Settlement delayed for banks, brokerages
By Ben White
The Washington Post
NEW YORK — A global settlement of multiple conflict-of-interest inquiries into Wall Street's biggest banks and brokerages seemed imminent as recently as last week. Now players on all sides seem resigned to a delay that could push a final deal well into January, if not beyond.
Part of the problem is money. A handful of firms that have avoided the embarrassing public release of internal e-mails showing unseemly business practices feel they should pay less than the $60 million to $75 million in fines requested by regulators last month.
This group includes Morgan Stanley, UBS Warburg, Lehman Brothers Holdings Inc., Bear Stearns & Co., U.S. Bancorp Piper Jaffray Inc. and Deutsche Bank AG.
Regulators have come back to these firms with a proposal that each pay a $50 million fine. In addition, each would be required to contribute $50 million annually for at least five years into a fund that would buy independent research produced by firms that do no investment-banking work.
This $50 million annual assessment would apparently apply to all firms involved in the talks, industry sources said. Each firm would be required to distribute the independent reports to brokerage clients along with reports produced by their own analysts.
The "50/50 proposal," as it is being called, is still too high for some.
"It's just not reflective of any behavior that's been discovered," an official at one of the six reluctant firms said yesterday. However, an executive at another one of the firms said regulators were getting closer to an acceptable deal.
Meanwhile, California regulators, who have been investigating Deutsche Bank and Thomas Weisel Partners, continue to think that the fines being proposed are too low, particularly for Deutsche Bank. Andre Pineda, California's deputy corporations commissioner, said he was unaware of the 50/50 proposal. "If the final settlement comes in too low, we won't sign on," he said.
Several other firms, including Credit Suisse First Boston Corp., the Salomon Smith Barney unit of Citigroup Inc., Goldman Sachs and J.P. Morgan Chase & Co. continue to be eager to pay a fine and move on.
Even so, some are negotiating somewhat smaller payments than originally proposed. Regulators say they fully expected such bargaining.
Sources say regulators originally proposed a fine of $250 million for Credit Suisse, which may be willing to pay around $150 million. Salomon, which was asked to pay $500 million, may pay around $350 million.
