I have often noted on this blog that one problem with big banks is that there are too many layers of servile management between the people who really know what’s going on and the decision makers. Guess what happens when middle management is not servile?:
Paul Moore compares his dismissal as head of risk at failed U.K. bank HBOS Plc to King Henry VIII’s decapitation of his sainted Chancellor Thomas More 474 years ago.
Moore lost his job in 2004 after he warned that the bank’s growth strategy posed “a serious risk to financial stability.” More lost his head in 1535 after he refused to recognize Henry VIII’s self-appointment as head of the Church of England.
“There is a natural conflict of interest where people whose job it is to challenge have to report to those who have the power of life and death over them,” Moore, 50, said in an interview in London. “What caused this financial crisis was the inadequate balance and separation of powers.”
Risk and compliance managers should report to a non- executive director for “quality assurance,” rather than to the executives they monitor, Moore said. His idea was rejected yesterday in a preliminary government review of banks by former Bank of England director David Walker. Risk managers should report to both executives and non-executives, Walker said.
It’s something of tricky question. Dotted line reporting means no responsibility; dual reporting is just a shade on the nutbar side. On the other hand, if I was on the director’s risk committee and I didn’t have all the access I wanted to the Chief Risk Officer (or didn’t have confidence in him), I’d be a little upset. It should also be noted that risk management is a cost centre, not a profit centre. I’ve seen some of the ads for risk management personnel … invariably, anybody with enough brains, balls and knowledge to do the job properly can make way more money doing something else.
OSFI has promoted another ex-banker to help regulate the banks.
Today’s CIT news is:
CIT Group Inc. advisers, including JPMorgan Chase & Co. and Morgan Stanley, have begun discussing options for funding the lender if it succumbs to bankruptcy, according to people with knowledge of the matter.
JPMorgan and Morgan Stanley are in talks with other banks about a debtor-in-possession loan, used to fund a company’s operations after it seeks court protection from creditors, said the people, who declined to be identified because the negotiations are private. CIT and its advisers, including Morgan Stanley and Evercore Partners Inc., are also trying to arrange rescue financing to avert bankruptcy, they said.
…
“This thing doesn’t have a future,” CreditSights analyst David Hendler said today in a telephone interview. “Anything is possible but the problem is not solvable anymore. They’re just in denial it’s finally over,” the New York-based analyst said referring to the rescue financing.
I have other things to do this weekend, so the market update will be late … really late … Sunday evening?
Update, 2009-7-19: Another good strong day for preferreds on good volume, with FixedReset median YTW all the way down to 4.20%!
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5864 % | 1,161.6 |
| FixedFloater | 7.25 % | 5.46 % | 34,371 | 16.69 | 1 | 0.0000 % | 2,118.3 |
| Floater | 3.28 % | 3.90 % | 81,199 | 17.64 | 3 | 0.5864 % | 1,451.1 |
| OpRet | 4.97 % | -3.23 % | 132,618 | 0.08 | 15 | 0.1149 % | 2,221.1 |
| SplitShare | 6.06 % | 4.72 % | 95,193 | 4.15 | 4 | 0.3460 % | 1,933.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1149 % | 2,031.0 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1067 % | 1,778.5 |
| Perpetual-Discount | 6.23 % | 6.27 % | 157,707 | 13.54 | 71 | 0.1067 % | 1,638.0 |
| FixedReset | 5.53 % | 4.20 % | 576,647 | 4.24 | 40 | 0.3334 % | 2,079.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| POW.PR.D | Perpetual-Discount | -2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 19.54 Evaluated at bid price : 19.54 Bid-YTW : 6.45 % |
| GWO.PR.G | Perpetual-Discount | -1.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 20.55 Evaluated at bid price : 20.55 Bid-YTW : 6.40 % |
| HSB.PR.C | Perpetual-Discount | -1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 20.27 Evaluated at bid price : 20.27 Bid-YTW : 6.36 % |
| HSB.PR.D | Perpetual-Discount | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 19.69 Evaluated at bid price : 19.69 Bid-YTW : 6.42 % |
| RY.PR.I | FixedReset | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 23.45 Evaluated at bid price : 25.90 Bid-YTW : 4.25 % |
| SLF.PR.C | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 17.26 Evaluated at bid price : 17.26 Bid-YTW : 6.52 % |
| SLF.PR.D | Perpetual-Discount | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 17.25 Evaluated at bid price : 17.25 Bid-YTW : 6.52 % |
| ELF.PR.F | Perpetual-Discount | 1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 19.01 Evaluated at bid price : 19.01 Bid-YTW : 7.03 % |
| MFC.PR.C | Perpetual-Discount | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 17.64 Evaluated at bid price : 17.64 Bid-YTW : 6.46 % |
| CU.PR.B | Perpetual-Discount | 1.21 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 24.86 Evaluated at bid price : 25.15 Bid-YTW : 6.05 % |
| HSB.PR.E | FixedReset | 1.23 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-30 Maturity Price : 25.00 Evaluated at bid price : 27.95 Bid-YTW : 4.11 % |
| BMO.PR.M | FixedReset | 1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 23.50 Evaluated at bid price : 25.89 Bid-YTW : 4.01 % |
| TRI.PR.B | Floater | 1.55 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 15.75 Evaluated at bid price : 15.75 Bid-YTW : 2.51 % |
| GWO.PR.F | Perpetual-Discount | 1.63 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 23.46 Evaluated at bid price : 23.73 Bid-YTW : 6.27 % |
| BNA.PR.C | SplitShare | 1.83 % | Asset coverage of 2.6+:1 as of July 8, according to DBRS. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 16.66 Bid-YTW : 10.01 % |
| BAM.PR.J | OpRet | 2.73 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 22.60 Bid-YTW : 6.97 % |
| MFC.PR.E | FixedReset | 3.44 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 27.09 Bid-YTW : 3.99 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.B | Perpetual-Discount | 148,510 | Nesbitt crossed 20,000 at 18.20; RBC crossed 60,000 at the same price; Nesbitt crossed 37,500 at 18.21. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 18.15 Evaluated at bid price : 18.15 Bid-YTW : 6.49 % |
| BMO.PR.P | FixedReset | 99,320 | Nesbitt crossed 15,000 at 26.85. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.00 Evaluated at bid price : 26.68 Bid-YTW : 4.15 % |
| TD.PR.G | FixedReset | 94,150 | Nesbitt crossed 70,000 at 27.71. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.69 Bid-YTW : 3.81 % |
| MFC.PR.E | FixedReset | 87,420 | Nesbitt crossed 20,000 at 26.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-10-19 Maturity Price : 25.00 Evaluated at bid price : 27.09 Bid-YTW : 3.99 % |
| BNA.PR.D | SplitShare | 58,432 | Recent new issue. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2014-07-09 Maturity Price : 25.00 Evaluated at bid price : 25.07 Bid-YTW : 7.26 % |
| TD.PR.O | Perpetual-Discount | 55,862 | Nesbitt crossed 30,000 at 20.40. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-07-17 Maturity Price : 20.41 Evaluated at bid price : 20.41 Bid-YTW : 5.97 % |
| There were 48 other index-included issues trading in excess of 10,000 shares. | |||