Infinite Unknown

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NEW YORK, Nov 11 (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research, Stock Buzz) Chief Executive John Thain said the global economy is in a deep slowdown and will not recover quickly, and the environment recalls 1929, the advent of the Great Depression.

Speaking Tuesday at his bank’s annual financial services conference, Thain said he was “cautiously optimistic” about the outlook for the industry. But he said credit remains constricted and asset prices generally are still falling.

“The U.S. economy is contracting very rapidly,” creating uncertainty “at least over the next few quarters,” Thain said. “We are going to be in a very difficult economic environment for a significant period of time.”

Conditions deteriorated as the U.S. housing market collapse mushroomed into a more general crisis of confidence.

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Tags: Bank of America, Economy, financial crisis, Great Depression, Merrill Lynch, Recession, Stock Market, U.S., Wall Street

The financial industry is bracing for a fresh round of job cuts as Wall Street banks slash costs to cushion the blow of further market turbulence and deepening economic woes in 2009.

Executives and analysts say the redundancies - to be finalised this month as banks prepare next year’s budgets - could top 70,000 among US groups alone and add to the estimated 150,000 jobs already lost by the financial sector worldwide.

The job losses are expected to be concentrated in the investment banking and trading businesses that have been hit hard by the near-freeze in capital markets and the collapse in takeover and financing activity.

The continued shrinking of the banking industry will deepen the economic plight of financial centres such as New York, London and Hong Kong by reducing tax revenues and putting pressure on the local housing market.

“The fourth quarter is going to be very disruptive,” Meredith Whitney, analyst at Oppenheimer, said in a video interview with the Financial Times. “For many of the capital markets intensive players, you’re going to have resizing of anywhere from 25 to 30 per cent of their workforce. But if you think about it, from the peak, revenues are down more than that.”

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Tags: Bear Stearns, Citigroup, Economy, Goldman Sachs, Lehman Brothers, Merrill Lynch, Morgan Stanley, U.S., Wall Street

RBS ‘making monkeys’ out of the government, says Vince Cable

Royal Bank of Scotland. Photograph: Newscast

Royal Bank of Scotland, which is being bailed out with £20bn of taxpayers’ money, has signalled it is preparing to pay bonuses to thousands of staff despite government pledges to crack down on City pay.

The bank has set aside £1.79bn to cover “staff costs” - including discretionary bonuses - at its investment banking division for the first six months of the year alone. The same division caused a £5.9bn writedown that wiped out the bank’s profits for the same period.

The government had demanded that boardroom directors at RBS should not receive bonuses this year and the chief executive, Sir Fred Goodwin, is walking away without a pay-off. But below boardroom level, RBS and other groups are preparing to pay bonuses to investment bankers who continue to generate profits.

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Tags: Banks, Citigroup, Economy, Goldman Sachs, Government, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Politics, RBS, U.K., Wall Street

Oct. 27 (Bloomberg) — Five straight quarters of losses and a 70 percent slide in its stock this year haven’t stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses.

Goldman Sachs Group Inc. and Morgan Stanley, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.

The worst financial crisis since the Great Depression, a $700 billion taxpayer bailout, public outcry over excessive pay and the demise of three of the biggest securities firms won’t deter Wall Street from offering year-end rewards to employees on top of their salaries, compensation experts say.

“Critical producers and critical managers will be retained with the same bonus they had last year,” said Robert Sloan, head of U.S. financial-services recruiting at Egon Zehnder International, a New York-based executive-search firm. “The others will see sharp cuts.”

Goldman, the biggest and most profitable Wall Street firm until it opted to become a bank holding company last month, has set aside about $6.85 billion for bonuses, or an average of $210,300 for each employee, down 32 percent from $339,400 a year ago. Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has $6.44 billion for bonuses, or $138,700 per person, down 20 percent from last year. Both firms accrue a fixed percentage of their revenue for compensation, so the decline in bonus pools matches the drop in revenue.

Merrill’s Compensation

The money Merrill has set aside for bonuses equates to an average $110,000 for each of its 60,900 people, up from $108,000 a year ago because more than 3,000 jobs have been cut.

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Tags: Bank of America, Banks, Economy, financial crisis, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, Stock Market, U.S., Wall Street

Oct. 25 (Bloomberg) — Alpha Bank & Trust in Alpharetta, Georgia, with $346 million in deposits, was seized by regulators and closed as the collapse of the housing market and loan defaults claimed a 16th U.S. bank this year.

Alpha, with $354 million in assets, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. sold the deposits to Stearns Bank N.A., of St. Cloud, Minnesota. Alpha’s two offices north of Atlanta will open on Oct. 27 as branches of Stearns Bank, the FDIC said yesterday.

Regulators have closed the most banks in 15 years, and the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. were among the biggest in history. About 4.4 percent of Alpha’s assets were defaulted real-estate loans it took back on its balance sheet, quadruple the total for most U.S. banks, based on data compiled by Charlottesville, Virginia-based SNL Financial.

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Tags: Bank of America, Banks, Bear Stearns, Citigroup, Economy, FDIC, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, Treasury, Washington Mutual, Wells Fargo & Co.

Oct. 20 (Bloomberg) — Merrill Lynch & Co. Chief Executive Officer John Thain said he expects “thousands” of job losses from the bank’s $50 billion takeover by Bank of America Corp.

Most of the cuts will fall in information technology, operations and “corporate functions,” Thain, 53, said in a Bloomberg Television interview in Dubai today. Jobs in the fixed income and commodities divisions won’t be eliminated after the deal, he said.

“We haven’t mapped it out in terms of actual number of people, but we are committed to saving $7 billion across the combined platforms, and that will be a challenge,” Thain said. “Between our two companies it will be clearly thousands of jobs.”

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Tags: Bank of America, Banks, Economy, FDIC, Fed, Federal Reserve, Merrill Lynch, mortgage crisis, Mortgages, Recession, Stock Market, Treasury, U.S., Unemployment, Wall Street

America’s leading banks continued to announce hefty losses yesterday as Citigroup reported a further writedown of more than $13 billion (£7.5 billion) for the third quarter and Merrill Lynch took another $9.5 billion hit.

The latest writedowns brought Citigroup’s total hit from the credit crunch to about $60 billion and left it with an overall group loss, of $2.8 billion, for the fourth consecutive quarter.

Merrill Lynch, which has clocked up about $50 billion of credit-crunch related charges, reported its fifth consecutive quarterly group loss, of $5.15 billion, for the third quarter. The group agreed a fire sale to Bank of America last month to boost its capital reserves.

Citigroup’s loss was larger than the $2.2 billion deficit the bank recorded the year before, but considerably smaller than the $3.8 billion loss analysts had collectively forecast for the period. Group revenues fell 23 per cent to $16.7 billion.

Although Citigroup’s results came in ahead of expectations, analysts were concerned that they provided further evidence that the financial crisis was spreading from Wall Street to Main Street.

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Tags: Bank of America, Banks, Citigroup, Credit Crisis, credit crunch, Economy, financial crisis, Merrill Lynch, mortgage crisis, Mortgages, Stock Market, Wall Street

LONDON (MarketWatch) — Euphoria over bank bailouts and the temporarily buoyant stock markets is masking a sober reality.

The piper still has to be paid.

One fairly sanguine estimate of the cost of salvaging Wall Street came Tuesday morning from analysts at Merrill Lynch. They figure the inflationary effect of all the bank bailout measures now underway will push gold to $1,500 an ounce and oil back to $150 a barrel. See related item.

Related: article: Why Gold Is Dropping When It Shouldn’t - and what it all means

The analysts don’t offer a timeline, but the way markets have been jumping around lately it could be any day now.

Perhaps the real question is: why stop at $1,500?

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Tags: bailout, Credit Crisis, credit crunch, Economy, Foreclosures, Gold, Government, Inflation, Merrill Lynch, mortgage crisis, Mortgages, Oil, Politics, Recession, Stock Market, U.S., Wall Street

Most U.S. Stocks Fall as Earnings Concern Overshadows Bank Plan

Oct. 14 (Bloomberg) — Most U.S. stocks fell a day after the market’s biggest rally since the 1930s as a worsening outlook for earnings forced investors to look beyond a $2 trillion global push to rescue banks.

PepsiCo lost as much as 14 percent, the most since October 1987, after lowering its profit forecast as customers cut back on snacks and soft drinks. Microsoft and Intel slid more than 5 percent as analysts said demand for computers is slowing. Morgan Stanley, Citigroup Inc. and Merrill Lynch & Co. added more than 19 percent, sending banking shares to a third straight advance.

“Notwithstanding the government and Treasury’s actions focusing on financials, the general economic environment has deteriorated quite a bit in the last five or six weeks,” said Jonathan Armitage, head of U.S. large-cap equities at the American unit of Schroders, the U.K. manager of $259 billion. “You’re just seeing different parts of the equity market reacting to that.”

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Tags: Banks, Citigroup, Coca Cola, Economy, financial crisis, Goldman Sachs, Merrill Lynch, Morgan Stanley, PepsiCo, Politics, Recession, Stock Market, U.S., Wall Street

Treasury Chief Says Banks Must Deploy New Capital

Treasury Secretary Henry M. Paulson Jr., speaking in Washington on Tuesday morning, described the government’s bailout as “extensive, powerful and transformative.” The Federal Reserve chairman, Ben S. Bernanke, is at right.

WASHINGTON - Describing the government’s financial bailout plan as “extensive, powerful and transformative,” Treasury Secretary Henry M. Paulson Jr. said on Tuesday that the injection of $250 billion into the nation’s banks was needed to restore confidence and avoid a collapse of the financial system.

Speaking shortly after President Bush used similar terms to describe the proposal, Mr. Paulson said the Treasury would make $250 billion available to banks to help recapitalize those banks and to get them lending again, among themselves and to businesses and consumers.

“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Mr. Paulson said, who offered some details of the plan along with the Federal Reserve chairman, Ben S. Bernanke, and the chairman of the Federal Deposit Insurance Corporation, Sheila C. Bair.

With the proposal, the United States follows similar plans announced Monday across Europe - almost all intended to inject money into the banks and unfreeze the credit markets. Markets around the world have rebounded on news of the coordinated efforts. The Dow Jones industrial average gained 936 points, or 11 percent on Monday, the largest single-day gain in the American stock market since the 1930s, and gained more than 300 points more in the opening minutes of trading on Tuesday. European markets were up at least 5 percent on Tuesday after rising nearing 10 percent Monday. Continue reading »

Tags: bailout, Bank of America, Banks, Ben Bernanke, Citigroup, Economy, FDIC, Fed, Federal Reserve, financial crisis, George Bush, Government, Henry Paulson, JPMorgan, Merrill Lynch, Politics, Stock Market, taxpayers, Treasury, Wall Street