$$$ Banks set to cut 10-15% of staff as markets take toll on revenues [FT]

$$$ Dow Jones Up: Mission Accomplished! [Jeff Matthews]

$$$ WeatherDesk: Happy Ending [The Beach]

$$$ The only man in America who will give you a loan [WallStrip]

Barclays announced today that it "rescued" a $1.6 billion debt fund run by Cairn Capital after it was unable to raise money in the credit markets, a situation that Barclays would undoubtedly take credit for, if only creating a discredited market were something to brag about (which, in some circles, it is, just not those in which the Barclettes move). Separately, the bank, blaming the proverbial "technical breakdown," borrowed a sizeable amount of money (£1.6bn ) from the Bank of England yesterday, for the second time in two weeks.

Barclays claims that "[the bank] itself is flush with liquidity." But does its appeal that everyone "quit your bitching and leave us alone or someone's going to get hurt" (actual statement: "In these challenging times the dramatisation of such situations is of no help to markets, their members or their customers") seem a bit defensive for an organization that doesn't have a care in the world? Some think the lady doth protest too much and are demanding answers. James Harding would care to know:

Why was it just Barclays that found itself scrambling for funds? Why could Barclays not find lenders in the commercial market? And why was it that, if the Crest settlement system was to blame, other banks did not also go running to the Bank of England?

It's getting kind of late in the day and we're about to close up shop for the weekend, otherwise we'd obviously provide groundbreaking answers (and more) to all those questions. For now, we leave you with one of our own, that might actually put this thing to bed-- substance abuse? (Don't act like it's not the logical conclusion.)

Barclays Rescues $1.6 Billion Cairn Capital Debt Fund [Bloomberg]
Barclays admits borrowing hundreds of millions at Bank's emergency rate [The Guardian]
Barclays and the interbank market [Financial Times]
Transparent lack of transparency [Times Online]

The entire week has been a prelude to this morning's speech by Fed chairman Ben Bernanke. But late last night we learned that President George Bush would upstage Bernanke by announcing a new policy just an hour after the release of Bernanke's speech.

Rather than pretend we know what this all means, we're just going to open this thread up to comments from our readers. You're smarter than us anyway.

Britain's largest bank announced today that it will not be implementing a plan to make money by charging interest on graduate overdrafts, because Facebook.com asked it not to. HSBC caved after catching wind of a group on the social networking site called "Stop the Great HSBC Graduate Rip-off," whose 5,756 members requested that the financial institution *not* charge them interest, referred to the bank as a "spin machine," and encouraged friends and family to go elsewhere out of spite. (One member, Martin Deakins, posted on the group's wall: "YEAH see HSBC you cant just f**k us over as and when you feel like it." Another, Michael Dean Anderson, perhaps a mole sent by the banking giant, wrote: "You all really need to get over yourselves and just pay it back. Fucking freeloaders: hate 'em. Much love.")

The reversal marks a victory for grads who would sooner opt to have money versus not have money, and a new low for the bank (next, Goldman Sachs's GEO will slash fees from 2/20 to 0/10 to 0/0, under pressure from a group formed by a bunch of Stern kids pushing their luck). Some might also regard it as accomplishment for the Facebook family, though it disappoints us greatly to see something that was created soley for the purposes of stalking classmates and/or getting laid to be used for such constructive means. Stuff like this was never in Adidas flip-flop boy's business plan.

HSBC submits to online student protest [Times Online]
Can HSBC Really Be Just That Dumb? [myvestauk]

Who needs the best striker in the world (Thierry Henry) when the real power in English Premiership football is in getting backed by a Russian oligarch? From DealBook:

Russian mining magnate Alisher Usmanov has acquired a stake in Arsenal from David Dein, the club's former vice-chairman and a close ally of manager Arsene Wenger. The sale of the 14.6 percent stake for 75 million pounds ($152 million) may fuel speculation that Mr Usmanov, who has made much of his fortune in the steel industry, may eventually mount a takover bid for the north London club.

English football is becoming like Battle-Bots (or one giant pissing contest) for Russian magnates, as Chelsea has been annoyingly good since Roman Abramovich bought the team in 2003.

(Pictured - The Arsenal SLR-105, a Bulgarian AK variant)

Russian Steel Magnate Buys Arsenal Stake [DealBook]

Do you agree with Forbes' list of the 100 most powerful women? Merkel is #1, fine, but Oprah below the CEO of Rite Aid (the logic here is that America's housewives need their prescription refills to tolerate the massive emotional swings required of an Oprah viewing without lighting themselves on fire)? Ruth Bader Ginsburg below the CEO of Sara Lee (deliciousness is never un-constitutional). Hillary Clinton below 'I am important in my own special and deserved way' Melinda Gates? Queen Elizabeth II at #23 (ok, we don't know if we'd put her higher or lower, but we love the fact that her occupation is "Queen"). The ghost of Nina Wang conspicuously absent from the list? No Melanie Griffith's character from "Working Girl"? No Rosie the Riveter?

Forbes' List of Most Powerful Penis-Lackers Contains Some Unexpected Surprises [Defamer]
The World's 100 Most Powerful Women [Forbes]

Baidu and Yahoo China, two of the most popular search engines in China, facilitate the country's near 100% rate of downloaded music that is stolen. That's right, almost all music downloaded in China is stolen (more proof that the Chinese are smarter than us). Other search engines in China, like Google China, don't have a built-in mp3 download tab, and are pissed that they can't gain search engine market share.

The International Federation of the Phonographic Industry (and the world of tomorrow), a consortium that includes reps from Sony BMG, Universal and Warner, is on the case, suing nearly everyone in China. The organization reportedly wins 90% of its lawsuits, but loses suits against the big boys like Baidu, which entrenches the current search engine pecking order by crippling the little guy... with slaps on the wrist. Since the averages damages awarded per lawsuit amount to $130 (yes, dollars), getting sued isn't that big of a deal to a budding search provider. The IFPI spends about $13k per case, which is a bold profit shucking initiative that only the record companies could dream up.

In other search engine news, Google and Yahoo have teamed up with Mercedes to allow each search enginge's map services to be sent to your car, if your car is a Mercedes. You know the state of auto-navigation is in trouble when car GPS systems are Google mapping a destination. The service will be available on the S-class, CL-class and entire 2008 C-class lineup.

Deaf to Music Piracy [BusinessWeek via Valleywag]
Google, Yahoo to direct your Mercedes [News.com via Valleywag]

Bush to Expand Government Role to Deal With Subprime (Bloomberg)
Well, so much for that whole 'Bush is an Austrian let the chips fall where they may' thing. The prez has established a new plan whereby the federal government will insure mortgages for delinquent, subprime borrowers, allowing them to refinance at better rates. And while they're at it, maybe they can extend the life of their mortgage to 70 years, just to get the monthly payment down to something manageable. It's almost tiresome to cry 'moral hazard' at this point, but what the heck "Moral Hazard"! Anyway, we wanted a compassionate conservative, so this is what we got.

McGraw-Hill replaces president of Standard & Poor's (Reuters)
Despite the fact that S&P has performed absolutely flawlessly during this whole credit debacle, with all blame resting on some faulty models (bad models, bad!), McGraw-Hill has decided to replace the unit's President. You might, however, be tempted to call the move window dressing, since the new president is another top S&P executive. This is not quite what's meant when they say 'change starts from within'.

Dell reports 2Q earnings jump (Thomson Financial)
Thank god for the laws of physics. Eventually things fall so hard, with so much crap hitting so many fans, that things will reverse themselves, at least a little. Over the past couple years, Dell has been hit by accounting scandals, desisting threats, terrible customer satisfaction, exploding batteries, product lameness, questions about stock buybacks, et. al. ad nauseum. So, eventually the company had to come through with a decent quarter. That they did, beating analyst estimates on the back of respectable (but by no means amazing) sales growth. Hats off.

Mexico Prepares to Allow U.S. Trucks to Cross Border (Bloomberg)
We must've been on a different planet for the past 12 years, because we were under the impression that this is what NAFTA was all about. Apparently that part was blocked. Anyway, good news for free traders and truck lovers. Now, about that privately-owned highway connecting Mexico to Canada...

$$$ I just filed a leave from work before burnout strikes. I'm [was] a banker, had been single for quite some time now and would like to unleash my other (wilder) side. Willing to try person of any background as long as you are psychologically balanced. [Craigslist]

$$$ Bin-Laden Trades [thestreet.com]

$$$ Eric Bolling Bolts CNBC's Fast Money for Fox? [The Big Picture]

Sponsored by the Financial Times.

The volatility trend continued today. The Dow Jones Industrial Average took a nosedive after the opening bell, recovered midday to the greensward and then fell right back down into the river of red. It closed down 50.56 to to 13238.73. The S&P stumbled 6.12 to 1457.64. Technology stocks did better, boosting the Nasdaq Composite. It gained a bit to close up 2.14 at 2565.30.

Share of Wall Street financial companies took a pounding. Bear Stearns, Goldman Sachs Group, Merrill Lynch and Morgan Stanley tumbled down after Lehman Brothers Holdings cut earnings forecasts for the firms.

It’s the penultimate day before the long Labor Day weekend, and volume was as light as you’d expect.
“My main question today wasn’t what I should trade. It was how I could get one of my vendors to invite me out to the Maria Sharapova match tonight,” one trader told us. We told him to get us a ticket too.

Market intelligence from people who aren’t off for Labor Day: FT Alphaville.

You know a product is failing when it loses its all important “verb replacement” status. For example, in the fledgling days of inclusive DVR cable packages, we would still say we were Tivo-ing something. Tivo’s emergence as a verb was a combination of a good product name, good marketing (for the opposite of this, see Hulu) and a rooting interest in the ingenuity of a small-ish company stealing thunder from the cable giants.

Since its methodical destruction by the cable giants (wait, you mean I don’t have to connect this awkwardly to a land line, I don’t need another box, and I don’t have to pay a large upfront fee for the box?) the fickle TV-viewing public acquiesced, and begrudgingly de-verbed Tivo. Now that the cable giants got us all hooked in on the cheap paying an extra monthly sub fee, they’re starting to raise rates accordingly, and we “DVR” our favorite shows.

Tivo is taking a hit today, down almost 10%, based on the following, from Seeking Alpha:

There are several factors at work in today’s slide. For one thing, revenue came up short of expectations - and so did guidance for the fiscal third quarter. For another, the company took an unexpected $11.2 million inventory writedown for standard definition DVRs, a casualty of its shift to a focus on high-definition DVRs. The company also suffered a net loss of 19,00 “TiVo owned” subscribers, disappointing investors who had expected to see at least a modest increase in subs.

There is some potential sunshine amidst the Tivo gloom - with the comapny's new focus on HD-DVR and a Comcast New England deal expected to start rolling out in September. For now, the bears are feeding.

It’s almost always a smart play to bet on verbs. You knew Google reached ubiquity when people started using Google as a verb, and this happened well before the IPO. Yahoo never became a verb, and is trying desperately to reposition itself in the tech space. Facebook has been annointed verb status, while leaving behind MySpace in the predicate race. Clearly the long bet is on facebook. Also – does anyone say they “Xeroxed” something still? It seems the world has quietly gone back to saying they “copy” things again.

TiVo Slides on Weak Revenue, Subscriber Losses [Seeking Alpha]

William Porter earlier this week sold nearly 5% of his shares in the International Securities Exchange, one of the leading electronic options exchanges, according to documents obtained by DealBreaker. Porter, who also founded E*Trade and sits on its board, was one of the founders of ISE. He served on the board until term limits forced him to leave recently. Although he is the third largest holder of ISE shares, the sales have not yet been disclosed.

Porter sold over 95,000 shares for around six million dollars. The average share price was near $66 dollars. Prior to selling these shares, he owned around 5.1% of the company and will likely be required to file a Schedule 13D report noting the sale with the SEC. These sales appear to bring him just below the 5% threshold for reporting to the SEC, so subsequent sales will not need to be disclosed.

The ISE is currently the subject of a takeover bid by Eurex, Deutsche Börse's derivatives arm. A spokeperson for ISE said that the company believes the transaction will close in the fourth quarter.

William Porter could not be reached for comment. The International Securities Exchange said it did not comment on trades in its shares.

Goldman, Wall Street Firms' Estimates Cut by Lehman [Bloomberg]
Bear, Lehman, Citi shares fall on Merrill downgrade [Reuters]
Downgrade Dumps Lehman [thestreet.com]
Lehman: Talking Down The Street [Forbes]
Citigroup, Lehman and Bear Stearns Downgraded [CNBC]
Lehman Drags Financials Lower [WSJ]
U.S. banks get axed [globeandmail]
Who’s afraid of the big bad banks? Everyone. [FT Alphaville]

No one is safe from infringing on Viacom's copyrights. Take this latest example, from BoingBoing:

Christopher Knight made three commercials as part of his campaign to run for a seat on the Rockingham County Board of Education. He posted them on YouTube. Viacom's VH1 ran one of the commercials on its show Web Junk 2.0, without seeking Knight's permission. Knight then posted the Web Junk 2.0 segment on YouTube. Yesterday, YouTube pulled the clip, at the request of Viacom, which said Knight was infringing on its copyright.

Infringing Viacom claims copyright infringement [BoingBoing]

If you work in structured finance, you might soon be getting fired, unlike Rick Ziwot, who voluntarily left his job. HSBC confirmed today that Ziwot will depart from his post as the bank’s global head of structured credit products, to be replaced by Jeff Jakubiak, head of structured credit products for Europe, the Middle East, Africa and Asia. Allegra Kelly will become deputy head of the structured credit products group (a title that includes a badge, plus chaps and spurs).

Think Ziwot’s exit has anything to do with fears of major losses for collateralized-debt-obligation investors affected by subprime? Think again. According to HSBC, Ziwot’s departure (and the ensuing shuffle) has nothing to do with the meltdown in the market. Rather, it had to do with “a decision by Rick Ziwot to retire after his 45th birthday, which was in July." Okay, we’ll buy. You set a deadline for yourself and you stick to it, man, you fucking stick to it. (But seriously, who among hasn’t planned to retire at 45? This sounds legit to us, no sarcasm implied.)

Structured-Products Head Is Set to Leave HSBC [WSJ]
Senior US credit banker Caplan departs RBS [Times Online]

I light up another cigarette. The sky is brilliant blue. The weather man had promised humidity leading to rain tonight. But it’s not yet noon on a late August morning, and the air is almost crisp. A slight breeze blows the smoke over my right shoulder and toward the Hudson river.

Somewhere beyond the far shore of the Hudson there are thousands of homes bought with mortgages that everyone now calls subprime and many view with terror. The phrase “subprime slime” is used but I can never tell whether it refers to the mortgages, the way they corrode other credit products, the people who bought houses with them, the people who lent them out or the folks who bought structured credit products containing them or the folks who built and sold those products.

I’m on the rooftop of a Tribeca building. The apartment just below me is owned by a money-manager who has asked me not to describe his employer too closely. I’m not even supposed to reveal whether it’s an investment bank, a hedge fund, a money manger, a mutual fund, a pension fund or something else entirely. He’s in the credit business, managing a portfolio of credit products bought with money his employer is charged with managing. I’m here because he’s promised to talk to me about commercial paper.

“It’s Hendricks, so you don’t need any vermouth,” he says. He places a martini glass in front of me. The liquid is so clear that the light barely breaks as it passes through it. A pale green slice of cucumber floats atop, clinging to the edge of the glass. “It’s summer,” he says to explain the cucumber.

The Pritzkers, who are like the Hiltons you still recognize with clothes on, sold a $1 billion stake in their Hyatt hotel chain to Goldman and Madrone Capital Partners started by Wal-Mart chairman Rob Walton.

Speculation about the fate of Hyatt has been on the rise with the chain’s ongoing restructuring plan, internal family drama, and Blackstone’s $26 billion Hilton buyout. The Hyatt restructuring has involved 53 internal mergers, expansion into China and preparations to release detailed financials.

The Pritzker domestic squabbles culminated in a $1 billion lawsuit a couple years ago in which Liesel Pritzker accused her father Robert of tapping into the trust fund. Liesel eventually won $450 million (or lost $550 million, or made normal people want to cry).

Liesel has taken the stage name “Matthews” (or mom's maiden name) for a number of screen roles (and real life), including Sara Crewe in the mid-90s classic, “A Little Princess,” which is one of Lloyd Blankfein’s favorite films, and played a vital role in getting Goldman to pull the trigger on the purchase. Scenes like this are not uncommon at 85 Broad Street:

Miss Minchin (played by a confused junior analyst): Don't tell me you still fancy yourself a princess? Child, look around you! Or better yet, look in the mirror.
Lloyd Blankfein: I am a princess. All bank CEOs are. Even if they live in tiny old attics. Even if they dress in rags, even if they aren't pretty, or smart, or young. They're still princesses. All of us. Didn't your last boss ever tell you that? Didn't he?

Actually, the entire premise of “A Little Princess” is that a batty girl (Sara Crewe) in an oppressive boarding school responds to every situation by claiming that she is a princess. A typical scene:

Random Teacher: Your dress is on fire.
Sara Crewe: I am a princess.
Random Teacher: I’m fucking serious, your dress is on fire.
Sara Crewe: All girls are princesses, even if they are burning, or freezing, or suffering from a horribly infectious rash.
Random Teacher: Stop, drop and roll bitch, our insurance doesn’t cover this.
Sara Crewe: All girls are princesses, whether they are stopping, dropping or rolling…

This has also been the Goldman response to its hedge fund’s ignominious performance (Investor: Your hedge fund is blowing up, Goldman: We’re princesses, we’re Goldman, we’re Wall Street Royalty alright! We’re PRINCESSES!”)

Pritzkers sell $1bn stake in Global Hyatt [Financial Times]

There’s a lot of bitching and moaning going on, of late, about how hedge fund mangers like James Simons and private equity giants like (OXYMORON ALERT:) Stephen Schwarzman* make too much money. But bitching and moaning on their own only go so far, which is why, every once in a while, there has to be a report that gives a little weight to the “it isn’t fair” argument that Schwarzman earned one hundred billion dollars last year and our compensation is one belly rub per post (and a scratch behind the ears for every “after the jump,” because page views = money, people).

Today’s (essentially) scientific study comes courtesy of the Institute for Policy Studies (IPS) and United for a Fair Economy. It found that in 2006, the top 20 hedge fund and private equity bosses (Simons, Cohen, Griffin, Schwarzman, Kravis, etc) earned an average of $657.5 million, versus the $29,544 average raked in by U.S. workers. This translates to the former making 22,255 times that of the latter. But, obviously, that’s not the best part. The report notes that the discrepancy between the two groups “dwarfs”—that’s a direct quote—the discrepancy between CEOs and workers (corporate execs, on average, earn a measly 365 times that of U.S. workers). Actually, no, that’s not the best part, which is the statistic that last year, the Top 20 earned more money in ten minutes than U.S. workers made the whole year. The blatantly passive aggressive subtext here is that there’s something wrong with this.

Douglas Lowenstein, president of the Private Equity Council reminds us that “Income disparity is an important issue, but studies driven by sound bites don't advance a national debate about how our nation should respond” and, personally, as people who are practically deaf when it comes to sound bites, we think he’s dead right. Hedge fund lobbyist John Gaine, of the Managed Funds Association, notes that HF compensation is “fee-based and directly attributable to…performance.” Also right. Sarah Anderson, a director at IPS, decidedly not assisting us in our quest for a hat trick, criticizes the gap, and argues that Congress ought to increase the tax on private equity firm’s earnings from 15% to 35%.

Rather disturbingly, there seems to be a growing contingent in this country that agrees with Ms. Anderson. Individuals and groups who take issue with what they subjectively regard as astronomically bloated pay. People (Ben Stein, the New York Times) who have a “problem” with the so-called tax “loophole” (which, if you take off your shades of cynicism for a moment, will see is actually just a “business model”), open only to managers, and not ordinary Americans.

Thankfully, an organization known as SHAME (Southampton Alliance for Monied Estates) has its head on its shoulders and knows that hedge fund and private equity managers aren’t just like you and I—they’re better, and should be compensated and taxed accordingly. Yesterday, SHAME, in association with Concerned Neighbors of Henry Kravis, took to the streets and demanded more tax breaks for private equity kings. Rallying around Kravis’s mansion, SHAME called on Congress to let the KKR boss and other buyout billionaires with homes in the Hamptons to keep the 15% tax they’ve long come to enjoy. SHAME sang slogans like “protect the emerging plutocracy.” SHAME told DealBook, “We’re out here to help save our local neighborhood billionaires.” SHAME passed around a petition and encouraged people to defend the rights of a contingent of people that so obviously cannot defend itself.

John Carney, discussing SHAME's motivations on the eve of the rally [CNBC]
Union takes LBO protest to Hamptons [Reuters]
Buyout Tax Debate Hits the Hamptons [DealBook]
Cash of the titans: Criticism of pay for fund execs grows [USA Today]

*I will be here—KILLING—all day.

Summer ratings are out, defined by Nielsen in this instance as the period between 5/24 and 8/22. The ratings are as mystifying as ever, showing a large contingent of people who voluntarily watch CBS programming. CBS has 5 out of the top ten most watched summer series, while FOX has 3, NBC has 2 and ABC laid a summer ratings goose-egg (people were apparently out trying to find their own McDreamy rather than watching him bed an entire hospital staff).

The real story is CBS actually having viewers. They’re out there, among us. They look just like you and me. “He seemed like a normal guy,” the neighbor’s testimonial always says, “I couldn’t tell he watched the King of Queens.”

Who watches CBS? Is it an AARP thing? Is it a Blue/Red state thing? Do CBS viewers have the super-power that they able to tell which cable boxes are Nielsen boxes? We’re desperately trying to understand, as no one we’ve ever met watches programming on CBS, or will admit to doing so. In fact, no one we’ve ever met has ever met anyone who watches CBS programming. In fact, knowing someone who watches CBS has become more novel or hip than having a gay, disabled, terminally ill or concert zitherist friend. It’s a defining characteristic, “Oh yeah, you remember Jim, the one who watches CBS...”

Aside from the four simultaneous versions of CSI that CBS runs (we weren’t aware the CSI franchise was this out of control - it's only a matter of time before they come out with CSI:CBS or CSI:CSI (chronicling crimes that happen only on the set of CSIs)), another permanent fixture in the top ten is Two and a Half Men. A funny drinking game to play when watching Two and a Half Men (the same went doubly for Everybody Loves Violently Bleeding From The Ears Raymond) is to do a shot every time the “This Laughter Is Bringing Me To Orgasm” laugh track plays after a non-event (DB does not endorse or sponsor this activity, as you will die). It’s amazing – they’ve almost effectively replaced actual jokes and punch-lines with cuing the laugh track (unless there’s something about Charlie Sheen raising an eyebrow that I’m missing).

One promising trend in the summer ratings was the demise of reality shows, as viewers are finally starting to realize that “professional” reality show auditioners/contestants are way more annoying than real actors, although the only difference is the networks’ own forced semantic finagling. Unfortunately reality shows have been displaced with American Idol style programming, which cannot die fast enough (although we always marvel over how airtight the contracts and release forms people sign to get on these shows must be, since no one ever comes out and talks about how ridiculously scripted they are).

Television: Stat Snapshot [Wall Street Journal]

PS - We occasionally watch How I Met Your Mother

Carney: So the word on the Street is that the Fed is watching commercial paper market very closely. Not really concerned about mortgages. What are you hearing there in Wyoming?

Jackson, Wyoming Correspondent: I caught 5 flyfishing today and now I'm at the rodeo.

Forget bonuses. The question for many in finance right now is whether they'll still have jobs at year's end.

The chorus of those saying there will be layoffs on Wall Street has gotten louder, and the message clearer. Weeks ago we told the viewers of CNBC's On The Money that units in investment banks linked to complicated debt products would be most vulnerable to layoffs. We named Bear Stearns and Lehman Brothers as likely cutters.

Yesterday CNBC's Charlie Gasparino named Bear and Lehman, and threw Goldman Sachs into the mix. The cuts are likely to come shortly after Labor Day. This morning, the Lex column in the Financial Times adds the Royal Bank of Scotland as a probable cutter. It also gives some great background on why structured finance groups are under such pressure.

This rapid shedding of staff reflects the urgent need to cut costs as revenues decline in this highly lucrative and (until recently) growth business. Lehman and RBS, for example, topped the underwriting league tables for asset-backed securities last year, according to Dealogic. Cutting back quickly is par for the course for investment banks, with their high staff costs. It will help, but won’t replace lost revenues. For the top 10 global investment banks, fixed income revenues (where most asset-backed business is booked) reached more than $27bn in the first quarter – more than double the total five years before, according to Credit Suisse. And structured finance has been particularly profitable, so margins are likely to decline too.

Structured finance profits [Financial Times]

Despite what many in the business media seem to believe, Warren Buffett did not spring fully formed from the mind of Zeus. He too was born of woman and today the old guy celebrates his 77th birthday. As a gift to him, we're opening up our special vault of Warren Buffett posts. Some very special items can be found inside.

There's the time we wondered whether Warren Buffett is going to Hell. That prompted him to write a letter about DealBreaker. Let's not forget the time some Australian called him a 'notorious tightwad.' Or the day we learned he had disowned his granddaughter.

Looking back on that list, we have to admit it looks like we've been a bit harsh on the guy. (Maybe that's why no-one at Berkshire returns our calls when we ask for interviews or even just glimpses of the Oracle.) But we're pretty sure Warren's not too broken up over these DealBreaker posts. He's got a lot to cheer him up. A lot of women. Look at all the ladies who seem to have crushed on him in the last year: Liz Claman, Becky Quick and WallStrip's Lindsay Campbell. The girls at Hooters loved him too. And last year, on his birthday, the Dub-Bee got hitched to his longtime sweetheart.

So happy 77th birthday, Warren. Enjoy that Dairy Queen sundae!

China Finance Minister Exits Amid Impropriety Claims (Bloomberg)
The Chinese finance minister has left his post after allegations of improper conduct leveled against him by state newspapers. Hopefully for him, these improprieties don't rise to the level of that one guy who was in charge of food and drug safety, who was eventually executed. On the other hand, some think this is pure politics and that the charges are just an excuse, which would probably be the best thing.

Grower recalls 34 tons of spinach (Mercury News)
Last year it was E. Coli in the spinach supply. This year it's salmonella, as a California spinach grower is recalling 34 tons after testing revealed a tainted sample. At the time, last year, the whole hysteria seemed like it got blown out of proportion (probably the case with all of these food recalls), and it could easily happen again here if incidents multiply.

Yahoo’s New President Oversees a Shake-Up (NYT)
Just a few months after shoving out (okay, shoving up -- they made him Chairman) CEO Terry Semel, Yahoo is putting more heads under the guillotine. In other words, simply making a few changes at the top doesn't seem to have had much of an effect... so they're making more leadership changes. The big change is that the company's top sales executive is out the door, though it's hard to believe that this will change much. After all, it's hard to be good at sales if you don't have something good to sell.

Rumored iPod update stokes Apple stock (Mercury News)
Apple's stock jumped yesterday on speculation of yet another iPod. Just wondering, will iPod fatigue eventually set in. It seems like it would have to, but who knows? Isn't the news of another iPod something of a yawner?

$$$ Two new studies reveal secret sauce used by activist hedge funds. [AllAboutAlpha]

$$$ Female Piratery or Female Lies? [LoSC]

$$$ Most successful traders enjoy shoplifting, and so did Lindsay…until today. [WallStrip]

Closing Bell brought to you by Financial Times.

The market has been conditioned in this August stretch to reward the absence of apocalyptic news with large rallies. Today was no different!

-No hedge fund combusted (ok, Basis Capital admitted they were very badly burned, and Cheyne Capital needs a couple skin grafts)
-Every third fixed income trader at JPMorgan did not get shot (happened, a bit graphic)
-There was no flight to quality in giant diamond-covered skull investments (ok, so that also happened)

We cry uncle… we admit it (along with most market analysts), we’re as confused as you are.

It seems so many institutions were clicking their heels and wishing for a Fed rate cut in September that everyone drank the Kool-Aid and the major U.S. indexes were all up close to 2%. The Dow finished up 1.9%, the Nasdaq was up 2.5% on the day and the S&P 500 rose 2.2%.

Major news on the day included Altria trying to quit smoking (up 1%), Apple coyly announcing that they are going to announce something (up 6%), Big Lots getting bigger and lottier with a 4x profit surge (up 10%) and more ratings cuts for home-builders.

More hard core market pornography from FT Alphaville.

“For the Love of God,” the platinum skull that Damien Hirst studded with 8,601 diamonds and called art, has been sold. An unnamed investment group—perhaps requesting anonymity because this is the kind of purchase that gets you a reputation for being insane—will pay $100 million in cash for the piece, which had been on the market since at least June 3.

Less than two weeks ago, Eli Broad, who recently seized the “opportunity” to give Goldman’s GEO fund a bunch of money, warned that major losses hitting hedge fund managers would hurt the contemporary art market, and that many expensive pieces would go unsold. A spokeswoman for Broad declined to comment on whether or not her boss is currently in the process of removing egg from his face. Is the sale indicative of market woes being over or of someone having taste in “art” so bad he/she said “credit crunch be damned, I’ve got to have this thing” (or of Eli knowing nothing)? We say a little bit of both.

On a more personal note, we’re sad to say that it’s highly unlikely that Stevie Cohen, who owns Hirst’s dead shark, was the buyer, as SAC was down as much as 9% at one point this month (which we like to call: "SAC's worst. month. ever.").

Earlier: What The Market Hath Wrought

Hirst Sells Skull for $100 Million, Manager Says [Bloomberg]

Another hedge fund hit hard by the contamination from subprime sludge has filed for bankruptcy. This time it’s Basis Capital, an Australian hedge fund, that has thrown in the towel. And once again, it’s hoping it’s towel lands on the beach in the Cayman Islands.

Losses in the Basis Yield Alpha Fund could exceed 80 percent, according to Bloomberg. Basis Capital was founded in 1999 by Australian bankers Steve Howell and Stuart Fowler. As recently as May, the firm had more than $1 billion in assets under management.

At the end of July, two Bear Stearns funds filed for bankruptcy in the Cayman Island, and asked a US judge to block any lawsuits from lenders and investors while the bankruptcy in the Caymans went ahead. The judges in the Caymans have a record of favoring fund managers, which has made the Caribbean nation an attractive place for hedge funds to organize. Three out of four hedge funds globally are incorporated in the western Caribbean islands.
The judge in the Bear Stearns case has not yet blocked lawsuits against the funds, saying he needed more time to decide what to do. Most of the assets of both the Bear Stearns funds and the Basis fund are reportedly in the US.

Several big Wall Street firms are lenders to the Basis fund. JP Morgan Chase Bank, Goldman Sachs , Citigroup, Morgan Stanley, Lehman Brothers and Merrill Lynch are all reportedly listed as creditors.

Basis Yield Files Bankruptcy Over Subprime Defaults [Bloomberg]

DealBreaker’s probing coverage into the search for a name of News Corp and NBC Universal’s online video JV is over. The two companies finally put that billion dollar brain-trust to work and came up with a name that is bound to draw viewers and admirers alike.

The winner – Hulu. Hulu. We’re serious. Hulu – the result of a five month search. Hulu – when you get punched while trying to say the word “Hula.” Hulu – the lieutenant commander of the Enterprise when everyone has a cold. Hulu – how George Bush mispronounces the first two syllables of the folksy word “hullabaloo.”

It took the ad wizards five months to “capture” the spontaneity and child-friendly assonance of hip techie names like Lala, Tinkie-Winkie, Joost, Wii, WiiWii, Yahoo, Belo, PooPoo, Lyondell Chemical Company and Fuchs Petrolub AG*.

Conclusion - Either the marketing team is borderline retarded or it took Rupert this long to shout “Hulu” out his window during a storm in which he thought the Nothing was consuming the remnants of Fantastica and the Ivory Tower in which the childlike empress resides (which has been our theory all along).

The new site is going to begin invitation-only beta testing in just two short months. It is expected to launch in 2130.

News Corp and NBC Universal name video site Hulu [Yahoo Finance]

*There is a company that makes lubricants called Fuchs (we had to reprint it to believe it)

It seems like half of CNBC’s on air talent is on vacation this week. And, if you trust this story on today’s Page Six, it’s not a moment too soon.

The femmes have become a bit more fatale over at the business network, according to Page Six. There are apparently too many queen bees and too little honey in the hive of CNBC.

CNBC'S endless fawning over "Money Honey" Maria Bartiromo and her younger, fast-rising rival Erin Burnett has the network's lesser-known finance femmes on the warpath.

A source says reporters including sexy blonde Melissa Francis, who covers energy, have complained to CNBC suits that while they get zip, Bartiromo and Burnett are treated like princesses - with massive promotion, regular gigs on the "Today" show and "NBC Nightly News," perks such as limos and gushing quotes from network brass in newspaper articles.

"The catfight that started with Maria being jealous of Erin's rise has spread down the line. Now all of the other female reporters are getting p - - - ed off," our insider said.

"They're going to management and telling them they want equal treatment - better public relations, better placement on the air. They are all being divas now. It's gotten ridiculous."

Page Six adds that “CNBC has muzzled Bartiromo, Burnett and Francis.” But an unnamed network flack denies everything. “That’s insane. It sounds like the jealousy is coming from outside the building," the flack says.

This should probably be read with a bit of skepticism. To begin with, some of the details are wrong. Melissa Francis is the host of On The Money, not “an energy reporter.” More importantly, here at the DealBreaker Bunker we’ve got a pretty good idea about what goes on inside the Global HQ of CNBC and we haven’t heard anything about a “catfight.” The ordinary rivalry that goes on insider all networks—certainly. But this seems overstated.

After the jump, a very boring reading of the Page Six item and two crazed, conspiratorial readings.

The specter that is haunting the markets lately goes by the name “1987.” A stock market runup, a buyout boom, high-yield bonds, increased government regulation, tax hikes on investments and buyouts. It all seems eerily familiar to many people with long memories. And the chart above is not exactly re-assuring.

But, surprisingly, some traders take the similarities to 1987 as a contrary indicator.

“There’s no way the Fed will allow October 19, 1987 to happen all over again,” a trader told us Monday night after his fifth scotch.

For some people, there’s always a bull market somewhere. And the assumption that a rate cut can and will save the markets—or even the broader economy—may be wishful thinking. Or just the scotch talking.

The Federal Reserve’s intervention is credited with the fast recovery in the Dow in 1987, when the stock index finished slightly up for the year. A gross domestic product grew 3.7 percent in 1987's third quarter, and continued in to grow in the subsequent quarters. There was the Fed fueled rock growth of 7.2 percent in 1987's fourth quarter, 1.9 percent in 1988's first quarter, 5.2 percent in 1988's second quarter, and 2.2 percent in 1988's third quarter. Buyouts resumed. High yield debt kept finding buyers. Jim Cramer famously made a lot of money.

But it didn’t last long. The leveraged buyout market came to a crash in 1989. The Dow turned bearish the next year. The country went into a recession. And many believe that the bear market and recession were on the early nineties were made far worse by the Fed’s 1987 intervention, which inflation hawks say created the illusion of prosperity and led to lots of capital misallocation. When market realities began to set in and capital started fleeing the dead-ends into which it had been led by the siren song of easy money, the pain really started?

Is the Federal Reserve trying to trod a more careful path this time? One thing’s for sure, if they don’t cut rates in September some will no doubt scream “they don’t know what they’re doing.” But it’s still an open question whether the Punch Bowl Caucus really understands what it’s doing.

CEOs of the world, unite! Forget that CEOs make 364 times more than the average worker (not including perks and benefits) - the average PE and hedge fund manager makes 61 times that of the average CEO.

Side rant regarding sub-workers: The study, conducted by the Institute for Policy Studies and United for a Fair Economy (IPS / UFE), factors in part-time jobs to the average worker salary. If you take the average for a full-time non-managerial job (40k), CEO pay is a mere 270 times the average worker. It’s good to know a fairer society is only a few theoretical adjustments away.

Don’t get your guillotine mobs in a bunch though, CEOs have toned it down, from the lavish 525 times the average worker salary they made in 2000 (that was the record). Forget the fact that in 1989 CEOs made only 71 times the salary of the average worker (Reagan just paved the way for that socialist Bush). Seriously, forget it. Sleep tight knowing that people who make $40k are only imaginary, like the borough of Brooklyn, or the strange creatures adorning the cover of Barbara Ehrenreich’s diary (those aren’t unicorns).

The real story is that CEOs are being forced into exploitative contracts, lulled by the false consciousness of 5 and 44. Sure, the common worker can get coerced into an oppressive labor agreement because he needs a common wage to survive, but CEOs need a robust portfolio of high-yielding alternative investments to survive as well, at the country club. CEOs have never felt as inadequate as members of the Second Estate, partly because PE/Hedge fund managers have several more estates.

CEO pay: 364 times more than workers [CNN Money]

For the second time in two days, RenTec has denied plans for a minority stake sale, telling Reuters, “We are not in discussions and there are no plans…There is no truth to the story." Renaissance had previously told the Financial Times that there never has and never will be anything in the works. (FT choose not to believe them, and you shouldn’t either. They will be worn down, it’s only a question of when (if anyone has the algorithm that determines how long it takes to break the 1.7 Billion Packs/Day Man, let us know. RT employees, don't be bashful.))

Earlier: James Simons Will Sell Stakes For Cigs

Renaissance Tech says no plans for stake sale [Reuters]

Little ink should be spilled debating whether or not investment banking sucks. Whether your answer is "Yes" or "Yes, very much so" is a matter of preference. 100-hour work weeks + enforced genuflecting to spreadsheets and associates alike + a Vitamin D deficiency + the fact that the toll being taken on your body as a result of said occupation has the same side effects as massive intakes of Lemon Lime Gatorade + the sleepless nights spent wondering how big or small that bonus will be + the missing “cool (we lost three billion dollars in a matter of weeks)”-factor associated with being a hedge master (or even minion)? Pass. But can one actually make the case that investment banking is more demanding than serving in Iraq? Apparently. Deal Journal reports Capt. J. Dow Covey’s opinion on the matter:

“I practiced law for three years,” he said, “then got into investment banking. When 9/11 happened I just had to sign up with the Army. Investment banking is a lot more stressful than this.”

Okay. Except that when you’re living in your cubicle at 270 Park, there’s very little risk of getting shot (pray as you might for it to happen), and call us crazy, but not having to stress over wondering if we’re going to die today seems to displace, uh, everything else. But that's just us-- crazy! Thoughts? (NB: we do not discount the risk of heart attack associated with working in IB, or suicide, either. If you ever feel like giving up, or just need to talk to someone-- tips at dealbreaker dot com.)

Investment Banking: More Stressful Than Serving in Iraq [Deal Journal]

DaimlerChrysler released its first earnings statement after its adopted baby left the nest to be raised by a three-headed dog. The Q2 result – a 14% drop in profit and 3% dip in revenue compared to the same period last year. The real DC explains that the profit drop is due to artificially inflated gains last year from selling a stake in Airbus owner EADS.

DaimlerChrysler expects to take less of a hit from transferring 80% of Chrysler to Cerberus, at around $3.4 billion instead of the $4 to $5 billion originally braced for. The Company will be allowed to sell a loan to Cerberus next August, and date again.

DaimlerChrysler Ag (NYSE: DAI) is up 1% in pre-market trading.

In other auto news, French car maker Renault denied that it was interested in Volvo. Renault Chairman Carlos Ghosn commented that a Volvo in French hands would be left untended and that the company “doesn't need a new [Volvo]. What it needs is new products and technology, and a good shower. It is not a question of principle, but one of good sense."

Ford keeps flashing its Swedish tended Volvo around for others to ogle, along with its other luxury brands Jaguar and Land Rover as part of a turnaround strategy.

Renault’s outlook is upbeat, as it doesn’t think it can sink any lower in the European market. Actually it thinks it can slip a bit lower, but after slipping a remaining little bit, things have nowhere to go but up! Everyone has to hit the ground sometime, right? From MarketWatch:

Ghosn said he expects Renault's share of the European market to have bottomed out later this year and that it should start rising again in 2008, thanks to a 26-model new product offensive that started in June with the launch of a new Twingo city car and as sales of the Laguna lift off in October.

DaimlerChrysler profit drops 14% [MarketWatch]
Renault not interested in acquiring Volvo [MarketWatch]

More fallout from the mortgage mess. Only a month after CIT said it would sell its mortgage origination business, yesterday it announced that it was simply shuttering it instead.

“The move comes as dozens of other financial institutions flee the free-falling business of making home loans to consumers with subprime credit. Last week, Lehman Brothers closed its subprime mortgage unit, and Capital One shut down the wholesale unit of GreenPoint Mortgage,” Crain’s New York reports. Bear Stearns had shut down two of its mortgage units the week prior to last. HSBC, one the the biggest providers of subprime mortgages, has shut down some operations but is far from exiting the mortgage origination business.

CIT is eliminating 550 jobs across 25 offices by shuttering the operation.

CIT first reported problems in its mortgage business, which caters primarily to subprime borrowers, six weeks ago. At that point the Manhattan-based firm wrote down the value of its roughly $10 billion portfolio by $765 million, resulting in an unexpected second quarter loss of $135 million. Its stock plummeted, as investors feared further writedowns to come. On Tuesday the shares lost another 4%, sinking to $35.85 by late morning.

So far the mass layoffs haven’t yet hit Wall Street. But many fear that just as the problems in the subprime mortgage market spread to other credit markets, the layoffs may follow as well.

CIT shutters lending business, takes charge [Crain's]

The Murdochification of the Journal continues...

Cheyne May Liquidate Commercial Paper Unit Amid Market Rout (Bloomberg)
Tremors in the commercial paper market scare as more than anything else, since commercial paper is like the oil that keeps the gears of commerce spinning. Without it, everything just seizes up, coming to a crashing, burning halt. Not fun. Cheyne Capital Management may be forced to liquidate its commercial operation, as S&P has lowered its credit rating (good timing). The hedge fund management firm, set up by to ex-Morgan Stanley bankers, says it has enough cash to keep the business going through November.

Credit problems are spilling over into the student loan sector (CNBC)
Last night DealBreaker editor John Carney explained to the On the Money audience how the credit crunch may combine with action on Capitol Hill to make student loans an expensive cocktail for college students. Of course, loose credit for college has probably made education an over-valued asset anyway. Introducing some rationality into this market may not be such a bad thing.

Wonder Bread bakery says region has gone stale (San Diego Union Tribune)
It's weird to think that there are whole regions of the country where you can't get Wonder Bread anymore. Granted, it's weird to think that there are people out there that still buy the stuff -- certainly we don't know any. But there was something amusing about seeing it on shelfs -- it did at least have a nice bag. That being said, you have to imagine the company could've tone just a wee bit more to change with the times. Their product wasn't so good, like Coke, where you just don't mess with it. Perhaps a sourdough, thick-crusted wonder bread would've done the trick.

General Mills to close Trenton plant (CBC.ca)
Wow, rough times for everyone in carb sector. Not only is Wonder Bread pulling out of more markets, General Mills is laying off plant workers. The company also announced that it's getting out of the once-lucrative frozen waffle business. Of course, the 800-lb. gorilla in the space, Eggo, is owned by Kellog, and that won't be going anywhere. Oh and Eggos are gross.

Home prices here up, but not way up (Seattle Post-Intelligencer)
We're starting to wonder whether there are some errors about how housing prices are tabulated on a national and local scale. It just seems to be a recurring them that while the overall housing market is going down, every major municipality claims to be bucking the trend. Come on -- the whole decline can't be concentrated in Detroit and Las Vegas. Anyway, if you believe it, add Seattle to the list of cities which continues to see prices rise.

$$$ Renaissance: Making Stuff Up About Bill Gates for Fun and Profit [Paul Kedrosky]

$$$ “People think it’s a big drug-sex thing out there when it’s really, really not,” the trader says. “It couldn’t be farther from the truth.” [Portfolio]

$$$ Carney, On The Money, CNBC, Tonight, 7

$$$ Blue Nile, Inc. (NILE)

Sponsored by the Financial Times.

The day started ugly. Merrill Lynch cut the ratings on Bear Stearns, Citigroup and Lehman Brothers. The was the second day in a row of downgrades for Bear and Lehman, who had been cut (along with Morgan Stanley) by Goldman Sachs on Monday. “Kicking them while their down,” some said. Shares in Bear, Citi, Lehman, and Morgan Stanley all fell in today’s trading.

Much of the chatter today was about exposure to credit market losses. Reports pegged State Street as having the largest exposure to asset-backed commercial paper, one of the markets where liquidity has recently become as scarce as rocking horse manure. State Street fell almost 4% today.

The release of the notes from the last Federal Reserve meeting set off the usual round of Fedlinology, with traders looking for signs of whether or not the Fed would cut rates. Never mind that the minutes are now twenty-one days old, meaning they predating the liquidity crisis that led central banks around the world to pour out cash and sent the equities markets into turmoil. Practically ancient history now. But still, some hoped that their would be signs the Fed was planning a rate cut at that early date. Such signs were not in evidence.

The Dow Jones Industrial Average dropped 279.88 to land down at 13042.25. The S&P 500 fell 34.42 to 1432.37. The Nasdaq Composite Index stumbled 60.61 to 2500.64.

Selling accelerated in the final hours, and the now familiar trading curbs returned to the NYSE. Volume was light, but not unusually so for a late-August day. Much of the movement in stocks amounted to what some quantitative hedge fund managers refer to as "misbehavior." In other words, stocks that the quant computers think should have gone up went down, and vice versa. That might spell pain for long-short quants who haven't learned their lesson from the market's last bout of misbehavior.

Mark your intelligence to market with FT Alphaville.

People who work out audibly should be shot. But should they be thrown through a wall? That’s the question at the heart of a police investigation into a spinning class imbroglio between a hedge fund manager and a broker that took place over the weekend at an Equinox gym. Stuart Sugarman was peddling along, minding his own business and feeling the burn. Problem was, he was making everyone else feel his burn, too, by “loudly” grunting, commenting, “Great song!” and yelling, “You go, girl,” throughout class.

Annoyed by these outbursts of enthusiasm and music reviews, fellow rider Christopher Carter apparently first asked Sugarman to quiet down, then told him to "Shut the fuck up," then threatened "If you don't shut the fuck up, I'm getting off my bike," and finally, after being told to “stop being a baby,” made good on his promise and also took it one step further—by dismounting and throwing Sugarman and his Schwinn against the wall, and leaving a hole in the sheetrock.

Sugarman, who got back on his bike and finished the class, says he suffered a concussion and had to have extensive back surgery, using cadaver discs to repair the six injured ones in his neck. Carter has been charged with a misdemeanor assault, though Sugarman’s lawyer, Samuel Davis is asking the DA to up that to a felony. Davis claims that what should’ve been a request to “keep it down a bit” turned into a “spin rage” attack charge not unlike that of “Leonard Marshal of the New York Giants hitting a practice sled.” The defense from Carter’s lawyer, Dan Ollen, has been to call Sugarman, “a piece of work.” Davis says that he and his client will also be suing Equinox, who reportedly revoked Sugarman’s membership this morning.

DealBook, always-- always-- adding insult to (neck and back) injury, points out that Sugarman may not actually be a hedge fund manager, but the senior managing director of boutique investment bank Sunrise Securities, instead.

Psycho Spin-Out [NYP]
Now Gym Wallops 'Grunter' [NYP]
Spin This: When Brokers Attack [DealBook]

Sam Zell’s warning at the end of 2005 in his annual “holiday card” that excess liquidity, falling yields and narrowing spreads will violently return to equilibrium seems awfully prescient. Zell produced a parody of the song “Raindrops Keep Falling On My Head,” with lyrics detailing his take on the current economic situation.

It’s not that there was a lack of doomsday prophesizing before the subprime shoe dropped and credit started drying up, but not that many people were out of the closet as early as 2005 (there was still another record year to juice returns from!) and in such a fancy musical outfit.

Zell’s take is so prescient that he ran out of ideas by 2006, when his holiday card consisted of a typical anti-SarbOx rant. You can view all of Zell’s musical endeavors here (with a special shout to TMQ for reminding us this existed in the first place), but here’s the Theory of Relativity vid:

The lyrics for those unable to harness the YouTubes after the jump...

When it comes to making strange bedfellows, modern finance makes politics look like an old-fashioned match-maker. The most famous words on the current financial turmoil came not in the form of a political speech from a major presidential candidate, but from Jim Cramer, a former hedge fund manager turned popular CNBC stockpicker and market prognosticator. His five-and-half minute call for the Federal Reserve to cut interest rates, however, strangely recalls the most famous political speech of an earlier era—William Jennings Bryan’s 1896 “Cross of Gold” speech before the Democratic National Convention in Chicago.

The emotional desire of the nineteenth-century populist movement Bryan led was to smash the power of Plymouth Rock, which stood for old New England and Wall Street. The emotional desire of what Dan Gross has called “the Punch Bowl Caucus” is to cut interest rates—return the punch bowl—to jazz up the Wall Street party again. But they share an emotional tone—and, more importantly, an economic goal: the loosening of a monetary policy they claim is so tight it is ruining ‘their people.’

Gross’s essay nicely describes the membership of the Punch Bowl Caucus: Wall Street investment banks, hedge fund traders, private equity managers, the chief executives of heavily indebted automakers, the heads of home loan businesses, supply-siders who believe “the government should never intervene in the economy, unless it is to bail out hedge funds and investment banks,” and internationalists who worry about what would happen to the developing world if Americans suddenly quit spending their earnings on foreign goods.

Since they share an emotional tone and the goal of loose money that inspired the old Populism, but differ in their background, let us adopt “Wall Street Populism” as the proper term for the Punch Bowl Caucus. It is, after all, something of a Free Silver movement with gilted edges.

There are, of course, crucial differences. The old populist were openly egalitarian radicals while the Wall Street Populists are openly elitist radicals—concerned about the jobs and firms of people who have been in the financial industry for, as Cramer put it, “twenty-five years.” The old populists viewed Wall Street and the railroads as their enemy. The Wall Street Populists are, well, closely tied to Wall Street. The old populists spoke in the eloquent and evocative images built from the Christian tradition. The language of the Wall Street Populists is less burdened by syntax, tradition or allusion.

That the cause of looser money gone from those who wished to smash Plymouth Rock on the Grand Canyon to those who want to keep Wall Street afloat on free credit shows how different twenty-first century finance is from nineteenth century finance. You know that Wall Street long ago stepped through the looking glass when a hedge fund manager adopts the cause of William Jennings Bryan. We’d call it “unreal” except that it is all too real.

The Punch Bowl Caucus [Slate]

When I first started at DealBreaker, I realized quickly that there were a few things you could always count on. You could count on Goldman to be the best, its hedge funds not included. You could count on commenters to never shut the fuck up about totally insignificant errors in grammar and punctuation that they were only pointing out so as to feel good about themselves on an anonymous message board for two seconds as a result of their obviously unparalleled “gotcha!” skills. You could count on quant models to always beat the market. And you could count on a young man, a dancer and a banker, named Eugene Plotkin, who took in more than $6.7 million in an insider trading scheme that was hatched at a Russian bathhouse and included a Merrill Lynch junior analyst, a 63-year old retired Croatian underwear seamstress, an exotic dancer and two former employees from the Wisconsin branch of a BusinessWeek printing press, to claim that he was completely innocent. Today that faith was broken.

The former Goldman Sachs associate pleaded guilty to one count of conspiracy and eight counts of insider trading. Plotkin’s crimes carry a maximum penalty of 165 years in prison, though under the terms of a plea agreement, he only faces 5 years and 11 months (and will also have to turn over the $6.7). Sentencing takes place on November 30. Plotkin told U.S. Magistrate Judge Debra Freeman, “I understand what I did was wrong and against the law'' and said he was “deeply sorry” for his “intent to perpetrate a fraud upon the investing public.'' He said nothing about robbing us of our ability to ever believe again.

Ex-Goldman Associate Pleads Guilty to Insider Trading [Bloomberg]

Nah, we’re just kidding. But old crab hands *was* in fact nominated for AskMen.com’s Top 49 Men of 2007. Not necessarily something to write home about, but not something to scoff at, either, perhaps. The list of candidates campaigning for the title of “Top Man” all “found great success in the past 12 months and have carried themselves like true men’s men,” according to AM. (The inclusion of Pete Wentz and Ryan Seacrest is suspect.)

Obviously, Schwarzman will easily beat out Mark Wahlberg, Denzel Washington and Matt Damon, fellow nominees who don’t have crab hands. Also easily defeated will be Dane Cook, because Schwarzman’s standup routine is far superior, and that counts for a lot.

But others in the field could be tough contenders. Mark Zuckerberg? He’s already convinced 930,281 Facebook users to join the group “Zucks 4 Top Man.” David Chase is reportedly taking out hits on all the nominees. And Rupert Murdoch is just plain stunning and will clearly put up a good fight. Last year’s winner, trying to go 2 for 2, was George Clooney-- not much competition there. If you care at all about Stephen, and shares of Blackstone, which are apparently predicted to spike up or down based on the results of this momentous poll, get out there and vote today.

Top 49 Men [AskMen.com]

If Jim Cramer was mad at the prospect of millions of Americans losing their homes, who knows what Krakatoa-esque calamity awaits when he finds that millions of Americans may lose their student loans. In the current credit crunch, student loans have been flying under the radar, at least coverage-wise.

Like mortgages, student loans often get bundled by the major banks into ABS and bought by pension funds and other institutional investors. Like subprime mortgages, there’s a lot of speculation involving people with questionable credit (ABS of student loans funding liberal arts degrees clearly need a ratings cut).

The banks get an added perk from large federal subsidies to the lenders of federally guaranteed student loans. The scope of the student loan ABS market is substantial - more than $350 billion in student loan ABS have been issued since 1998, including a record $79 billion in 2006.

In response to the current market, many new student loan financings have been shelved and loan financing costs are rising. Next week, lawmakers and industry groups are finalizing a student loan reform proposal to send to George W. Bush, in response to recent scandals involving “kickback schemes and conflicts of interest among lenders and college officials.” One of the primary reforms is a subsidy cut. Rumor has it that the White House is on board and that the only argument involves the size of the subsidy cut.

A large subsidy cut would exacerbate the squeeze placed on lenders and the banks bundling student loans into ABS.

Securitizing student loan debt [Reuters]

Market/lady friend/mahjong troubles got you down? Cheer up—you now have the unique opportunity to own a tiny part of Renaissance Technologies (provided, of course, that you’re an institutional and/or sophisticated investor, which we’ve been told by Ad Sales you all are, which would explain how you’re able to spring for those pricey six-packs of Mike’s H.L. with such ease). The greatest hedge ever run out of Setauket, Long Island is said to be planning a minority stake sale in the coming weeks (though, predictably, the sale has been denied, for now). While AQR and KKR (and DVR and DDR) have reportedly been proceeding cautiously with their planned IPOs in the wake of some fireworks in the credit market, James Simons is confident things will work themselves out, and that there will be a demand for a little piece of James at home, as well as in Asia and the Middle East. (Rep from Goldman: “it’s not just the Ladies that Love Cool James, that's all I'm saying.")

The $30 billion fund is apparently going with stake sales similar to those of super secretive SAC, as they would allow them to raise capital but not be forced to reveal any major information about RT's 7th grade math-based trading schemes. Despite having momentarily jumped on the summer losses bandwagon, Renaissance’s flagship Medallion is said to be up for the year.

Bullish US hedge fund may sell stake [FT]

Such were the instructions of the Knights Who Say "Leh," as Lehman is rumored to have hired Jeb Bush as an advisor for its in-house investment arm. The Shrubberies have a long history of landing prestigious corporate gigs - from G.H.W.B.'s stint at Carlyle and G.G.H.W.B.'s (Grandfather of G.H.W.B.) run at Brown Brothers Harriman. The Shrubberies have so densely lined the upper echelons of corporate America, future Shrubberies are often added to make a path, and rest on the absence of laurels particularly.

Is this a sign that the banks are in desperation mode and looking to bring in people with Washington connections to strong-arm some (more) intervention to stem the oncoming tide of financial turmoil (or a sign that J.B. is going to wait until the Shrubbery name becomes a little less toxic and boost his campaign coffers to make a run in 2012)?

Jeb Bush: Lehman’s Secret Weapon [Deal Journal]

While some people are reminiscing about financial panics of the past, or even grokking the Great Depression, it’s not all despair, poverty and austerity yet for the kings of finance.

As Dennis Berman’s The Game column points out in today’s Wall Street Journal, the gilded age and its attendants—extravagance and excess—continues to roar on in some on the more fashionable precincts.

“Just last week, Apollo Management LP chief Leon Black threw a beach bash for about 200 family friends out in the Hamptons,” Berman writes. “The group enjoyed catering from Nobu and Daniel, two of Manhattan's priciest eateries, while taking in a private concert by Tom Petty & the Heartbreakers.”

It’s hard not to wonder if something might have seemed a bit off to the partiers when the Heartbreakers launched into 2002’s “When Money Wasn’t King.”

If you reach back in your memory
A little bell might ring
About a time that once existed
When money wasn't king
If you stretch your imagination
I'll tell you all a tale
About a time when everything
Wasn't up for sale

Credit Crunch Lowers Boom On Deal Excess [Wall Street Journal

State Street got hit with a one-two combination of bad news today. The Boston Globe reported that the State Street Limited Duration bond Fund lost about 37 percent of its value during the first three weeks of August. Meanwhile, the Times of London woke everyone up early this morning with a report that State Street has $22 billion of exposure to asset-backed commercial paper conduits, off-balance sheet vehicles that have led to troubles for rival financial institutions during the recent credit market turmoil.

It’s a terrible mix of news. The losses in the supposedly conservative bond fund would place it among this summer’s worst casualties. "Both the level of underperformance and the degree of market turmoil are unprecedented in our 30-year history as a fixed income manager," State Street’s Sean P. Flannery has told clients in a letter.

See? It's totally not their fault. These things never happen. Except, you know, when they do.

On the conduit thing, State Street has credit lines to at least six of these off-balance sheet vehicles, which make up or 17 per cent of its total assets, according to the Times. The Times says its reporting is based on regulatory filings. “That proportion makes State Street the most highly exposed bank to conduits among its European and American peers,” the Times reports.

Update 11:23: State Street shares fell nearly 3% this morning.

Further fiasco[Boston Globe]
State Street bank has highest exposure to conduits [The Times]

ASX, Euronext may be eyeing LSE stake (Financial Post)
The NASDAQ announced a couple weeks ago that it would reluctantly dump its stake in the LSE, as it recognized that it would never have it to itself. Plus, with all of the other competition and consolidation in the stock exchange space, the NASDAQ had plenty of other fish to fry. However, despite the LSE's reputation as a cruel mistress, both the NYSE Euronext and the Australian Stock Exchange may be interested in picking up a slice of the NASDAQ's stake. It's not clear what their intentions would be, whether the buy would be an investment or something more strategic.

Whole Foods wraps up purchase of Wild Oats (AP)
And with that... it's over! Just like in a basketball game, once the buzzer buzzes, there's no going back and reviewing plays, no fouling the shooter to put him on the line. The game's over. Whole Foods 1, FTC 0. Now it's time to focus on XM/Sirius and see that it ends up the same.

Redone Deal Not Thought Contagious (NYT)
Analysts are rushing to insure investors that the HD Supply saga is unique and that deal reprising won't become the norm. We're not so sure. First of all, any time someone uses the word contagious or contained, it's a good rule of thumb to assume that they're completely wrong. Second, part of the argument for saying that HD Supply won't happen again rests upon the idea that there was a unique set of conditions in place here. But look around -- there are weird things going on in a host of deals. Clear Channel is having trouble dumping 400 local stations, which it needs to do before it goes public. Although the sense of panic may have waned for a couple of days, the market is still skeptical on a lot of deals, probably quite rightly.

Embattled gold miner suing former CEO (Vancouver Sun)
We mentioned yesterday that there had been a dearth of good metals stories this summer. Apparently, we spoke to soon. Vancouver's Southwestern Resources Corp., a gold miner, is suing its former CEO, for tampering with test to results to inflate the quantity of gold at a site in China. While (allegedly) manipulating these results on his own, CEO John Paterson was also selling shares in the company, taking advantage of a stock market boost. The lawsuit didn't specify the total damages sought, though the company wants at least $1 million. $1 million, how quaint.

[via Big Picture]

$$$ Deals: Without Dubai, It's Downright Dry
In our M&A Roundup for the week ended Aug. 26, the Middle-East nation's investment in MGM Mirage accounts for 60% of the activity.

$$$ Erin Burnett Teaches Us To Use Terrible World Events To Our Advantage: An Inspiring Story Of A Blogger And Her Collection Agent [jezebel]

$$$ Handsome Hedge Fund Manager Seeks Attractive, Fashionable Woman [craigslist]

$$$ Air Guitar Hero [Gelf]

$$$ The internet bores Mark Cuban [Blog Maverick]

Is criticism of Portfolio just jealous sniping from rivals? That’s more or less the take of The Deal’s Matthew Wurtzel.

“The second issue of Conde Nast Publications' business magazine Portfolio is now at newsstands leading critics like MarketWatch's Jon Friedman and The New Republics' Elizabeth Spiers to rip it apart once again. The magazine has established lofty goals of changing business journalism so, of course, it is going to illicit ill-will amongst rivals,” Wurtzel writes. “However, the hazing — if you will — of Portfolio is commonplace in business journalism. After all, Portfolio is not the only business journalism effort to face such treatment. The as-yet to air Fox Business Channel has received similar derision.”

Does that make sense? Some of the early criticism of the magazine came from DealBreaker's founder Elizabeth Spiers, who hardly seems to be a likely partisan of the cause of not changing business journalism. The Deal seems to be projecting its own experiences on to Portfolio. When it was launched, it was widely criticized by more established business journalism outlets. “Although the chorus of naysayers — The Wall Street Journal, The New York Times and the Financial Times — was smaller, their voices were perhaps just as loud — these are, of course, the stalwarts of daily news,” Wurtzel writes. “Their ‘big issue’ with The Deal was whether a privately owned newspaper reporting on private equity could remain objective.”

These days, according to Wurtzel, the criticism comes faster and with more heat because of the proliferation of online media—such as blogs.

We’re going to take that as a compliment.

[Disclosure Note: If you look over the left column, you might notice that Portfolio is an advertiser on DealBreaker. Phew. That was hard to admit. Now I need to go find myself a nice cold glass of Mike's Hard Lemonade.]

Portfolio bashing is normal [Dealscape]

Closing Bell rung by the Financial Times.

More jittery light volume pre-Labor day trading resulted in lower major U.S. indexes. The Dow finished down 0.4%, the Nasdaq finished down 0.6% and the S&P led the losers with a 0.9% tumble, with all 10 S&P sectors trading lower.

Financial stocks dipped, with Bear and Lehman losing 4% on the day and JPMorgan losing 2% to nearly bottom out the worst of the Dow performers (JPMorgan was the second worst performing Dow component on the day). Utilities dipped, with Exelon and American Electric Power losing 3% each.

Asian markets finished higher on the day and European markets were mostly mixed to higher.

Tomorrow minutes of the last Fed meeting will be released, which would be more newsworthy if they weren’t already dated by the August 16 conference call and emergency Fed action. The transcript of that hot number won’t be released until October. The S&P/Case-Shiller housing-price index numbers also come out tomorrow, and are expected to show continued price declines.

Come in for the real thing at FT Alphaville.

After years of being relatively peaceful, the Japanese gangsters known as the yakuza are becoming more violent, according to a report from Japan’s national police agency. And what’s driving them to violence?

The stock market.

In the wake of the end of the Japanese building boom, which had been a major source of income for Japanese gangsters, the yakuza have been diversifying their portfolio by branching out into insider trading. Since few of the tattooed gang members are in places to acquire inside information the old fashioned way, they’ve developed a new technique. They beat it out of those who have it.

“Investigators are also alarmed at renewed yakuza interest in the stock market, with the threat of violence being used by gangs to gain inside information before investing their money, " the UK’s Guardian reports.

Just to be clear, when we talk about the benefits of repealing insider trading statutes, we’re not encouraging this sort of thing.

Yakuza moves from street to boardroom [Guardian]

The Illinois State University College of Business is implementing a dress code that will eliminate the schleppiness of T-shirts, sweats, jeans, hoodies, life-partner-beaters, baby-tees, pleather vests, banana hammocks, juicy couture and cargo thongs found in most college classrooms these days.

ISU is going strictly business casual (the range of which is pictured), instead of student-chic. The punishment for not adhering to the fashion police will be expulsion from class (or the Cabo "case-trip"?) and academically punitive in nature (you get a pass-minus), which seems a bit over-the-top.

In another move to increase "overall professionalism" at the school, ISU may take its own generic-looking "Red Bird" mascot and finally formalize it into the "Cardinal" that it has been ripping off for ages.

Smarten Up, MBA Students, or Else! [Deal Journal]

Erin Burnett is lavished with praise by Washington Post media critic Howard Kurtz. Ever since DealBreaker readers awarded her the top honors in our “Who Moves Your Market” poll, Burnett has come under increased scrutinyfawning from the press. But this is the longest, most in-depth profile to date. It’s pretty clear that Howie is a bit smitten with the Street Sweetie.

“The 31-year-old is razor sharp, works crazy hours, is comfortable discussing liquidity or collateralized debt obligations -- and everyone keeps talking about her looks,” Kurtz writes before immediately talking about her looks. “Under the lights, in a smoky blue dress that matches her eyes as well as her shoes, her flowing dark hair perfectly teased, she is not exactly hard on the eyes.”

Kurtz rehashes what you already know: Chris Matthews ogling her, Jon Stewart mocking her, Rush Limbaugh praising her and the CNBC executives adoring her. Grew up on a Maryland farm. Played field hockey. Went to Williams. Worked at Goldman. But there’s plenty of new stuff. Which we read so you don’t have to.

Wait Till We Get Our Haines On You
• Burnett on Haines: "We were like two dogs circling around."
• Haines on Burnett"We hit it off immediately She's very bright, funny. She's not a diva. She understands the markets. She works like a dog. It's just a ball to work with her."

Burnett On, Uhm, DealBreaker?
• “It's been an immense responsibility," she says. "We've been purveying facts rather than becoming part of the fear-mongering."

How Burnett Got Her Rapid-Fire, ‘Even Cramer Can’t Out Talk Me’ Banter Down Pat
• “After Burnett was promoted to a booker's job, Citigroup recruited her to help create an online financial news service. It was there – ‘doing thousands of interviews that very few people watched,’ she says -- that Burnett honed her skills. In 2003 she sent a tape to Matthew Winkler, Bloomberg's editor in chief, and was hired for its business channel, where she received several months of voice coaching.”

Burnett on Breakfast: Shorting It
• “She seems to subsist on little food, her sole intake before noon consisting of coffee and a bag of Sun-Maid dried apples, nibbled while Haines is doing the talking.”

Burnett On What You Really Wanted To Know Anyway
• Burnett is tight-lipped on the subject [of whether she is married or has a boyfriend], saying only that she's "in a relationship." After a pause, she adds: "And it's not with a woman." Further interrogation reveals only that her beau works in financial services.

Looking Good at CNBC (Pretty, Too) [Washington Post]

Several weeks back, we posted the first and last installment of the DealBreaker Sex Diaries, for about five minutes, before we got in trouble with Dad and were made to take it down. But the basic gist of the impetus for ripping off New York’s “Sex Diaries” was that they frustrated us with their utter lack of, what’s the word—sex. There was always a lot of thinking about sex, a lot of near-sex, a lot of “my boyfriend grabs my breasts, and falls asleep” sex/“my girlfriend straddles me and passes out” sex, but precious little sex-sex.

Today’s SD, however, contains “three unsuccessful intercourse attempts, two fantasies, one porn viewing, one act of masturbation in a shared bedroom, and three acts of intercourse.” Here's a quick bit:

Recidivist escapee primates aren’t usually DealBreaker fodder but for some reason this tale of an orangutan who broke from his bonds caught our attention.

A 14-year-old Bornean orangutan got loose Sunday afternoon at Zoo Atlanta, spending about 30 minutes outside his compound before zoo workers tranquilized the animal and returned him to his habitat.

Sulango got out about 2:43 p.m., said Dennis Kelly, the zoo's president and chief executive officer. He roamed no farther than 100 feet from the exhibit, he said.

The zoo declared a "code brown," meaning it called specialists to move zoo-goers away from the site while others sedated the animal, Kelly said. Sulango, he said, seemed confused and didn't venture far from the site.

Orangutan escapes exhibit at Zoo Atlanta [AJC.com]

Chief among the names being thrown around as the next Attorney General is Michael Chertoff. And when we say the name Chertoff is being thrown around, we mean that Chertoff’s associates seem to be engaged in shock and awe carpet-bombing of the media and White House to get the job for their man.

Sometimes referred to as “The First Attorney of New Jersey” (a title which, we’re assured, is meant as a compliment), the current Secretary of Homeland Security has spent most of his career as a government lawyer. After graduating Harvard law school (where he served on the prestigious law review), he began his career as a law clerk for Justice Brennan, became an assistant US Attorney and was appointed by the first President Bush to serve as US attorney in New Jersey.

At thirty-six, he was one of the youngest ever to get such an appointment. “ Kid Prosecutor,” a partner at a prominent corporate law firm once called him. He served as the Senate Republican majority’s chief counsel during the Whitewater hearings. He became the head of the Justice Department’s criminal prosecution arm and then was appointed by to the Third Circuit as a federal appeals judge by the current President Bush. Between government stints, however, he worked a partner at Latham & Watkins, where he won a number of high-profile cases for the defense. This guy’s resume has over-achiever written all over it. If you line up the letters according to your decoder ring it spells “Supreme Court Justice.”

But when the Bush administration considered appointing Chertoff to run the SEC, Wall Street acted quickly to shoot him down. Lobbyists with Wall Street firms stressed that his record as a successful and aggressive prosecutor gave him little experience in dealing with business issues, and behind closed doors they whispered that he might have developed a one-sided view of corporate America and Wall Street as being rife with criminality and fraud. Eventually the Bush administration settled on Chris Cox, a former Congressman and Latham & Watkins partner who was viewed as more sympathetic to Wall Street.

Some on Wall Street believe that the same criticisms might be applicable if Chertoff were appointed Attorney General. His controversial decision to prosecute Arthur Anderson for its role in Enron’s destruction strikes many as a bad sign.

“The best we can hope for is that he’ll concentrate on terror issues,” one Wall Street lawyer said. “He’s a born prosecutor and no friend of Wall Street or business in general.”

As those of you who read the increasingly relevant A2 this morning already know, economists are now losing more sleep over subprime than terrorism. Yes, they believe that the threat posed to the United States by mortgage defaults and heavy debt loads is bigger than that of us being attacked by Canada, which I’ve long suspected is up to no good around the VT/CA border, even though they feign innocence when you ask them what they’re doing there and claim to just be trying to make it to UVM to score pot. This just goes to show you that economists are out to lunch, and wouldn’t know what the biggest threat to the country was if it bit them on the ass. Since we apparently have to do everything around here, let us step up to the plate and bite those economists’ asses: the biggest threat to the United States isn’t terrorism or subprime—it’s the fact that Crocs, the maker of those hideous, hideous eyesores (which, coincidentally, are favored by terrorists and subprime mortgage holders alike), is up 3 percent, on the news that the company will now expand its reign of terror into clothing lines for men and children. If you love America, go short Crocs now. Otherwise, the terrorists win, and you will probably have testify at Osama's war-crimes trial.

Sidebar to the econs: when you were coming up with subprime as threat numero uno, did you stop and think, “Is this something that can somehow be blamed on Saddam Hussein?” Since we know you weren’t aware that Sadd’s brother Ahmed ran the Sacramento office of Countrywide, which was responsible for 33% of new loan generation, we’re going to go with “No.” Amateurs.

Crocs Shares Rise on Clothing Plan [CNBC]
Defaults Bigger Threat for U.S. Economy than Terrorism [CNBC]

Was the “recognition” of James Pallotta in his nearly 2,000 word tome to investors last week. It was Pallotta's way of apologizing for being so hard on himself and an answer to the old riddle - what's the sound of one hand patting yourself on the back. The full letter is reprinted after the jump, but here are some of the highlights:

To state the obvious, [the 8% loss] would not have been the case had we understood fully the speed and ferocity with which events would unfold. [Once we fix the flux capacitor, everything will be fine. Had we known we were going to lose a ton of money we wouldn’t have lost a ton of money because we would have done things that would have avoided losing money, having already known the things that would lose money.]

Compounding matters, our short book failed us, which was enormously frustrating because historically it has been more volatile than our long book (and, therefore, sized accordingly). [It’s enormously frustrating when the market doesn’t obey historical precedent, or when fund managers don’t obey the first rule of the market which is that it doesn’t obey historical precedent and that future performance cannot be predicated on past results.]

Many of our equity shorts ripped to the upside as VAR-induced forced-covering by quantitative strategies accelerated. [PS – it was the quant’s fault… f’ing computer models.]

We are first and foremost “bottom up” cash flow-obsessed stock pickers. [Jim Cramer without the sound board.]

In the end, it is entirely possible that losses will prove both “wide” and “narrow” in their distribution across the globe (meaning that losses will be widely distributed but will likely hit certain institutions particularly hard). However, a deeper crisis -- spurred by failure (or near failure) of a major financial institution -- must be acknowledged as a possible risk also. [A plague on all your houses, but some houses will be plagued more than others.]

Again, I welcome your calls and visits with our team in Boston, and I wish you the very best. [I just called, to say, I love you. Also, I will take you on a whale sighting excursion. Or we can go to Fenway. Or take a duck tour. Please just come visit. I’m so alone, so very alone.]

The full letter after the jump.

The resignation today of Attorney General Alberto Gonzales has ignited speculation about who might fill the top spot at the Justice Department. On Wall Street some are wondering whether the Gonzales’ resignation might help or hurt investment banks, brokerages and corporate America on a number of pending legal issues.

The Justice Department handles more than just the prosecutions of organized criminals, drug dealers and terrorists. It is also involved in law-enforcement in the finance community and corporate America. Chief among the legal issues that concern Wall Street is so-called ‘scheme-liability,’ where banks may be found guilty for assisting the corporate fraud of their clients. Wall Street is also concerned with other issues of institutional liability, for instance whether to prosecute an entire company or an individual when fraud is alleged by executives and employees. Wall Street firms are generally friendly towards insider trading prosecutions, except perhaps when prosecutors get zealously creative and go after financiers whose acts are not widely thought of as illegal.

Under Gonzales, the Justice Department has had a mixed record on Wall Street issues. Gonzales himself, a former corporate lawyer whose list of clients once included Enron, is viewed as having a generally pro-business outlook. Some critics, who asked not to be named for fear of political or legal retaliation, dispute this.

“He’s pro-successful business,” one critic said. “But if your company is in trouble, his Justice department made no bones about going after you.”

The Department has aggressively prosecuted the folks its lawyers like to call ‘wrong-doers,’ including accountants who helped clients develop aggressive tax-avoidance structures, executives involved in back-dating and a host of others involved in the business scandals of the late nineties and early part of this decade. Since Gonzales ran into trouble following revelations of the firing of several government lawyers, many have seen the department as “rudderless.”

“It’s been an asylum run by inmates,” said one court observer.

There is a widespread view on Wall Street that career government prosecutors tend to be more hostile to business than political appointees with more experience in the private sector. There is a fear that a “rudderless” Justice department will drift into a more aggressive current for prosecuting alleged wrong-doing by corporate executives and Wall Street financiers. The hope on Wall Street is that Gonzales’ replacement will be named quickly and come from a background that displays some sympathy for business.

Several names are being talked about as potential nominees. The Wall Street Journal’s Law Blog has a great rundown of the likely suspects. Whether this will be a boon or a bane for Wall Street firms will likely depend on who President George Bush appoints to replace Gonzales, and how quickly that appointment is made. As the day goes on, we’ll profile some of the leading candidates for the job.

Who Will Be Our Next Attorney General? [WSJ's Law Blog]

We’re all for reducing the institutionalized love between a man and a woman down to dollars and cents and “fuck, you, I get the Pomeranian, you get the kids!” That should be obvious at this point. And, also, far be it from us to take issue with the math skills of others when we’ve never professed to be number-inclined people ourselves. But when it comes to protecting your assets, we do what’s necessary. So: New York’s advice today re: bear market divorces maybe ought to be avoided.

As you well know, unless a prenuptial agreement was signed, divorce laws in New York state that each spouse is entitled to half of all income earned. According to Nancy Chemtob, the lawyer consulted for the piece, if you think you’ll your salary and bonus will be smaller next year, you should get out “now!” (like, today), when you still have a decent amount of coin. Because “why be forced by the courts to split less money”? Well—maybe so that you can keep as much for yourself (and wives 2, 3, 4, 5) as possible, and out of the hands of that money-grubbing whore? Regarding the recommendation to call it quits *before* you get laid off by Bear (Global Alpha, etc), attorney Susan Bender told New York: “we have some pretty savvy judges in New York,” who may be onto your game, aptly named, “The fact that I found this advice to be sound is reason enough for me to get nailed by my ex and banned from ever working with money—my own and other people’s—again.”

Bear Market? Dump Your Wife [NYM]

Our own advice: tweak ever so slightly so that the marital (-dissolving) counsel is directed at the wives of Wall Street. Then you've got gospel.

Here’s one: in 2005, a letter sent to Reverend Barry Parker of St. Paul’s Anglican Church in Toronto warned the man of the cloth that one of his sheep had gone to the dark side. According to the note’s sender, P. Fate, who wrote from St. Patrick’s Cathedral in New York, parishioner/insurance executive Prem Watsa was taking stockholders of Fairfax Financial Holdings Ltd. for a ride. Mr. Fate, deeply troubled by this affront to Jesus and shareholder value, advised the Reverend to “be skeptical” and demand a full confession. Who do you think Fairfax claimed was behind the allegedly baseless smear campaign against the firm? If you answered “Satan,” you’re wrong, but on the right track (same goes for people who said “Jon Lovitz”). Fairfax, who has a history of “accounting lapses,” asserts that the letter was the work of hedge fund managers Stevie Cohen, Dan Loeb, David Rocker, Adam Sender, and Jim Chanos.

According to the ‘fax, who probably should’ve actually just gone with “Satan,” the managers hired Houston real estate broker/Nigerian natural gas dabbler/MI4 Reconnaissance director Spyro Contogouris to send out slanderous (and downright insulting) notes about the insurer in order to drive down its stock. (Fairfax also alleges that MI4 Reconnaissance employee Max Bernstein acted in cahoots, citing a lack of foreskin as motivation.)

Contogouris, who claims to be innocent regarding unrelated embezzlement charges brought against him last November, denies wrongdoing, as do the managers. The motley crew will argue to have Fairfax’s admirably creative albeit batshit crazy claim dismissed on September 5. It goes without saying that this sort of scheme seems beneath that of Cohen, who prefers to drive down stocks by just plain scaring the shit out of people with the rotting carcasses of dead sharks/humans; Chanos, because it seems unlikely that the guy who called out Enron would be all, “Hey, I’ve got a genius money-making scheme: we send a letter to a Reverend. That’ll bump us into the next tax bracket”; and Sender, because it obviously took many tries to get the glamour shot we borrowed from Bloomberg just right. For reasons we don’t think it necessary to get into here, Loeb is obviously suspect.

Hedge Fund Hit Man Hired by Cohen, Loeb, Sender, Says Insurer [Bloomberg]

Sam Zell reportedly made a trip to one of his new (awaiting FCC approval) Tribune properties at the LA Times. Despite Times Publisher David Hiller’s attempt to make Zell seem as fuzzy as possible, other accounts contend that Zell tore the Times a new one.

Among Zell’s alleged “constructive criticisms” of the LA Times:

-It has a crap business section
-Its reporting is not guided by popular demand
-It lacks a focus on foreign coverage
-Called the idea that front-page ads compromise the integrity of the paper a crock of shit
-Said that the paper was pretty bland in general

Hiller’s memo provided a laundry list of Zell-isms and Zell advice, designed to summarize a videoed Q&A that was posted for employee viewing (if anyone has a copy of the vid, send it or a link over to tips at dealbreaker dot com). Some of the gems:

--“I promise you I did not come here to be captain of the Titanic”
--“My head and neck only look forward;” “I don’t really give a [ ] about the past”
--“I can’t do it” has to be eliminated from our vocabulary
--The future is up to us; Sam wants our plans not his plans; wants open, candor from us (doesn’t kill the messenger)

Hiller's take on Sam Zell [LABizObserved]
Zell’s Big Dis [Slate]

A lot of you probably think that urge on Capitol Hill to raise taxes on private equity companies that go public has been dampened by recent market turmoil, threats of recession, and the discovery of at least three ways of avoiding the tax. But that’s because you don’t know much about Capitol Hill.

On the Letters to the Editor page of today’s Wall Street Journal, Republican Senate finance head Charles Grassley reminds us that Capitol Hill operates on a very different planet from Wall Street. The tax won’t raise more revenue for the government? That’s not the issue. The tax may hurt the economy may depleting it of a last-resort, go-private option for troubled companies? Doesn’t bother the lawmakers. It will hurt the markets by draining at least some takeover premiums from companies with damaged stock prices? That’s just Wall Street, not Main Street. It throws a dagger at the heart of another kind of public capital formation at a time when public capital markets are under assault from regulatory burdens left-over from the business scandal outrage of the first years of the decade? They don’t care.

So what’s on the mind of the top Republican finance lawmaker? Well, it seems that it’s nothing more than a drive to tax companies because they go public, unless they are oil and gas partnerships.

[Excerpts from Grassley's letter after the jump.]

Letters to the Editor (seventh letter) [Wall Street Journal]

James Pallotta, part owner of the Boston Celtics and manager of the Tudor Investment Raptor fund, admitted that he's getting crushed this year in a recent investor letter. The Raptor fund lost $400 million in a few weeks last month and is down 8% for the year. The bum year is an anomaly for the Raptor fund, which opened in 1993 and has an annual return of 19%. Tudor's 4 and 23 fee structure helped earn Pallotta $200 million in 2005.

The Raptor fund is a long/short fund, giving quants a bit of relief as the most mocked fund strategy in the current market. The primary failure of the Raptor fund, according to Pallotta in his letter, was the lack of protection offered by the fund's short book. If both the long and short books of a fund are getting killed, doesn't that suggest a rather improper (or undisciplined) use of the traditional "hedge" structure provided by a long/short fund, even in a down market (or especially in a down market, since you think you'd get extra protection from your shorts)?

The Raptor slide caps a string of recent fund-smacks for Pallotta, who announced he was shutting down his $550 million Tudor Witches Rock Fund in June after poor returns. It is possible that Tudor's winning streak is up, as the firm famously boasts that it hasn't had a down year since its inception in 1980. The Tudor BVI fund lost 3% in July.

Pallotta bemoans an existing or forthcoming recession in his investor letter, and warns of the overall health of investment returns, and Kevin Garnett, Ray Allen and Paul Pierce. If anyone has the letter send it to tips at dealbreaker dot com.

Boston Hedge Fund Star Loses $400 Million [DealBook]

Taiwan's Acer Agrees to Acquire Gateway for About $710 Million (WSJ)
And with that, the long, sad saga known as Gateway finally comes to a close. Not really much to say about the "cow company" , other than it seemed to hang around a longer than it should have. It did some stints in consumer electronics, though it never really went anywhere, ultimately returning to its roots as a boring boxmaker. With the purchase, Acer passes Lenovo as the world's third biggest computer maker, behind HP and Dell. With any luck, we'll never have to see Ted Waite's ponytail again.

Goldman to buy Tiffany's Tokyo for $318 mln-source (Reuters)
A jewelry business is a nice asset to round out any well diversified operation. Just ask Warren Buffett and all the wives of Berkshire-Hathaway shareholders who receive a new bauble every year, right around the time of the annual pilgrimage. Goldman Sachs has announced the purchase of Tiffany's flagship Tokyo store in the popular Ginza shopping district. The purchase price of $318 million is considered a high price for the area, an indication that Tokyo real estate prices are on the rebound. Still, they have a long time to go before they hit their peak again. Wasn't the royal palace once worth the same as all of Manhattan?

Debt Issues Top Economists' Fears (WSJ)
According to a poll, economists are more fearful of the subprime debt crisis than they are of terrorism. Or, at least, they think it represents a bigger threat to the US. All polls are suspect, but let's just assume for the time being that this is true. It sort of makes you wonder how many on the right would react if a contingent of politicians started acting this way. Suppose the Democrats decided to make this their top priority -- would the right start flipping out that they weren't adequately concerned about the global war on terror? Consider the reaction when any politician suggests that global warming is the #1 threat facing humanity. A host pundits and pols start coming down on the guy, calling the person naive for thinking that that could possibly be a bigger issue than the GWOT. It's one thing to believe in something, it's another thing when you start getting pissed that not everyone shares your biggest concern.

Home Depot Hit As Credit Crunch Squeezes Deals (WSJ)
Last week it was revealed that there were serious concerns about the fate of Home Depot Supply, the unit that Home Depot has been trying to unload for several months. It had a deal lined up, but nothing got done before the recent chapter of the credit crunch, putting financing at risk. Well, it looks like they got a deal done, but it's at a price tag nearly 20% off MSRP. So, the unit will still go to private equity, but Home Depot will have about $2 billion less cash in its bank account than it would have had before.

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Apple loses its AT&T exclusivity - through the magic of a SIM unlocking crack [engadget]

Former BP boss John Browne enters a new chamber of secrets, this time at energy PE firm Riverstone [Deal Journal]

Buy those Blue Chips before Labor Day, dump them right before the week after [SeekingAlpha]

In true American Gladiator style, Linsay goes Joosting with Mike Volpi [WallStrip]

Sponsored by the Financial Times.

Better than expected durable goods and new housing starts. Bank of Americas bailout of Countrywide. A tech rally. The major indexes all gained. But the move came on very thin trading. Lot’s of people seemed to have decided to take the day off. If the market rallies and no-one is there to hear it, does it make a sound?

If you’re still in the office, maybe you’d like the numbers. The Dow Jones Industrial Average climbed steadily all day, ending with a gain of 142.99 to reach 13378.87. Almost every Dow component went up. The S&P 500 climbed 16.87 to 1479.37. The Nasdaq Composite Index gained 34.99 to close at 2576.69. On the NYSE, rising stocks overwhelmed decliners. Two-thousand, five hundred and seventy four rose. Only 753 fell.

It was, in other words, quiet. Too quiet.

Market intelligence, served up even while you are on the beach, at FT Alphaville.

Word is just filtering up to us that Miami is ablaze in rumors that Fidel Castro has died. Unfortunately, it appears that this may simply be wishful thinking on the part of many members of Miami’s Cuban exile community.

The Cuban health minister has denied the rumor that Castro is dead. And it’s not really clear why he would lie about this. Castro’s sick, and possibly incapacitated. But it’s unlikely that he’s dead.

So don’t start booking those tickets to free Havana yet.

Cuba Foreign Minister Says Castro Health Rumors Untrue [NBC South Florida]

The people have spoken. In our totally unauthorized, unaffiliated, unscientific and unauthoritative poll for who should become the permanent anchor of CNBC’s midday show The Call, the clear winner is…

Well, let’s not rush into things. It was a hotly contested plebiscite at every level. In the end, the second place contender ended within striking distance of the first, just seven percent behind. A lot of the real action was in the second tier of contestants—Rebecca Jarvis, Trish Regan and Erin Burnett. They all finished within just a few points of each other.

Perhaps most surprising was the poor performance of Maria Bartiromo. Once the top star of the network, many of her fans seem to have deserted her. Or, you know, maybe they just don’t read DealBreaker.

After the jump, the progress and final results of the DealBreaker Reader Poll.

GE (NYSE: GE) is up 0.36% on the news that NBC is going to start airing a revamped version of American Gladiators. The new show will be produced by MGM TV (which produced the original) and Reveille. NBC Entertainment co-chair Ben Silverman began working on the project while still at Reveille.

The new version of the show will feature “21st Century Twists” including BackStories ™, which weren’t invented until the late 90s). From Variety:

This time, in a new wrinkle, the players will be given the opportunity to train for their match -- and viewers will be given a glimpse of their personalities prior to the actual competish (Competish…Variety is just so presh!).

The original show was on for seven seasons from 1989-1996 (almost no one (outside of the Castro) remembers Malibu (pictured) who debuted in season one and never came back for season two, or Sunny (yes, there was a Gladiator named Sunny) who got injured during the semis and never returned).

The new show will have four male and four female gladiators. Here they are, revamped for the 21st century:

Male
1. Freedom
2. Bling
3. Subprime
4. Biodiesel

Female
1. Katrina
2. Slut
3. Zirconium
4. XXY

After the jump one of the most amazing things you will watch in the next 10 minutes:

NBC pumps up for 'Gladiators' redo [Variety]

Rupert Murdoch almost seems to be living up to the worst fears many had when made his bid for Dow Jones. Almost.

He’s been “flexing his muscles” by calling Wall Street Journal reporters, according to the Los Angeles Times. At least three reporters have had calls for him.

So what has prompted Murdoch’s calls? Does he want more favorable coverage of China? More “fair and balanced” Fox New Channel style reporting? A five-star review for the Simpson’s Movie?

Not quite. It seems that what Murdoch has been doing is attempting to keep the reporting staff of the Journal intact. The three reporters he’s called were considering leaving the Journal and Murdoch has asked them to stay.

“Murdoch, who has been vacationing in the Mediterranean in recent days, made the calls to the reporters from his yacht, the Rosehearty, named for the Murdoch family's ancestral home in Scotland,” the LA Times reports.

Scandal upon scandal! He’s got a yacht! It’s in the Mediterranean. Where are the reporters’ yachts? Where is the Mediterranean for the reporters?

We’re not sure why this is anything but a positive story for the Journal, its editors, its reports and its readers. As we maintained from the beginning, Murdoch did not come to destroy the Journal but to own it. And now he’s personally reaching out to reporters in an attempt to keep it intact.

But there’s already a movement to make something scandalous of these moves. “Some journalists in the newsroom took the gesture as a sign of Murdoch's commitment to keep the staff's quality high. Others said it showed that Murdoch would take a hands-on approach in newsroom affairs despite a special committee established to keep him from interfering in coverage,” the LA Times reports.

Heaven forbid! The owner is trying to keep his top reporters! It’s a clear violation of the editorial integrity of the newspaper, which apparently now means letting the newsroom fall report.

So who are the put-upon reporters who got the call? The LA Times named them as Tara Parker-Pope, Kate Kelly and Henny Sender. The latter two are DealBreaker favorites, who have broken important stories in recent months. (Tara Parker-Pope is a Health writer.) We’re sure they’re in high demand, and it just seems demented to expect that Murdoch wouldn’t fight to keep them on board.

Our question: is this what they were talking about when they said Murdoch would "interfere" with the Journal? If so, bring it on!

Murdoch's presence felt at Journal [Los Angeles Times]

Dart-throwing monkeys and now Tokyo housewives prove that they should be in charge at trading desks across the Street. The one downfall of the Tokyo housewife investor, however, is that she is not as adept at tax evasion as your average fund manager.

A Tokyo housewife who made $3.4 million in recent forex trades got nabbed for tax evasion today. From Reuters:

Yukiko Ikebe, 60, got a suspended jail sentence and was fined 34 million yen after she used relatives' names to make her gains look smaller and avoid paying tax, public broadcaster NHK said. "She felt it was unfair to have to pay tax on her gains, when she made losses some years," NHK quoted the judge as saying. "She spent the money on kimonos and jewelry."

Housewife hid $3 million in forex gains [Reuters]

This is really getting exciting! The poll results have shifted dramatically since this morning. Melissa Francis is still in the lead but Becky Quick is living up to her name, coming up from behind with an amazing speed. (It may be that her stint hosting The Call with Trish Regan this morning helped boost her visibility with those of you who get to your desks too late to catch her on Squawk Box.)

Rebecca Jarvis, who was at the head of the pack just behind Francis this morning, has slipped down to the second tier with Erin Burnett and Trish Regan. Margaret Brennan follows a good distance behind. Maria Bartiromo and Michelle Caruso Carrerra are in the back of the pack.

We’re closing this poll down in one hour or so. Get your votes in now!

And, yes, we realize this is all a bit silly. But it’s a Friday in August. A quarter of our team has already checked out for the beach. The Dow is climbing slowly upward with the lightest volume of the year. It seems like a good time to enjoy ourselves by engaging in timed eating contests, smuggling hits from our flask while no one is looking and polling our readers about the women of CNBC.

The latest results and your chance to vote (if you haven't already) after the jump!

We’re headed for a record low-volume trading day at the New York Stock Exchange, with the major indexes slightly up but mostly “range bound,” as they say. London is heading into a three day weekend, and it looks like a lot of people on this side of the Atlantic have just decided to take today off.

One of the things that has the markets so sanguine is the widespread expectation that the Federal Reserve will cut its target for interest rates. But there a lots of signs that this expectation may be built more on hope and faith than realistic assumptions. We’ve been told by an economist who is familiar with the thinking inside the Fed that the widespread assumption that the Fed won’t disappoint the markets is a contrary indicator: the Fed is eager to prove that it is not a servant of Wall Street and is instead basing its monetary policy on the goal of achieving sustainable, low-inflation growth in the broader economy.

And the broader economy seems to be doing quite well. Sales of new homes in July exceeded expectations. There’s no signs of rising unemployement. And despite a few well-publicized cases, the much feared mortgage credit crunch has not yet thrown a generation of Americans out of their homes. We’re not a nation of Tom Joads and it doesn’t look like we’re about to become one either.

There are serious problems with the credit markets but these are largely not problems the Fed can fix by lowering interest rates. The underlying problems are really rooted in collateral valuation. This is what is hitting the leveraged buyout market—bankers wondering whether the companies whose buyouts they are financing are really worth what the private equity guys claim. This is what is hitting the market in collateral debt obligations. This is what has stopped up the flow in commercial paper.

The Fed probably can’t fix the collateral valuation issue. It can only pour enough money on the economy to make it harder to properly calculate the values of assets, increasing the chances for capital misallocation. This isn’t our view, it’s the view that sources familiar with the thinking of several members of the Open Markets Committee say may be dominant.

All this doesn’t sound like a recipe for a Fed cut in September. Things could change. But it is starting to look like Wall Street might be getting ahead of itself by baking in a rate cut. Which means that we might be in for another wild ride in September if the Fed refuses to take its orders from Wall Street.

When you’re a cowboy, on a portfolio of distressed real-estate and foreign loans you ride, liquidity is wanted (waaaanted) whether the fund is dead or alive.

The latest stirrings of major fund trouble, on the PE side, revolve around Dallas-based Lone Star Funds. Word is that the fund is suffering big losses from its MBS investments and that the last two companies the fund tried to sell resulted in pulled auctions.

The fund is heavily invested in distressed loans in Asia, particularly from the South Korean government. The two parties have been in ongoing legal battles for several years and the South Korean government has this pesky habit of raiding Lone Star offices.

Yesterday, South Korean tax officials raided Lone Star offices to seize documents regarding the fund’s $2.3 billion worth of June investment deals including the sale of Kukdong Engineering and Construction and a 13.6% stake in Korea Exchange Bank. South Korean tax officials also raided Lone Star offices in 2005 and imposed $200 million in taxes on Lone Star and four other funds heavily invested in the country.

Nothing crunches fund liquidity quite like a one-two combo of plummeting MBS returns and foreign government raids.

Lone Star Fund V is a $5 billion fund raised in 2004. Major investors include CalSTRS, NYSTRS, WSIB, OPERS and STRPERS.

South Korea tax officials raid Lone Star offices [Reuters]

Neuromed announced Wednesday that it received $53 million for some advanced opioid studies, from some Canucks, other venture firms and that guy in the basement next door. The company is developing a once-daily treatment of hydromorphone, a pain-killer up to 10 times stronger than morphine.

Hydromorphone only exists in the U.S. as an immediate-release drug (Dalaudid) and must be administered many times a day, which either provides awkward social contact with caretakers for those in terminal pain or forces embarrassing frequent bathroom breaks for the recreational user.

Neuromed dished out $30 million in April to get exclusive marketing rights to extended-release hydromorphone and immediately placed calls to Rush Limbaugh’s ad-sales guy.

Companies are especially careful how they market the release mechanism of their incredibly powerful narcotics. The whole “release” debacle was one of things that got OxyContin maker Purdue Pharma in $600 million worth of trouble. Keep that in mind next time you see an ad with either a translucent hydromorphoned butterfly terrorizing someone while they sleep or a product easily confused with a Tylenol gelcap.

Neuromed gets funds to develop painkiller [Philadelphia Inquirer]

Everyone in town is scrambling to find out the latest news on the sale of Home Depot's wholesale supply unit. As first reported by Dennis Berman on the Wall Street Journal's Deal Journal, the banks providing financing for the deal have balked at the terms. (Earlier versions hinting that this was on the way came from the New York Times and the Financial Times.)

The situation has been described as "ugly" and "hostile." The private equity firms involved — Bain Capital, Carlyle Group, and Clayton, Dubilier & Rice — have been trying to cut the purchase price. Home Depot was reportedly ready to accept a $1.2 billion haircut on the $10.3 billion deal. But the banks — J.P. Morgan Chase & Co., Lehman Brothers Holdings Inc. and Merrill Lynch & Co — are still resisting providing funding, and are said to be preparing for a possible lawsuit from their private equity clients.

According to Berman, there is a possibility that "the deal could fall apart entirely, which would be a massive blow to Home Depot and a threat to the LBO pipeline that remains — roughly $225 billion of financing for deals, in fact."

In short, the deal is being looked at as a test case for how the various players in the leverage buyout business will deal with the credit crunch and housing market slowdown. And right now it looks like everyone is flunking, at least if the grades are based on "playing well with others."

We spoke with some people at Lehman this morning who were not working on the deal but are familiar with its progress. One described the situation as "radioactive." We're not even sure what that means but it sure doesn't sound healthy!

So far, it seems we haven't been able to crack the deal to get at real sources. We're not making any progress. What are you hearing? Leave a comment or send an email to tips@dealbreaker.com.

Home Depot: A 2X4 Upside the Head [Deal Journal]
Home Depot Talks On Unit Get Hostile [Wall Street Journal]

Some punk analyst (No really, some Punk Ziegel & Co. analyst) is accusing the Fed of forcing the major banks to borrow from the discount window. Market analyst Richard Bove thinks Bernanke sweetly serenaded JPMorgan, Bank of America, Wachovia and Citi to a tune of "Come to my window / Borrow cash, even though you don't need to / Come to my window / I'll cut rates soon." From MSN:

The discount rate, though lower than it was last week, is still higher than the 5.25 percent federal funds rate, which is what banks pay to borrow from one another. Plus, because of the $38 billion in cash the Fed has pumped into the system, banks are charging only 4.9 percent for overnight loans, Bove said. A statement from three of the banks that borrowed from the discount window said they wanted to "demonstrate the potential value of the Fed's credit facility and encourage other banks to use it."

The whole thing was a "P.R. gig," like getting knocked up by David Crosby. The banks took the dough to remove the stigma on borrowing money from the Fed as a credit line of last resort (and of getting inseminated by a drugged out musician), and to encourage smaller banks to do the same.

Ahead of the Bell: Federal Reserve [AP via MSN Money]

A major upset seems to be in the works in our reader poll of which CNBC woman should get the job of hosting the Call, whch airs each day at 11 am. Melissa Francis and Rebecca Jarvis have taken the first and second place, beating both the Money Honey Maria Bartiromo and Street Sweetie Erin Burnett. Trish Regan, Becky Quick and Burnett are all jockeying in the second tier. Margaret Brennan trails then. Bringing up the rear, we have Bartiromo and Michelle Caruso Carrerra.

But all this could change. There is still time to vote for your favored anchor. After the jump, we bring you the poll and the latest results!

Gap's top-to-bottom makeover helps boost 2Q profit 19 percent (AP)
Every once in a while, we put on our "retail chain analyst" cap and walk into stores, just to get a feel for how they're doing. About 2 months ago, we stopped in the Gap, in part to see how busy it was, in part to see whether they had any wearable shorts, and in part just to see what their overall style was these days. It was really a jaw dropping experience, as we were wholly unprepared for the staggering lack of style or fashion on display. We had no idea people were still selling cargo pants these days, or button down shirts with weird prints over the pocket. The only way we could describe the style was "nerdy engineering student who thinks he's cool a la 1998". So yes, we're quite shocked that the company has apparently boosted its bottom line for the first time in forever. We were sure they were on a one way street to oblivion.

Whole Foods May Complete Purchase After Stay Denied (Bloomberg)
...And once again the FTC gets slapped down. Whole Foods can once again proceed with plans to buy out
Wild Oats.

Fate of Home Depot Unit Sale Up in Air (AP)
We're not sure that it really qualifies as "news" that a pending deal might not go through. If anything, the opposite would be far more worthy of attention. Nonetheless, concerns continue to mount that Home Depot might not be able to dump its HD supply business, or if it does, it may need to lower the price tag.

Long Island Scrapping Ocean Wind Park (AP)
It's not a sentiment that's widely held, but we've always found wind farms, with their graceful turbines sucking energy out of the sky, to be things of beauty. In an ideal world, every windy mountain top would have three or four up there, passively collecting otherwise wasted kinetic energy. That being said, there's no point in making these investments if they're not cost effective, and apparently more areas are starting to question the benefit-- even in today's energy market, which is saying something. Long Island had been prepping an ocean based farm (cool, though we prefer mountains, as we said), but the utility has decided to drop plans, citing cost. A similar ocean-based project was recently dropped in Texas.

$$$ Senator Forehead Saves the World [LoSC]

$$$ Mary Meeker's YouTube Math [Blodget]

$$$ Bartiromo vs. Burnett [YouTube]

Closing Bell brought to you by the Financial Times.

The three major U.S. indexes started up today, and then finished flat to slightly lower. The Dow finished virtually flat, the S&P was down 0.1% and the Nasdaq was down 0.4%. European stocks were also mostly flat while Asian stocks almost all rallied over 1% or higher.

Bank of America announced that is was dumping $2 billion into Countrywide, even as Countrywide CEO Angelo Mozilo cried that the sky was still falling. Mozilo is thinking recession. Other market strategists are whining that the Fed is not doing enough to restore liquidity to the credit markets.

Check out FT Alphaville for info on the prerequisite to mo' problems.

Hey football fans! A fund managed by HRJ Capital, the investment firm that counts Joe Montana and Ronnie Lott among its partners, lost 12.3 percent in those first two heady weeks of August, wiping out almost all of its 2007 gain. (And that’s after rising 12.4 percent through July. Ouch, right?) According to the firm, declines in its Legends Multi-Strategy Plus Fund should be blamed on everyone’s favorite fall guy—subprime. A letter sent to investors dated August 22 contains the rocket science, platitudes and—and correct us if we’re wrong—air of condescension we’ve come to expect of investor letters detailing losses, noting, “The first two weeks of August have brought about an extremely difficult market environment for several of the Legends Funds' managers… What changed in August was the apparent de-leveraging of quantitative equity market neutral funds as a source of greatest liquidity when there was none to be had in equity portfolios.”

Are there jokes to be made alluding obliquely or overtly to Montana and Lott’s careers with the 49ers and, later, with the Chiefs and Raiders, respectively? Probably, but I have no idea what they are because I don’t know jack about football. References to it in pop culture, positions, basic rules and strategies, you name it, because I definitely can’t. It’s not that I have anything against football, I just don’t get it. It’s not easy to understand like baseball, or as fun to watch as hockey, and every time someone’s ever tried to explain it to me I listen for the first thirty seconds and then, involuntarily, start hearing the lyrics to “Margaritaville.” It also seems like it takes a freaking decade to get from one end of the field to the other, what with all the stopping and starting every five seconds. (You can’t argue with me on that point, I know I’m right.)

I’m not proud of my ignorance and I actually am pretty envious of the hundreds of millions of people who seem to derive inordinate amounts of pleasure from the game. I went to the Rose Bowl in 1998 (Michigan v. Washington State); it was fun, but I can’t help but thinking I would’ve enjoyed myself more if I knew what the fuck was going on. This post probably also would’ve been better. (Another point I won’t back down on.)

So what I’m thinking is DealBreaker reader/writer Monday Night Football watching/tutorials this fall, at whatever bar you want, on Carney (who also doesn’t get football, and will therefore be in attendance and taking notes for me when I can’t make it.) When Ryan Leaf’s Leaf Investments (“We overhype and underperform”) goes under, I’ll have something funny, or mildly amusing at best, to say about it.

Joe Montana's Firm Says Fund Declined 12% in August [Bloomberg]

This Options Group, which tracks all things pay and hiring related on the Street, thinks bonuses will decline as much as 5% in 2007. This would be the first bonus cut in 5 years. Usually more concrete discussions about year-end bonuses start to happen in October and the potential pool becomes clearer. Our current intelligence on this is skeptical: it's really too early to tell.

Watch the LBO market, though. If those buyouts fall apart, it could indicate deeper problems that will hit your bottom line.

Credit Woes Threaten Bonuses On Wall Street [New York Post]

It’s come to our attention, via logging on to www.bloomberg.com, that a pair of men’s shoes is being sold not 0.2 miles from DB HQs for $725—bedazzled with a silver skull and crossbones. Brought to you by 127-year-old British shoemaker Barker Ltd., the design on the sumptuous leather loafer is a throwback to the insignia “of the 17th Lancers, a British regiment of dauntless dandies from a long-gone era.'' A dandy is a man who is excessively concerned about his clothes and appearance; a fop. The subtext here is that this man is gay.

Kent Kilroe, a broker who lives in the East Village and admits to owning multiple pairs, says he was seduced by both the emblem and comfort. While researching Barker, Derrick Miller “fell in love with the logo.” Bloomberg writer and Barker apologist Jeremy Gerard says that the skull and c-bones are as inconspicuous as “a horse bit or interlocking G’s.” The assumption that showy Gucci loafers are any less offensive is troubling.

A friend of DealBreaker well-versed in the sartorial inclinations of men who work in finance and men who work in finance in general claims that she “would totally do a guy wearing Barker Black shoes, but wouldn’t expect other people to take him seriously.” The well-heeled harpies over at Fashionista.com estimate that “these shoes are for men who can't slaughter or pirate in the boardroom, and so they must try and do so in their closet instead. Don't do it.” You’ve probably gleaned our opinion on the matter. Yours?

For $725, Skull-and-Crossbone Loafers Whisper Cachet, Comfort [Bloomberg]

More journalists and media commentators seem to be playing everyone's favorite new game of Tearing Into Portfolio. This morning we mentioned Elizabeth Spiers' piece on the second issue of the magazine—a brilliantly wicked, lengthy evisceration that recalls why we once wanted Elizabeth to edit a collection of nasty essays we proposed calling “The Poison Pen.” And Jon Friedman’s at it too, using his column at Market Beat to take aim at the magazine. And over happy hour drinks the other day, we heard lots of nattering negativity from the nabobs.

But as we pointed out this morning, it’s a bit early to pronounce the failure of an enterprise that hasn’t yet even settled into a regular publishing schedule. We’ve had two issues, published months apart. The Portfolio-ista’s haven’t yet flourished, perhaps, but it seems a bit early to expect them to have totally remade business journalism and fixed everything that’s been so wrong with it for so long. What’s worse, this is starting to look a bit like a pile on: everyone jumping the new kid on the block just because he comes from a rich family.

Gary Weiss, a veteran business reporter and one of the best guys doing investigative business journalism today, thinks the Portfolio bashing has gone too far, too fast.

Look, they're probably right. The first issue underwhelmed me, and I'm not exactly running to the newsstand for the second one. But I am starting to wonder if the constant slamming on Portfolio isn't going a bit overboard. After all, are the competitors all that much better?

There are only a dwindling number of periodicals left that engage in long-form narrative journalism. Even a flawed outlet for this vanishing species is better than nothing.

The magazine is only just beginning, for Pete's sake. Portfolio may suck eggs in some respects, its office politics may be right out of the Kremlin circa 1938, but it is a new outlet in a contracting market. To answer my own question, it matters. Give the friggin' magazine a chance. Lay off.

More after the jump.

Earlier this week, we asked you to nominate who should get the gig as the regular anchor of CNBC’s late morning show, “The Call.” We had an overwhelming number of responses in comments and emails, with “On The Money” host Melissa Francis as a clear favorite among the nominators. But that was just stage one and now the contest begins for real: with a Reader Poll.

After the jump, you’ll have the chance to vote on which of the ladies of CNBC should gain the job. We’ve excluded a few nominees on the LBJ principle—they’ve assured us that if nominated they will not run, and if elected they will not serve. So WallStrip’s Lindsay Campbell is out. We’ve also netted out porn stars and DealBreaker writers: no Savannah Samson or Bess Levin.

What that leaves us with is a roster of rising stars and long-time favorites on the network. You know the names and the faces. Now it’s your chance to vote: Who Do You Want Giving You “The Call?”

I’ve always maintained that it pays to have a sugar daddy in the man Eliot Spitzer made the poster boy for his Wall Street witch-hunt in pursuit of Albany residency, and, if you can swing it, a Jew from Detroit, too. Case in point: Goldman’s previously floundering Global Equity Opportunities shot up 12 percent last week after the 85 Broads got a $1 billion pick-me-up from former AIG chairman Maurice “Hank” Greenberg and billionaire Eli Broad, in addition to $2 billion, from itself (by which we mean GSC, the bank. Let it go). In what some might regard as a nice recovery, assets more than doubled to $7.5 billion, after the fund lost approximately 30 percent earlier this month, due to some messiness in the mortgage sector.

Another quant fund that quantifiably improved its performance was RenTec, which made up almost the entire lot of its 8.7 percent decline from the beginning of August. An apparently clairvoyant James Simons had written to investors on August 10, “Usually such behavior—[market turmoil]—causes first pain and then opportunity… [with a return to normal conditions], we anticipate an attractive opportunity.” The turnaround made both investors who would choose to make money over losing it happy, and those of us keeping tabs on how many times the word “opportunity” is used in a letter by a hedge fund manager MTD, and having it actually mean something other than “bull shit.”

Goldman’s Global Alpha, down 27 percent for the year through August 13, is not doing as well. Clients’ requests for withdrawals totaling $1.6 billion have left the fund with a mere $6.8 billion in assets.

Goldman Global Equity Hedge Fund Rises 12% After Cash Infusion [Bloomberg]

Zuckerberg (shocked): "You mean we have to monetize our user base in order to command a $50 billion asking price? A couple mil from selling icons of cuddling bears won't cut it?"

Upon this revelation, Facebook is working on a system that lets advertisers target ads based on profile content. Facebook swears this is just like Google reading your emails to target you with ads, which provide a constant source of amusement. Facebook plans to unleash the adspace invader in the fall.

We doubt the system will be able to tell if the information in your profile is a joke, or if you've actually read Voltaire, Clancy or Ferrell (but you quote them so you must be familiar with their work, no?).

If you found this story boring, the top two Reuters stories may ignite your interest...

Facebook devising new advertising system: report [Reuters]
Woman sets fire to ex-husband's penis [Reuters]
Boy in court for throwing sausage [Reuters]

From copyranter, how did this man get this woman on top of this building? Easy - a “passion to perform,” a desire to be “lifted even higher,” and a Deutsche in a box.

Step 1: Cut a hole in the logo
Step 2: Put your Deutsche in that box
Step 3: Make her sit on the box

And that’s the way you do it.

Deutsche Bank. A Passion to Perform...oral sex on our Logo. [copyranter]

When the second issue of Portfolio, Condé Nast's big-budget business mag, came in over the transom, our first thoughts were various kinds of disappointment. There were pictures of cars on the cover. Very little about subprime, commercial paper, Chinese monetary policy, quant funds or the other things we've been obsessing over lately. And if it wasn't participating in the conversation that's been going on in board rooms and Wall Street, it also didn't seem to be setting the agenda for a new kind of conversation.

In our best hopes, Portfolio will be like a glamorous girl who, if she's not actually hosting the party, at least draws a crowd around her with bright, insightful and witty remarks about the passing scene. Instead she just seemed to be have a nice smile, a dullish dress and not much to say.

What's worse, it looked like we were actually going to have to read the thing. When the first issue showed up, we turned it over to our founder Elizabeth Spiers, who penned a three-thousand word critique. Now that she's moved on and is concentrating on her novel, we figured the chances of getting her to review the second issue were pretty slim.

Obviously we underestimated Spiers. She's back wielding her pen against Portfolio once again, this time in the pages of The New Republic.

[More after the jump]

Sponsored by Bloomberg.com

Bank of America invests $2 billion in Countrywide (Reuters)
Countrywide is the latest mortgage lender to sell a stake in itself at a discount price. In a move to be more liquid, the company has sold $2 billion worth of preferred stock to Bank of America. The non-voting shares yield 7.25% and can be converted into common stock at $18/share, well below the market's closing price. There'd been lots of talk around town that Warren Buffett wanted a piece of the action, and this might be how he is getting it. Buffett owns 8.7 million shares of Bank of America.

Fighting for the pooling equilibrium (Marginal Revolution)
On the matter of major banks tapping the fed to reduce the stigma of tapping the fed, the quote of the day goes to Tyler Cowen: "I don't know if this will work, but it is a neat trick. Imagine that you, as a smart person, went around saying stupid things, in an attempt to limit discrimination against the stupid."

Utah Mine Boss Vows to Keep Searching (AP)
The relentless (and some might say foolish) hope on display by the continued rescue mission in Utah is both impressive and bewildering at the same time. And yet we have to wonder whether the operation would have gone the way it has had there not been such stigma attached to mine owners and mine safety. It seems pretty safe to say that no matter how safe a given mine is, if an earthquake traps a group of miners, the owner will be called negligent. It seems that if anything, the owners' continued efforts at bringing this thing to a conclusion could be motivated by a desire to simply get the facts, in anticipation of years of legal headaches.

Fed's Uncertainty Over Growth Makes Early Rate Cut Less Likely (Bloomberg)
All of the sudden, that rate cut with a 380% chance of happening is looking less likely -- maybe it's just 250% now (maybe less). With each passing day, a chorus of folks are starting to question the assumption. Days like yesterday, when the stock market rallied comfortably, aren't helping anything. Perhaps that whole discount window wasn't actually a message that rates will be cut, but just that the Fed is standing by, paying attention, not asleep, as suggested by Cramer. So if need be, a cut will be made, but if there's no cut, it's not because the Fed is clueless.

$$$ Investment Strategies in a World Where Time Travel is Possible [LoSC]

$$$ Spectacular Consumption & The Cristal Wars [Banker's Ball]

$$$ Paychex, Inc. [WallStrip]

$$$ Carney, CNBC, 7:00 pm

Closing Bell brought to you by the Financial Times.

More final hour wackiness capped a small but significant market rally today. The big three U.S. Indexes (Dow, S&P, Nasdaq) finished up 1%. All ten S&P tracked sectors were trading higher at market close.

Citibank, Bank of America, Wachovia and JPMorgan all borrowed $500 million from the Fed discount window but were adamant about the Fed needing to keep up the rate cuts in order to sustain the rally.

The housing market saw a drop in the number of applications for U.S. residential mortgages for the first time in three weeks. Toll Brothers posted a sharp quarterly decline and refused to give guidance, but rallied to finish up 5% (hey, if it’s not going under…). Lowe’s was upgraded by JPMorgan and UBS and rallied 3%.

One of the reasons stocks rallied was a break from the lull in merger activity. Some highlights include the foreplay of TD Ameritrade and E*Trade, who keep dancing with each other, but this time may finally seal the deal. Dubai "loves U.S. brands," and overpaid for another U.S. asset in its purchase of a 9.5% stake in MGM.

Check out FT Alphaville for more market goodness.

Lehman Brothers announced this afternoon that it is shuttering BNC Mortgage, one of its home lending units and, in the process, laying off 1,200 employees. This translates to roughly 4.2 percent of its total workforce (and: 4.2 percent less people clamoring for a Size M Super Mario Brothers t-shirt with a “LEH” superimposed onto the “Super Mario” at bonus time). The bank noted that current market conditions, wherein no one in their right mind is giving out subprime loans, have significantly reduced the demand for “resources and capacity in the subprime space.” Lehman will suffer only a mild hit of $52 million to third-quarter earnings. One Brother based in New York commented, “Big deal, it’s our lending arm and they likely sit in Wisconsin, no? BNC???” Familiarizing himself at this point seems somewhat moot.

Lehman Closes Subprime Unit and Lays Off 1,200 [NYT]

In late August, after crushing the only web or Windows games that aren’t firewalled on the system, there isn’t much left to do but count the minutes until you can Seamless dinner, and wait for the pre-train dump off. Even though MDs are on vacation, financial Circadian rhythms maintain that a ton of work needs to be dumped on you right before or after dinner.

Side rant: The work-induced-boredom DB challenge, a perfect game of hearts - 4 hands, shooting the moon each time (pictured, and one of our finer work-induced-boredom accomplishments). Most online games are stonewalled these days at the banks. Once Yahoo games were ripped (no TextTwist!) from JPM we had to get creative. Some ideas - NabiscoWorld has a good Hold’em game, and you could always have the investor relations screen an alt+tab away. It also never hurts if someone uploads a NES emulator on the shared drive.

Other DB work-induced-boredom challenges:

Freecell game #1941: Considered the hardest deal in the first 32,000. It's beatable, don't cheat! (this took us about 20 minutes but less than 10 re-deals... it's all about where you start)

Minesweeper on "expert" in under 100 seconds: Good luck! (we can't even touch this, and word is that if you're really good you beat it in under 60, which is scary)

More rants and summer suggestions after the jump, including some thoughts on the theme parks you aren't going to this summer.

Our Capitol Hill lawmakers don’t feel your pain. Despite the recent turmoil in the financial markets and the bloodletting at many so-called “quant” funds, lawmakers are putting pressure on the Fed not to cut interest rates and continue to push ahead with plans to raise taxes on private equity firms. A new study from a Penn Law professor, however, suggests that the proposed tax hike will not generate very much by way of revenues for the government.

Part of the reason that raising taxes on private equity won’t generate more revenue is that fund managers are likely to change the way they are compensated. Carried interest will decrease while fees increase, and since the fees are tax deductible business expenses, the tax effect is a wash.

About $200 billion a year is invested every year in private-equity funds and between $12 billion and $17 billion in carried interest is granted, Knoll wrote. Taxing that carried interest as ordinary income would generate between $2 billion and $3.2 billion in additional taxes annually, he said.

Private-equity firms probably would find ways to avoid the added tax burden, Knoll said. The firms may raise fees on wealthy individuals, who can deduct the higher fees, or shift costs to the companies in their portfolios, he said.

"For such companies, the payment of a contingent fee to a private-equity firm in exchange for its assistance in selecting the directors, hiring the managers, and helping to restructure and operate the business would likely qualify as an ordinary and necessary business expense,'' that can be deducted from income, Knoll wrote. Such a strategy may generate ``little or no net increase in tax collections.''

Buyout Firm Tax Boost Won't Raise Revenue, Study Says [Bloomberg]

Download pdf file of Knoll's paper [SSRN]

Deal Journal: How would you assess Goldman Sachs?

Wilhelm: Goldman has probably lost some of its cachet in terms of advisory services. It’s lost people over time to hedge funds. Effectively, what Goldman has been doing is working with people who have left the firm to provide services to them. Look at the profitability of its prime brokerage. That’s all service to hedge funds. You could look at it as Goldman outsourcing the human capital of trading. It’s really providing distribution and execution services for these guys.

Deal Journal: But come on, Goldman is still Goldman, right?

Wilheim: It looks more like a Citibank.

We know morale is down and everyone is FREAKED OUT about the prospect of their bonuses being reduced by 5% and more than a few of you are considering cutting your losses and ending it now, but name calling like this is really unbecoming of grown men (as are the tears, in public places).

Traders vs. Bankers: Breaking Up Wall Street Banks [Deal Journal]

383 Madison is the house that “[un]sexy” trading and handling money for clients and looking really good when things looked really bad for Wall Street’s real players built. So why isn’t Bear Stearns busy getting permission from the city of New York to add a deck off its master bedroom, remodeling the kitchen and preparing to make neighbors jealous with a forthcoming in-ground pool? According to some catty bitches over at Fortune, because Bear got jealous of the Street’s heavy hitters*—Goldman Sachs in particular—and strayed too far from its decidedly “back office” roots. Oh yes, they went there.

When it should’ve been sticking to its tried and true “mundane business of trading, especially complicated debt securities,” a model that made Bear successful in good times, and very successful in bad times, the self-described “Spartan” of Wall Street was getting into the riskier game of hedge funds. This was a bad idea for three reasons.

The first is that no one at Bear Stearns has the slightest idea what these highly exclusive, unregulated private investment pools actually are. (To be fair, though, few do.)

The second is that when BS decided to get into the more volatile pastime, a departure from the firm’s historically conservative nature, it didn’t just say “oh, we’ll try something a little more dicey but do it the Bear Stearns way,” it said “fuck being conservative, if we’re going to play Russian Roulette why not do it blindfolded while dropping acid?” This would explain why the fund pretty much ignored/missed danger signs in the subprime mortgage market, and put together a management team that gave the impression (based on reality) that it couldn’t care less. (To play devil’s advocate for a moment, writing reviews of “Evan Almighty” really is important than keeping a watchful eye on billions of dollars.)

The third is that when James Cayne’s delusions of grandeur got the better of him, and he decided to go to head to head with Lloyd Blankfein out of petty jealousy, he didn’t realize that the Nebbishy Master of The Universe didn’t get to where he is today by taking four hour lunch breaks to play bridge tournaments and entire weeks off to cheat at golf.

Two failed hedge funds, a fired heir apparent, and a precipitously falling stock price later, BSC has seen better days. But according to Bear, its foray into big boy land will not hurt the firm’s bottom line. To the contrary, Bear Stearns is in exactly the type of environment in which it thrives, on “nimble[ness] and creativity.” It will be profitable and bonuses will not suffer. Because it just slashed 240+ jobs.

How Bear Stearns lost its way [Fortune]

*Let’s make a pact to never use that phrase or phrases like it (“big hitter” is no better) again. Deal? Deal.

"The market wants it. Blowhard commentators are clamoring for it. And the various prognosticators that trade futures contracts see the Federal Reserve dropping the funds rate prior to its meeting in four weeks," writes Market Beat's David Gaffen. But what if the Fed doesn't cut?

Gaffen gives five reasons the Fed might not cut.

We'll do him one better. This morning we spoke to a former Fed staffer, an economist who is familiar with the thinking inside the money changers' temple, who believes the Fed won't cut in September.

"All the pressure to cut is a counter-indicator," the economist said. "The folks with the votes don't like to appear pressured by the market to cut. From the Fed's point of view, inflation is still the real risk. The credit market is correcting for risk just fine. There's no need for a cut now."

Update: Almost every economist agrees with our source!

Five Reasons: Why the Fed Won’t Cut Rates [Wall Street Journal]

The population of China, unable to describe what was going on between Maria Bartiromo and Todd Thomson during their trysts to the Far East, decided to modernize its language.

Respectful of Maria’s status as the Money Honey, Maria and Todd were officially branded “ban tang fu qi” or a “semi-honey couple.” The phrase denotes young, married professionals who live in separate homes or go on long trans-continental flights with one another.

Chinese authorities were pretty pissed when they found out Maria and Todd weren’t married, and no one has the heart to tell the CPC how old the two are (if they ever want to be seen again).

“Semi-honey couple” is just one of the 171 new terms added to the national language registry in China, designed to reflect modern work and life situations. One of the terms added, “fang nu,” literally translates into “house slaves,” and refers to young people struggling to pay off home-loans. A culturally ingrained stigma is one way to prevent a subprime crisis.

Another term, “duan bei,” literally means “brokeback” and refers to male homosexuals. That’s where the Ang Lee movie title comes from, although going from urban slang in Shanghai to cowboys in Wyoming is a pretty significant leap.

“Ding chong jia ting” was officially registered and means “DINKS with pets.” A DINK is an acronym for “double income no kids.” The term refers to an increasing number of married professionals in China who choose a pet over having a child.

Modern marriage, mortgages enter Chinese lexicon [Reuters]

It's day two of our call for nominations for "The Call," the one hour show that is airing on CNBC right now. Since it began after Liz Claman's departure for Fox Biz, the show has been, for the most part, hosted Trish Regan, formerly of Goldman Sachs and D.E. Shaw. Various guest hosts have also taken a seat for the popular midday hour. We understand that CNBC is still deciding who should become the permanent anchor of the hour.

So who should be the regular anchor? Well, you know how we decided those things around here—a Reader Poll. So, in the spirit of our now famous “Who Moves Your Market Poll” we’re asking reader to begin the polling process by nominating which CNBC anchor, reporter or correspondent should get The Call. Leave your ideas in the comments section below or send nominations to tips@dealbreaker.com. Feel free to nominate individuals or even teams. Once we get the nominations, we'll start up our polling software so DealBreaker readers can vote on who should host The Call.

General Motor's "biggest China manufacturing joint venture said it would offer interest-free car loans, as the company maneuvers for advantage in the increasingly competitive China market and tries to encourage people in this cash-centered economy to borrow to buy cars," the Wall Street Journal reports.

Even worse: other dealers are apparently offering better deals. Negative amortization. Debt that grows its own equity. Leverage the buys itself out.

GM-China Joint Venture Offers No-Interest Loans [Wall Street Journal]

Or the Minotaur, as fugitive U.S. hedge fund manager Angelo Haligiannis was captured Monday on the southern island of Crete.

Angelo was the former president of Sterling Watters Capital and pled guilty to swindling investors out of $27 million in September 2005. His crime – lying about the performance of his fund… which didn’t really exist after a certain point. More from Reuters:

Haligiannis told investors his funds managed $180 million in 2003 and that the fund had achieved returns of 1,565 percent between 1996 and 2003, according to the indictment. Based on those claims, Haligiannis raised a total of $26 million from some 80 investors. But the fund suffered losses of more than $17 million in 2000 alone. By January 2003, the firm had assets of less than $170,000 and "did virtually no trading whatsoever," the SEC said.

Haligiannis took off shortly before his sentencing in January 2006. A judge in January 2007 went ahead and ordered Haligiannis to pay penalties of over $30 million, figuring he’d be captured and all. Authorities eventually nabbed him in Crete because Angelo made the mistake of leaving a trail of string wherever he traveled on the isle.

Fugitive Fund Manager Arrested in Greece [DealBook]
Fugitive fund manager found in Greece [Reuters via CNN Money]

[Are you one of the five people left in your office this week? Then you should take what you can get. Seriously, it's like tumbleweeds over here...]

Sponsored by Bloomberg.com

Upper Deck ends proposal to acquire Topps Co. (MarketWatch)
When we were, oh, 17 years younger this would've been the most important M&A deal of all time to us. Now it's more like "whoa, those companies are still around?" every time we hear an update on this story. Anyway, Upper Deck has announced that it will cease its attempt to purchase trading card company Topps, noting fierce resistance on the part of Topps management. It's been a long long time since the last time we purchased a pack of cards (okay, not entirely true -- we bought a pack of 1993 Fleer cards from a vending machine at Eckerd last year), but at least back then, Upper Deck were always expensive and glossy, while Topps were cheap and cardboardy. Anyone know how it is today?

Judge unmoved by Whole Foods CEO's merger comments (Reuters)
Now that the reasoning in the Whole Foods/Wild Oats case has been unsealed, we can see what the judge thought of all the zany development that occured leading up to his decision. Other than the Yahoo message boards fiasco, the other big bombshell of the case was revelation of certain things John Mackey said to the board, indicating that a merger would give Whole Foods pricing power. Turns out, the judge really didn't care much about that. One antitrust lawyer summed it up perfectly, saying "antitrust is really not about what people say. It really is about how markets work and what companies can do after a merger".

Fed's Strategy of Increasing Liquidity Survives for a Third Day (Bloomberg)
That little thing about the discount window notwithstanding, the Fed has yet to indicate a willingness to cut lending rates (although the market has certainly been predicting as such). At this point, the plan of attack is simply to increase liquidity, a different play than the one Greenspan & Co. ran when they faced a crisis. Of course, to make a distinction between cheap cash and plentiful cash is a bit disingenuous, seeing as the latter will certainly turn into the former given enough time.

Bonuses on Wall Street Threatened by Credit Crunch (Bloomberg)
Bonus season is a lot like Christmas -- the fun, the disappointment, the anticipation, the jealousy and the fact that it seems to start earlier and earlier every year. We've already mentioned it a few times here, and now that Wall Street is acting so wildly, it only makes sense to discuss the effect on bonuses. It goes without saying that bonuses could be really skimpy at certain hedge funds, particularly ones that have been crushed by volatility. On the whole, some expect bonuses to be down 5% from last year, which would still make them pretty high. Anyway, few folks have any idea, so its best to wait until some anonymous, unverifiable memos start hitting our screen.

$$$ "Disgracefully, a 24-year-old Jewish hedge fund manager who took his Bar Mitzvah money and turned it into millions." [NewsBusters]

$$$ John W. Henry will not have to sell the Sox. [Reuters]

$$$ Northwest Airlines 15 Minute-Time [Jeff Matthews]

$$$ Funny Money: The Horror [thestreet.com]

$$$ "I'm looking for an investor or banker who has an impressive apartment in NYC to barter for stock in my company that im taking public on the NYSE." [craigslist]

Sponsored by the Financial Times.

August officially started today in the markets. The major stock indexes spent much of the day unmoved. By the closing bells, the Dow ended down, the S&P and Nasdaq Composite up, while a slight majority of stocks traded on the NYSE ended up. The yields on treasuries, which went hog wild yesterday, seemed to yield to pressure from everyone and anyone trying to ease the so-called “liquidity crisis.” The Vix was still high but way down from last Thursday’s high.

The Dow Jones Industrial Average lost 30.49 to close at 13090.86. The S&P 500 climbed a bit, adding 1.57 to reach 1447.12. The Nasdaq Composite Index was moved up 12.71 to 2521.30. Like we said, it was a day in August.
The executive and legislative branches of the federal government did their best to compromise the independence of the Federal Reserve, with Treasury Secretary Hank Paulson appearing on CNBC prior to a meeting with Ben Bernanke and Senator Chris Dodd holding a press conference immediately after. Messages from the politicians: we care. And we’re going to make sure these fellas at the Fed do too.

Some at the Fed didn’t get the message. Or perhaps inconsistency is the new message. Or maybe independence. Richmond Fed chief Jeffrey Lacker, a noted inflation hawk, said inflation hawkish things and pointed out that the Fed’s job was not responding to fluctuations in the financial markets. Message from the Fed: we might care, we might not. You report. We decide.

Market intelligence, made fresh daily, at FT Alphaville.

The accounting profession doesn't have the best reputation. Because of their role in business scandals of the late 1990s many investors think that the main job of accountants is to conceal underperformance by businesses by hiding losses, avoiding taxes and inflating gains. On the flip side, many entrepreneurs thinks that accountants and accounting standards are too stodgy for the modern economy. Many executives look warily at the big accounting firms, privately (and sometimes publicly) complaining that accountants manage to emerge from each round of business scandals with new rules that bring in ever more fees.

And it has long been so. As John Steele Gordon illustrates in his article on the history of American accounting in this week's Barron's, businesses were very resistant to even the idea of giving reports on their performance, much less having those reports audited by professional bean counters.

"When in 1866 the New York Stock Exchange asked the Delaware, Lackawanna, and Western Railroad for its financials, the railroad curtly replied that it 'makes no reports' and 'publishes no statements.' Translation: Drop dead," Steele reports.

So what changed things? The power of a monopoly and expanding capital needs. "In 1869, the New York Stock Exchange merged with its chief rival, the Open Board of Brokers, and became the overwhelmingly dominant institution on the Street. For the first time it became important for brokerage firms to belong to the exchange and for companies to have their securities listed. The NYSE quickly began to impose rules on both brokers and on the companies that sought listings" Steele explains.

As the country's industrial economy exploded in size in the last decades of the 19th century, the need for capital exploded as well. Increasingly, that capital could only come from the great Wall Street banks, of which J.P. Morgan & Co. was the apotheosis. These banks needed to be sure the books were honest before floating an issue of securities.

To ensure honesty, the stock exchange and the banks increasingly required that the books be certified by independent accountants, a profession that quickly grew at this time. As late as 1884, only 81 self-employed accountants were listed in the city directories of New York, Chicago, and Philadelphia combined. Five years later, there were 322 listings.

What Gordon doesn't point out, however, has been the negative effects of accounting as providing a partially illusory legibility to business activity. Balance sheets and financial statements have expanded and become more complex as transparency and disclosure have become the leading paradigms required by law and general practice. But all too often often--as the investing public has learned time and again, good and hard--the idea that the disclosed facts and figures, the more the better, describe the actual business prospects of an enterprise works better in theory than practice.

Shedding Light on Business Accounts [Barron's]

As we were discussing this morning, it is common knowledge that you can blame anything on the markets, as they’re mostly, if not entirely, a solipsistic construct. (We also asked you to try and blame something on the markets tonight and will expect full reports as to how using the markets as a means for getting out of child support payments went, by 9 am tomorrow at the latest). In case you need some help getting started, we’ll illustrate now how a London man recently used the markets as an excuse where most (normal) people probably wouldn’t have thought to employ this newly branded scapegoat.

Bertrand Des Pallieres, founder of SPQR Capital, a hedge fund based in the St. James District of the City, claims that the reason he didn’t notice his Maserati Cambiocorsa had been impounded was because he was “so focused on the swings in the financial markets.” Yes, because of the “unforeseen market volatility” unfolding before his very eyes, Des Pallieres didn’t realize that his blue, £80,000 vehicle wasn’t where it was supposed to be-- for three months. ``I was distracted by the market turmoil,'' Des Pallieres, who had to pay “thousands of pounds” for 65 congestion-charge fines and ``lots'' of parking tickets, told Bloomberg.

Obviously, we applaud Des Pallieres for thinking outside the box, but we have to ask:

Hedge Fund Manager, Gripped by Market Rout, Abandons Maserati [Bloomberg]

Bolstered by a 44% return in emerging market stocks and a 30% boost from real estate and PE, The Harvard University Endowment Fund returned 23% for the fiscal year ending in June. The Harvard Management Company grew assets under management by almost $6 billion to $41 billion during the year.

The Harvard endowment lost about 1% of its total assets ($350 million) when Sowood Capital Management, founded by ex-Harvard Fund foreign stock head Jeffrey Larson, failed bond markets 101 in July, lost half of its assets, and sold what was left of its portfolio to Citadel. Despite bond market academic probation, the Harvard endowment was up 0.4% in July.

Harvard survived the setback thanks to a "high degree of diversification." A microcosm of its undergraduate population, which consists of a bunch of rich kids of all creeds and colors, the Harvard Fund was diversified enough to weather the tough July market.

Harvard has beat the endowment return benchmark by almost 5% in the last five years, returning 18.4% compared to the 13.8% average annual return of the benchmark. Yale reports results next month.

Harvard's Fund Returns 23%, Boosting Size to $34.9 Billion [Wall Street Journal]

It has now been one month and one day since Liz Claman left “Morning Call,” the CNBC morning show which aired from ten am until noon. Since then, “Squawk on the Street” has been expanded to two hours, with Mark Haines and Erin Burnett bringing us from 9 am till 11 am each day. And the show has lost more than an hour—it’s lost the “Morning” part of it’s title. Now they’re just calling it, well, “The Call.”

The show has been, for the most part, hosted Trish Regan, formerly of Goldman Sachs and D.E. Shaw. Various guest hosts have also taken a seat for the popular midday hour. We understand that CNBC is still deciding who should become the permanent anchor of the hour.

Well, you know how we decided those things around here—a Reader Poll. So, in the spirit of our now famous “Who Moves Your Market Poll” we’re asking reader to begin the polling process by nominating which CNBC anchor, reporter or correspondent should get The Call. Leave your ideas in the comments section below or send nominations to tips@dealbreaker.com. Feel free to nominate individuals or even teams. Once we get the nominations, we'll start up our polling software so DealBreaker readers can vote on who should host The Call.

Aleksey-Lite, whose employment at Fortress Investment Group is up for debate (sources at the firm claim he doesn’t work there, Michaelson says they’re bluffing) told the Post today, "As I'm sure you know, blogs are full of rumors. . . . It's all just untrue."

As we're sure you know, we imagine the ellipses in that quote displace the moment in the conversation when Michaelson asked the Post reporter “can you hang on a sec?” put his hand over the receiver and screamed “I’m in the middle of something!” to the burgeoning line of patrons outside his Mr. Softee truck.

After the jump, a flow chart for how Michaelson should address press inquiries regarding Fortress in the future:

Talk continues on Wall Street about the rumors that spread in the early hours this morning that a major US investment bank had or was about to file for Chapter 11 bankruptcy protection.

“We've heard vague talk a US investment bank is in trouble,” a source tells Thomson Financial, which first reported the story.

While a bankruptcy of a major investment bank is not beyond the realm of possibility, we’re skeptical on this rumor. If this was real, we would expect that there would be even more rumor-wine leaking from the grape vine than there has been. Even Thomson sounds a skeptical note about the report. “Another dealer said he had heard that a banking group has filed for Chapter 11 protection, but pointed out that any such news would be on the SEC website,” Thomson writes.

But if there's one thing that has us wondering if there might be something to this story, it's the full-court public relations press coming from our nation's capital this morning. Treasury Secretary Hank Paulson went on CNBC this morning, before meeting with Federal Reserve chairman Ben Bernanke and Senator Chris Dodd. Cue shots of Bernanke walking through the halls of the Capitol building. Pan to Dodd press conference. Why all the pomp and circumstance unless something is very, very wrong?

Wall Street outlook down on talk large US bank filed for Chapter 11 protection [Thomson Financial via Forbes]

The Hinduja family, majority owners of Indian apparel maker Gokaldas, accepted Blackstone's dowry of $165 million to take Steve Schwarzman into its clan. The blushing Blackstone bride will eventually hold up to 70% of the company. Blackstone will acquire an initial 50.1% stake followed by a secondary offering for 20% of the company required by Indian takeover law.

Blackstone acquires apparel maker [TheDeal.com]

Four months ago we launched The Big Idea, our occasional feature speculating about the future of finance, with a guess that Goldman might Sachs consider spinning off it’s proprietary trading group. There had been word on the street that the big pay packages received by many of the top names in private equity and at hedge funds had some within Goldman proprietary trading group feeling underappreciated. “We're hearing from investment bankers who have talked to people inside the firm that Goldman could face pressure to spin-off its trading and hedge fund business in order to realize the value of the business before its guys start to defect or strike out on their own,” we wrote.

At the time, the Big Idea made something of a splash across the financial media and was heavily discussed in the financial community. But Goldman, then trading at it’s fifty-two week high, didn’t seem very keen on the idea. But just because Goldman wasn’t willing to talk spin-off didn’t mean that some of the top guys inside of Goldman weren’t plotting their own private spin-off.

This weekend’s Wall Street Journal details the rise and departure of Mark McGoldrick, the 48-year-old founder and former head of the “Special Situations” group at Goldman. Last year, McGoldrick got a $70 million bonus, one of the highest bonuses paid by the firm and more than Goldman CEO Lloyd Blankfein's $53 million, but considered himself and his team “under-compensated.”

More After the Jump

Bebo, the social networking site known for not being quite as relevant as MySpace or Facebook (we swear we’re HUGE in Europe…we swear), is teaming up with Microsoft to launch an instant-messaging program in its network.

How will the new service work for Bebo’s users? An explanation, from the Journal:

Bebo members will be able to click a link to start an IM session with any other Bebo member, even if neither has a Windows Live ID, the sign-on used for Hotmail and other Microsoft services. They'll also be able to exchange messages with Bebo friends who aren't logged on, but who are using Microsoft's regular Windows Live Messenger program. However, Bebo users will not be able to send instant messages to Windows Live Messenger users who don't have Bebo accounts, and Windows Live Messenger users won't be able to see if their buddies are logged on to Bebo.

The genius of Microsoft is apparent – Bebo users get a half-functional version of Windows Live Messenger that they can’t talk to non-Bebo Windows Live Messenger users with. And this move is based on the presumption that many Bebo users use Windows Live Messenger. Why do we need the middleman? Is it trying to create appeal by adding another layer of exclusivity (because it doesn’t seem to add much else)?

It’s like Facebook’s recent semi-integration with AIM. Considering you already IM many of your Facebook friends, it’s kind of superfluous whether they’re on Facebook or not.

Bebo is listed here as having 34 million users, the same number of users as Facebook (although this same list has MySpace showing 192 million users and Classmates.com as having 40 million users…I mean, sure…it’s pretty easy to be cavalier about users when they’re unmonetized).

Social-Networking Site Bebo To Use Microsoft's IM Service [Wall Street Journal]

Despite rising delinquencies and foreclosures, a possible class action suit and, just yesterday, and the disappearance of 500 jobs, Countrywide Financial wants you to know that nothing is fucked, dude. The mortgage company’s unusually sunny outlook in the face of adversity manifested itself in full-page advertisements in the Times and other newspapers that told existing customers (the remaining two of them) and potential customers that nebulous but definitely-existing bubbles protect them from the problems in the mortgage market. So don’t worry! Furthermore, the bank “is well capitalized” and “the future is bright.” Works for us.

Countrywide Tries Soothing Customer Worries Amid Layoff Reports [CNBC]
Countrywide says it cut 500 mortgage jobs [Reuters]
Countrywide faces class action lawsuit [Forbes]

When PE firms look in the mirror, they don’t see a cruel strip-and-flip type in the business of profiting at a company and its employees’ expense. They see something…beautiful.

In a Grant Thornton survey of 100 PE firms about PE firms, PE firms overwhelmingly came down on the side of PE firms. Continuing the trend, the Private Equity Council (the PE industry lobby) came down resoundingly in favor of PE firms in recent Congressional hearings. The main points of self-affirmation – PE creates jobs, is extremely ethical in its proceedings and is largely misunderstood.

So why oh why would PE firms ever develop a bad reputation? Why are non-PE firms and non-PE firm lobbyists always picking on the PE industry? The answer – the liberal media. Liberals just don’t understand the nuances of job creation. When you can make the same profit (cough…product, I meant product) with way fewer people, you lay a ton of people off. That’s phase one in the PE job creation cycle, often misunderstood by the liberal media as creating unemployment.

When you fire a ton of people after taking a company private, it’s not like you stop them from working, you just free them up to do other things, like cure AIDS. Liberals don’t want a cure for AIDS, which is why they criticize PE firms. This not only practically gives people AIDS, but it damages the self-esteem of PE firms, which is an important factor in having the confidence to file an IPO and guarantee a huge non-carry cash stream before returns dry up.

PE firms create jobs. Just look at this report from A.T. Kearney paid by PE firms to report that PE firms (defined by A.T. Kearney to include venture capital, non-buyouts and basically every time a person in the U.S. got a "job") created 600,000 jobs in the U.S. from 2000-2003. Can’t find an example of an actual buyout where this happened? Don’t worry, it only works in aggregate. That makes no sense? What?

Does Private Equity Create Jobs or Not? [Deal Journal]

(Allegedly.) When we asked yesterday what would be the next proverbial egg on Sentinel’s face, we were anticipating something along the lines of “filed for Chapter 11 bankruptcy with the wrong regulatory body” or “put tinfoil in the microwave,” and not “civil fraud charges of lying to investors and misappropriating their assets” levied by the SEC. But what can you do? Go with it, that’s what.

So: in a complaint filed with the U.S. District Court in Chicago yesterday, the SEC claimed that Sentinel defrauded its clients by improperly “commingling, misappropriating, and leveraging their securities without their knowledge,” in violation of the Investment Advisers Act (specifically, the Blood Brothers clause). Supposedly, Sentinel relocated $460 million in securities from clients’ accounts into its own using one of those cranes from the arcade games that are impossible to win but you end up spending an obscene amount of quarters on anyway in a vain attempt to prove you can be the first person to beat the system, in order to obtain a $321 million line of credit—for its own selfish gains. (Not to play sides here, and to side with a bunch of criminals at that, but if you’re going to commit a felony, here’s hoping there’s a personal benefit on the horizon).

Shockingly, in its daily account statements to clients, Sentinel did not feel the need to touch on the “improper activities” that were going on at the firm ("Hey guys, we're stealing your money, what's new with you?"). And in the letter that was sent out August 13, informing customers that a $1.5 billion fund was being frozen and that they wouldn’t be getting their money back without selling assets at “deep discounts,” like, say as much as 30 percent to market prices, Sentinel opined that “fear has overtaken reason.” Apparently, at the time, no one at the firm “feared” “getting caught.” This would explain why Sentinel blamed everything on the “liquidity crisis” and not themselves.

Perhaps the best part of this whole deal is that Sentinel is now being blamed for (go with me on this) everything bad that happened last week, and the reason the Federal Reserve Board cracked.*

(To be fair, though, it really is common knowledge that you can blame anything on the markets, as they’re mostly a solipsistic construct. Try blaming something on the markets tonight. Seriously—it works.)

U.S. files fraud charges against Sentinel [Reuters]
Sentinel Sued by SEC, Accused of Defrauding Clients [Bloomberg]
NFA Drops Sentinel Ball.. SEC Picks Up Sentinel Ball [Naked Shorts]

*unconfirmed: Cramer has challenged Sentinel to a duel at the Garden to determine who can take the credit.

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SunTrust poised to cut 7% of its workforce (Toronto Star)
If this keeps up, we're going to need to start a spreadsheet to keep up with all of the data. So far we've got layoffs at Bear Stearns, Countrywide, CapitalOne and Now SunTrust, plus a bunch more that we've probably overlooked. Between this news and hedge fund blowups, the Opening Bell practically writes itself. Actually, we stopped mentioning every last little blowup a long time ago. Boy did that get old quickly.

Luminent, Thornburg take liquidity steps (Reuters)
When you can't raise capital through traditional means, what do you do? Duh, sell off part of your soul to the devil at a steep discount. Mortgage buyer Luminent has announced that it will sell a stake in itself to an investor for a deep discount, just to keep the cash flowing. We could easily see this becoming a new strategy at hedge funds -- looking for companies with sever liquidity problems and then buying out stakes in them at below-market rates, capitalizing on their desperation. Then again, is any stock sale really below market?

KKR Financial to Raise $500 Million From Investors (Bloomberg)
And here's another one -- beleaguered KKR financial, affiliate of KKR, has announced plans to sell a stake in itself to investors at below market rates. Fallon Capital Management and Morgan Stanley will together buy $16 million shares at $1 off the list price.

Plaintiffs Find Payday Elusive in Vioxx Cases (NYT)
We were just thinking that it'd been awhile since we'd read anything on the Vioxx cases. Last we checked in, Merck had continued its impressive run in the courts, vindicating its decision to take on each trial one-by-one, despite the significant legal fees. As the Times notes, it's really been quite a victory for the company, as its yet to pay out anything, even in cases that its lost. You can probably guess the Opening Bell's stance on the whole thing, just as you can guess the Times'. The article seethes with resentment, noting that the general council who crafted the defense strategy has now been promoted, a Michael Moore like charge (promotions awarded for defending the company against patients...). Though of course he deserves to be promoted. Analysts now estimate $5 billion in total damages, down from a hi