How to define Prop Trading

All market professionals know what proprietary trading positions are when they see one. But one has to doubt if regulators - or the politicians pulling their strings - are so perceptive. They also will have to write regulations that are as watertight as possible and define the term so that it fits as many conceivable real-life situations as possible. But consider this: any boring retail bank has by necessity some mismatch between the maturity of assets and liabilities. One could say that this mismatch - and even more the changes to it as market conditions/expectations evolve - constitutes proprietary trading. The lesson is that the elimination of proprietary trading will not by itself solve the problems that are inherent in a banking system that is based on the (false) premise that there will never be market panics and/or that the authorities can always contain them at no or little cost to the taxpayer.

Investment Banking Jobs in Danger?

When the prominent banking analyst Meredith Whitney predicts substantial job cuts in the investment banking industry it pays to listen. After all, in 2007 she had correctly predicted that banks would be under severe pressure when she highlighted that Citigroup was under capitalized. As we at Temple Associates work as business as well as recruitment consultants for financial services firms we look at this chilling news from two angles. Naturally we were pleased with the brisk demand for staff that we have seen during the past 6 - 12 months. As business advisers, however,  we were always sceptical about firms that hired staff 'by the dozen' and tried to expand at breakneck speed. Many of the worst perpetrators are no longer with us as their businesses lacked the cohesive culture that would have allowed them to navigate the dry patches that any investment banking business invariably goes through from time to time. More often than not the salaries that were handed out in order to entice experienced professionals to join were higher than necessary and burdened the business with excessive fixed costs.

No one helps Bank analyst Bove in hour of need

We are not able to confirm details in today's New York Times article about the lack of support for Dick Bove. BankAtlantic, a Florida bank, sued him, accusing him of defamation after he wrote a report about the banking industry in July 2008, just as the financial crisis was starting to boil over. The bank contended that the report falsely suggested that the institution was in trouble.
But if his claim that several associations that represent stock analysts or the securities industry declined his requests to help him pay his legal bills it leaves a sour taste in the mouth - to say the least. What use are the Securities Industry and Financial Markets Association, the New York Society of Security Analysts and the CFA Institute if they decline to make a stand for independent investment research. To cap it all, they declined to comment when approached by the New York Times. Even worse - the investment bank Ladenburg Thalmann, his then employer, chose to settle its end of the case by paying BankAtlantic $350,000, without admitting to any wrongdoing, and leaving Mr. Bove to defend himself.  We are glad to report that Bove won his court case against the Bank but is still left with legal bills totalling $800,000. The stakes in a case like this are high as any successful lawsuit against an analyst would deter critical analyst comments in the future and stifle independent research.