This has the look of a trend. First Goldman and Morgan Stanley and Now RJ. When the going gets tough, the Masters of the Universe slither over to their safe haven at the Fed.
Bring back Glass-Steagall.
The Bond Buyer
Raymond James Financial Will Apply for Bank Holding Company Status
By Patrick Temple-West
September 29, 2008
Raymond James Financial Inc. confirmed Thursday that it will apply for bank holding company status, following the course taken last week by the larger investment banks, Goldman Sachs Group Inc. and Morgan Stanley.
The firm's management stressed that the move comes as part of a long-term strategy and does not indicate any immediate capital needs. The conversion "will have little impact" on the firm's operations and management structure, officials said in a financial statement filed with the Securities and Exchange Commission.
"It's an unfortunate misperception that Goldman Sachs, Morgan Stanley, and now Raymond James are fundamentally changing their business models," Thomas A. James, the firm's CEO and chairman, said in the filing. "In fact, these changes are more form than substance in that regard."
Raymond James ranked 24th among municipal underwriters and was senior manager on 54 issues this year through Sept. 25, according to Thomson Reuters. The firm ranked 34th among financial advisors, serving as FA on 12 issues for the same period. With $40.8 billion in assets under management as of June 30, Raymond James would rank 32nd among bank holding companies, according to the Federal Reserve.
The conversion to a bank holding company is the first step toward eventually becoming a financial holding company, the firm said. If approved by the Fed, the St. Petersburg, Fla.-based Raymond James will convert its thrift, Raymond James Bank, into a state-chartered commercial bank.
The conversion of the bank, which had $7.7 billion in deposits as of June 30, would allow it to engage in more corporate lending, which historically has been more profitable and bears less interest rate risk, the firm said. A financial holding company is a subset of a bank holding company that allows a firm to engage in investing, insurance, and other activities when its commercial bank meets the regulatory standards set by the Fed.
The conversion would lead to greater regulation by the Federal Reserve. Under Regulation Y, the Fed may regulate non-banking activities of the parent company, including mergers and acquisitions. The parent is also expected to maintain the capital and leverage requirements the Fed places on the commercial banks. Subsidiary commercial banks are limited by how much they can lend to the parent company.
Once the conversion for Raymond James takes place, oversight of the Raymond James Bank will be transferred from the Office of Thrift Supervision to the Office of the Comptroller of the Currency.
Goldman Sachs and Morgan Stanley received Fed approval on Sept. 22 to convert to bank holding companies on an expedited basis. The five-day waiting period the Fed requires to examine antitrust concerns before beginning the conversion status was waived for both firms because "emergency conditions exist that justify expeditious action," the Fed said.
Raymond James said it is not looking for emergency funding and that it expects the conversion to a banking holding company to be completed by summer 2009.
The shift to bank holding companies signifies a change in the financial sector. Investment banks like Raymond James rely on short-term borrowing to fund its businesses. Large bank holding companies like Citigroup Global Markets Inc. and JPMorgan Chase & Co. have weathered the liquidity crisis better than the investment banks because they are perceived as being safer under Fed regulations.
29 September 2008
Raymond James Applies to Become a Bank Holding Company
$630 Billion Helicopter Drop from the Fed
"These capitalists generally act harmoniously and in concert to fleece the people, and now that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel."
Abraham Lincoln, speech to Illinois legislature, January 1837
Fed Pumps Further $630 Billion Into Financial System
By Scott Lanman and Craig Torres
Sept. 29 (Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.
The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.
The Fed's expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.
``Today's blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, ``the Fed's balance sheet is about to explode.'' (As Dr. Greg House might say, "Cooool.." - Jesse)
The MSCI World Index of stocks in 23 developed markets sank 6 percent, the most since its creation in 1970. Credit markets deteriorated further as authorities tried to save more financial institutions from collapse.
European Rescue
European governments have rescued four banks in two days and the Federal Deposit Insurance Corp. said today it helped Citigroup Inc. buy the banking operations of Wachovia Corp. after its shares collapsed. The Standard & Poor's 500 Index fell 3.8 percent and the cost of borrowing dollars for three months rose to the highest since January. The rate for euros hit a record.
``If people think the authorities may give in to fears, they are wrong,'' Financial Stability Forum Chairman Mario Draghi said today in Amsterdam, where the international group of regulators and finance officials is meeting. ``There is willingness and determination on winning the battle to restore confidence and stability.'' (Yes, manipulate the markets until confidence is restored - Jesse)
Banks and brokers have slowed lending as they struggle to restore their capital after $586 billion in credit losses and writedowns since the mortgage crisis began a year ago. The bankruptcy of Lehman Brothers Holdings Inc. also sparked fears among banks they wouldn't be repaid by counterparties, driving up the cost of short-term loans between banks.
Subscribe to:
Posts (Atom)
