting system means results may be splintered, raising the prospect small, single interest parties will have final say over what laws pass in the world’s 12th-largest economy.
…
The influx of new parties has led the Australian Electoral Commission to order 100,000 magnifying glasses to help voters read ballot papers that will be printed in a tiny 6-point font to cram in all the contenders’ names. The total number of candidates won’t be known until after the election is called.

Given a voting system that lets voters indicate an order of preference for candidates, contestants with negligible first-choice selections can be elected. That happened in 2004 when creationist Steve Fielding, who went on to cast decisive votes on laws regarding media ownership, won a Senate seat after his Family First Party snared just 2 percent of the vote in Victoria state. In 1984, Jo Vallentine won a seat while campaigning for the now defunct Nuclear Disarmament Party.

I hadn’t realized there was this money laundering wrinkle in the SAC Capital charges:

The money-laundering complaint U.S. Attorney Preet Bharara filed against Steven Cohen’s SAC Capital Advisors LP raised the prospect that the hedge fund’s $14 billion in assets may be subject to forfeiture.
…
In announcing the lawsuit and SAC’s parallel indictment for insider trading, Bharara wouldn’t specify the dollar amount he was seeking. His money-laundering complaint just says he wants “all right, title and interest” in SAC’s assets, should he prove his case.

The law underlying the civil case states that any property “involved in” money-laundering activities, or traceable to them, can be forfeited. That sweeping language has proved more limited than it sounds.

Judges have approved forfeiture of illegal profits from a crime plus money derived from those profits, including appropriate interest, according to lawyers who have dealt with the money-laundering law. Bharara said that criminal conduct at the fund had resulted in “hundreds of millions of dollars of illegal profits.”

GWO is still looking for cheap assets:

Great-West Lifeco Inc. won’t let efforts to mesh its recent $1.75-billion acquisition of Irish Life Group with its existing Irish business stand in the way of future mergers.
…
“Clearly corporate teams will be working with Irish Life Group, but that is in no way going to constrain us from continuing to look for opportunities to grow, whether its additional growth in Europe or the U.S.,” said Paul Mahon, chief executive of Great-West, on a conference call. While other major Canadian life insurers have looked to Asia for growth, Great-West has intensified its focus on Europe. Mr. Mahon noted that further growth within Ireland itself would be unlikely, though.

Does the US want to find the best possible person for the role of Fed chair? Or does it want a woman?

[Former Fed Governor Susan] Phillips said the focus on gender in speculation over who will succeed Ben S. Bernanke as chairman — Fed Vice Chair Janet Yellen, former Treasury Secretary Lawrence Summers or former Vice ChairDonald Kohn — has reminded her that women remain scarce as central-bank heads.

Yellen, 66, would be the first female leader in the central bank’s 100-year history and, while women have populated its senior ranks, there is a “big difference” in the authority and visibility wielded by the chairmen, Phillips said. They speak for the entire institution, set the agenda and often “preserve to themselves” relationships with the administration and Congress.

It is “the second most-powerful position in the country after the president — it’s a very influential position,” said Mark Calabria, director of financial-regulation studies at the Cato Institute in Washington and a former Senate Banking Committee aide. “There is a glass-ceiling element to this that does make this different than being vice chair.”

This follows on the heels of the OSC expanding from policeman to social activist:

Canadian companies will be asked to disclose the proportion of women they have on their boards and in senior management as part of a new policy being proposed by Canada’s largest securities market regulator.

The Ontario Securities Commission will unveil a consultation paper Tuesday suggesting that companies be required to develop and disclose policies to improve their boardroom gender diversity, or else explain why they have opted not to have a policy.

Keystone, Schmeystone! TransCanada’s got a big project in the works!

TransCanada Corp., the country’s second-biggest pipeline operator, plans to go ahead with a C$12 billion ($11.7 billion) pipeline that will ship oil from Western Canada to the East Coast.

The Energy East project would have a capacity of 1.1 million barrels a day and be in service by the end of 2017 for deliveries to Quebec and to New Brunswick in 2018, the Calgary-based company said today in a statement.

The project to supply East Coast refineries and export terminals involves converting a portion of 3,000 kilometers (1,864 miles) of existing 42-inch natural gas pipeline and building 1,400 kilometers of new pipeline, the company said.

Travesty.:

Fabrice Tourre, the former Goldman Sachs Group Inc. (GS) vice president on trial for his role in a failed $1 billion investment, was found liable on six of seven claims by a jury in Manhattan.

The verdict is a victory for the government in one of the most high-profile trials to come out of the financial crisis of 2007-2008. The U.S. Securities and Exchange Commission accused Tourre, 34, of intentionally misleading participants in a 2007 deal known as Abacus about the role played by Paulson & Co., the hedge fund of billionaire John Paulson.
…
Tourre was found liable on three claims of intending to defraud, two claims of negligence and one count of aiding and abetting. He was found not liable on the claim of misrepresentations and omissions.

National Bank has acquired TD Waterhouse Institutional Services:

National Bank of Canada (“National Bank”) and The Toronto-Dominion Bank (“TD”), through subsidiaries, have entered into an agreement providing for the acquisition by National Bank of TD’s institutional services business known as TD Waterhouse Institutional Services.

Like National Bank’s Correspondent Network (“NBCN”), TD Waterhouse Institutional Services is a leader in the provision of back-office solutions, including custody, trading, clearing, settlement and record keeping, for independent Canadian based registered portfolio managers and introducing brokers.

The purchase price for the acquisition is $250 million, subject to a price adjustment mechanism based on asset retention. The transaction is expected to increase National Bank’s 2014 and 2015 recurring EPS by $0.12 and $0.14, respectively, assuming full benefit of the acquisition in fiscal year 2014. National Bank estimates the transaction will reduce its Common Equity Tier 1 ratio under Basel III rules by approximately 40 basis points. National Bank expects its Common Equity Tier 1 ratio to remain above 8% following closing of the transaction. Closing is expected to occur later this year, subject to receipt of required regulatory approvals and other transaction terms and conditions.

I’m glad to see the end of TDWIS – their service policies were an arrogant joke. DBRS notes:

The combination of the Bank’s Correspondent Network and TD Waterhouse Institutional Services will make National a leader in the institutional services business with 408 market intermediaries overseeing over $84 billion in assets under administration.

It would have been nice to see this business pass out of banks’ hands, though. And I find it hard to forget National’s reprehensible conduct regarding playing both sides of the ABCP market prior to the Credit Crunch.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 35bp, FixedResets off 9bp and DeemedRetractibles down 28bp. There is yet another very lengthy Performance Highlights table, heavily skewed towards losers. Volume was on the low side of average.

The FOMC statement was released and had no surprises:

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.
…
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.
…
Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

Market reaction was favourable:

U.S. stocks extended gains after the Federal Reserve said it will maintain its $85 billion in monthly bond purchases and persistently low inflation could hamper the expansion.

The Standard & Poor’s 500 Index climbed 0.4 percent to 1,692.89 at 2:06 p.m. in New York.

The jury is deliberating on the Fabulous Fab case:

The jurors listened to more than two weeks’ worth of sometimes combative testimony, including from Mr. Tourre himself. Much of the trial was laden with complex jargon that both the S.E.C. and the defense team acknowledged was likely to make the jury’s eyes glaze over. Several jurors appeared to doze off during the financially denser portions of the trial.

The WSJ has a good round-up of the issues:

—Did Mr. Tourre intentionally or recklessly engage in a scheme to defraud investors? This is similar to a conspiracy charge in a criminal case.

— Did Mr. Tourre obtain money or property as a result of material misstatements or omissions? This includes statements in marketing materials for the deal. The jury can decide he was negligent, rather than intentionally committing fraud, in relation to these statements.

—Did Mr. Tourre engage in a deceptive course of conduct related to the offer or sale of securities? Again, the jury can decide he acted in negligence, rather than with intent, in this claim.

Brazil, recently reviled for financial mismanagement is kicking against the pricks:

Brazil’s executive director at the IMF refused to back the fund’s move this week to keep bankrolling Greece, citing risks of non-repayment, and the fund itself said Athens might need faster debt relief from Europe.

“Recent developments in Greece confirm some of our worst fears,” said Paulo Nogueira Batista, Brazil’s executive director at the IMF, who also represents 10 small nations in Central and South America, the Caribbean, Asia and Africa. Batista clarified on Wednesday that he was speaking only for himself.

“Implementation [of Greece’s reform program] has been unsatisfactory in almost all areas; growth and debt sustainability assumptions continue to be over-optimistic,” said Batista, criticizing the IMF executive board’s decision on Monday to release €1.7-billion ($2.32-billion) of rescue loans to Greece.

It was a poor day overall for the Canadian preferred share market, with both PerpetualDiscounts and DeemedRetractibles losing 23bp, while FixedResets gained 6bp. The Performance Highlights table was again very lengthy considering the overall price movement. Volume was average.

PerpetualDiscounts now yield 5.47%, equivalent to 7.11% interest at the standard 1.3x equivalency factor. Long corporates now yield a little under 4.7%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 240bp, a slight (and perhaps spurious) widening from the 235bp reported July 24.

Pricing for month-end was enlivened by the TSX’s moronic insistence on selling the “Last” quotations rather than the “Closing” quotations. I’m getting really sick of this idiocy, particularly since MAPF owns a hatfull of MFC.PR.C.

The Fabulous Fab trial goes to jury today:

A win by the SEC may demonstrate the agency has the will and resources to win cases at trial, strengthening its hand in future negotiations with Wall Street institutions and their employees.

A loss, following a defeat last year in a trial against Brian Stoker, the former head of Citigroup Inc.’s CDO structuring group, would be the second high-profile trial loss in cases tied to the 2008 financial meltdown, in the Manhattan federal courthouse just blocks from Wall Street.

“At the end of the day, this was a tremendous build-up for what amounts to a minor case involving a midlevel player whose personality essentially became the case,” said Jacob Frenkel, a former SEC lawyer not involved in the Tourre case. “What we’re seeing so far is that the government’s best shot at Goldman was a low-level figure.”

The decision not to call any additional witnesses “highlights the level of confidence the defense has in its case,” Frenkel said.

In other fallout from the Credit Crunch, Barclays has come out with a massive rights deal:

Barclays Plc (BARC), the U.K.’s second-largest bank by assets, plans to raise 5.8 billion pounds ($8.9 billion) in a rights offering to bolster capital as it booked its biggest charge to date for customer compensation.

nvestors will be able to buy one new share for every four they already own for 185 pence, 40 percent less than yesterday’s closing price, London-based Barclays said in a statement today. It will also shrink assets by as much as 80 billion pounds to 1.5 trillion pounds and sell 2 billion pounds of loss-absorbing securities to meet calls by the regulator to cut leverage.

Chief Executive Officer Antony Jenkins, 52, is selling more shares than the 4 billion pounds analysts had anticipated after the lender’s capital shortfall swelled to 12.8 billion pounds at the end of June under the stricter Basel III rules on bank capital. The Prudential Regulation Authority is imposing a 3 percent leverage ratio, forcing banks to hold 3 pounds of equity for every 100 pounds of assets to make the financial system safer. Barclays had sought to plug the deficit by using contingent convertible bonds and retaining earnings.
…
Barclays was one of only two British lenders to miss the regulator’s leverage target in June, with only 2.5 percent. Nationwide Building Society, which at 2 percent also failed, was given until the end of 2015 to make up the shortfall.

Barclays said that under the full Basel III rules its ratio was only 2.2 percent at the end of June. The ratio declined after the latest version of the Basel rules added 85 billion pounds of leverage exposure, the lender said. Part of the 12.8 billion-pound gap comes from a PRA calculation of future bad loan losses and potential redress for customers, which reduces capital by 4.1 billion pounds, Barclays said.

Deutsche Bank followed:

Deutsche Bank AG (DBK), continental Europe’s biggest bank, said it will shrink its balance sheet by 250 billion euros ($332 billion), joining Barclays Plc (BARC) and UBS AG (UBSN) in seeking to comply with stricter capital rules.

Deutsche Bank will reduce leverage by changing the way it accounts for derivatives and by winding down a 73 billion-euro portfolio of assets, Chief Financial Officer Stefan Krause told investors on a conference call today. Krause announced the plan after the bank said net income slid 49 percent to 334 million euros, missing the average 767.6 million-euro estimate of nine analysts.

Meanwhile, UBS provides some insight as to why scaremongers talk about “downgrades” rather than “defaults”:

UBS needed state aid after the bankruptcy of Lehman Brothers Holdings Inc. in 2008 froze financial markets and the Swiss bank’s mistimed bet on the U.S. housing market resulted in more than $57 billion in writedowns and losses during the subprime crisis.

The company spun off $38.7 billion of risky assets into the Swiss National Bank fund, while the government provided 6 billion francs ($6.4 billion) of equity and the SNB made a loan to support the assets as they were being run down. The Swiss government sold its investment in UBS less than a year later for a profit of 1.2 billion francs.

As part of the rescue, UBS was granted an option to buy back the equity of the fund once the SNB loan was repaid. Under that arrangement, UBS would pay the central bank $1 billion plus 50 percent of the value of equity exceeding that level — amounting to about $3.25 billion based on values at the end of last year.

REITs are the key to a lot of deals. Does this tell you anything?

The high likelihood that Hudson’s Bay will spin off its real estate portfolio into a real estate investment trust (REIT) – seen by many as not only a means to cash in on the ample high-value real estate it would acquire in the Saks deal, but also a source of funds to reduce the debt burden – is also, paradoxically, a dilemma for Moody’s.
…
Still, the REIT looks like the key to solving Hudson’s Bay’s debt puzzle. Mr. Caicco estimates that Hudson’s Bay could hand nearly $1.6-billion of its debt over to the REIT, along with the assets associated with it. There, the debt would be supported by nearly $3.8-billion in properties across Hudson’s Bay, Saks and Lord & Taylor’s holdings.

This is why the market needs to hear the REIT plan. Without it, an awful lot of debt questions remain unanswered.

More trouble for Canaccord?

Aggarwal, 40, of Gurgaon, India, was arrested yesterday by agents of the Federal Bureau of Investigation in San Jose, California, as part of the U.S. government’s six-year crackdown on insider trading at hedge funds, said Peter Donald, an FBI spokesman in New York.

Manhattan U.S. Attorney Preet Bharara’s office said Aggarwal is charged with one count of conspiracy to commit securities fraud and one count of conspiracy to commit wire fraud for passing along an inside tip about a pending deal between Yahoo! Inc. (YHOO) and Microsoft Corp. (MSFT)

“Sandeep Aggarwal leveraged his contacts in the technology industry to obtain an illegal edge in the form of inside information about a highly anticipated development, then lied about his criminal conduct,” Bharara said in a statement.

Aggarwal formerly worked at Collins Stewart LLC in San Francisco, said a person familiar with the situation, who requested anonymity because the matter wasn’t public. Andrea Sergautis, a spokeswoman for Canaccord Genuity in Toronto, which acquired Collins Stewart, didn’t return a call seeking comment on Aggarwal’s case.

Aggarwal provided material nonpublic information about a strategic partnership in Internet search and advertising between Microsoft and Yahoo to two different hedge funds, including SAC, the U.S. alleged in a criminal complaint unsealed today.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 1bp, FixedResets up 10bp and DeemedRetractibles gaining 8bp. There was again a surprisingly lengthy Performance Highlights table. Volume was above average.

Looks to me as if Obama’s preparing to reject Keystone XL:

U.S. President Barack Obama called into question the number of jobs that would be created from the controversial Keystone XL pipeline in an interview with the New York Times released on Saturday.

“Republicans have said that this would be a big jobs generator,” Obama said, according to the newspaper.

“There is no evidence that that’s true. The most realistic estimates are this might create maybe 2,000 jobs during the construction of the pipeline, which might take a year or two, and then after that we’re talking about somewhere between 50 and 100 jobs in an economy of 150 million working people.”
…
The Times said Obama disputed an argument that the pipeline would bring down gasoline prices. He said it might actually increase prices somewhat in the U.S. Midwest, which would be able to ship more of its oil elsewhere in the world, the paper reported.

TransCanada shot back:

In a statement issued late Saturday, TransCanada described the proposed 2,500-kilometre pipeline as the largest infrastructure project waiting to be built in the U.S., with 13,000 construction jobs alone.

Well, 13,000 construction jobs lasting how long each? And it is not clear how that reconciles with their other claim:

The $5.3-billion Keystone XL Pipeline Project is the largest infrastructure project currently proposed in the United States. Construction of the 1,179-mile pipeline will require 9,000 skilled American workers. The project will provide jobs for welders, mechanics, electricians, pipefitters, laborers, safety coordinators, heavy equipment operators and other workers who rely on large construction projects for their livelihoods.

In addition to construction jobs, an estimated 7,000 U.S. jobs are being supported in manufacturing the steel pipe and the thousands of fittings, valves, pumps and control devices required for a major oil pipeline.

There may be some legal tussling over the mosaic theory of investment analysis, given its likely prominence in the SAC trial:

In the 41-page indictment filed July 25, prosecutors alleged that Cohen and his top managers sought to hire traders and analysts who had the ability to deliver any kind of “edge” over the market.

Take Richard Lee, who joined the Stamford, Connecticut-based hedge fund from Citadel LLC in April 2009 even though prosecutors claim SAC had been warned by one of Lee’s former colleagues that he was suspected of insider trading at Citadel. Lee pleaded guilty on July 23 to two counts of insider trading, both of which occurred at SAC in 2009.
…
The SAC indictment also cites the examples of Jon Horvath, a former research analyst at SAC who pleaded guilty to insider trading last September, and Mathew Martoma, who has pleaded not guilty to charges that he engaged in insider trading.

In an e-mail cited in the indictment, Horvath justified his recommendation that SAC invest in Sun Microsystems Inc. in October 2007 by saying, “My edge is contacts at the company and their distribution channel.”

As for Martoma, whose trial is scheduled to begin in November, SAC hired him, according to prosecutors, in part because of his “industry contacts beyond management” in the pharmaceutical field.

He’s accused of using tips from a doctor who had access to information on drug trials to recommend Cohen sell his stake in two drug companies, helping SAC make $276 million. It’s the biggest insider trading case in U.S. history, prosecutors said.

“The relentless pursuit of an information ‘edge’ fostered a business culture within SAC in which there was no meaningful commitment to ensure that such ‘edge’ came from legitimate research and not inside information,” the indictment says.

I’m not enough of a barrack-room lawyer to opine on how explicit the pursuit must be in order to be considered criminal; but one thing is clear: when you promise immense rewards if such-and-such is done and a pink slip if it isn’t, you have created a culture in which naughtiness is more likely than would otherwise be the case. But is that criminal? Cohen may well be citing Henry II in his defence: Will no one rid me of this turbulent priest? I mean, geez, that was rhetorical, right?

Politicians all over seem afraid of property bubbles:

Taiwan (TWGDCONY) is considering changes in luxury tax rules to narrow the gap between property prices and incomes amid slower pace of economic expansion.

“Current rules have flaws, for example, we are unable to tax those deep-pocket investors, who can wait for more than two years to sell properties,” Finance Minister Chang Sheng-ford said in a briefing on July 26. Changes may include a levy on buyers of properties, he said. Sellers are already taxed.

The move comes amid an increase in prices of properties in Taipei City, the country’s capital, and a widening in the gap between home prices and incomes. Taiwan, which imposed luxury tax from June 2011, may extend the current levy on investment properties sold within two years of purchase, Chang said.

A 15 percent tax applies to commercial and residential investment properties sold within a year of purchase and 10 percent to those sold within two years. A 10 percent tax applies on sales of luxury goods such as yachts and airplanes worth at least NT$3 million ($100,328), and furs and furniture valued at NT$500,000 or more.

All over? Well, maybe not in Rangoon, Burma (as us crypto-imperialists like to call it) – there it’s considered pretty good:

Sean Danley has spent the past six months scouting office space in Yangon after being sent to establish the Myanmar branch of his U.S.-based employer.

He looked in the city’s three sole 1990s-era towers, where annual rents have climbed to more than $100 a square foot, compared with less than $75 in downtown Manhattan, according to broker CBRE Group Inc. Too expensive, he said.
…
Developers are rushing to solve Danley’s problem, one faced by hundreds of multinational companies setting up operations in Myanmar following its political opening and easing of international sanctions. Yangon, the commercial capital, needs at least 8.7 million square feet (800,000 square meters) of office space to support the influx, according to Yoma Strategic Holdings Ltd. (YOMA) About 1.9 million square feet will be available by the end of 2015, compared with 600,000 now, the Myanmar office of broker Colliers International UK Plc estimated.
…
Rents have increased almost fivefold in Yangon’s three towers, none of which is higher than 27 stories, from $22 a square foot a year as of the end of 2011, before Myanmar President Thein Sein began allowing more political freedom and loosening economic controls, according to CBRE data. Tenants at the three — Sakura Tower, FMI Centre and Centrepoint Towers — include Standard Chartered Plc (STAN), PricewaterhouseCoopers LLP, Coca-Cola Co., Nestle SA, Sumitomo Corp., Bank of Tokyo-Mitsubishi UFJ Ltd. and Malayan Banking Bhd.

Some interesting testimony from Fabulous Fab:

Tourre testified he made $1.7 million in salary and bonus in 2007.
…
Tourre, a French citizen, said he voluntarily testified before a U.S. Senate subcommittee in 2010. After that he “had to take a step back and think about what to do,” as his career had been “effectively destroyed” by the allegations. Tourre was placed on paid leave by Goldman Sachs for one year, at his base salary of about $750,000. He said he hoped he’d be able to return to the firm.

The rewards for being a top-notch institutional salesman at a big-name dealer are pretty good! Of course, that leads to the whole corrosion of ethics problem that is currently at issue at SAC Capital; but the point is, the customers know this. A good institutional salesman will not waste your time; he’ll tell you about events, deals, market colour and trivia in which you might genuinely have an interest (lousy ones are just order takers), get you data, maybe even set up a meeting with somebody; but he will not give you decent investment advice, mainly because that’s not his job and that’s not the business of his firm. Only incompetent idiots, such as Laura Schwartz and Alan Roseman of ACA Management LLC would expect it.

Let’s all laugh at the Greens:

Germany’s air pollution is set to worsen for a second year, the first back-to-back increase since at least the 1980s, after Chancellor Angela Merkel’s decision to shut nuclear plants led utilities to burn more coal.

The nation, which is seeking to lead European climate-protection efforts, probably will produce higher greenhouse-gas emissions in 2013 on top of a 1.5 percent gain last year, according to the DIW economic institute, which acts as an adviser to the government.

Utilities led by RWE AG (RWE) and EON SE boosted hard coal imports 25 percent in the first quarter to 10 million metric tons, the nation’s Coal Importers Association said.

Dodd-Frank is having a visible effect:

American International Group Inc. (AIG) will return funds to customers of its banking unit and shut their accounts as the Dodd-Frank Act places limits on insurers with deposit-taking units.

AIG Federal Savings Bank “will no longer be servicing retail deposit accounts as of Sept. 30,” according to a letter to customers. “All accounts will be automatically closed as of that date and any funds, including all interest due on your accounts, will be returned.”

AIG is joining Principal Financial Group Inc. (PFG) in narrowing its focus ahead of rules that limit proprietary trading and investments in private-equity or hedge funds by insurers with bank units. MetLife Inc. (MET), Hartford Financial Services Group Inc. and Allstate Corp. have sold deposits or retreated from banking as regulators increase oversight.

“AIG Federal Savings Bank is currently undergoing an orderly transition from a traditional savings bank to a trust only thrift,” Jon Diat, a spokesman for the New York-based insurer, said in an e-mail yesterday.

A young man was shot by Toronto police on the weekend. According to a criminal lawyer of my acquaintance, Toronto cops have become increasingly arrogant over the past decade – he’s seeing lots of cases where all the escalation of an incident has come from the police side.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts flat, FixedResets off 9bp and Deemed Retractibles gaining 1bp. Somewhat surprisingly, given the overall lack of movement, the Performance Highlights table is lengthy, with BAM issues notable amongst both winners and losers. Volume was below average.