• 04 Oct 2007 at 1:03 PM
  • Banks

Is Wall Street’s Newfangled Honesty Just A Fancy Way Of Lying?

jamescayne.jpgIn the last week, Citigroup, Deutsche Bank, and UBS announced that they wrote down $1.4 billion, $3.11 billion and $3.4 billion in the third quarter, respectively. In the land of reality, where sane human beings live, these numbers would be considered bad news. Rational people would perhaps take the opportunity to tell the banks, “Hey, you fucked up,” as a way of motivating them to do better. Instead, not only were the banks not given the smack in the face they so desperately need, but they were praised for being honest. “You screwed up big time, but we’re just so happy you’re telling us the truth for once!” has been the gist of it. Obviously those in charge of the truth-telling mission jumped on the back-patting bandwagon, and praised themselves, too. “It was about transparency,” said DB Chief Executive Josef Ackermann. “We did it, and several others — UBS, Citibank — did it as well. It was important to re-establish people’s trust in the products and in the markets.”
The best part is that, as the conspiracy theorists at the Journal point out, this whole coming clean shtick is more or less an elaborate lie. The banks have provided “clarity,” in so far as they admitted to BILLIONS in losses, but the clarity is only packaging in which to ship a box full of lies that will later help the people who “can’t tell a lie” tell more lies. And if you think about it, that’s just good business:

“If you’re a smart CEO, you’re going to write off everything and then some, maybe even to below-market prices, because you’re going to be hidden in the woodshed with everybody else,” says Daniel Genter, chief executive and chief investment officer of RNC Genter Capital Management, a Los Angeles-based investment firm that manages about $3 billion in bonds and stocks, mostly for high-net-worth individuals. “They’ll make it look a lot worse than it is, but that’s the smart move, because you’ve got little to lose and you might get some of it back in a quarter or two.”

But maybe we’re just being cynical assholes? Deutsche Bank promises that it “continues to apply accounting and valuation principles consistently with prior periods” and a UBS spokesman told the Journal that the bank’s writedowns are “appropriate and follow established accounting principles and industry standards.” Citigroup has “taken impairments in the third quarter based on a rigorous process applying appropriate accounting principles.” Goldman, which hasn’t even written anything down but is just so bursting with honesty that it had to tell someone about it, was in “constant contact over the summer with the Securities and Exchange Commission to discuss the way it was pricing tough-to-value securities.”
All this chest-bumping for telling the truth really gets in our craw because, to be honest (heh), we could care less about these mystical abilities in the sport of candor. Great—you’ve succeeded at being honest (though not really). How about now, you sharpen your skills at not losing billions upon billions of fucking dollars, which, not sure if anyone ever made this clear, is actually your main goal. Do that and your reward will be that you can tell as many lies as you want. Like this one: “Bear Stearns Seeing the Start Of a Rebound,” Executives Say. Yeah, that felt good.
Banks’ Candor Makes Street Suspicious [WSJ]

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Comments (17)

  1. Posted by Anonymous | October 4, 2007 at 1:05 PM

    beautiful.

  2. Posted by Al Phillips | October 4, 2007 at 1:16 PM

    In answer to the articles title……yes.

  3. Posted by Reader | October 4, 2007 at 1:20 PM

    Ackerman is Deutsche’s CEO, not UBS’

  4. Posted by Captain Stabbin | October 4, 2007 at 1:26 PM

    When mark-to-make believe accounting is the industry practice, claiming that you followed such widely-accepted standards doesn’t quite do much to inspire confidence…

  5. Posted by Anonymous | October 4, 2007 at 1:34 PM

    Nothing any of you clowns can do it about :)

  6. Posted by Anonymous | October 4, 2007 at 1:35 PM

    Would it be better to lowball the writedown this quarter and have to come back again next quarter to add to it? Or maybe you’d like to keep that CEO job…

  7. Posted by not lovin levin | October 4, 2007 at 1:45 PM

    man she makes me mad.

  8. Posted by lovin levin | October 4, 2007 at 1:48 PM

    then get the hell out of here. YOU make ME (and everyone else who reads this site) MAD.

  9. Posted by Anonymous | October 4, 2007 at 1:55 PM

    Machiavelli recommends that bloodshed be done all at once.

  10. Posted by anon | October 4, 2007 at 2:02 PM

    Bess has obviously never owned an illiquid asset, much less tried to value you one with multiple valuations imbedded in it. ever tried forecasting prepayments, defaults and recovery ratios for thousands of mortgage loans to arrive at one specific combined value? and even then, understanding that modeled value is just that: modeled value. there still is an actual market value that is official only once the security has traded. it ain’t like quoting IBM’s stock Px on the NYSE at a particular point in time.

  11. Posted by Anonymous | October 4, 2007 at 2:06 PM

    hey anon, your job sounds hard! tell us more about what you do all day, oh great one!

  12. Posted by Bess Levin | October 4, 2007 at 2:08 PM

    “Bess has obviously never owned an illiquid asset…”
    Now that’s where you’re wrong, 2:02.

  13. Posted by Anonymous | October 4, 2007 at 2:12 PM

    why is jimmy cock cayne on every other db page

  14. Posted by Anonymous | October 4, 2007 at 2:20 PM

    “we could care less”
    You mean you couldn’t care less, i.e. you care so little about it right now there is no possible way your amount of caring could be any lower. If you could care less, then why don’t you?

  15. Posted by Anonymous | October 4, 2007 at 2:23 PM

    dealbreaker readers, excuse me, commenters are the biggest bunch of fucking retards to walk the face of this earth, a fact they are way too proud of.

  16. Posted by fuld | October 4, 2007 at 2:31 PM

    Hey 2:12, you remeber that old childrens folk tune too?
    Jimmy cock cayne and I don’t care
    Jimmy cock cayne and I don’t care
    Jimmy cock cayne and I don’t care
    I think I’ll rip his head off.
    Brings back memories…..

  17. Posted by inIT4the$ | October 4, 2007 at 3:26 PM

    Fuld, nice one