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  Friday, 21 Nov 2014 | 1:52 PM ET

Fed's Tarullo wants to get tougher on big banks

Posted By: Kate Kelly

Federal Reserve Board Governor Daniel Tarullo argued Friday that financial-firm compliance enforcement hasn't been stiff enough and that tougher action on the part of the Fed and other regulators was likely needed.

"The accumulation of violations, investigations, and in many cases, I think, acknowledgement of violations" in a variety of areas, Tarullo said during the second day of a tense two-day hearing on U.S. bank commodity activities.

The recent trouble in markets for interest rates, currencies, mortgages, and commodities, "suggests that in general, the compliance, procedures, mechanisms, expectations, within firms for abiding by laws ... are not adequate in many cases," he said. The Fed, Tarullo added, is focused on "how to assure" that robust enough monitoring is in place.

»Read more
  Friday, 21 Nov 2014 | 6:00 AM ET

Testimony to end, but AIG case far from over

Posted By: Mary Thompson
AIG headquarters in New York City.
Adam Jeffery | CNBC
AIG headquarters in New York City.

The last witness in an eight-week trial over the government's role in AIG's bailout is expected to be called Friday, but a verdict is still months away.

The trial, being heard in federal claims court in Washington, D.C., is a bench trial. Overseen by Judge Thomas Wheeler, it has pitted the government against a high-powered team of lawyers representing former AIG CEO Hank Greenberg and other current and former shareholders of the insurance giant.

The plaintiffs claim the Federal Reserve overstepped its powers by imposing unusually high interest rates on AIG, and taking what became a 92 percent stake in the company as part of a $182 billion bailout of AIG. During the trial, financial luminaries including former Treasury secretaries Hank Paulson and Timothy Geithner, along with former Fed Chairman Ben Bernanke, were called to testify.

In an opening statement at the trial, a lawyer from the Department of Justice, Kenneth Dintzer, said AIG received assistance only because of the potential global consequences of the company filing for bankruptcy, and that the loan terms made sense given market conditions. "The goal was not to save AIG, it was to save the world from AIG," Dintzer said.

»Read more
  Thursday, 20 Nov 2014 | 3:42 PM ET

Fired bankers at Goldman, NY Fed were pals: Lawyer

Posted By: Mary Thompson

Rohit Bansal and Jason Gross had been friends for years, both having worked at the New York Federal Reserve. Now both find themselves out of jobs because of information Gross may have illegally shared with the Bansal.

"He and Mr. Bansal socialized together, they vacationed together," said attorney Bruce Barket, a partner at Barket Marion Epstein & Kearon who is representing 30-year-old Gross.

Barket, a criminal defense lawyer, told CNBC that Gross left his job as a bank examiner at the New York Fed in early October. Barket said it was not clear to him if Gross was fired or if he left of his own volition.

Bansal, 29, was fired from Goldman Sachs on Sept. 26, after a senior Goldman executive flagged a report Bansal had prepared for the financial institutions group, a unit of the investment banking division.

According to an internal memo sent to employees and obtained by CNBC, in the report, Bansal, who had joined Goldman from the New York Fed in July, included information received from Gross that the senior executive recognized as being confidential to the bank's supervisor—also the New York Fed.

»Read more
  Thursday, 20 Nov 2014 | 2:24 PM ET

Bill Gross to manage $500 million for George Soros

Posted By: Lawrence Delevingne

Recently departed Pimco boss Bill Gross just got a vote of confidence from one of the most successful investors of all time.

Janus Capital Management announced Thursday that Quantum Partners, a private investment vehicle managed by Soros Fund Management, has invested $500 million in a separate account managed by Gross.

The account will pursue a similar strategy to the publicly accessible Janus Global Unconstrained Bond Fund, which managed just $442.8 million as of Oct. 31, according to Janus. Pimco managed $1.87 trillion firmwide as of Sept. 30.

Read MorePimco is pulling down rest of the bond market

»Read more
  Thursday, 20 Nov 2014 | 11:51 AM ET

Bond market volatility: There's a VIX for that

Posted By: Jeff Cox
Getty Images

As the Federal Reserve gets set to chart a future course off zero interest rates, investors now have a chance to play along with how the moves will affect the government bond market.

The Chicago Board Options Exchange has added another wrinkle to its package of "VIX"—or Volatility Index—products, with futures that trace market sentiment over the direction of the 10-year Treasury note.

Futures trading on the 10-year U.S. Treasury Note Volatility Index (ticker VXTYN) began a week ago, about a month too late for October's whipsaw activity in government bond yields but still plenty ahead of the real action in rates that should start once the Fed begins the expected normalization process in 2015.

»Read more
  Thursday, 20 Nov 2014 | 10:50 AM ET

Greek drama: Telecom focus of bloody PE fight

Posted By: Lawrence Delevingne
David Bonderman, founding partner of TPG Capital
Andrew Harrer | Bloomberg | Getty Images
David Bonderman, founding partner of TPG Capital

A hedge fund and other out-of-luck bond investors have won a $565 million judgment in a long-running legal saga that accuses large private equity firms of unfairly profiting from a Greek telecom company they set up to fail with piles of debt.

Despite the favorable court ruling filed Tuesday, London-based SPQR Capital and other bondholders of the company still face legal challenges to get PE giants TPG Capital Management and Apax Partners to pay.

»Read more
  Thursday, 20 Nov 2014 | 1:21 PM ET

Under fire in commodity probe, Goldman makes move

Posted By: Kate Kelly

At a combative Capitol Hill hearing Thursday over its commodity investing and trading, a Goldman Sachs executive said the firm is in talks with a Russian buyer, among others, about selling its embattled metal warehousing business.

During the hearing, where a feisty Sen. Carl Levin grilled Goldman's higher-ups over allegations they manipulated metal investment rules for profit, hurting aluminum purchasers, the head of Goldman's commodity investment group, Jacques Gabillon, said the firm was in discussions with foreign investors—including at least one in Russia—about potentially selling Metro, its metal warehousing subsidiary.

"We are running a sales process right now and we have a variety of interest from companies in Europe, in Russia and in China," Gabillon said during the question-and-answer portion of the hearing.

The remarks are significant because other transactions between U.S. and Russian companies have been thrown into question amid powerful U.S. and EU sanctions against the country since its annexation of a portion of Ukraine earlier this year.

»Read more
  Wednesday, 19 Nov 2014 | 5:00 PM ET

Goldman accused of exploiting metal storage rules

Posted By: Kate Kelly

In a voluminous new report reflecting two years of research, an influential Senate panel accuses Goldman Sachs of manipulating aluminum storage rules in order to line its own pockets, even as manufacturers and customers suffered.

Since 2010, when it acquired the metal storage company Metro International Trade Services, Goldman has engaged in a slew of manipulative "merry-go-round" trades in which aluminum slabs are moved from one warehouse facility to another, says the 396-page report by the Senate Permanent Subcommittee on Investigations, resulting in record U.S. fees for storing and shipping aluminum and, as a result, higher overall costs for aluminum-product manufacturers and consumers.

"These merry-go-round transactions lengthened the metal load out queue to exit the Metro warehouse system [and] blocked the exits for other metal owners seeking to leave the system," states the report, unveiled at 5 p.m. on Wednesday in advance of a two-day hearing set to be held on the subject in Washington, D.C.

Read MoreNext for banks: Layoffs, chat smackdown, more regs

Those actions, combined with "extensive aluminum trading" that Goldman engaged in in the aluminum market during that period, the report adds, have "given rise to serious questions about the integrity of the aluminum market."

Early in the week of the report's release, the Senate hearings were already promising to be contentious. In its own 31-page position paper, prepared in advance of the release of the subcommittee's report, Goldman officials defended their actions with Metro and other commodity businesses. "The queues were the result of metal owners' independent, financially-motivated decisions to remove metal that had been placed in Metro's warehouses," the report stated. "Like any other landlord, Metro was merely competing for tenants."

Goldman enhanced its own profits in the physical storage and trading of aluminum, the Senate panel report argues, by purchasing Metro, a longtime warehousing business that stores aluminum, copper, zinc, and other base metals around the U.S.; stacking Metro's board exclusively with Goldman executives; and then striking backroom deals with aluminum owners like the international trading firm Glencore and the London hedge fund Red Kite.

Those deals allowed Metro to remove each client's aluminum from one Metro warehouse and move it shortly thereafter into another—tying up its ground transportation systems and creating substantial delays for other clients wanting to ship metal out of storage.

»Read more
  Wednesday, 19 Nov 2014 | 11:58 AM ET

This nifty ETF maneuver is becoming more common

Posted By: Jeff Cox
Traders work on the floor of the New York Stock Exchange, Nov. 7, 2014.
Lucas Jackson | Reuters
Traders work on the floor of the New York Stock Exchange, Nov. 7, 2014.

When companies do reverse splits on their shares, it's often seen as a Hail Mary pass by a stock that's circling the drain. When exchange-traded funds try the same move, it's often cheered.

That's yet another unusual feature of the ETF world, an industry that's rapidly approaching $2 trillion in assets.

There has been a steady stream of reverse splits in 2014, among the most recent being ProShares' announcement that it was performing a 1-for-4 split on 10 of its inverse and leveraged products. While many of the firm's short funds have declined in price since the Oct. 15 reverse splits, that's primarily because the sectors the funds covered have gained with a rising stock market. Conversely, those "short" funds benefit from market declines. Otherwise, the funds have shown little damage from the move.

A normal split sees investors get multiple shares per each they hold. An inverse does the opposite and is often used to prop up flagging prices for a struggling company.

»Read more
  Tuesday, 18 Nov 2014 | 11:55 AM ET

Pimco is pulling down rest of the bond market

Posted By: Jeff Cox
A man walks past a Pacific Investment Management Company LLC (PIMCO) advertisment which is displayed on a building in Hong Kong, China.
Brent Lewin | Bloomberg | Getty Images
A man walks past a Pacific Investment Management Company LLC (PIMCO) advertisment which is displayed on a building in Hong Kong, China.

Investors have been withdrawing money aggressively out of bond funds recently, and it's pretty much all Pimco's fault.

In fact, when excluding flows from the Newport Beach, California-based fixed income behemoth, all other bond funds actually have been taking in money, according to calculations from Morningstar that highlight just how pronounced a reaction investors have had to Bill Gross leaving the firm he founded.

In total, taxable bond funds lost $41.8 billion in September and October. When subtracting Pimco from the equation, October's number turns positive by $9.2 billion, the data show.

»Read more

About NetNet

  • NetNet is where you'll find the low-down and the high jinks of Wall Street. It's the place for insider stories, trader gossip, and tales of the foibles of the moneyed crowd and the culture of finance.Wall Street news and commentary served fresh all day long.

 

  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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