Crains New York - April 22, 2013 - (Page 4)

IN THE MARKETS gettyimages by Aaron Elstein Suit brings woe for Berkshire L ast July, tiny Berkshire Bank decided to battle with giants when it filed a class-action lawsuit alleging that Bank of America, JPMorgan Chase and more than a dozen other global institutions ripped it off when they manipulated the London interbank offered rate, LIBOR. By monkeying with that key rate, which is used to determine the interest rate on billions’ worth of commercial and consumer loans, Berkshire argued the big banks deprived it of untold amounts of profit. bloomberg news The lawsuit made big news at the time, coming only weeks after British bank Barclays paid a $450 million fine to settle charges that it had rigged LIBOR for years. Since then, UBS has paid $1.5 billion in penalties, and its Japanese subsidiary has pleaded guilty to a federal criminal charge. Other big banks are expected to cough up hefty fines. But the lawsuit was consolidated into a broader case, and a federal judge last month dismissed large swaths of it. Worse, the parent of the 12-branch, $830 million-inassets bank last week disclosed a trio of accounting snafus. The bank said it discovered errors in computing its tax bill, and deficiencies in arriving at the fair value of its investment portfolio and the correct amount of reserves needed to cover expected loan losses. It said it had moved to rectify the errors but was still working to address material weaknesses in its internal controls that caused the problems in the first place. Also, Berkshire said it has replaced its former chief executive— a 20-year veteran of the bank who also served as chief financial officer—with a part-time periodontist named Joseph Fink. Mr. Fink’s background may be unusual for a bank CEO, but he is the son-in-law of Moses Marx, a veteran real estate developer who controls a 69% stake in Berkshire. According to a 2005 New York Sun article, Berkshire was cofounded by Steve Ross in 1989, the same year the head of Warner Communications merged his company with Time Inc. The bank has long specialized in serving the region’s Orthodox Jewish community. Apart from its accounting glitches, Berkshire faces a problem shared by most small banks: Its profits from lending are getting squeezed by the ultralow interest rates set by the Federal Reserve to jolt the economy. The difference between what Berkshire pays for funds and the amount it charges for loans, known as net interest margin, hit 2.64% last year. It was 3.09% last year and 3.53% in 2010. That helps explain why net earnings slipped to $12 million last year from $46 million in 2011. Considering that the Fed has assured that it will keep rates at rockbottom levels until unemployment drops,it seems as though Berkshire’s struggles are destined to continue.Ⅲ 32K THE NUMBER of employees at Goldman Sachs at the end of the first quarter. Under CEO Lloyd Blankfein, head count has shrunk at the elite institution by 10% over the past two years. http://www.miamimeetings.com http://www.miamimeetings.com http://www.anchin.com http://www.anchin.com http://www.twitter.com/anchinconstruct

Table of Contents for the Digital Edition of Crains New York - April 22, 2013

Crains New York - April 22, 2013
IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
CORPORATE LADDER
REAL ESTATE DEALS
OPINION
ALAIR TOWNSEND
GREG DAVID
REPORT: GREEN NEW YORK
THE LIST
FOR THE RECORD
CLASSIFIEDS
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - April 22, 2013

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