Bear, BNP / SG, Citi, DB, Merrill, Nomura, Subprime, Wachovia

The Wall Street Journal reports that US federal prosecutors are investigating whether a former executive at Bear Stearns improperly withdrew funds he invested in one of the firm's two troubled hedge funds whilst at the same time talking up the prospects of the funds to investors. Ex-Bear fund manager Ralph Cioffi is said to have withdrawn $2m of his own money from one of the funds just weeks before the funds imploded in April. The fund manager, however, did retain some $4m in the other (much riskier) fund. Cioffi left Bear last week.

Reuters reports that BNP Paribas CEO Baudouin Prot told Paris Match in a recent interview that it would make 'no sense' for his bank to merge with French rival Societe Generale. Prot said that 'our two banks both have powerful financial and investment needs, and have the same customers who represent around 30% of each company's business. Merging the two would make no sense'.

Bloomberg reports that Citigroup's new CEO has appointed Don Callahan, a man who he once worked with at Morgan Stanley, as the company's new CAO. Callahan, 51, will take charge of ops and IT, corporate affairs and marketing. And The New York Post reports that Merrill boss John Thain is bringing back Jeff Kronthal, the man who ran trading and underwriting for CDOs, and who was axed by former Merrill CEO Stan O'Neal almost 18 months ago. Kronthal will work as a consultant to fixed-income boss David Sobotka.

The Wall Street Journal reports that Deutsche Bank will pay $25m to settle Enron-related claims, and will subordinate $416m in claims against the Enron estate.

Bloomberg also reports that Nomura has said that, despite the recent rumours, it has no interest in acquiring broker Collins Stewart.

US Treasury Secretary Hank Paulson has said that he feels that banks are making progress in cleaning up their subprime mess. CNBC quotes Paulson, who said that 'there's no doubt that greater disclosure, which has been driven by investors, is a positive. I think for a great number of financial institutions, standing behind their SIVs and taking them on their balance sheets is a very positive step, and it will help move a process along'. Paulson again described the current market difficulties as 'unprecedented'.

Finally, the Charlotte Observer reports that Wachovia Corp. is to lay off a further 20 staff in fixed income, including some in the firm's structured products group. Wachovia spokesperson Christy Phillips-Brown said that 'we continuously assess all of our businesses, and will respond appropriately to the current business environment across our platform'. (Looks like more layoffs ahead, then).

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