Friday’s Headlines: Bank breakups unlikely

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While investors, regulators, politicians and the general public may be screaming for big banks to shatter into tiny pieces, Wall Street leaders are unlikely to waiver from the status quo, says a BusinessWeek article today.

“Wall Street banks are likely to cling to the status quo, which gives them two advantages: cheap funding in the form of deposits and lower borrowing costs because investors believe the government stands behind them,” the story says.

Should banks break up, we would find ourselves with smaller firms that cannot accept deposits, and therefore would have to borrow at a premium. Also, these smaller firms would be forced to hold more capital to cushion against losses, since they would not be government-backed. Case in point: Last year’s bankruptcy of MF Global was an example of how securities firms not attached to banks are high-risk.

Other news:

Firms including Nomura, Credit Suisse and UBS are preparing job cuts in Europe that are deepest since the start of the financial crisis. Financial Times
Nomura considers buying an Asian investment bank or brokerage. Bloomberg
Hedge funds are focusing more on risk management and communicating more with investors. Hedge Week
Top business schools with the most financial aid. BusinessWeek
Pension funds scrutinize private equity investments. WSJ
Credit hedge fund Bell Point is closing by year’s end. Bloomberg
Goldman and Morgan Stanley held conference calls with bond investors as the firms seek new buyers for their debt. WSJ
Private equity firms have committed $5.1B this summer to midstream energy companies. WSJ
Smaller deals make up a growing share of buyouts in the U.K. Financial Times

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