Who could have seen this happening after Wall Street was popping corks from champagne bottles last week declaring the European crisis was over? It is not over and is not going anywhere because Greece refuses to address their debt!This new European uncertainty took down all the markets today.
After losing tons of customers to credit unions, Bank of America came to their senses and dropped the $5 debit card monthly fee.
Its only a matter of time now before the handcuffs come out for Corslime as MF Global admitted to federal regulators that money had been diverted out of customer accounts.
Here are the top financial stories of the day:
1) Greek vote brings uncertainty back to Wall Street-From Reuters
Stocks tumbled on Tuesday after investors were blindsided by a surprise call for a Greek referendum on an EU bailout plan, casting doubt on the sustainability of the recent market rally.
The S&P 500 has slid more than 5 percent so far this week in moves reminiscent of the stomach-churning market swings seen over the past two months and after investors thought the worst of the euro zone debt crisis was over.
The speedy pullback comes after stocks rebounded to post their best month in 20 years in October. The gains were fueled by hope for an eventual deal to rescue Greece, finally agreed upon at last week's European Union summit.
"The fact that we gave it back as quick as we did in two days is very concerning," said Ari Wald, an analyst at Brown Brothers Harriman.
"It looks very much as though it was a lot of short-covering, a lot of bears found themselves on the wrong side of the trade," he said of the October rally.
Analysts said if Greek voters reject the unpopular bailout in a vote proposed by Greek Premier George Papandreou, it would likely result in a "hard default" by Greece, causing bigger losses for banks and raising the threat of systemic risk.
The news slammed European stocks, particularly the region's banks, which slumped 6 percent. U.S. banks were also hit hard. Morgan Stanley, which investors worry has heavy exposure to Europe, fell 8 percent to $16.23.
Indexes swung sharply as successive European lawmakers lined up behind the bailout package but returned to close near session lows after a Greek government spokesman said the prime minister told his cabinet the referendum would go ahead.
The Dow Jones industrial average fell 297.05 points, or 2.48 percent, at 11,657.96. The Standard & Poor's 500 Index lost 35.02 points, or 2.79 percent, at 1,218.28. The Nasdaq Composite Index dropped 77.45 points, or 2.89 percent, at 2,606.96.
The selloff came on sharp spike in volume with 10.3 billion shares traded on the NYSE, the Amex, and the Nasdaq, 22 percent above its 20-day moving average, while the CBOE volatility index jumped 16 percent to 34.77, its highest since around mid-October.
Nearly six stocks fell on the NYSE for every one that rose.
Adding to the gloom, factory activity in Asia's big export economies slowed to the weakest rate in nearly three years in October, while UK manufacturing suffered a sharp decline, reigniting fears of a global slowdown.
The S&P 500 traded below its 14-day moving average for the first time since October 7, pointing to a possible shift in short-term momentum. The benchmark also broke through support at 1,220.
Wald said the S&P 500's 50-day moving average was now key support on the downside.
"You have got to cut it short at that 50-day moving average," he said. "If we can't hold the 50-day, which is around 1,190, it wouldn't be a very good technical picture."
Economic data showed the pace of growth in the U.S. manufacturing sector slowed in October, though improvement in new orders suggested resiliency in the sector.
"If we can keep Europe out of the headlines and Washington out of the headlines and just focus on the economic data and the corporate data we'd be in great shape," said John Canally, investment strategist and economist for LPL Financial in Boston.
In a move that put further pressure on commodity prices, Japan vowed to step into foreign exchange markets again. The government sold a record $98.7 billion on Monday in yen to curb its strength, which is hurting Japan's export-based economy.
The U.S. dollar index rose 1.5 percent. U.S. oil futures settled 1.07 percent down at $92.19, and copper prices fell 3 percent. Many commodities are priced in the greenback, making a spike in dollar prices more expensive for traders in other currencies and saps demand.
2) Bank of America drops $5 debit card fee plan-From Reuters
Bank of America Corp scrapped plans to charge a $5 per-month debit fee, handing a victory to consumers and protesters angry with big banks.
The second-biggest U.S. bank, whose shares were down over 3 percent, said on Tuesday that the move was in response to customer feedback and competition. Bank of America was under pressure to make the change as rivals backtracked from plans to charge customers for using their debit cards.
"It's a sign of consumer power in action," said Norma Garcia, manager of the financial services program for Consumers Union. "This is a sign of the marketplace working."
Last week JPMorgan Chase & Co and Wells Fargo & Co decided to cancel test programs, while SunTrust Banks Inc and Regions Financial Corp said on Monday that they would end monthly charges and reimburse customers.
U.S. Sen. Richard Durbin, the author of the swipe fee legislation, told reporters on Capitol Hill that the reversal by major banks was "an amazing victory" for consumers across the country.
"What we have basically proven is that with transparency and competition, consumers will make a choice about where they want to do business and walk away from those they think are not treating them fairly or are overcharging them," the Illinois Democrat said. "I hope the banking industry learns from this."
Anti-Wall-Street protesters, who set up camp in a New York City park more than six weeks ago to demonstrate economic inequality, also claimed the move by Bank of America as a victory, but one they shared with several other anti-bank initiatives.
"It's certainly an indication that Occupy Wall Street and the occupations that are going on across the country are steering public discussion," said Ed Needham, a spokesman for the Occupy Wall Street movement.
"This is what the movement would consider a very, very small first step on rectifying an oppressive dynamic between the financial services industry and the 99 percent."
Protesters say they are upset that the billions of dollars in bank bailouts doled out during the recession allowed banks to resume earning huge profits while average Americans have had no relief from high unemployment and job insecurity.
Needham said that among the other initiatives that could be credited with forcing the back-down by Bank of America was the month-long Bank Transfer Day campaign.
The Bank Transfer Day campaign, started by 27-year-old Californian Kristen Christian on Facebook on October 4, is encouraging people to close their bank accounts and move their money to credit unions on Saturday.
Bank of America, which planned to start charging the fee next year, began softening its stance last week. The Charlotte, North Carolina, bank planned to give customers more ways to avoid the charge, such as maintaining minimum balances, having paychecks direct-deposited or using their Bank of America credit cards
"We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee," Bank of America Co-Chief Operating Officer David Darnell said in a statement.
The reversal is another embarrassing about-face for Bank of America Chief Executive Officer Brian Moynihan. Last spring, he disclosed plans for a modest dividend increase this year, only to have the Federal Reserve Board deny the request.
Nancy Bush, a longtime bank analyst and contributing editor at SNL Financial, said she was surprised the bank backtracked after Moynihan's "flip-flop" on the dividend.
"If you're going to set a policy, set a policy," Bush said. "Talk it through beforehand, think through the ramifications and stick to your guns."
Bank of America's third-quarter results show Moynihan is making progress in turning around the company but his management team's communications skills "still need work," she said. The bank was also a victim of bad timing and joined other banks in misjudging customer sentiment, Bush said.
Shares of Bank of America were down 3.1 percent at $6.62 in afternoon trading. The KBW Bank Index was down 2.2 percent after a proposed Greek referendum threatened to upend a European bailout plan to contain the sovereign debt crisis.
3) MF Global Acknowledged Diverting Customer Funds-From The Wall Street Journal
MF Global admitted to federal regulators that money had been diverted out of customer accounts, according to a federal official who said the move violated the law.
The Wall Street brokerage, which filed for bankruptcy protection Monday, acknowledged the shortfall amid mounting questions from regulators as they went through the firm's books while trying to facilitate a sale to Interactive Brokers Group Inc., the official said. Regulators still don't know where the customer funds went, who directed the move or how widespread the practice was, the official said.
Regulators are still working to determine whether MF Global had a continuing problem with handling customer funds or if executives diverted funds as the company's financial situation deteriorated and grew more desperate, the official said.
MF Global didn't immediately respond to requests for comment.
Separately, MF Global hired restructuring adviser FTI Consulting Inc., people familiar with the matter said. The details of the assignment are unclear. An FTI spokeswoman didn't immediately respond to a request for comment.
FTI provides restructuring advice to distressed companies, helping them manage cash and other operations and sometimes filling interim executive roles. The firm competes with Alvarez & Marsal and AlixPartners, among others. Alvarez & Marsal has been overseeing the liquidation of Lehman Brothers Holdings Inc.'s estate since the bank filed for bankruptcy protection three years ago.
The regulatory inquiry comes as the chief executive officer of futures-exchange operator CME Group Inc. said Tuesday that a mismatch in MF Global's books, centered on how it handled billions in customer funds, was still being investigated after CME and other exchanges on Monday took emergency action to bar the firm and its clients from doing further business.
CME Group said that exchange staff and regulators were still trying to get a handle on the collapse of MF Global. "CME has determined that MF Global is not in compliance with [Commodity Futures
Trading Commission] and CME customer segregation requirements," said Craig Donohue, chief executive of CME, on a conference call discussing third-quarter results for the world's biggest futures exchange operator.
Currently, Mr. Donohue said, officials are "unable to determine the size or scope of the failure."
The comments deepen questions around the recordkeeping of MF Global, one of the biggest players on derivatives exchanges around the world. By law, clearing firms like MF Global are required to "segregate" the funds of their customers from the firm's own assets and from one another. If a broker fails, separate accounts make it easier to transfer customers' futures positions and funds to another broker.
The fact that customer funds aren't where they're supposed to be is not a good sign, said Dan Waldman, an attorney at Arnold & Porter and a former CFTC general counsel. "If a broker is dipping into the [segregated] funds to cover other expenses, that's a problem," said Mr. Waldman, who has no affiliation with the case at this time.
If account irregularities at MF Global were a one-time problem, regulators might have had a hard time detecting the issue, Mr. Waldman added. But an ongoing problem that went undetected would raise questions about the current regulatory system.
Obviously when customers are at risk and when the system doesn't work the way it was supposed to, people take a look and see if there's something else that needs to be done or is there a better system that needs to be built," Mr. Waldman said.
Mr. Donohue said Tuesday that the situation with MF Global remained "very fluid" and that the exchange continued to work with MF Global and its clients to transfer trading positions to other clearing firms.
The bankruptcy process for firms that run both a broker-dealer and futures-clearing business is complicated, Mr. Donohue said, because it involves two different regimes for protection of customer assets.
CME's regulatory responsibilities as an exchange involve auditing and supervising the members of its markets and clearinghouse, and Mr. Donohue said the exchange group was working with regulators to resolve issues related to customer collateral and trading positions held with MF Global.
"We are working with the CFTC and will be contacting the trustee to facilitate the transfer of customer positions and a portion of the supporting collateral," he said.
Quote of the Day from Dave Ramsey.com:
The most important thing about goals is having one. — Geoffry F. Abert
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