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Wells Fargo general counsel postpones planned retirement

James Strother, Wells Fargo Co’s (WFC.N) general counsel, who had originally planned to retire at year-end, will stay on indefinitely in the position to deal with fallout from the bank’s sales scandal, according to a bank spokesman.

“In light of recent events the decision was made to have Jim Strother remain with the company and continue to serve as our general counsel,” said Peter Gilchrist, a Wells Fargo spokesman.

The decision was made by the bank’s board of directors and a search is under way for Strother’s replacement, Gilchrist said.

An email and call to Strother were not returned.

The scandal pertains to Wells Fargo opening as many as 2 million accounts in customers’ names without their permission. The bank is facing lawsuits from former employees and customers, as well as increased regulatory scrutiny.

Strother became the San Francisco-based bank’s top lawyer in 2003, and sat behind then-CEO John Stumpf at a bruising congressional hearing about the scandal in September. He has been at Wells Fargo and its predecessor, Norwest Corporation, since 1986.

Strother was deeply involved in Wells Fargo’s acquisition of Wachovia during the 2008 financial crisis. He also keeps a close eye on compliance issues, something that is not always a general counsel’s responsibility.

Wells Fargo reached a $190 million regulatory settlement over the phony accounts in September, and parted ways with Stumpf the following month.

It is now working to answer questions from politicians and regulators, replace a flawed compensation system that incentivized employees to open phantom accounts, and repair its reputation among customers, including municipalities that have cut business ties.

Because he turned 65 this year, Strother would ordinarily be required to retire at the end of the year, according to an internal policy at Wells Fargo affecting members of the bank’s operating committee.

However, the bank occasionally makes exceptions to this rule in extraordinary situations. During the financial crisis, then-Chairman Dick Kovacevich postponed his retirement by slightly more than a year.

(Reporting by Dan Freed in New York; editing by Gary Grosse and Andrew Hay)

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After OPEC deal, oil expected to rally

NEW YORK Oil’s blistering rally of up to 10 percent to $50 a barrel on Wednesday should continue into next week, analysts and fund managers said, after the world’s top producers announced a historic deal to rein in output.

The Organization of the Petroleum Exporting Countries reached its first deal to cut oil output since 2008 – signaling its return to managing supply in world markets.


Why OPEC cuts may not boost oil prices 

The path ahead for the oil market, however, is expected to be volatile, as those who positioned for a rally unwind their trades to book profits. The possibility that OPEC will be unable to meet its commitment to cut production could also undermine prices as well.

That makes the long-term path for oil more uncertain, as few expect the commodity to reach $60 a barrel soon.

“You’re going to get a few days of fluctuations,” Paul Mumford, fund manager at Cavendish Asset Management said.

“Nothing goes up in straight lines and people do like to take profits when big moves like this occur.”

Oil prices soared to their highest in over a month on the news of the deal, with global benchmark Brent crude futures LCOc1 plowing through the $50 a barrel, clinching their biggest daily percentage gains since February. [O/R]

Speculators piled into crude oil options and futures in the days ahead of the OPEC meeting. Volumes in call options that allow the holder to buy January crude futures at $60 per barrel CL600A7 soared to a record a day ahead of the meeting.

As these positions are unwound, oil prices could see some selling, market participants said.

From a technical perspective, for Brent crude LCOc1 to show a bullish trend, prices must rally above $53.70, while U.S. crude West Texas Intermediate (WTI) futures CLc1 would need to surpass $49.85, analysts said.

Brent ended Wednesday’s session at $50.47, up $4.09 or 8.8 percent, after hitting an intraday high of $50.49. WTI settled at $49.44, up $4.21, or 9.3 percent with a session high of $49.90,

“I think prices will continue to rally and we could see it move up to that $51.20 and maybe even the $53.60 a barrel level,” Dean Rogers, senior analyst at Kase Co, said.

“The reality is if prices are above $50, people are going to turn wells back on, they’re going to start drilling and so the market could, as reality sets back in over the next few weeks, settle back into that $10 range we’ve been in since summer.”

U.S. shale producers are poised to benefit the most – if their production increases, it could offset OPEC’s efforts.

“We anticipate oil prices will likely remain rangebound between $50 and $60 per barrel over the next few years,” said Rob Thummel, portfolio manager at Tortoise Capital, which has $15 billion in energy assets.

Brent’s recent high in October was $53.70, and movement above that point would signal that a further rally is possible, said Fawad Razaqzada, a market analyst at

WTI could rally to as much as $59 a barrel over the next few weeks after surpassing $49.85 a barrel, said Walter Zimmerman, chief technical analyst at ICAP. That $49.85 a barrel level represents the Fibonnaci 78.62 retracement of last decline from October to November, Zimmerman said. The market may first pull back, as traders adjust their positions, he said.


(Reporting by Devika Krishna Kumar and Jessica Resnick-Ault; Editing by Marguerita Choy)

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Goldman shares hit highest level since financial crisis in post-election rally

Shares of Goldman Sachs Group Inc (GS.N) on Wednesday climbed to their highest levels since the financial crisis, as the bank benefited from a post-U.S. presidential election rally.

The stock reached $220.77 in late morning trading, returning to a point not seen since December 2007.

Goldman was the biggest driver for the Dow Jones Industrial Average .DJI, adding 56.2 points out of a net gain of 66.6 points for the index. Goldman, like other Wall Street firms, has seen its stock soar after the Nov. 8 election, as investors expect banks to see benefits from rising interest rates and lighter regulation under a Donald Trump presidency.

In recent years, bank stocks have been largely thought of as utilities, rather than growth stocks. Post-financial regulations have forced banks to hold large amounts of capital which hurt returns.

But since the election, the KBW Nasdaq Bank Index has risen 11 percent, outpacing the broader Dow, which is up 4 percent.

Deutsche Bank on Tuesday hiked its price target for Goldman to $255 from $180, saying a stronger economy would bode well for the bank’s businesses like mergers-and-acquisition advisory services, capital markets and trading.

Not everyone is so bullish on Goldman.

Nomura’s Instinet research arm on Tuesday downgraded the bank from “buy” to “neutral,” arguing that the potential benefits of a Trump presidency may already be priced into Goldman shares.

“We see limited upside for Goldman … and we expect the shares to lag, as the ‘rising Trump tide’ euphoria begins to fade and investors become more selective,” Instinet analyst Steven Chubak wrote in a note.

(Reporting by Olivia Oran and Sinead Carew in New York, Editing by Franklin Paul and Jonathan Oatis)

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FINRA fines Merrill Lynch for failures in supervision of leveraged clients

NEW YORK The Financial Industry Regulatory Authority said on Wednesday it fined Bank of America (BAC.N) Merrill Lynch $7 million for inadequate supervision of client brokerage accounts that used leverage to buy Puerto Rican municipal bonds and other securities.

FINRA found that between 2010 and mid-2013, Merrill Lynch’s systems did not adequately enforce policies that govern how clients can use securities-backed loans. Lines of credit, called loan management accounts at Merrill Lynch, allow clients to borrow money using the securities in their portfolios as collateral.

FINRA found Merrill Lynch’s systems failed to ensure the suitability of Puerto Rican municipal bonds and closed-end funds for customers who were highly leveraged through these loans or whose investments were mostly concentrated in Puerto Rican securities.

FINRA said that 25 customers with modest net worth had three-quarters of their portfolios invested in Puerto Rican securities and lost a total of $1.2 million.

The fine includes $780,000 in restitution for those clients.

“Following a comprehensive internal review of our loan management accounts, we reported issues to FINRA, cooperated fully with their inquiry and have strengthened our controls and procedures,” Bank of America spokesman Bill Halldin wrote in an email.

Merrill Lynch neither admitted nor denied the charges.

(Reporting By Elizabeth Dilts; Editingnby Steve Orlofsky)

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Oil up more than 8 percent on OPEC deal to cut output to 32.5 million bpd

New York Oil prices rose more than 8 percent on Wednesday as some of the world’s largest oil producers agreed to curb oil output for the first time since 2008 in a last-ditch bid to support prices.

OPEC agreed to cut production to 32.5 million barrels per day, Kuwait’s oil minister said. The cuts include Iraq reducing output by 200,000 bpd to 4.351 million bpd beginning in January.

Kuwait, Venezuela and Algeria have agreed to monitor compliance with the OPEC agreement.

Non-OPEC member Russia has agreed to cut output by 300,000 bpd. OPEC will meet with non-OPEC producers on Dec. 9.

U.S. West Texas Intermediate crude futures CLc1 rose $4.02 to $49.25 a barrel, a 8.9 percent gain, by 11:24 a.m. (1624 GMT). WTI briefly traded at a high of $49.37 a barrel, a 9 percent gain.

Brent crude futures LCOc1 rose $3.79 to $50.17 a barrel, a 8.2 percent gain.

(Additional reporting by Amanda Cooper and Karolin Schaps in London, Henning Gloystein in Singapore; Editing by Marguerita Choy and Chizu Nomiyama)

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U.S. private jobs, consumer spending data support Fed rate hike

WASHINGTON U.S. private employers stepped up hiring in November and consumer spending increased last month, the latest signs of economic strength that could further cement the case for an interest rate hike from the Federal Reserve next month.

The data on Wednesday also showed income rising solidly and savings climbing to a seven-month high in October, positioning households to boost spending in the future.

“There is nothing in today’s reports that put a roadblock in front of a Fed rate hike in December. The economy continues to move ahead powered by the American consumer who has got the income to both spend and save for a rainy day,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The ADP National Employment Report showed that private payrolls increased by 216,000 jobs this month, well above economists’ expectations for a gain of 165,000 jobs. The report is jointly developed with Moody’s Analytics.

The ADP figures come ahead of the Labor Department’s more comprehensive employment report on Friday, which includes both public and private sector payrolls. Economists polled by Reuters are looking for nonfarm employment to have risen by 175,000 jobs in November after increasing by 161,000 jobs in October.

In a separate report, the Commerce Department said consumer spending, which accounts for about 70 percent of U.S. economic activity, increased 0.3 percent after an upwardly revised 0.7 percent gain in September. Spending in September was previously reported to have risen 0.5 percent.

A third report showing a marginal increase in contracts to buy previously owned homes last month, however, put a wrinkle in an otherwise brightening economic outlook.

The consumer spending and private hiring reports added to data on residential construction, home sales, inflation and manufacturing that have suggested the economy sustained its momentum early in the fourth quarter after growing at its quickest pace in two years in the July-September period.

The government reported on Tuesday that gross domestic product increased at a 3.2 percent annual rate in the third quarter, driven by strong consumer spending and a surge in soybean exports.

A strengthening economy, together with a labor market that is near full employment could make the Fed comfortable to hike rates at its Dec. 13-14 policy meeting. The U.S. central bank raised its overnight benchmark interest rate last December for the first time in nearly a decade.

The dollar .DXY was trading higher against a basket of currencies, while prices for U.S. government bonds fell. Stocks on Wall Street generally rose, with both the Dow Jones industrial average .DJI and the SP 500 index .SPX hitting record intraday highs.


Consumer spending could get further support next year if U.S. President-elect Donald Trump’s proposals to cut taxes and boost spending are approved by Congress.

With consumer spending firming, inflation continued to gain in October. The personal consumption expenditures (PCE) price index rose 0.2 percent after similar increases in both August and September. In the 12 months through October the PCE price index rose 1.4 percent, the biggest advance since October 2014, after increasing 1.2 percent in September.

Excluding food and energy, the so-called core PCE price index gained 0.1 percent after rising by the same margin in September. That left the year-on-year increase in the core PCE at 1.7 percent in October. The core PCE has increased by that same margin for three straight months.

The core PCE is the Fed’s preferred inflation measure and is running below its 2 percent target.

“The bottoming out in energy prices earlier this year has contributed to stronger overall inflation,” said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh.

“Inflation will continue to pick up over the next couple of years. Stronger wage growth as the labor market continues to tighten will lead firms to raise prices, as will the pass-through of higher energy prices throughout the broader economy.”

The sustained uptick in price pressures, however, curbed the gain in inflation-adjusted consumer spending, which increased 0.1 percent last month after rising 0.5 percent in September. That suggests some moderation in consumer spending this quarter from the third quarter’s solid 2.8 percent pace.

Overall consumer spending in October was supported by a 1.0 percent increase in purchases of long-lasting manufactured goods such as automobiles. Spending on services fell 0.2 percent.

Personal income rose 0.6 percent last month after increasing 0.4 percent in September. Wages and salaries advanced 0.5 percent for a second straight month.

Savings increased to $860.2 billion, the highest level since March of this year, from $814.1 billion in September.

(Reporting by Lucia Mutikani; Additional reporting by Dan Burns and David Lawder; Editing by Paul Simao)

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Trump’s Treasury pick targets taxes, trade reforms: media

WASHINGTON President-elect Donald Trump’s pick to lead the U.S. Treasury, Steven Mnuchin, said on Wednesday the administration would make tax reform and trade pact overhauls top priorities as they seek a sustained pace of 3 percent to 4 percent economic growth.

Mnuchin also signaled a desire to remove U.S. mortgage-finance companies Fannie Mae and Freddie Mac from government ownership, a move that could have wide-ranging ramifications for how Americans pay for their homes.

The one-time Goldman Sachs banker, together with Wilbur Ross, Trump’s nominee for commerce secretary, outlined Trump’s economic agenda, including what Mnuchin called the largest tax overhaul since the Ronald Reagan administration, in an interview on CNBC.

Trump announced the economic team nominations, along with that of Chicago Cubs co-owner Todd Ricketts as Ross’s deputy, in a statement on Wednesday.

Mnuchin and Ross reinforced the sweeping proposals Trump put forth in September to simplify the tax code and slash the corporate tax rate to 15 percent, cutting the top rate for all businesses from the present 35 percent.

“We think by cutting corporate taxes we’ll create huge economic growth and we’ll have huge personal income,” Mnuchin said in the interview.

Tax experts have questioned Trump’s assertion that the proposals would not add to the nation’s debt and deficit. Mnuchin and Ross said lower tax rates would be offset by reductions in the number of income tax deductions.

“Taxes are way too complicated and people spend way too much time worrying about ways to get them lower,” Mnuchin said.

He also said the administration would cap mortgage interest deductibility but would allow for some deductions.

In a separate interview on Fox Business Network, Mnuchin said a major tax reform that includes a large middle income tax cut would be achieved within 90 days of the Trump presidency.

He also said he expected to reach 3 percent to 4 percent economic growth in the next couple of years. “I think it’s very achievable,” Mnuchin told FBN.

Mnuchin also told FBN mortgage giants Fannie Mae and Freddie Mac must get out of government ownership. Common shares of both, which trade on the lightly-regulated Pink Sheets market, shot up by around 30 percent to their highest levels in more than two years.

The two companies have operated under Treasury Department conservatorship since the 2008 financial crisis, when plunging home prices crippled their finances and threatened to bring down the U.S. financial system. Repeated efforts since then to reform the U.S. housing finance system have foundered in Congress.


Trump, throughout his presidential campaign, pledged to redraw trade deals to win back American jobs. He has threatened Mexico and China with punitive tariffs that some economists have warned could spark a trade war that could potentially roll back decades of liberalization.

Mnuchin and Ross said trade reform would be a top agenda item in the new administration. Both men criticized regional trade pacts, saying they favor bilateral agreements with trade partners.

“There’s trade, there’s sensible trade and there’s dumb trade. We’ve been doing a lot of dumb trade,” Ross said.

Trump has vowed to kill the Trans Pacific Partnership, an ambitious Asia-Pacific trade pact linking the United States and 11 countries.

Mnuchin said the Treasury and Commerce Departments have trade enforcement capabilities. With regard to China’s foreign exchange policy, he said on CNBC, “If we determine we need to label them as a currency manipulator, that’s something the Treasury would do.”

Ross told FBN the United States will impose tariffs if necessary. “There’ll be especially tariffs for punitive purposes for people who dump,” he said.

The plans put forth by Mnuchin and Ross mirrored Trump’s stated agenda, said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.

“The color is in how they plan to do it, and here the news is good,” he said. “For Mnuchin, tax reform rather than tax cuts, offsetting cuts to deductions matching rate reductions, means that the deficit impact will be smaller than was feared.”

“Similarly, for Ross the note that we will be working on improving trade agreements but with tariffs as a last resort helps reduce fears of disruption,” he said. “Overall, should be positive for markets by emphasizing the business positive policies will be pursued in a minimally disruptive way.”

Thomas Simons, money market economist with the Jefferies in New York, characterized the plans as containing “a lot of things that sound good” but offered few details about how they will be executed.

Mnuchin and Ross also criticized the financial reform legislation known as Dodd-Frank, passed after the 2007-8 financial crisis, as too complicated and cuts back lending.

Asked on CNBC about Federal Reserve Chair Janet Yellen’s performance, both men said they believed she had done a good job. That assessment conflicts with Trump’s earlier criticism of Yellen during the campaign.

Ross said he believes it is likely the Fed will raise interest rates at its meeting in December.

(Reporting by Doina Chiacu and Dan Burns; Additional reporting by Sinead Carew and Karen Brettell in New York; Editing by Chizu Nomiyama and Nick Zieminski)

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Fannie, Freddie need to get out of government ownership: Mnuchin

Mortgage finance companies Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK) should no longer be owned by the U.S. government, Treasury Secretary nominee Steven Mnuchin said on Wednesday.

His comments sent shares of the two government-sponsored enterprises to their highest levels since September 2014. Both companies have been in U.S. government conservatorship since the 2008 financial crisis.

The risk premiums, or yield spreads on Fannie and Freddie’s bonds over U.S. Treasuries held steady from late on Tuesday.

Mnuchin delivered the remarks in an interview on Fox Business Network, and Bloomberg reported them.

“People don’t expect the government to just step away from the GSEs,” said Larry Milstein, head of government and agency trading at R.W. Pressprich Co in New York.

Fannie shares were last up 32 percent at $4.08, while Freddie rose 31 percent to $3.99.

(Reporting by Dan Burns and Richard Leong; Editing by Lisa Von Ahn)

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OPEC agrees first output cut since 2008, Saudis to take ‘big hit’

VIENNA OPEC has agreed its first limit on oil output since 2008, sources in the producer group told Reuters, with Saudi Arabia accepting “a big hit” on its production and agreeing to arch-rival Iran freezing output at pre-sanctions levels.

Brent crude futures jumped 8 percent to more than $50 a barrel after Riyadh signaled it had finally reached a compromise with Iran after insisting in recent weeks that Tehran fully participate in any cut.

The source said the Organization of the Petroleum Exporting Countries had on Wednesday agreed on a proposal by member Algeria to reduce production by around 4.5 percent, or about 1.2 million barrels per day.

Saudi Arabia would contribute around 0.5 million bpd by reducing output to 10.06 million bpd, the source said, while Iran would freeze output at close to current levels of 3.797 million bpd and other members would also cut production.

The source added that OPEC had also suspended Indonesia from OPEC and hence the exact combined reduction was yet to be calculated. The meeting was still ongoing after around six hours of debate.

“OPEC has proved to the skeptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut,” said OPEC watcher Amrita Sen from Energy Aspects.

Before the meeting, Saudi Energy Minister Khalid al-Falih said OPEC was indeed focusing on significant cuts and hoped Russia and other non-OPEC producers would contribute a reduction of another 0.6 million bpd.

“It will mean that we (Saudi) take a big cut and a big hit from our current production and from our forecast for 2017,” Falih said.

Clashes between Saudi Arabia and Iran have dominated many previous OPEC meetings.

But the tone changed on Wednesday with Iranian Oil Minister Bijan Zanganeh saying he was positive since Iran had not been asked to cut output.

He also said Russia was ready to reduce production.

“Moscow have agreed to reduce their production and cut after our decision,” Zanganeh said.


OPEC, which accounts for a third of global oil production, made a preliminary agreement in Algiers in September to cap output in an effort to prop up oil prices, which have halved since mid-2014.

OPEC said it would exempt Iran, Libya and Nigeria from cuts as their output has been crimped by unrest and sanctions.

The September deal was seen as a victory for Iran. Tehran has long argued it wants to raise production to regain market share lost under Western sanctions, when Saudi Arabia increased output.

Sources said that out of additional non-OPEC cuts of 0.6 million bpd, OPEC expected Russia to cut by 0.4 million. A Russian ministry source said the figure was “a bit excessive”.

OPEC member Iraq has also been pressing for higher output limits, saying it needs more money to fight the militant group Islamic State.

Iran and Iraq together produce over 8 million bpd, only slightly behind long-time leader Saudi with 10.5 million bpd.

“If you get this deal done, it would be huge. You remove a lot of oil from the market and you get the Russian participation,” said veteran OPEC watcher and founder of Pira consultancy Gary Ross.

Bob McNally, president of Washington-based consultancy Rapidan group, said on Twitter that compliance with cuts would be key: “In deals with Russia, OPEC is like (the late U.S.) President (Ronald) Reagan used to say: ‘Trust but verify’.”

(Additional reporting by Vladimir Soldatkin, Shadia Nasralla and Lisa Barrington; Writing by Dmitry Zhdannikov; Editing by Dale Hudson)

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