Issues of governance and oversight continue to play out at Wells Fargo, which faces into a vote of confidence by shareholders next week. Shareholder advisory group Institutional Shareholder Services (ISS) recommended earlier this month that shareholders vote against 12 of the 15 directors. "The recommendation was another blow to the country's third-largest bank, which has been struggling for months to move past revelations that thousands of employees created as many as two million accounts in customers' names without permission to hit lofty sales targets," says Reuters. "ISS's recommendation followed one by Glass Lewis, its closest competitor, which recommended votes against six directors for similar reasons. The ball is now in the shareholders' court. A sampling of investors who spoke to Reuters were split on how to vote." While US banks have suggested that Wells Fargo's hard-selling culture was an anomaly, the packed sessions at this month's Consumer Banking Association suggests otherwise. Lafferty News suspects that the Wells Fargo story has a long way to run yet.
Deutsche Bank will pay a total of $157 million in fines for its inadequate oversight of traders, breaking the Volcker rule, along with preventing currency traders from chatting online with competitors. "Significant gaps existed across key aspects of Deutsche Bank's Volcker Rule compliance program," the Fed said Thursday, according to Bloomberg. "As for chats, the bank failed to detect that currency traders engaged in 'unsafe and unsound conduct', disclosing some positions or talking about coordinating strategies, the Fed said." The Volcker Rule is intended to prevent a bank with federally-insured deposits from betting with its own money. Although the penalty is modest in the context of the several billion in fines and settlements paid by Deutsche Bank in recent years, it's another in a long series of fines incurred for failing to control and supervise its staff. "'It's pretty unpleasant that they stand out with the Volcker Rule violations,' Andreas Plaesier, an analyst at MM Warburg with a hold rating on Deutsche Bank shares, said by phone. "It's really surprising just how many controls failed across the bank in recent years and it doesn't cast a good light on former management." Many banks are hoping that the Volcker Rule will be at least amended if not discarded under Treasury Secretary Steven Mnuchin.
Not many banking-related movies around at the moment, but the Guardian's review of Going in Style raised a grim chuckle for connecting Steven Mnuchin-related dots. "In the predictably inert, if not explicitly vile, geriatric buddy movie Going in Style, Michael Caine plays an octogenarian prole who is about to lose his home to a heartless bank. His cashflow problems necessitate the obligatory senior tete-a-tete with the obligatory insensitive bank manager, a stock character previously seen in Saint Vincent and Drag Me to Hell. Dissatisfied with the result of their little chinwag, Caine and his fellow retirees Morgan Freeman and Alan Arkin decide to rob the bank," writes Joe Queenan. "Going in Style was co-produced by Steven Mnuchin, a hedge-fund manager recently named secretary of the US treasury by the irrepressible Donald Trump. During the financial crisis of 2009, Mnuchin made a fortune for himself by investing in a mortgage bank that had a nasty habit of foreclosing on peoples' homes. In fact, he invested in several of these enterprises. Anyone who thinks the Age of Irony is dead should think again."
In other media news, this weekend sees the return of HBO's Silicon Valley, the preferred vehicle for darkly comic comment on the tech bro culture. The show's main villain has become a proxy for Uber's Travis Kalanick. (Sample quote: "Failure is growth. Failure is learning. But sometimes failure is just failure.") For newcomers to the show, it revolves around five coders who build a business called Pied Piper, using a "middle-out compression algorithm" which has become a kind of in-joke among programmers. The algorithm is supposed to compress videos, reducing the amount of data needed to stream video that tricks the eye into thinking it's high quality. Big media businesses are trying to figure out if they should love or hate algorithms, particularly now that so many of them have embraced Facebook as a platform for the delivery of their content. As the Chicago Tribune discovered recently, being at the mercy of Facebook's algorithms leaves it with wild swings in readership. As Digiday writes: "The Facebook anguish continues. A Medium post investigating declining Facebook reach has set off the most recent alarm bells among publishers. Kurt Gessler, deputy editor for digital news at the Chicago Tribune, posted that since January, the Tribune has seen a significant drop in the reach of its posts on Facebook, despite having grown its fan base. The post sparked a sigh of validation across publishers as others chimed in on social media that they're seeing similar declines."
And in that spirit, this week's reading recommendation is a book by Irish journalist Mark O'Connell, with the excellent title To Be A Machine: Adventures among cyborgs, utopians, hackers and the futurists solving the modest problem of death.
Quotes of the Week
A selection of quotes that have caught our eye of late at Lafferty News. Truth be told, one or two are more than a week old but they bear repeating nonetheless...
- "The digital world's most imposing paradox continues to ring true: if it's secure it's unlikely to be easily accessible, and if it's easily accessible it's unlikely to be secure."
Izabella Kaminska, Financial Times
- "According to the [leaked] memo, the bill would strip [the CFPB] of its authority to bring cases against financial institutions under a provision known as unfair, deceptive and abusive practices, and eliminate databases of consumer complaints."
- "Most banks think that mobile and digital is a project to invest in, not a cultural transformation. But this dependency on our devices is a cultural transformation."
Chris Skinner, BankNxt
- "My life has been utterly destroyed because I did the right thing."
Whistleblowing ex-Unicredit executive, Jonathan Sugarman, quoted in the Irish Times
- "The inconvenient Apple Pay truth is that if Apple is really playing the long game, they might have to be willing to pay for it. And, while they're at it, give merchants some incentive to push it."
Karen Webster, pymnts.com
Finally, in social media news, @LaffertyNews is now being followed by a Twitter account called Machine Learning: food for thought.
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