NEW YORK ( TheStreet) -- Until the stock market opened on Wednesday, widespread power outages and flooding caused by Hurricane Sandy ground trading on Wall Street to a halt. However, amid an eerie quiet in the Financial District of Lower Manhattan, the unraveling of the Wall Street of yesteryear continued in full force.
Since Hurricane Sandy hit the East Coast late on Monday, major Wall Street players like Barclays (BCS) and JPMorgan (JPM) are reporting new details on scrutiny into their past risk taking ways, as global regulators seek to rope in what was widely considered an out of control financial sector.
Meanwhile UBS (UBS), one of the largest investment banks in Europe and owner of a football-field sized Stamford, Conn., trading floor, said on Tuesday it is throwing in the towel on many of its trading businesses amid a plan to cut 10,000 jobs that acknowledges the bank can no longer earn money from much of the trading that once dominated Wall Street.
Earlier in October, Citigroup (C) ousted its long-time CEO Vikram Pandit, in a move that signals the bank may refocus on traditional Main Street lending businesses over Wall Street trading, where Pandit had cut his teeth.See Why Bank and Regulators are Stepping-Up Mortgage Relief in Sandy's Wake On Wednesday, as stock markets opened for trading for the first time since Friday, Barclays and JPMorgan both shed new details in probes that bode poorly for a return to the risk-taking go-go years. In third-quarter earnings, Barclays said it may be fined by U.S. regulators for alleged manipulation of energy trading markets and it said that lawmakers are also looking into whether the British bank violated the U.S. Foreign Corrupt Practices Act. New revelations of regulatory probes come just months after the bank accepted a near $500 million fine for its manipulation of global interest rates, a settlement that indicated widespread fraud throughout the financial sector. The settlement cost company CEO Bob Diamond his job and indicated other major banks may yet take a similar hit, as a global regulatory probe intensifies. In the U.S., where Barclays is now a major Wall Street player after acquiring much of Lehman Brothers' investment banking businesses, Diamond's departure was especially acute. According to Bloomberg, Barclays said in earnings that the U.S. Federal Energy Regulatory Commission is probing the bank's power trading unit and could levy penalties as soon as Wednesday. After competitor Standard Chartered was fined $200 million by New York regulators for its failure to comply with the Foreign Corrupt Practices Act, Barclays also disclosed a DOJ inquest that may have similar ramifications on Wednesday. Outside of prospective regulatory penalties, Barclays' earnings indicated Wall Street's animal spirits remain tame. The bank posted a 29% gain in third-quarter pretax profit of $2.8 billion; however, those earnings failed to impress investors who pushed shares sharply lower. UBS, on the other hand, surged more than 13% as investors sent a clear signal that the bank was right to outline an exit of key Wall Street trading businesses that will cost 10,000 traders and bankers their jobs in coming years. On Tuesday, UBS reported an unexpected pretax loss of $2.7 billion, on restructuring charges from a plan to cut 10,000 jobs across its global investment bank.
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