DealBook Today's Top Headlines on June 6, 2016: Credit Suisse Boss Faces Revolt | Panama Papers Show How Rich U.S. Clients Hid Millions Abroad | JPMorgan Chase Embraces Business Casual.
Monday, June 6, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
CREDIT SUISSE BOSS FACES REVOLTCredit Suisse,
the second-largest bank in Switzerland after UBS, is in open revolt just
a year after Tidjane Thiam took over as chief executive and shifted the
bank's focus to wealth management,
Landon Thomas Jr. reports in DealBook. Shares in Credit Suisse are also down 50 percent over the last year.
For decades, Credit Suisse was dominated both culturally and financially by a richly paid banking elite and these deal makers are now furious at Mr. Thiam. He has cut their pay and blamed them for the $6 billion in losses that the firm has had on his watch.
Credit Suisse isn't the only bank to move away from traditional investment banking, but Mr. Thiam has done little to hide his disdain for these activities.
The question is whether his blunt, domineering style will end up
alienating bankers rather than persuading them of the merits of his
"It is never easy to tell people that whole parts of the business that
have put bread on their table and bought them a second house have become
uneconomic," said Guy Moszkowski, a longtime securities analyst at
It is no surprise that he has not bent to the complaints of bankers and
traders in unprofitable businesses. "There needs to be a cultural
change," he said in a television interview in March, in which he argued that bankers were pursuing risky trades to justify their high pay.
In turn, deal makers in London and New York, who have seen their bonuses
cut by nearly 40 percent, have not hidden their dislike for him.
Several bankers, who spoke on the condition of anonymity, grumbled that Mr. Thiam had "lost the building."
That's Wall Street's way of saying that he no longer commanded the
respect of traders. Bankers also said that when Mr. Thiam has appeared
on television in recent months, employees loudly vented their
frustrations at the screen.
Many at Credit Suisse find Mr. Thiam's personal style jarring. He enjoys a robust social life
and has been making the rounds at clubs in London and Davos,
Switzerland, while thousands are being laid off and stock is at a
His defenders say he has no choice, because Credit Suisse can no longer
rely on trading derivatives. And wealth managers in Switzerland and Asia
are embracing the new strategy. He also asked his board for a 40
percent cut in his bonus, taking in $4.5 million for the six months he
worked last year.
The board continues to stand by him, but Richard E. Thornburgh, a former
Credit Suisse banker with 30 years of experience at the firm who is now
chairman of the board's risk committee, has met with top bankers and
traders to hear them out and urge them to remain focused on their
For the moment, Mr. Thiam seems willing to accept the wounded cries of
his bankers to ensure the success of his grand plan. "Is there a vision.
Is there a direction?" Mr. Thiam asked in a speech last year. "The Germans say that the horrible end is better than horror without end."
PANAMA PAPERS SHOW HOW RICH U.S. CLIENTS HID MILLIONS ABROADThe New York Times's examination of the Panama Papers has found that Mossack Fonseca had at least 2,400 United States-based clients over the past decade
and set up at least 2,800 companies on their behalf in the British
Virgin Islands, Panama, the Seychelles and other jurisdictions that
specialize in helping to hide wealth. The trove of internal documents
from the law firm were obtained by the German newspaper Süddeutsche
Zeitung and the International Consortium of Investigative Journalists,
and has now been shared with The Times.
The documents show that Mossack Fonseca did much more than create offshore shell companies and accounts,
Eric Lipton and Julie Creswell report. For many American clients, the firm offered a guide to skirting or evading United States tax and financial disclosure laws.
The methods included locating an individual from a "tax-convenient" jurisdiction to be the straw man owner of an offshore account
or encouraging a client to use his foreign passports to open offshore
accounts and avoid regulatory scrutiny. If the compliance department at
one foreign bank contacted by Mossack Fonseca asked too many questions,
the firm simply turned to other, less inquisitive banks. The firm's
clients included people with criminal records, in spite of its public
stance of not working with individuals convicted of crimes.
Federal law allows United States citizens to transfer money overseas,
but these foreign holdings must be declared to the Treasury Department,
and any taxes on capital gains, interest or dividends must be paid.
Federal officials estimate that the government loses $40 billion to $70
billion a year in unpaid taxes on offshore holdings.
Experts who examined the documents were reluctant to declare that the
law firm or its clients had broken any laws given that no charges had
been filed, but they did say that they were surprised at how
explicitly Mossack Fonseca had offered advice that appeared carefully
crafted to help clients avoid United States tax laws.
Mossack Fonseca has said repeatedly that it had honored international
tax and banking laws, but presented with summaries of several cases by
The Times, it did not try to explain its actions. "Our significantly
expanded compliance office today not only evaluates new client
candidates, but also existing accounts, and especially those that were
established prior to the new international regulatory regime coming into
effect," a representative said in a written statement, referring to a
2010 law passed by Congress. "It wasn't always this way."
The American client list does not appear to include the sort of
high-profile political figures that have emerged in other parts of the
world, but Mossack Fonseca's services were in high demand by the rich and famous in the United States. Read more about them here.
ON THE AGENDA The chairwoman of the Federal Reserve, Janet Yellen, will speak at the World Affairs Council of Philadelphia at 12:30 p.m.Martin Shkreli, the former chief of Turing Pharmaceuticals, will appear in federal court in Brooklyn at 12:45 p.m.
JPMORGAN CHASE EMBRACES BUSINESS CASUALJPMorgan is making business casual its everyday dress code,
Michael J. de la Merced reports in DealBook.
The bank told its 237,420 employees in an internal memorandum that it
was moving away from the uniform of a white shirt and dark tie.
"More clients are dressing informally, and many parts of our
business are already business casual," JPMorgan's operating committee
wrote in the memo, which was reported earlier by The Wall Street Journal.
JPMorgan employees have already been dressing more casually, drawing inspiration from Jamie Dimon, the chief executive.
Information technology workers and other behind-the-scenes employees already dress more informally. Bankers in places like Silicon Valley also opt for khakis and sweaters.
Even the company's most traditional of deal makers, the former vice
chairman James B. Lee Jr. - known for his slicked-back hair and business
shirts with white collars and cuffs - directed his bankers to dress in
hoodies during the run-up to Facebook's initial public offering of
Still, they won't be switching out of tailored suits immediately. The
memo specifies that employees should dress for the client. Denim is not
considered appropriate and employees push the boundaries of the dress code at their peril.
A set of frequently asked questions about corporate attire warns that
if employees are not dressed appropriately, they "may be subject to
disciplinary action, up to and including termination of employment."
Rothschild & Company to Acquire Compagnie Financière Martin MaurelThe combination
of their private banking and asset management operations in France
would create a bank with $39 billion in assets under management.
Owner of Military Security Business Said to Be for Sale Constellis
Holdings, the owner of the military security services business formerly
known as Blackwater, is considering a sale that it hopes could value the
company at as much as $1 billion, including debt, Reuters reports,
citing people familiar with the matter.
As U.S. Banks Exit Commodities, an Australian Rival Takes OverAfter the
Federal Reserve pledged to crack down on banks engaged in the lucrative
business of commodities trading, most big Wall Street firms got out, but
Macquarie, Australia's largest investment bank, has taken the opposite
Founder of Private Equity Firm Reopens Battle with Citi Over EMI DealGuy Hands, the
founder and chairman of Terra Firma, is accusing Citigroup of misleading
him into overpaying for the failing music group EMI.
The Hedge Fund Industry Needs a Makeover Despite being
an industry made of risk takers, hedge funds are not doing enough to
take some very easy stands on diversity and inclusion, Mary Childs
writes in a Financial Times op-ed.
Billionaires Back New Shipping Fund Eric Schmidt of
Google and a clutch of billionaires have backed a new quantitative
hedge fund that mines global shipping data to track and trade
international commodity flows.
Man Group Promotes Chief Financial Officer to Co-President Man Group has
promoted its chief financial officer, Jonathan Sorrell, to co-president
after he led its efforts to diversify its core quant and stockpicking
strategies and lessen its reliance on single funds.
South Korean Company's $4.9 Billion I.P.O. Faces Setback Lotte Group's
hotel unit is facing delays with its initial public offering after the
company and a member of its founding family became embroiled in a
bribery investigation, Bloomberg reports, citing people familiar with
New York Fed Initially Rejected Transfers from Bangladesh Central Bank AccountOn the day of
an online theft from the Bangladesh central bank's account, the New York
Federal Reserve had rejected 35 requests to transfer funds to various
overseas accounts, Reuters reports, citing a New York Fed official and a
senior Bangladesh Bank official.
If the Economy Is Sinking, Policy Makers Are Far From PreparedIt seems hard
to think of a time in recent United States history when policy makers
have had so little room to maneuver to help the economy.
Workers' Wages Rebound, While Wall Street SquirmsMedian weekly
wages, adjusted for inflation, have finally climbed above their 2009
levels, even as corporate profits have slipped from their recent peak,
Jeff Sommer writes in Strategies.
'Stairway to Heaven' to Be Scrutinized in Court in Copyright CaseThis case - in
which a lawsuit claims that part of the classic hit by Led Zeppelin was
copied from "Taurus," a tune by Spirit - is being watched as a test of
the limits of copyright.
Why the Economic Payoff From Technology Is So ElusiveAreas like
computing and mobile devices have made advances, but the government has
reported disappointingly slow growth and continuing stagnation in