2014 has been an interesting year for big banks. In many ways, they’re healthier than they’ve been since the financial crisis. But much of that revitalizing has come from the purging of past transgressions. With fines stemming from mortgage-backed securities schemes, dealings with sanctioned countries and rate manipulation scandals, banks have posted a record year. They’ve combined to pay an astounding $56 billion in fines in 2014, roughly the equivalent to the gross domestic product of Croatia, according to the Financial Times. That’s the largest fine total the industry has ever amassed.
New York has been particularly greedy, pulling billions from foreign banks like BNP and Credit Suisse. London hasn’t been any nicer, with the UK’s Financial Conduct Authority levying an average fine of $3.2 million – a five-fold increase over a year ago.
While much of what gets talked about is the conduct and the ramifications for banks and their investors, there has been little focus on the financial windfall that governments are seeing. New York in particular is flush with newfound cash, and, just like bankers come bonus day, politicians are angling toward getting a bigger piece of the pie.
New York Governor Andrew Cuomo did well for himself, walking away with $3.6 billion of BNP’s record $8.97 billion fine, good enough for 2.6% of the state’s budget. New York will have about $5 billion to play with come January.
Now, what to do with all that money. Local service organizations will be disappointed in the fact that little money will go to their funding, as the surplus is a one-time injection of cash. It can’t be used on recurring expenses. Rather, Cuomo is reportedly eyeing upgrades to the MTA system, revamping infrastructure such as the Tappan Zee Bridge and helping to reduce local property taxes.
Other lawmakers have different ideas, like increasing wages for pubic employees, additional school funding and the creation of new jobs within parks and libraries. The debate will all play out in Albany in January.
Whatever they do with the money, we as New Yorkers owe a great deal of gratitude to the banks. A French bank had dealings with Iran a decade ago and now we get a new bridge and lower taxes. Doesn’t seem to make a great deal of sense but we’ll take it. ‘
London hasn't said what it will do with its surplus, but expect similar discussions to ensue.
No Bonuses For You (Dealbook)
RBS is holding back bonuses for two dozen former and current employees as it continues an internal review of its FX trading operations.
Hack Or Be Hacked (Bloomberg)
Financial institutions are apparently doing more than defending themselves when it comes to hacking. They’re on the offensive as well, striking back at hackers networks themselves.
BP a Potential Suspect (Bloomberg)
Nearly a dozen banks have been swallowed up in the FX rate manipulation scandal. Now, one of the UK’s largest corporations, BP, looks prepared to join. Traders with the energy giant may have been in some of those online chat rooms.
Another One Bites the Dust (FIN Alternatives)
New York hedge fund Merchants’ Gate Capital is closing its doors after seven years. Hedge funds are shuttering at the fastest pace since the crisis.
Big Four Hiring in London (Financial News)
Deloitte is joining the other members of the Big Four by staffing up in advisory in the UK. The firm just hired a veteran banker from J.P. Morgan. Its competition has been doing much of the same as the London IPO market heats up.
Goldman Dominates Canada (Bloomberg)
Goldman Sachs is the top M&A adviser for 2014, both globally and in Canada. Goldman advised on $61.6 billion worth of deals in Canada, its highest total ever in America’s top hat.
JPM’s Big Fix (Dealbook)
J.P. Morgan just published a 96-page document titled “How We Do Business – The Report,” in which it lays out the changes the bank has made to better improve its corporate governance. On interesting note: the bank said it has spent $1.7 billion and added 16,000 employees since 2012 to improve its compliance and control efforts.
Buzz Around the Office
‘Manspread’ Ban (NY Times)
New York’s Metropolitan Transportation Authority is planning a new public service announcement to eliminate “manspreading” – when men spread their legs unnecessarily wide when sitting on subways. At least one men’s group is fighting the proposed movement, calling it sexist.
Quote of the Day: “I hope that in this year to come, you make mistakes.
Because if you are making mistakes, then you are making new things, trying new things, learning, living, pushing yourself, changing yourself, changing your world. You're doing things you've never done before, and more importantly, you're Doing Something.
So that's my wish for you, and all of us, and my wish for myself. Make New Mistakes. Make glorious, amazing mistakes. Make mistakes nobody's ever made before. Don't freeze, don't stop, don't worry that it isn't good enough, or it isn't perfect, whatever it is: art, or love, or work or family or life.
Whatever it is you're scared of doing, Do it.
Make your mistakes, next year and forever.”
― Neil Gaiman