Treasury Secretary Timothy F. Geithner on Thursday urged the regulatory team that he leads to push ahead with new rules aimed at America’s money market funds, which manage $2.6 trillion.
In a letter to the Financial Stability Oversight Council, a special committee of senior regulators set up after the 2008 financial crisis, Mr. Geithner said the changes were “essential for financial stability.”
The Securities and Exchange Commission, which is the primary regulator for money market funds, had proposed the main changes favored by Mr. Geithner in his letter.
But the commission dropped its attempt at a money market fund overhaul last month after it become clear that a majority of its commissioners were not going to vote for the measures. Large mutual fund companies fiercely opposed the reforms, saying they were unnecessary and could harm a type of investment fund that had proved to be popular.
“You can be sure that the firms on the receiving end won’t take this passively,” said Jay G. Baris, a lawyer at Morrison Foerster, which represents money market funds.
During the 2008 crisis, investors fled money market funds in droves, which worsened the credit freeze that gripped the banking system. Money funds then received a big bailout from the Treasury and the Federal Reserve.
Before the passage of the Dodd-Frank Act, attempts to make changes to the money market fund industry would most likely have died after the commission dropped them. But the Financial Stability Oversight Council, set up by the Dodd-Frank financial overhaul legislation, can choose to take over from the commission.
Mr. Geithner lays out a number of ways in which the council, which meets Friday, can act.
In his letter, he urges the council to gather public comments on a range of reforms and then make a final overhaul recommendation to the Securities and Exchange Commission. The commission would be required to adopt those changes, or explain why it did not. Mr. Geithner said the council’s staff was already working on recommendations and he hoped they would be considered at the council’s November meeting.
The recommendation would include two changes supported by the commission. One would require money market funds to hold loss buffers. The other would end the money market funds’ practice of valuing investors’ shares at $1 even when the funds’ assets should reflect a value slightly below $1.
Mr. Geithner said in his letter that, while the S.E.C. is best positioned to regulate money market funds, the Financial Stability Oversight Council could move forward without waiting for the commission. The council, he wrote, could designate certain money market fund entities as systemically important and subject those firms to regulation by the Federal Reserve, which could then impose an overhaul.
Mr. Baris, the lawyer, said that a designating a money market fund as systemically important could make it hard for it to stay in business. “Who would want to invest in a fund that has been designated by the federal government in this manner?” he said. “It will drive investors away.” Mr. Baris said he believed that Mr. Geithner might face resistance on the council if any new rules single out specific money market funds.
In addition, the council could designate money market fund activities as critical to the working of the financial system’s plumbing. That would allow regulators to impose heightened risk management standards on money market funds.
Mr. Geithner wrote that without the changes, “our financial system will remain vulnerable to runs and instability.”
If the council acts, the mutual fund industry will almost certainly fight back. The industry’s lawyers will most likely contest the council’s interpretation of Dodd-Frank and perhaps even the council’s authority to act.
Article source: http://dealbook.nytimes.com/2012/09/27/geithner-urges-changes-to-strengthen-mutual-funds/?partner=rss&emc=rss
DealBook: Thomas Weisel, Banker Behind Armstrong, Says He Was Unaware of Doping
The financier Thomas Weisel recently boxed up the bright-yellow cycling jerseys that lined an entire wall of his office, which overlooks San Francisco’s harbor. They were gifts from Lance Armstrong, a longtime friend whom Mr. Weisel had bankrolled through seven Tour de France wins.
The evidence that Mr. Armstrong repeatedly used performance-enhancing drugs, which culminated in a televised confession with Oprah Winfrey on Thursday night, has destroyed his career, and now threatens to blacken the reputation of Mr. Weisel.
Mr. Weisel, 71, the founder of the cycling team that is at the center of the sport’s biggest doping scandal, is accused of wrongdoing in a federal whistle-blower suit that was leaked publicly this week. The suit, filed by Floyd Landis, a former teammate of Mr. Armstrong’s who has admitted to doping, claims that Mr. Weisel and other team officials “engaged in a systematic program of doping.” Mr. Weisel has also been linked to a $500,000 payment aimed at silencing a drug test Mr. Armstrong purportedly failed in the late 1990s.
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Despite several years of accusations of rampant doping on the team, Mr. Weisel, in his first public comments on the matter, said those accusations were false.
“I did not know until very recently that Lance Armstrong had engaged in doping while riding for the team,” he said. “Any allegation that I was aware of or condoned or supported doping by any team rider is false.”
Mr. Weisel said the credibility of the people interviewed in an October report by the United States Anti-Doping Agency, which described Mr. Armstrong’s doping activities, persuaded him that the cyclist had used performance-enhancing drugs. He said he had heard rumors of drug abuse, but dismissed them because the cyclists were passing the drug tests. He never personally saw an instance of doping on the team, he said.
Mr. Weisel is a legend in investment banking, where attention to detail can make — or break — a deal. Now it is clear that Mr. Armstrong and other cyclists involved in Tailwind Sports, the holding company for the United States Postal Service cycling team and an organization that Mr. Weisel led as chairman, were using performance-enhancing drugs right under his nose. If he did not know about the team’s win-at-all costs approach, he should have, friends and rivals alike say.
Since October, when the antidoping report was issued, Mr. Weisel has found himself in the middle of a media storm. The report did not name Mr. Weisel, but did say that a “small army of enablers, including doping doctors, drug smugglers, and others within and outside the sport and on his team” helped Mr. Armstrong.
Mr. Armstrong, in hopes of mitigating his lifetime ban from Olympic sports, might implicate Mr. Weisel and other team owners, according to people briefed on the case. So far, Mr. Weisel said, neither Mr. Armstrong nor any rider on the team has said that he discussed doping with Mr. Weisel or that he witnessed Mr. Weisel participate in or observe any act of doping.
Mr. Weisel said he was cooperating with federal authorities and has testified that he knew nothing of Mr. Armstrong’s activities. About two years ago, he turned over pages of documents related to Tailwind’s activities. “I am as dismayed as everyone else to see a sport that I love and have supported scandalized by this inexcusable behavior,” he said.
Mr. Weisel is best known on Wall Street for the technology companies he has advised, like Yahoo, Sunglass Hut and Amgen. In the 1990s, he ran Montgomery Securities, eventually selling it for more than $1 billion. He then started his own firm, which struggled to survive in the volatile world of technology banking. It was eventually sold to Stifel Nicolaus, where he is now a co-chairman.
While many bankers fill their offices with tombstones, paperweight-like trinkets that commemorate the closing of a big deal, Mr. Weisel has always favored sports paraphernalia.
His passion for sports is no secret; he even liked to hire athletes to work at his firm. Mr. Weisel, who was raised in Milwaukee, is a former competitive speed skater and helped the troubled United States Ski Team get back on its feet.
An avid cyclist, Mr. Weisel started Montgomery Sports, his first cycling team, in the late 1980s. Mr. Armstrong was an early rider for one of its teams. The idea was to develop a top-flight professional United States cycling team. The team went through a number of corporate sponsors before the Postal Service signed on in the mid-1990s. According to a biography of Mr. Weisel, “Capital Instincts: Life as an Entrepreneur, Financier and Athlete,” Mr. Weisel invested over $5 million in the early days.
On Wall Street, people knew never to try to schedule a meeting with Mr. Weisel in July. His calendar was blocked because he was almost always in Europe for the Tour de France. He accompanied Mr. Armstrong for each of his consecutive victories between 1999 and 2005. Mr. Weisel said he was typically on the course for several days and would meet the team at the finish line in Paris.
“If not for Thom’s generosity and vision, there would be no Tour de France titles behind my name,” Mr. Armstrong wrote in the forward to Mr. Weisel’s book. Mr. Weisel, he wrote, did not “meddle with the team’s strategy or training,” but was instead a “spectator with the best seat in the house.”
“He’ll pull up alongside me, hanging out of the car, beating the side of the car, just screaming at the top of his lungs. That’s his bliss. I love it when he is there.”
In the wake of the antidoping report, Mr. Armstrong was stripped of his Tour de France titles. On one Tour, in 1999, the team masseuse, Emma O’Reilly, has said, according to published reports, that she witnessed Mr. Weisel huddling with Mr. Armstrong after a report that the cyclist had tested positive for a banned substance. Mr. Weisel was frantic about what to do, she said. Mr. Weisel said he did not have “any recollection” of the incident to which Ms. O’Reilly was referring.
Mr. Weisel said he never discussed doping with Mr. Armstrong because the cyclist was constantly asked about the subject, was tested frequently and had denied doping countless times. “I believed him,” Mr. Weisel said.
Mr. Landis’ suit contends that Mr. Weisel’s financial ties and influence over a governing body of cycling “helped make it possible for the U.S.P.S. Team to carry on the extensive program of systematic doping.” The suit does not single out Mr. Weisel as being present in any of the many instances of blood transfusions and use or distribution of performance-enhancing drugs that Mr. Landis recounts from his years on the team, from 2002 to 2004.
Mr. Weisel removed Mr. Armstrong’s jersey’s from his office after reading the antidoping report. He said that he had not spoken to Mr. Armstrong since the report, and that he had not been close to Mr. Armstrong for some time. “I’m disappointed,” Mr. Weisel said. “I believed that Mr. Armstrong and these other riders had not doped while on the team, as Mr. Armstrong had consistently and publicly stated.”
Article source: http://dealbook.nytimes.com/2013/01/17/thomas-weisel-banker-behind-armstrong-says-he-was-unaware-of-doping/?partner=rss&emc=rss