$$$ Carlyle to Shutter Blue Wave Hedge Fund

$$$ Plumbing the K.K.R. Un-I.P.O. [DealBook]

$$$ What Would Warren Say? [Jeff Matthews]

$$$ When Are We In a Recession? [LoSC]

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Dennis Berman digs up a fascinating excerpt on short-selling from the 1932 hearings on the stock market crash. it’s a shame we don’t seem to have anyone in Congress now even capable of formulating the question asked by New York Congressman Frank Oliver: “They blamed the ‘shorts,’ whereas, as a matter of fact, if the prices were inflated, they should have blamed the ‘longs’ for having inflated them?”

Following in the footsteps of superstar NFL wide-outs Chad Johnson and Terrell Owens (and former Kansas Senator Bob Dole), Carl Icahn referred to himself in the third-person today on his blog post, “Concerning the Annual Yahoo! Meeting.”

“Additionally, if any committee is formed to negotiate a meaningful transaction, Carl Icahn will be a member of that committee,” he wrote.

Now, Carl just needs a slick nickname to be right up there with Johnson and Owens. Suggestions?

Anyway, in his latest post, Carl makes it clear that he will not be attending the meeting since the proxy fight is over. He said, “it will not do shareholders or Yahoo! any good to have the annual meeting turn into a media event for no purpose.”

Carl reiterated that his minority position on the board is significant because he will be involved in any major transaction that Yahoo explores. The compromise that was reached between the two parties appears to be very beneficial for Icahn, especially since support for his board slate had significantly waned in recent weeks. We will have coverage of the meeting tomorrow.

—Senior third-person correspondent Travis

Were you recently laid off? Don’t despair. There is probably a hedge fund out there who wants to hire you. Oddly enough, the strongest demand is for people with experience in structure credit products, especially mortgage backed securities, according to David Ellis at CNNMoney.

Realizing that there could be plenty of opportunities to get good assets on the cheap, distressed opportunity investors want people who can assess the value of these toxic products, notes Pat Wieser, partner and co-head of the global banking and markets practice of the executive recruitment firm Rhodes Associates.

Former Credit Suisse broker Julian Tzolov, under investigation for being a sheep and pushing auction rate securities, is thought to have fled to his native Bulgaria. (Suicide has been ruled out, faking one’s own death apparently only be de rigeur among the hedge fund set.) Tzolov resigned from the firm on September 7, 2007, so he’s presumably been planning the trip for a while. That, or he’s not in Bulgaria at all, and has simply been waiting for his god damn ShroomBurger.

The Journal noted that Credit Suisse itself is not a target of the probe, Tzolov apparently evidently being a go-getter who probably would’ve been more suited to certain other Swiss banks.

Broker Goes Missing As Securities Charges Near [WSJ]

And don’t forget: buy Bear Stearns. [CNBC]

Here’s a copy of the formal complaint from the Massachusetts Secretary of the Commonwealth charging Merrill Lynch with fraud in pushing auction rate securities as sweet deals even though the dealers knew that wasn’t exactly the case. We haven’t slogged through the eighty pages yet, but here’s something you might like, from p. 7:

As one executive confided to a personal acquaintance in an email on November 19, 2007: “Market is collapsing. No more $2k dinners at CRU!! The Financials are being invicerated! (sic). More firings over at Citi…Inventory flooding the street. Going to be a great ‘08 trading environment.”

Merrill Complaint [Office of the Secretary of the Commonwealth]

Top first years, S&T: 60k, “plus a 20k increase in base.”

Update: another self-described “top” first year in S&T claims it’s more like 75K. I don’t know what to believe. If only someone signing checks from the inside could comment definitively below.

Charlie Gasparino reports that former Bear CEO Alan “We’ve Got Liquidity Coming Out Of Every Orifice” Schwartz will leave Bearpont Morgan Stearns at the end of the summer. Schwartz has apparently been “working on some deals” at Bearpont, but decided—as did senior executives at the firm— that the fit wasn’t quite right. According to Gasparino, Amphibious Al has not yet decided what to do next, though a small boutique firm, major bank (please say Lehman), and private equity shop are all in the hopper.

Earlier: Alan Schwartz Declining Offer From JPMorgan Cayne?

I can barely even type this because I’m so upset that my hands are shaking and I’m experiencing chest pains and a tingly feeling in my left arm. GOLDMAN SACHS HAS BLOCKED ITS EMPLOYEES FROM COMMENTING ON DEALBREAKER, AS REGISTERED USERS OR GUESTS. Mind you, not from *reading* DealBreaker, but from commenting on it. This is unacceptable! I must know what the Masters of the Universe are thinking and feeling at all times! God! I’m going to go throw up now, more info as it comes in.

**Obviously this is some absurd measure from Team No Rumors but if MOTU are spreading rumors I’m sure they have a good reason, and their lies are better in every way than anything anyone from [insert inferior bank here] is going to leave on some random post about Cody Willard’s health issues.

Bartiromo: CAN LEHMAN SURVIVE THIS?

Whitney: I — I THINK — I DON’T KNOW. I DON’T KNOW.

Future Of Financials [CNBC]

China’s Shift on Food Was Key to Trade Impasse (NYT)
Tilt! It was the emerging developed nations to blame for the collapse of the Doha trade rounds, it seems. And here we thought it was all about the US protecting Iowa corn farmers. Turns out it was the Indians and Chinese hoping to protect key agricultural exports. Oh well. It’s actually a good sign of the progress of both of those countries that they now behave like aging Western superpowers with something to lose.

Layoffs possible for 22K California state workers (AP)
The other day they were talking about paying all of California’s state employees the minimum wage. Now they’re talking about laying off 22,000 temporary and part timers to overcome a budget shortfall. Stepping back for a sec, is there any organization more cylically extreme than the California state government. It alternates every few years between crazy surpluses and crazy defecits, and never seems to realize that all good things must come to an end. Perhaps all political units are similarly misbehaved, but since California is a breeding ground for bubbles (tech, socal real estate), they just really feel it hard.

Broker Goes Missing As Securities Charges Near (WSJ)
Here’s a shocker. The Credit Suisse broker due to face charges over… something… may have fled the country to Bulgaria where he’s from. No official comment from lawyers or anyone, but the prosecutors obviously leaked this to The Journal to get the word out. Anyway, now the public can be on the lookout Julian Tzolov. If you see him, don’t confront him directly. He may engage you in some securities fraud or something.

China’s Debt Rating Raised to A+ by Standard & Poor’s (Bloomberg)
With $1.8 trillion padding the bank account, S&P is growing increasingly confident that China can pay its bills.

We interrupt happy hour to report told that the House Financial Services Committee has finalized a bill introduced earlier this month by Barney Frank that would place increased regulatory scrutiny on bond insurers and rating agencies, according to sources in our nation’s capital. The so-called “Municipal Bond Fairness Act” as the legislation is named, would require bond insurers to submit information about their financial soundness. It also requires ratings agencies to use one standard to rate both corporate and municipal bonds.

Frank has been one of the critics of the bond rating system, claiming that the ratings have raised borrowing costs for municipalities despite their relative safety compared with corporate debt. You already know what we think of this theory.

The bill will now likely go to the full House for consideration. We, on the other hand, are going to our local watering hole for drinks.

$$$ 65% of You Failed Level I of the CFA [LoSC]

$$$ KKR Valuation [Breaking Views]

$$$ UBS pays Massachusetts $1 mln to end probe [Reuters]

Can we talk about Australian banks for a moment? Earlier this week, ANZ Bank of Australia warned that its profits could fall by 25% and said it was writing down $1.2 billion (Aussie money) of bad loans. This contributed to a massive sell-off in Australian financial stocks, which were already hurting from last week’s news that National Australia Bank was taking a $830 million write down.

ANZ’s problems are simply an Australian version of what’s been happening in the US—a housing boom was attended by a mortgage boom (or was it the other way around?) and now mortgages are defaulting at unprecedented rates. NAB’s problems, on the other hand, aren’t even an Australian version of what’s happening in the US—they are what’s happening in the US. Most of NAB’s write-downs came from debt linked to the US mortgage market. NAB said it is suffering a 50% loss on American housing loans.

Veteran Australian business writer Robert Gottliebsen says that this paints a very bleak picture for financial markets around the world, and for the US in particular.

“This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates. A US recession is now locked in, but more alarmingly, 55 per cent loan losses point to the possibility of a depression,” he writes.

Gottliebsen thinks that write-downs of $1,300 billion “and perhaps even more” are “on the cards.”

NAB will shock Wall Street [Business Spectator]

Honestly, we never cared much either way about massage enthusiast/Bear Stearns investor Jeff Epstein but we’re starting to love The Ladies Man who, according to Page Six, has been spending his incarcerated days “at the [prison] library e-mailing various models he befriended in New York, sending them boxes of chocolates and promising them career help.” No sense wasting time getting back in the saddle.

We Hear [NYP]

Top second years: 95k.

Related: Goldman Changes Bonus Schedule To Treat Plankton Like People

The China Securities Regulatory Commission has ordered domestic fund managers to not publicly badmouth any Chinese stocks, in an effort to maintain stability “for the sake of a harmonious and successful Olympic Games.”** This is a great idea and one that SEC chairman Christopher Cox would be wise to emulate, though, not being able to trust Wall Street to listen to him ought to think about the old sock in mouth, duct tape around face method which would be both an effective means of policing and amusing to all. Perhaps even pleasurable to some (you know who you are).

So far the moratorium on negativity hasn’t done jack, with the Shanghai Composite Index continuing to fall since the CSRC laid down the law but these things take time. And in other China-getting-psyched-for-the-games news.

China Muzzles Its Money Managers [Portfolio]

**Loophole: it said nothing about privately bashing your company of choice via well-timed IMs along the lines of whatever is Chinese for: “I’d sooner give my daughter a presumably lead-laced Barbie doll than give this company my money.”

The parent company of Bennigan’s, the Irish-themed casual dining place, filed for bankruptcy yesterday, resulting in the closing of 200 Bennigan’s sites along with the 50 remaining restaurants of sister spin-off, Steak and Ale.

However, the 138 franchisee-owned restaurants are expected to remain open, though their future is uncertain without the support of the parent company, Metromedia Restaurant Group.

The casual, mid-price dining segment of the industry has struggled badly in recent times because of higher ingredient and labor costs coupled with downturns in consumer spending. People are dining out less or switching to fast food joints to save money.

I never was a fan of Bennigan’s, with my preferred casual dining chain currently being The Cheesecake Factory (On a side note, if you are a Cheesecake Factory fan, they are offering $1.50 slices of cheesecake today to celebrate their 30th anniversary). Applebee’s, which truly turns my stomach, is extremely popular near me because our local spot offers half-price appetizers after 10 pm, making it the perfect, cheap munchies food. Other than that after 10 pm traffic, I doubt they are getting many diners. Or at least I hope they aren’t.

—Food Services Correspondent Travis

Connecticut’s Attorney General is suing the three major rating agencies for giving lower ratings to bonds issued by municipalities. Moody’s, Standard & Poor’s and Fitch Ratings are accused of costing taxpayers “millions of dollars” by AG Richard Blumenthal.

The idea behind Blumenthal’s complaint is that the market has been mispricing munis for decades based on the assignments of the rating agencies. He asks us to believe that bond investors are unaware of very public facts—including the use of different ratings scales and the fact that the ten year cumulative default rate of muni bonds rated Baa is less than that of AAA rated corporate bonds. It requires, in short, that we subscribe to the idea that the markets have been radically inefficient in bond pricing.

Merrill Lynch needs a new logo to more accurately reflect the trajectory it’s been taking of late, and its goals for the future. Though an image of CEO John Thain wearing a custom designed executioner’s mask with space cut out for a ball gag would be the logical successor to the bull, this is a family firm and that kind of smut, while fitting, won’t fly. Luckily, we have another good candidate for consideration.

The euphoria in financial stocks yesterday seems to have been largely built on the idea of that “cathartic vomit.” The idea was that by writing down assets once again and selling off CDOs to Lone Star for 22 percent of their original value, Merrill Lynch had finally purged itself of the junk on its books. Never mind that we’ve heard that particular tune three times before. Everyone wanted to dance to it again.

But the morning after lots of people are having second thoughts. For starters, Merrill Lynch’s financing for the deal is troubling. They put up 75% of the money used to buy the assets, and the loan is apparently non-recourse. This means that if the CDOs drop too much in value, Lone Star can basically put them back to Merrill rather than pay off the financing.

In a report entitled “On Second Thought … ” Bank of America analyst Jeffrey Rosenberg explained that “Merrill now finds itself effectively in the position of having sold off its upside but retaining its downside.”

In other words, this alleged sale seems like yet another sleight of hand by Merrill’s management, a way to move the CDOs from one column on the balance sheet to another while no one is looking.

Merrill CDO sale not as good as it looks: analyst [Reuters]

Merrill Lynch has banned the use of external hard-drives and other devices that could be used to take documents off its internal networks, a person familiar with the matter said. The company has been stung by suspicions of leaks after its stock moved wildly in the days leading up to its announcement of new write-downs and capital raising efforts.

We’re also told that Merrill has circulated a memo to employees warning them against engaging in rumor mongering.

“We have more capital than we need, so we can say to the market that we don’t need more injections. We can confirm that we have tackled the problem.”

That was John Thain, back in March. Only a few months later, of course, Merrill Lynch had to go back to the market to sell more equity to deal with credit market losses. But this time they swear they really have tackled the problem!

Portfolio’s Megan Barnett has a run down of broken promises from banking executives, including Thain’s. Perhaps our favorite comes from Ken Thompson, who was the chief executive of Wachovia when he said this back in May 2006: “The mortgage market is going to be a great market in this country for a long time. We’ve got population growth. We’ve got people who are always going to want to live in homes that they own. It’s going to be a great market.”

“I Said What?!” [Portfolio]

As expected, the Federal Reserve is extending the broker-dealer discount window. The special borrowing facility which was launched following the collapse of Bear Stearns was scheduled to terminate in September. Now the Fed says it will stay open until January 30, 2009. The discount window has been cited by folks like Pimco’s Bill Gross as the reason why he remains confident that Lehman, among other investment banks, cannot fail.

The Fed also said it will extend the term lending facility that has provided additional liquidity to commercial banks. What’s more, they added a longer term borrowing facility, allowing banks to borrow for up to 84 days. Previously, banks borrowing under the facility were limited to 28 day terms.

We figure the weirdest part of Treasury Secretary Hank Paulson’s enthusiasm for covered bonds is the untimeliness of the products. In an atmosphere where banks are failing because of bad bets on mortgage assets, having a product that ensures bonds against bank failure with mortgage assets doesn’t seem all that exciting.

But, as we’ve said in this space, maybe the government is counting on investors to buy covered bonds because they are more than they seem. What if covered bonds are “covered” by an implicit government guarantee? That’s what Steve Waldman thinks is happening.

A guarantee by the issuing bank has gotta be worth something. If it were 2002 again and the banking industry had adopted this originate and guarantee model (rather than the originate and forget model they chose), perhaps we wouldn’t be in the current mess. But it is not 2002. These bonds will be offered by banks that would already have collapsed without vast support to the financial system by the Fed and the US Treasury. Guarantees by money-center banks are no longer bonds of confidence in the prudence or skill of bank managers. The value of such guarantees comes from a different place, from the notion that it is unthinkable the state would permit these banks to fail. A covered bond offered by Citi or Bank of America would only default if a titan collapsed. Investors might reasonably believe that would not be permitted to happen. If they are right, then these bonds are indeed covered. They are covered by you, dear taxpayer.

We’re all Fannie Mae now.

Covered by whom? Bonds on what? [Interfluidity]

Next up: a cumulative total of what John Thain has spent on size 12 high heels and tickets to Epcot since taking office (we all have our coping mechanisms, people).

[Econompic Data via Big Picture]

The commercials for used catheters on CNBC— why?

The SEC has extended its emergency limit on short sales, which was supposed to be over yesterday, to August 12. Sadly, the companies—Wachovia, National City, WaMu— begging to be added to the 19-man roster, have been denied. Not that those being left out of the fun are ready to see it this way just yet, but this is actually a good thing. If the SEC threw you a bone, you’d be required to spend at least a few hours coming up with another person or organization (Corey Haim) to blame for your company being in the toilet.

SEC Extends Limit on Short Sales of Brokers, Fannie, Freddie [Bloomberg]

Oil down below $122 on demand worries (AP)
Is this a head fake? A consolidation at a lower level as oil prepares to race towards $200? Or are we on the back side of a parabolic curve, that will now see things hurtle towards $50 or $80. It wouldn’t shock us if demand for oil meaningfully declined in this country. We’ve heard more than a few anecdotes about people pulling back. But then if gas gets down to $3 per share, it’s time to take out the Hummer again, right?

Nintendo reports jump in quarter profit on hit Wii (AP)
No idea what expectations were on this one, so can’t really tell you whether Nintendo had a good quarter on the back of its Wii gaming console. Profit in the quarter shot up 34 percent, so that’s something. And total sales were $996 million (almost $1 billion) so that too is something. Just the Wii Fit addition sold 3.42 million units, which seems impressive.

After 7 Years, Talks on Trade Collapse (NYT)
Jeez, the Doha round has been going for seven years. Pretty sure we mentioned yesterday that it wasn’t doing so hot, but yeah, seven years of futility cause they couldn’t agree on farm subsidies. Of course we’re against them here at the OB for all kindsa reasons, and we suspect that they hurt farmers in developing countries. But, just for the hell of it, is there a contrarian take that argues they don’t really affect farmers in the developing world? Give it your best shot.

Dell Tests Player to Renew iPod Battle (WSJ)
Dell, really? A new MP3 player that comes with its own store. Really? Of course they’ve already tried this before to little avail. This time they’re going with a more complete strategy, building out a new store and playing nice with others. But really? Then again, maybe Dell have learned something. SAI gave nice reviews to the design elemants on a new mini PC. But still.

$$$ “KKR will soon suck donkey balls in public“— Steve Schwarzman [NewsGroper]

$$$ Outrageous claims: Goldman Sachs isn’t omniscient. [TheDeal]

$$$ Prerequisite to Attaining Florida Mortgage Broker License: Criminal Record [1-2]

Earlier this month the U.S. attorney for the Southern District in New York charged 26 people with taking part in a mortgage fraud scheme companies that brokered loans with a total face value of more than $200 million. Many of the defendants worked for Galina Zhigun, who owns a Brooklyn-based mortgage brokerage called AGA Capital, which later became Lending Universe. The indictment said that the the scammer companies earned at least $4 million in commissions and fees. Lenders lost at least $4.5 million because they relied on false information.

So what kind of business was Lending Universe? After the jump, watching a video they produced to show you how easy it is to get a loan. And then write yourself a note not to trust mortgage brokers who play first person shooter games where they gun down lenders.

“Big firings” across JPMorgan credit today? Securitized products group, trading, etc? Anyone? Okay.

Oil billionaire T. Boone Pickens took a bath by betting with Carl Icahn in the battle to take over Yahoo. Pickens says he sold his 10 million shares of Yahoo. Pickens, who says he was simply following Icahn and admits he doesn’t know how to send an email, bought his shares in early may, likely paying between $25 and $27. Yahoo is now trading five dollars lower, in the $20 to $22 range. That puts Pickens’ loss at around $50 million.

Pickens rips Yahoo management, says he dumped shares at a loss [San Francisco Chronicle]

In a mere 69 years. As the logical bubble bursting follow-up to the Washington Post’s report that FBN averaged 8,000 viewers during daytime programming and 20,000 viewers in primetime for July, up from 6,000 and 15,000 at the start of the year, Portfolio’s Jeff Bercovici crunched some numbers and found that victory over CNBC is just around the corner. Assuming there is no growth from Englewood Cliffs—which is not likely, given the networks plans to introduce three hours of mid-day programming that will bring a sweaty, screaming, bench pressing Charlie Gasparino onto your trading floors—Fox will overtake CNBC and its 284,000-person daytime audience in 3,588 weeks (and with regard to primetime, a measly 884 weeks though I’m not sure who gives a rat’s a about that).

Which reminds me—not a single one of you has sent us a commercial to air on FBN for the bargain price of $250-$900 for a 30-second spot. DO IT NOW, before it’s too late, and the cost of achieving Foxtastic glory rises above what Cody managed at his hedge fund.

Fox Business Just Seven Decades From Victory [Portfolio]

The New York Sun has the clearest explanation of covered bond that we’ve seen.

A covered bond offers the holder what is known as a dual recourse. Normally, a bond is backed either by collateral or by a guarantee from the issuer. A covered bond is backed by both: One issued by Bank of America is backed by mortgages on the bank’s balance sheet, as well as by the solvency of the bank itself. If the bank fails, the bond holder has a claim on the mortgages; if the mortgages fail, the holder has a claim on the bank.

If you’re wondering how that helps a troubled bank in the midst of a mortgage default explosion, you aren’t alone.

Treasury Plan To Boost Covered Bonds Greeted Warmly

There are so many questions about Merrill Lynch’s sale of its CDO portfolio that have gone unanswered. For starters, is the seventy-five percent financing a recourse loan or a non-recourse loan? Is it secured by the assets Merrill just sold? And, most importantly, how did the value of the portfolio drop nearly 40% in just a few weeks?

After the jump, Antony Currie of BreakingViews explains: “Pricing is about as clear as mud.”

Stop what you’re doing and give me your full attention because we’ve got a scandal bigger than Merrill on our hands. Here is the shit, feel free, nay encouraged, nay obligated to disseminate because that’s how super serious it is:

Yesterday Treasury Secretary Hank Paulson set forth guidelines on covered bonds, the secured debt instrument being urged by the government as a way to ease the credit crisis. Now we are wondering whether taxpayers might be on the hook for covered bonds if a bank fails.

The question was raised by a statement on covered bonds from the FDIC.

“As conservator or receiver for an IDI, the FDIC has three options in responding to a properly structured covered bond transaction of the IDI: 1) continue to perform on the covered bond transaction under its terms; 2) pay-off the covered bonds in cash up to the value of the pledged collateral; or 3) allow liquidation of the pledged collateral to pay-off the covered bonds.”

If we’re reading this right, it seems the FDIC is saying that a failed bank could be permitted to perform on its covered bonds. Allowing funds to continue to be funneled to bondholders could raise the cost of bank failures by leaving less money for depositors. There’s no indication that the “continue to perform” obligations would be limited to the value of the collateral.

Emboldened by Merrill’s courting of public embarrassment, Citi is likely to post third-quarter write-downs of about $8 billion from its exposure to collateralized debt obligations, according to Deutsche Bank analyst Mike Mayo.

Analyst sees $8 billion Citi writeoff after Merrill move [Reuters]

[via AP]

Related: You Say Harem, I Say Whorehouse
And Yet, This Is Still Preferable To Ace Greenberg Giving Us Intimate Details About Barbara Walters

In addition the sale of new stock, Merrill Lynch announced last night that it was selling CDO assets that had once been on the books at over $30 billion for just $6.7 billion, twenty-two cents on the dollar. What’s more, Merrill itself is financing 75% of the purchase. That means that Merrill took in just $1.7 billion in cash for the assets it once said were worth $30 billion.

Perhaps the most troubling aspect of the sale is that just a couple of weeks ago Merrill marked these CDOs at $11 billion. If Merrill’s CDOs can lose 40% of their value over a couple of weeks, how confident can anyone be in their other marks or the marks of other investment banks?

Hey there aspiring Little Steves— nows your chance to sidle up to the big guy and remark, “Looks like we have the same taste in art, though mine clearly veers a little more towards the Renaissance Fair-inspired, gay works.” Artist Damien Hirst is selling some new pieces from his ‘animal-in-formaldehyde’ schtick collection. Up for grabs at Sotheby’s from September 15-16 will be “The Golden Calf,” a calf in a— wait for it— glass tank of formaldehyde, “The Incredible Journey,” a zebra in a— wait for it— glass tank of formaldehyde, and “The Dream Foal,” the unicorn pictured above in a— wait for it— glass tank of formaldehyde, among others. Get them while they’re hot. One item we’d recommend bowing out of is “The Kingdom,” a tiger shark in a glass tank, which cannot please Stevie-boy, who is supposed to be the only one who owns such a display of badassery. Hirst had originally promised SC that the follow-up shark would be submerged in a tank of jello, in order to clearly delineate alpha v. beta fish, but it’s been whispered that he ditched the gelatin at the last second, just to “see what happens.” Spoiler alert: since what will happen is the BG ripping your face off, you’d be wise to let him have this one, unless of course you’re into that sort of thing, in which case, proceed.

Artist Hirst Jumps The Shark, Cuts Out Dealers [NYP]
Golden calf, bull’s heart, a new shark: Hirst’s latest works may fetch £65m [Guardian]

Are we done with the nonsense about rumor mongers pushing down the stocks of broker-dealers? The only false rumors we’ve heard lately have come from the c-suites of Wall Street. John Thain repeatedly denied that Merrill Lynch needed to raise capital, but now Merrill is taking an enormous $5.7 billion write-down and raising $8.5 billion by selling new stock.

“We deliberately raised more capital than we lost last year … we believe that will allow us to not have to go back to the equity market in the foreseeable future,” Thain said in Tokyo in April. Apparently three-months later was not foreseeable.

Cue the chorus of “the worst is now over” and the reassurances that this is the last round of write-offs. Raising questions about whether Merrill understands its own balance sheet is probably rumor-mongering so we won’t even get started on that.

Quotes from Merrill’s Thain on capital needs [Reuters]

This is the one we’ve been waiting for, people. Manhattan Federal Judge Colleen McMahon, none too pleased with the stunts pulled by Sam Israel, is taking away his toys. McMahon signed a preliminary agreement yesterday demanding the industry’s biggest M*A*S*H fan hand over the scooter he tooled around on after faking his death, the RV he was hiding out in, a Tiffany watch and the $932 that was in his pocket when he was arrested on July 2 in Southwick, Massachusetts. Here’s where we come in: all the items are being sold, with any profits— and if I know the DealBreaker audience and its sick fetishes, there will be many— going toward the $150 million Israel owes in restitution. We’ll post more information about the sale as soon as it’s available, and, in the meantime, pray to God authorities will recover the love tokens Israel had stashed around his apartment in anticipation of his reunion with the egret, and the condom they used on their last night together (just kidding— Israel convinced her to go without, noting that any man-bird that came of it was meant to be).

Wall St. Swindler Loses Scooter [NYDN]

Alcatel-Lucent Announces Chairman Serge Tchuruk and CEO Pat Russo to Step Down
When Lucent merged with Alcatel, it was always known that CEO Patricia Russo would stand down before too long, basically once the integration was done. Actually, it’s a little surprising she stayed in her post this long, given that they’ve been merged for quite a while, and the fact that the combination has yet to bear any fruit. It posted yet another loss this morning. Beyond that, the company’s chairman is stepping down, as it prepares to do a bigger board shakeup that will see a smaller board and fresh faces. Out with the old entirely.

Unilever hangs on to European laundry list (FT)
Everywhere you look, folks are selling units here and there, just to pocket some extra cash. Unilever has should its laundry business in the US, though it’s keeping the European laundry business. The US unit was sold for $1.45 billion to Vestar Capital Partners. Given the voracious appetite for cash, it seems like it might be a good time for the Vestar Capitals of this world… selectively picking up assets from sellers desperate for scratch. It’s kind of like being in the pawn broker business, no?

Still no mark to market (Information Processing)
The math on Merrill’s big stake sale: “Mortgage-backed assets with face value of $30.6B were just sold by Merrill for $6.7B. 1) obviously, this reflects huge losses and forward looking expectations of a very high default rate on the underlying mortgages (over 50%?) 2) but, amazingly, this 80% loss on the securities only gives a kind of upper bound on their value: Merrill had to provide 75% of the financing to the buyer! Even with an 80% haircut Merrill might not have found a real buyer for the assets at this price.” He then notes the similarity to the go-go .com days when companies, to make their number, would finance their customers’ purchase of expensive networking gear — though that was before the bloom was totally off the rose. Also, at that time, companies were financing gear purchases by giving their customers stock, which was pretty crazy.

Monitor110 Learnings: The Good, The Bad, and The Really Bad (InformationArbitrage)
The death of Monitor110 got a lot of attention a couple weeks ago, particularly as the company had raised quite a bit of money and was the recipient of a lot of media attention over the last couple years. Anyway, key principal and investor Roger Ehrenberg has written a couple of excellent post-mortems that are well worth your time. So check it out.

$$$Deals: From Feast Back to Famine?
In our M&A Roundup for the period ended July 26, blockbusters finally run out after two big weeks of dominated by InBev and Dow Chemical. [CFO.com]

$$$ Dead chickens, secret formulas, a rumor investigation, a ban on naked people shorting. [TheDeal]

$$$ Countrywide Wins ‘Worst Company In America’ Award [Consumerist]

Related: Dick Bove’s Going To Make You Rich

More Bank Failures Likely Before Financials Recover [CNBC]

Standing alongside representatives of Bank of America and Washington Mutual, Treasury Secretary Hank Paulson sought to strengthen financial institutions by issuing “Best Practices for Residential Covered Bonds,” a move some hope will make it easier for banks to borrow money.

Hold on. We have that wrong. It turns out that Washington Mutual, which is the one of the only two issuers of covered bonds in the United States, didn’t get its place in the spotlight today. Instead, Paulson was surrounded by Bank of America (the other issue of covered bonds), JP Morgan Chase, Citigroup and Wells Fargo. Did someone just forget to invite Washington Mutual to the party? Or does the impending doom of Washington Mutual make them an awkward guest at the party?

Long before we were told by the Securities and Exchange Commission that short-sellers and rumor mongers were behind our credit market crisis, blame was being heaped on the ratings agencies. While we’ve since moved on here in these United States, attention in Europe has largely remained focused on the ratings agencies. The Europeans are proposing that regulators take on oversight responsibility for the agencies, on the dubious assumption that regulators will better be able to determine errors in credit quality assessment than market processes.

But we have a better idea.

All the financials are down today but taking the lead is Merrill Lynch, closing in on a ten percent decline. We want to know why. There was some talk on Friday about a report by Mffais.com that said Temasek Holding had sold its stake in MER, but the Singapore state-owned investment company told Bloomberg the story was “mischievous speculation” by a “dubious source”—a characterization with which Mffais took issue—so that can’t be it. Incidentally, though, we at DealBreaker take pride in being a dubious source that works hard to promulgate mischievous speculation so, if someone could let us know below what’s behind the drop— be it John Thain’s plan to drive the stock to a level at which his former employer would buy the dump ($1.50), the fact that Cinderella’s busy getting ready for tonight’s ball, or SAC backing the Zamboni truck out of there— that’d be top notch. Don’t be scared about getting in trouble vis-a-vis spreading baseless rumors for your own gain; Carney’s packing several (unlicensed) firearms and will protect us all.

We spent a good part of our weekend drinking bourbon in the mountains of upstate New York and talking about the implications of a legal matter we somehow neglected to write about in this space last weekend—the vindication of David Finnerty, the former specialist trader at Fleet (now Bank of America).

Three years ago, Finnerty was accused—along with 14 other specialists—by the US attorney’s office in New York of committing securities fraud in the form of “interpositioning,” which involves a specialist improperly using his position to profit by buying and selling securities for his own account in between buy and sell orders placed by customers. In 2006, a jury quickly convicted Finnerty after the briefest deliberations.

The conviction was overthrown by the trial judge, who said the prosecution failed to present evidence that Finnerty had deceived anyone. In order to commit fraud, their must be deceived party and an intent to deceive. It was never proven that Finnerty’s customers were misled by this age old practice among specialists or that Finnerty sought to deceive his customers.

Last week the Second Circuit’s three judge panel unanimously upheld the acquittal, which will put an end to the case. This ruling should provide grounds for appeals by two other accused specialists who were convicted, and perhaps even for the two who already pleaded guilty. (Two others were acquitted and one is a fugitive.)

The case is another blow against the series of cases brought by then New York Attorney General Eliot Spitzer and federal prosecutors against the New York Stock Exchange. Those accusations painted the picture of an exchange rife with fraud and corruption, a picture which increasingly seems to have been seriously misconceived. We won’t go so far as to say the prosecutions were fraudulent from the start, which may be why we never became government prosecutors.

We will say, however, that the Finnerty matter demonstrates the wrong-headedness of treating cases of this sort as criminal matters, rather than civil cases or addressing them through regulation. The criminal process is slow, costly and inelegant. And, all too often, ends in embarrassment for the government even after they’ve ruined the careers (and sometimes lives) of the wrongly accused.

The SEC’s inquiry into rumor-mongering on Wall Street is focusing on four different rumors about Lehman Brothers, according to the Wall Street Journal. Each of the rumors allegedly helped push down shares, and each has been denied by those named in it. Here are the four rumors:

• Falling back on the Federal Reserve: In early June, there were whispers that Lehman had been forced to go to the Federal Reserve’s special broker-dealer discount window to borrow money to preserve liquidity. Lehman denied the rumors.

• The Barclays Take-Under: A couple of weeks later, the rumor circulated that someone—maybe Barclays—was going to buy Lehman in a “take-under,” scooping up the firm for less than it’s market cap. Lehman didn’t respond to this rumor. Neither did Barclays. It hasn’t happened (yet).

• PIMCO is pulling its business out of Lehman: This rumor was quashed quickly, with Pimco’s Bill Gross taking to CNBC to deny it. Still, Lehman’s decline dropped precipitously and many remain skeptical about the denials. “Are you telling me that Pimco isn’t reducing its exposure to Lehman counter-party risk?” one market watcher remarked to DealBreaker, his voice heavy with skepticism. Gross’s denial was hardly reassuring about Lehman’s health—he said Pimco wasn’t pulling out because it was confident that the Fed would keep Lehman afloat. Moral hazard as a business strategy.

• SAC Capital is pulling its business out of Lehman: This was the same thing as the Pimco rumor. Quickly arose and was quickly denied. The best part about this was that the rumor actually elicited a statement from the usually secretive SAC Capital. That’s a clear sign of fear in the markets, when the mouth piece for Stevie Cohen actually starts saying things.

Agency Subpoenas Focus on 4 Rumors That Hit Lehman [Wall Street Journal]

Over the weekend the Senate overwhelmingly passed a the mortgage bailout bill that includes a government rescue plan for mortgage finance giants Fannie Mae and Freddie Mac, grants to states to subsidize local real estate markets and extends government protections for refinancing troubled mortgages. The legislation amounts to one of the most far-reaching government expansions in the real estate and financial markets in decades. Surprisingly, there has been very little public discussion of the details.

So what does the 700 page bill do? We’re not sure anyone knows since hardly anyone—perhaps no one at all—has read the entire thing or had a chance to evaluate how it will interact with existing laws. Here at DealBreaker we’ve discerned a few of the lowlights at Bailout Bill. (If you want to read the bill, click here and God bless you.) After the jump, we run through them.

Damned if you do/damned if you don’t UBS, under a bit of fire for both helping clients avoid paying taxes and hurting clients who it told auction-rate securities were a sweet ass deal, has suspended David Shulman, head of U.S. fixed income. The moratorium on Shulman being allowed to come into the office probably has something to do with Attorney General Andrew Cuomo’s suit against the Swiss bank concerning the perpetration of “multi-billion dollar fraud” on its clients, though there’ve been whispers from IT about Shulman repeatedly violating the company’s rules regarding “appropriate internet usage” (talkin’ ‘bout porn here). UBS stated that while it “does not believe that there was illegal conduct by any employee, we have found cases of poor judgment by certain individuals and are evaluating appropriate disciplinary measures,” which in this case would be three months of self-gratification without a digital aid.

UBS Suspends Top Executive [WSJ]

Deposed SemGroup chief executive and president Tom Kivisto told employees of the (voluntarily) bankrupt company on Saturday that things are going to be okay, though he refused to take questions from the media, only stating that “as the facts and truths surrounding this chain of events are revealed, the SemGroup employees will regain their trust in what they initially believed.” This is obviously going to take years and a lot of red tape to sort through so I’m just going to ruin the surprise for you now— it all leads back to Hooters. Though where the funeral homes come into play, I do not know.

Earlier: SemGroup: It Gets So Much Worse

SemGroup co - founder reassures employees amid probe [AP via NYT]

KKR Private Equity Investors and KKR & Co. Agree to Business Combination
KKR plans to go public on the NYSE. It won’t be doing an IPO however. Instead it will be merging with some Dutch affiliate listed in Amsterday, and it will then relist on the NYSE under the ticker “KKR”. Perfect. Said the company’s two founders in the release: “This transaction offers substantial benefits for KPE unitholders, and it builds KKR for the long-term. Going forward, KPE unitholders will benefit by being owners in a diversified asset management business that generates regular distributions of cash earnings.” Anyway, no doubt we’ll have a lot more to say about it today. One nice things: because there’s no IPO, perhaps the listing won’t be quite the media circus as the last time a major PE firm went public.

McCain Says Wall Street `Villain’ in Subprime Crisis (Bloomberg)
This will be news to everyone except the six people that watch ABC’s “This Week” Sunday morning program. Apparently John McCain used the word “villain” describe Wall St. when discussing the subprime mortgage mess. It sound like he favor prosecution, not mention the elimination of pay for certain Wall St. practitioners. We’re not even going to bother.

Ryanair warns of loss next year (BBC)
RyanAir better get its “beds & blowjobs” cabin class onto market stat! The Irish discount carrier, famous for selling some flights at 1 EUR (but then tacking on all kinds of ancillaries, like getting to use the jetway to get on the plane, and getting to check luggage), posted a sharp drop in earnings and wared it could incur its first annual loss. The cuplrit needs no introduction. It’s oil.

National gas prices dip below $4 a gallon (AP)
This explains that collective sigh of relief we’ve been hearing. National gas prices averaged $3.996 on Friday, which means if you’re filling up a big 25 gallon tank, it costs less than $100, which is pretty cool. Prices are at their lowest leve since May 16th.

$$$ Men get happier as they get older, women get sadder [Reuters]

$$$ GE says funding arm receives Wells notice from SEC [Reuters]

$$$ How To Insult An Investment Banker [Deal Journal]

$$$ Is Steve Jobs’ doctor an insider? [Blogging Stocks]

$$$ John McCain is a pretty grumpy guy

It’s Friday afternoon. Do you know where your CEO is? With banks and brokerages crashing all around us, and each weekend becoming a suspenseful death watch for financial institutions teetering on the edge, maybe it’s time you started looking for a new job. We spent part of the afternoon combing through our Career Center in search of the most interesting jobs. There are dozens to choose from, all categorized according to specialization. Today’s job is one for the quants.

A hedge fund here in New York City is looking for an experienced Statistical Arbitrage Trader/Quant. You should have at least two years experience in a similar role with a financial institution or another hedge fund. A graduate degree with a significant background in quantitative equity research designing and back testing trading strategies is a must.

Will the government’s bailout of Fannie Mae and Freddie Mac wipe out holders of their preferred stock and subordinated debt? That’s what S&P warned today with its statement that it was placing these instruments on a negative credit watch pending a review of the legislation on Capitol Hill.

“Although there is still ambiguity on the part of regulatory authority as it applies to how nonsenior creditors of Fannie Mae and Freddie Mac would be treated if the U.S. Treasury ever acted on its three-point liquidity plan, the language in HR 3221 increases the likelihood that subordinated debtholders and preferred stockholders would face greater subordination risk,” S&P’s analyst wrote.

S&P affirmed the mortgage giants’ triple-A senior unsecured debt ratings because the government is dead set against letting that stuff fail. The proposals to authorize the Treasury Department to rescue the two companies could land on the President’s desk as early as this weekend.

After research firm Gimme Credit screamed “fire” in Washington Mutual’s lobby yesterday, the bank put out statement saying that WaMu “funds all of its business through its banking operations, and does not rely on commercial paper,” and, furthermore, has seen “no real disruption in…core liquidity.” Everything is a-okay, so please stop publishing reports to the contrary.

But…if you want to talk about problems that in no way can be blamed on WM, how ‘bout those bastards at the SEC? According to WaMu, the new short selling provisions, which focus on 17 banks— WM not included—, are to blame for pressure on its shares. Treasurer Robert Williams told the Post: “[The SEC] limited the universe of options that you could use to hedge your position…[and as a result]…WaMu has seen short selling volumes double and triple.”

WaMu Whacked [NYP]

CNBC, Bloomberg and Fox Business are about to get a little more competition. According to a report in the Daily Telegraph, Thomson Reuters is launching a business television news channel. The programming will be offered on the web and some cable services.

The Telegraph says TR TV could be on air early as January, although these things usually get delayed and the paper notes that the company is being cautious in light of earlier failures by Reuters to get into video broadcasting.

Thomson Reuters to venture into television [Telegraph]

You might’ve thought you didn’t give a rat’s ass about the collapse of energy trader SemGroup but that changes now. According to Reuters, three “massage clinics,” eight funeral homes, two Hooters establishments and a pawnshop that “specializes in gold jewelry” are among the companies owed tens of millions of dollars by the (voluntarily) bankrupt company.

Pawnbroker among creditors in oil trader collapse [Reuters]

Charlie Gasparino reports that Lehman Brothers may be taking UBS analyst Glenn Schorr’s advice to sell at least part of its Neuberger Berman asset management unit (which, and swear I’m not making this a Holocaust thing, I always hear in my head as “Nuremberg” and I know you do too). Selling the entire thing could make Lehman around $8 billion, which would be nice for the cash but would also mean parting ways with a stable source of revenue, something ratings agencies might have a problem with, points out CG. I know what you’re all thinking and while I can’t get into the specifics, nobody panic. I have it on good authority that while some iteration of this deal may in fact go through, Lehman is still seriously considering our proposal to short itself in the prime brokerage accounts of certain hedge funds, collect the winnings and then blame said evil short sellers for the inevitable fall to zero. Weight off your shoulders, etc, I know.

Lehman Mulls Sale of Neuberger [CNBC]

It looks like the collapse of SemGroup, the oil traders who filed for bankruptcy after losing $2.4 billion, may wind up getting prosecuted as a criminal matter. We already knew the SEC was looking into the company’s cash-flow problems. Now the Associated Press is reporting that the US Attorney’s office in Oklahoma City is bringing SemGroup executives before a grand jury. We hear the FBI has been poking around, as well.

Exactly what caused SemGroup to collapse is still something of a mystery. It’s widely believed that SemGroup had huge short positions in oil futures but the size of its losses has many speculating that there may be something more complex going on.

SEC, US attorney investigating SemGroup [Associated Press]

Exceptional second years at Morgan Stanley are said to be receiving 100k, a figure that sounds high but was apparently made possible “by dicking over the middle and bottom tiers.”

Jeff Larson, who lost about $1.5 billion and his hedge fund, Sowood Capital Management last year, is looking for capital for new firm Larson/Kelleher Capital Management. Though we can’t promise he won’t make a few more wrong way bets, and lose it all again, rest assured that in the event your money is put in a bag and lit on fire, you’ll be receiving a very apologetic letter from an almost suspiciously sincere sounding Larson.

Failed Sowood hedge fund manager raising new money [Reuters]

Is Merrill Lynch coming apart at the seams? Morgan Stanley yesterday said it is poaching brokers Merrill as it expands its brokerage business. The story is a blow to Merrill Lynch chief executive John Thain, who recently described the brokerage business as one of Merrill’s strongest hopes for future growth.

Morgan’s brokerage has been run by James Gorman, Merrill’s former brokerage chief, since 2006. It seems that he’s exploiting recent troubles at Merrill stemming from credit market losses to lure away his former colleagues. Merrill’s suffering stock price has inflicted pain on brokers, many of whom hold large amounts of Merrill stock.

Schools eye four-day week to cut fuel costs (Reuters)
This is probably the best idea we’ve heard yet for solving the fuel crisis… some schools are planning on going back to a four-day school week. It’s mainly in rural areas, where kids might have to drive 50 miles by SUV to come on. Not only should this save fuel, but every less day kids spend in schools is a good one for their mental, emotional and physical well being. Plus, on Fridays they can work around the farm.

Fragile by Design (American)
Just love the sub-headline of this article: “If we could start from scratch, we would not create a mortgage finance system dominated by an enormous duopoly.” Gee, well when you put it that way, it looks pretty clear cut in retrospect.

A Cause for Applause? (Cafe Hayek)
Another one liner here. Don Boudreaux discusses the increase of the minimum wage from $5.85-$6.55: “In other words, Uncle Sam today arbitrarily increases the cost of employing low-skilled workers by 12 percent.” Also on the minimum wage front, we’re amused by this story, which says that Gov. Arnold Schwarzenegger is threatening to pay all state employees the minimum wage until a budget is reached, at which point he’ll retroactively institute their full pay. Given that most state employees probably aren’t in the legislature and thus unable to help pass the budget, we’re not quite sure what we think of holding innocent third parties hostage like this is. But… we like it anyway.

Cleveland-Cliffs’ Fateful Flaw (WSJ)
We don’t know too much about iron pellet producer Cleveland Cliffs, except that a few months ago, when we were in our favorite Chinese joint in Chinatown, all the waiters asked us for stock quotes on the company (we had our laptop on the table). First assumption: this must be something Cramer talks about. The company has a great name and it’s been on a killer stock run, though that’s moderated somewhat lately. Anyway, the company recently announced its attempt at an acquisition, but that’s upset Harbinger its big shareholder, who now wants the company to sell itself. Anyway, we’re mainly writing this as a reminder to ourselves to go back to the restaurant and see what they all think (and get some more intestine and hot peppers).

$$$ Ric Flair Finance Boards the Failboat [1-2]

$$$ WaMu Rumors [Seeking Alpha]

$$$ BofA Hires Goldman Investment Banker [TSC]

$$$ Cox and why naked shorting is sorta bad, but not really. [TheDeal]

The bank told Bloomberg this afternoon that it does all of its business through banking operations and “does not rely on commercial paper.” Then it sued Gimme Credit for defamation and negligence. JK! For now.

Maybe Related: BankAtlantic Sues Bove

Earlier: We Don’t Want To Be Accused Of Yelling ‘Fire’ In A Bank Lobby But…FIRE!

Goldman Sachs raising $10 billion to build a senior debt fund, according to Henny Sender. The fund will buy senior loans, complimenting the mezzanine fund Goldman already has in place. It also seems that Goldman may use the fund to originate buyout loans, allowing it to commit to financing deals in a market where many investors have shied away.

Interestingly, the fund will be operated by Goldman’s private equity arm, rather than its lending unit, Goldman Sachs Capital Partners, according to the report.

Goldman fund to invest in loans behind LBOs [Financial Times]

Hilariously named research firm “Gimme Credit” doesn’t want to go the way of Bove, or any of the perps Jamie Dimon’s got his eye on, but felt that it could not in good conscience not let you know that a loss of liquidity could spell trubs for Washington Mutal. Sayeth GC:

We do not want to be accused of screaming “fire!” in a bank lobby, as John Reich, the director of the OTS (WaMu’s primary regulator), said recently. We won’t use the phrase “run” on the bank, but we would be remiss if we did not observe that many creditors have quietly been pulling funds from the bank. For example, Fed Funds purchased and commercial paper declined $75 million at 6/30/08, down $2.0 billion at year-end and $3.4 billion a year ago. Securities sold under agreements to repurchase are down to $214 million, from $4.1 billion and $9.4 billion for the year-end and prior-year, respectively. Other borrowings are $30.6 billion, versus $39.0 billion in December. With unsecured creditors taking a giant step backwards, the combined percentage of the balance sheet funded by deposits and the Federal Home Loan Banks has increased to 78% up from 75% at year-end and 71% a year ago. Small wonder Mr. Reich is feeling testy.

You know, other than now. Credit Suisse analysts issued a report today that is supposed to make you feel better about the “issues” shares of Merrill Lynch, Lehman Brothers and Citi have been having of late, by reminding us that the Big C has so be here before, like that time its shares fell 77 percent from October 1989 to December 1991. Then Prince Alwaleed swooped in and bailed them out and by late 1992, things were just dandy. The note is all very rah-rah and “we’re going to pull through this!” and “Citi and all the other losers will be great again!” Up until the very end, of course, at which time CS pussies out, and recommends “sticking with strength”: Goldman and Morgan Stanley.

Deja Vu [Credit Suisse]

The attorney for the alleged rogue trader Jerome Kerviel has decided to go on the offense, highlighting the lack of internal controls at Kerviel’s employer SocGen.

Yesterday Kerveil made his first court appearance in months. After the hearing his lawyer told reporters that his defense would be built upon the decision in July by France’s Banking Commission to fine SocGen 4 million euros for breaches of internal controls.


Kerviel lawyer plans new defense of rogue trader [Retuers]

“Average” first years in ISG got 50k, “average” second years got 65k. Some are “disappointed,” some are “relieved,” some are waiting for their more exceptional colleagues to tell them what to think.

Merrill’s Comeback Man [CNBC]

Let’s see if we have this straight. The big market manipulation bust by the CFTC today involved three guys who tried 19 times to manipulate the markets and maybe succeeded only five times. Also: three of those times they actually manipulated the price downward! And their total take from market manipulation came out to $1 million.

So much for all that blather about mysterious speculators and manipulators being responsible for the escalated price of oil.

CFTC Charges Optiver Holding BV, Two Subsidiaries, and High-Ranking Employees with Manipulation of NYMEX Crude Oil, Heating Oil, and Gasoline Futures Contracts [CFTC]

In an attempt to stop throwing phones and temper tantrums over the lousy markets, a growing number of financiers are taking up yoga to “take a step back…and stay focused,” the Wall Street Journal writes in its A-Hed today.

The math whizzes at D.E. Shaw offer hour-long classes at the New York office, with about 80 of the 750 employees signed up. Allianz SE’s Pacific Investment Management, Blue Ridge Capital, Karsch Capital, and Pimco also get down with the dog.

Notable yogis include billionaires Paul Tudor Jones and William H. Gross, who specialize in Ashtanga, “an active form of yoga that involves flowing through a set series of poses.” Gross practices five days a week and says his best ideas come when he is standing on his head. I have to ask this question, though: Doesn’t anyone else find it kind of hard to concentrate when the blood is rushing to your head?

While most of these dudes seem to fully embrace yoga, Michael Karsch admits he doesn’t do all the poses, for fear of his balls dropping off: “I still feel like doing handstands during work is a little inappropriate.” Additionally, cult-like chanting of “om” and “aum,” common at the beginning of general yoga classes, is not favored by the financial professionals that yoga master Michael Ward and his wife offer classes to.

The alternative chant: Relax, go do it, when you want to go do it (Forward to 1:20).

—Senior Yogi Travis

Frank Quattrone wants to repeal the regulations that built a wall between sell-side research analysts and investment bankers arranging initial public offerings. Speaking at a technology conference at Stanford University yesterday, Quattrone said the regulations were making US markets less competitive and creating a dearth of IPOs.

“It hurts the competitiveness of our country to deny companies access to research analysts,” he said at the AlwaysOn conference. The remarks were some of his first public statements on markets since he formed his new firm in March. In 2003, he was accused of steering hot IPOs to clients to win investment-banking business. A later conviction on obstruction of justice charges was overturned by the courts.

The reforms were put in place after then-Attorney General Eliot Spitzer accused Wall Street analysts of publicly recommending stocks they to win investment banking fees. They now prevent sell-side analysts from sharing in profits from IPO fees.

Quattrone said that the reforms have had the unintended consequence of pushing some of the best analysts into hedge funds and private equity firms. Wall Street analysts now focus almost exclusively on large corporations, ignoring start-ups, Quattrone said.

One of the grand ironies of the prosecution of Quattrone was that investors who allegedly “benefited” from being let in on hot IPOs would have been poorer if they held those stocks as the tech bubble burst, while the “victims” of this discrimination were likely better off. Now Quattrone wants to bring back the IPO market by reviving conflicted stock analysis, which would undoubtedly enrich venture capitalists, entrepreneurs and investment bankers. But the more important question should be whether this “dearth” of start-up IPOs has hurt or helped investors?

Portfolio’s Megan Barnett says Quattrone is “dead wrong.”

The fact is, start-ups shouldn’t have to rely on their bank’s analysts to sell their story for them. If their business model is sound, and their valuation reasonable, their stocks will get noticed by institutions.

And why should any bank’s institutional clients be subjected to a sales pitch from an analyst who is fundamentally incapable of providing an objective opinion?

Quattrone ‘back in business’ [Mercury News]

Dear Mr. Quattrone, You’re Wrong. [Portfolio]

Attorney General Andrew Cuomo filed suit against UBS today claiming the firm deceived investors re: auction rate securities by telling them they were cash equivalents, and that senior executives divested themselves of $21 million in ARSes as the shit hit the fan, all the while continuing to tell customers everything was cool. Surprisingly, UBS said earlier this morning that it was not psyched at the prospect of being sued by the AG, telling the Journal, “A filing of a complaint at this point would be disappointing, given that we are working with regulators, peers, and industry groups to develop solutions addressing the liquidity issues in the ARS market.” In related news, Senator Carl Levin is still rallying hard to get the Swiss bank shut down entirely.

New York’s Cuomo Sues UBS, Alleges Deceptive Auction-Rate Sales [Bloomberg]
Cuomo Readies UBS Civil Suit [WSJ]

“Goldman just announced a change in its bonus schedule for two-year program analysts. Bonuses are usually announced in July, like other investment banks do for their analysts. This will change to align with bonuses in the rest of the firm, to the fiscal year end in November. Analysts starting ‘07 and before will get bonuses this July. Those and new analysts will get a four-month bonus in November. The purpose is to “align the treatment of our program analysts with all other employees…”

Is this a big deal? Something worth flipping out over? You tell us.

If you’ve been waiting for the chance to move into the secret headquarters of the Masters of the Universe, now is your chance. An apartment in the 17-story Art Deco building at 740 Park Avenue is on the market.

Simply known as “740” (or, as we call it, Castle Greyskull), the building is home to Steve Schwarzman, John Thain, Ron Lauder, David Koch and a host of other, lesser known financiers. John D. Rockefeller Jr. lived there from 1938 until his death. Ron Perelman lived there with his first wife (and left the building when he left his wife.) liadsflv. Henry Kravis lived there with his second wife, Carolyne Roehm. Charles P. Stevenson Jr, the blue blood hedge fund manager, lives there with his fourth wife and is chairman of the co-op board. Barbara Streisand wanted to live there but the building doesn’t like actresses or singers. The apartment that has hit the market is owned by Chinese born investment banker Peter Huang and his wife.

It will only cost you $38 million, some money to redecorate (warning: pics of frumpy furniture) and a strategy to get past the board. Here’s our suggestion: Stevenson learned about investing by studying market behavior just before and just after the stock market crash of 1929, so bone up on your history and be prepared to compare and contrast that financial catastrophe to the present debacle. According to 740 expert Michael Gross, the apartment’s floor plan should look like this.

Shrouded Sale at 740 [Michael Gross]

Before Steve Ballmer unveils Microsoft’s new strategy for killing it, today at 11:30:

The CNBC star has been named to the top of TelevisionWeek’s Hot List for 2008. Now, please proceed with the inevitable debate over who is “really” the hottest over at Englewood Cliffs (starts with a ‘M,’ ends with a ‘ark Haines’).

Dynamic Industry Leaders 35 and Younger [TV Week]

As you know, a lot of Apple shareholders have been freaking out over the life expectancy of a suddenly skinny Steve Jobs, causing several days of erratic trading, with AAPL down us much as ten percent on Tuesday, and two percent this morning. Though the SEC has no hard and fast rules regarding disclosure of a CEO’s health, a whole bunch of “experts” have put in their two cents on the matter, urging the company to be “as transparent as possible” by making a “public announcement” about what’s up. Though historically Apple has been less than an open book, and was criticized in 2003 for not telling the world about Jobs’s pancreatic cancer until after the tumor was removed, it seems that we’re finally breaking them.

Are there other things about SJ you’ve always wanted to know that we could claim may affect his ability to carry out his responsibilities? Now is the time to hit these bitches hard. Here are a few issues we’d like to be read in on (please add your demands below. I know we can crack them). 1. Sexual conquests, including name, act, method of birth control, location of act and how much time was spent laying groundwork (anything longer than 20 minutes is money out of shareholders’ pockets. I want fish in barrels, not dinner and drinks, which is time that could be better spent developing the next iWhatever). 2. Drug usage— how much did he pay and method of insertion. 3. Food— is SJ a 3-square meals a day type guy or a snacker, and if the latter, what kind of snacks? Is there a lot of high fructose corn syrup going on? 4. Recent playlists (what’s he running to? what’s he working to?) 5. This is more a general catch all but something we’d really be interested in is having a webcam on SJ, at all times.

Limited Disclosure On Jobs May Bite Apple [NYP]

Banks piled into fixed income trading last year while hedge fund participation in the market was largely flat, according to a new survey.

The study by Greenwich Associates found that hedge funds’ share of U.S. fixed-income trading volume fell to 20% from 29% last year, while overall trading volume int the market rose 12%. Hedge funds have been losing market share as banks and other investors have moved into the sector.

In some sectors, however, hedge fund trading remains very high. Trading volumes in high-yield credit products, leveraged loans and structured products increased, although much of this may be due to delvering. Distressed debt remains dominated by hedge funds, which account for 95% of the trading volume.

Lehman Brothers remains the top fixed-income dealer to hedge funds, according to the survey. JPMorgan Chase, Goldman Sachs, Deutsche Bank and Morgan Stanley fill out the top five.

For those of you losing sleep over the thought of shrinkage at the house of Citi, DO NOT FEAR: despite calls by persons with a clue, the great big behemoth wants you to know that’s never going to happen. On a conference call yesterday, chief financial officer Gary Crittenden told analysts— worried that this last quarter’s results were a sign of great things to come— that the bank doesn’t have “any intention to break up,” and, in fact, is meeting with contractors next week to discuss adding on a master bedroom (including his and her sinks, natch) and deck.

Citigroup doubles cash to cope with markets [IHT via DealBook]

Portfolio went downtown yesterday and sort of tested Bartender Bush’s not off-camera confessional about Wall Street’s drinking problem. Except that he said “Wall Street got drunk and now it has a hang over,” so the fact that many of the random passersby were sober at the time doesn’t really prove or disprove anything. Nonetheless, watching a bunch of you guys blow into a breathalizer was definitely a quality way to start the morning, and will dovetail nicely with our project this afternoon, when we will kindly ask you to piss into a cup to test for a grab bag ofdrugs. Don’t be afraid, but we will be naming names and employers.

Daimler Cuts Forecast as Second-Quarter Profit Drops (Bloomberg)
More weak auto figures, this time from Daimler, formerly part of Daimler-Chrysler. Daimler got to keep the luxury cars. Chrysler got to keep the Chryslers. Anyway, even luxury cars weren’t gooid enough to stem a 25 percent fall in profits. And the company lowered their outlook beyond that. C’mon Dr. Z. Work your magic.

China’s banks told to tighten mortgages (FT)
It’s nice that the US can serve as an example to the rest of the world. A cautionary tale. Following that little popped bubble called the US housing market, Chinese regulators are telling banks to, you know, really screen the folks they approve for mortgages. Of course, it’s hard to stop sippin’ the spiked Kool-Aid when it’s mainly filled with sugar and it gives you the confidence to flirt at the party. And as it is with most of these things, these warnings come as the downside of the slope is already coming. This kind of realization might have served a greater purpose, say, a year ago.

Why Facebook Connect Matters & Why it Will Win (GigaOM)
Given all the money going into companies just focusing on Facebook, the company’s big developer day is becoming a big deal. Anyway, one of the new things that they’re pushing forward with is Facebook Connect, which will let users sign onto third party sites with their Facebook account, and then import certain aspects of their social network (or social graph, as the geeks like to call it). Think your friends’ reviews on CitySearch? Big deal for the web? Some thing it’s huge, though we’ll reserve judgment.

Microsoft’s Latest Web Stumble: Kevin Johnson Out (AllThingsD)
At Microsoft last night… a major shakeup on the internet side of things. Kevin Johnson, who was considered to be a key “point man” on the Yahoo deal is out, and will go head up Juniper Networks. Also, his Platforms and Services business is being split up. And it sounds logical. Rather than treating all internet assets the same, there will be a delineation between the pure web stuff (search, advertising), and the stuff that’s about internet-extensions to Windows. Sounds smart. Will it make much of a difference? Unlikely.

We’re often derided as heartless capitalists here at DealBreaker, which is a strange way of describing our skepticism of bailouts for investment banks, mortgage lenders and billionaires. If there’s any fairness in this description, it probably arises from our noted doubts about mega- charities such as the Bill & Melinda Gates foundation and the misbegotten idea that corporations only do good deeds when they engage in unprofitable charitable activity rather than wealth and job creation.

We’re not, however, against helping out with a good cause. And to prove it, tonight we’ll be stopping by a fund raiser for The Nourishing Soup Kitchen. It’s being held at Merchants East, on First Avenue and 62nd Street. Things kick off at 7:00. Ten dollars buys you a warm fuzzy feeling and admission to the bar. (Note: there is no truth to the idea that we’re attending simply so we can bask in talk about soup lines, bank runs, mass layoffs and other things Wall Street has revived from the Great Depression.)

We just get by however we can.

UBS analyst Glenn Schorr laid out today what he thinks are Lehman’s only options for survival. According to Glenn, LEH must (choose one): Offload a “sizable slug” of its risk assets to a distressed buyer, sell Neuberger Berman, sell the firm outright, go private, enter a strategic partnership with a “credible partner,” or buy back its shares. Unfortunately, due to time constraints and room on the page, Schorr left out a few other ideas he has in mind for the firm, which we’ll include now so that we (us and LEH) can make the most informed decision possible. Our vote is for choice B, but you decide what you think is best, let us know, and we’ll forward the tally, plus notes, on to Dick:

a. Invite David Einhorn to join the board, handcuff him to his chair, and gloat that he is “now going down with this ship” (in this scenario, Fuld and his Eyebrow play the obvious villain, getting up into Einhorny’s face, menacingly hovering and whispering, “You had to keep digging, didn’t you, didn’t you, you meddling little bastard.”)

b. Short Lehman in the prime brokerage accounts of certain hedge funds, collect the winnings and then blame said evil short sellers for the inevitable fall to zero.

c. Keep your feet on the ground and reach for the stars and know in your heart that Lehman is going to make this thing work.*

d. Your Brilliant Plan.

Lehman Has Options, Albeit Costly Ones [UBS]

*Obviously a joke, so please just choose among A, B, and D.

It’s no surprise that the quants are a strange bunch. Last year, when their strategies cascaded to recorded losses, they blamed the markets for misbehavior. Now it seems a hedge fund looking for someone with quant skills has placed a particularly strange ad on Craigslist.

Remember way back in the day, when Meredith Whitney made a name for herself— Dollar Dominatrix— by downgrading the big C, and she got a few “fuck you, bitch” emails from investors and her husband, pro-wrestler-cum-liquid Viagra distributor John Layfield canceled a planned trip to Texas so that he could walk her to and from the office in case some Friends ‘o Citi tried anything funny? That was very nice of him, etc, but if this clip of JBL getting the stuffing kicked out him the other day by wrestler-cum-rapper John Cena is any indication, his protective services wouldn’t have done shit. Next, we’ll bring you the match everyone really wants to see: Whitney v. Pandit, winner takes all (ten shares of Citi).

To fuck you again! Just kidding. We have no idea if that’s the master plan, but would it be so crazy to assume that John “Forclosure is Your Friend” Paulson is starting a fund to provide capital to financial firms hurt by mortgage writedowns in order to get them back on their feet just before telling people he’s been “hearing things” about liquidity issues but, more importantly, overly friendly interactions between whoever’s running the big ones at the time and petting zoo residents, and shorting the entire sector, all the while working on a passion project entitled “Convince Moz to Start a New Lender”? We submit it would not.

Paulson & Co. Plans Fund to Provide Capital to Banks [Bloomberg]

President George Bush announced this morning that he was giving up his opposition to the housing bailout bill. Over night news emerged that House and Senate leaders had reached compromise deal that would extend protections Fannie Mae and Freddie Mac and provide up to $300 billion to insure refinanced mortgages.

The president had said he would veto the bill on the grounds that it would “unfairly benefit lenders who made bad loans.” It had been tainted by news that its most prominent supporter, senate banking committee chairman Chris Dodd, received massive campaign donations from Bank of America executives and sweetheart loans from Countrywide. A memorandum emerged indicating that the bill may in fact have been written around the requests of Bank of America.

In the end, it seems that everyone in Washington, DC decided to drop partisan fighting and ideology in favoring of “doing the right thing,” by which we mean spending other people’s money, increasing the authority of federal regulators and further distorting market processes.

In an unusually candid moment when he thought the television cameras were turned off, President George Bush said Wall Street “got drunk” and described our current situation as a hangover.

“There’s no question about it. Wall Street got drunk - that’s one of the reasons I asked you to turn off the TV cameras - it got drunk and now it’s got a hangover. The question is how long will it sober up and not try to do all these fancy financial instruments,” Bush said.

This will probably be read as a “gaffe” by pundits, which is how political commentators describe accidentally telling the truth in a particularly blunt and colorful way. After the jump, watch the video.

Costco Warns on Profit As Inflation Clouds Outlook (WSJ)
Costco, the big discount retailer that rich and upper middle class folks like to shop at, says it will miss upcoming expectations for a variety of reasons. Among them: Lower profits on gasoline sales (interesting) and a general inability to pass along prices. They’re Costco, after all, high prices aren’t their deal. Just to note, we like it when you pass along prices. To the restaurant we ate brunch at on Saturday: please lift your prices on steak & eggs $1 or $2, rather than serve that fat-riddle sponge you gave me. Blech.

Gambling on Facebook Games, Zynga Cashes In (WSJ)
And here’s all you need to know about how things are going on over on the other coast. Zynga, a company that makes time-waster Facebook apps, like money-less poker (yes, we know), just raised a $29 million second round, not long after raising $10 million. There’s been some consternation lately about how nobody will fund Facebook apps anymore, though that’s obviously just not true. Also, for those really watchign this space, Facebook CEO Mark Zuckerberg is giving a keynote at the company’s developer conference today. And here’s a post from Zynga investor Fred Wilson called Raising the Stakes. Oh, and while we’re using the gambling metaphors. The WSJ headline really shouldn’t call this ‘cashing in’. That’s when you take your chips off the table and leave the casino. It’s really more like they plunked another $1000 down, or stepped up to the 2-5 no limit table.

If You Didn’t Believe the Airlines Had to Keep Flying to Support The Underlying Credit Card Business… (View from the Wing)
Interesting nugget from View from the Wing. It seems that airlines are getting the hookup from their credit cart partners, when it comes to financing. United, for example, is getting $600 million from Chase, the bank with whom it offers co-branded rewards points credit cards. It sounds like the banks really have a lot to lose when one of these airlines fail.

Volkswagen Profit Rises on New Car Models, Tiguan SUV (Bloomberg)
This is weird… a car company showing a profit rise. And even weirder, Volkswagen was helped by sales of a new SUV. It’s too early in the morning for stuff like this.

Prospects for the Freakonomics Documentary (Freakonomics)
The ultimate Freakonomics post. So ultimate. It’s about the prediction market prospects on Freakonomics the movie. We still can’t quite figure out what it’s talking about though. We just hope there is one. Anyway, here’s some info from IMDB, which might be more reliable than a prediction market. But anyway, the film discussed here and at IMDB is a documentary. Wasn’t there supposed to be a narrative as well? Something with Matt Damon? Or are we thinking about Blink the movie?

$$$ A short disquisition on the joys of naked shorting [TheDeal]

$$$ Paulson Weighs In on Mark-to-Market Debate [DealBook]

$$$ Which Is More Expensive, Yahoo’s War on Microsoft or the War in Iraq? [DealJournal]

At least four subsidiaries of SemGroup filed for Chapter 11 bankruptcy today, after determining that seeking government protection from creditors would be the “the best way to maximize value,” unlike the oil trades that resulted in $3.2 billion in losses. SemGroup Energy began hinting that something was up last week, when it said that the parent company was experiencing liquidity “issues,” those being that they were drier than Bear Stearns (was rumored to have been). In more uplifting news, we’ve got Fox Business’s “Happy Hour” on and it seems that Cody, currently interviewing Miss Universe 2008 about being kidnapped, has made a speedy recovery from his bout with bell’s palsy.

Press Release [SemGroup]
Huge oil trading loss sinks energy trader SemGroup [Reuters]

We’re always trying to sharpen out content by learning about our readers.

Just kidding. These questions are mostly about telling the folks who pay our bills, our sponsors, what kind of readers we have. If you are a trader, hedge fund manager or work for an institutional investor we hope you’ll cast a ballot (as many as apply) below and let us know a bit more about you.

The son of Donald Trump is also called Donald Trump, and now he is following his father’s footsteps by attaching his name to a financial company that will speculate on real estate. Two years ago, Donald Trump launched a mortgage company that would focus on luxury properties. It failed dramatically when the housing market crashed. Now Bloomberg is reporting that Junior Trump is planning on launching a “hedge fund” that will invest in property in India.

Trump mortgage turned out to be a company that was run by a shifty chief executive and had very little to do with anyone called Trump. The Donald Senior had licensed his name out to the company but had little role in management—a fact that no-one knew until it failed.

So will The Little Donald be running a hedge or just attaching his name to it? It’s not clear right now. What is clear is that he intends for the fund to invest money in the same way that Trump Mortgage did—specializing in high end properties. Others who are looking to invest in real estate in India? Oh, right. Those real estate savvy folks over at Lehman Brothers.

Trump Jr. Plans $1 Billion Fund for Indian Property [Bloomberg]

We did it! Bleeding out the ass Wachovia is now up nearly twenty five percent clearly due in large part to our pep-rally this morning. Fantastic jobs all around.

Do you feel that? The sound of nothing going on today? Here’s something (that’s 48 hours away from being) exciting (if you are a Morgan Stanley analyst on the summer cycle): Thursday is the big day. And for the rest of you: you get nothing! Just kidding. Your safe-ish for work news is after the jump.

According to the Nasdaq, Friday the fourteenth was the first day it traded more Big Board shares than the NYSE itself, 1.726 billion shares versus 1.723 shares, respectively. This life changing event was noted by the Journal, and probably breathlessly written about in a Dear Diary post entitled “25.9% v. 25.8%, Suck On That, Niederauer” by CEO Robert Greifeld, but sort of seemed so insignificant that you wouldn’t have expected a response from the “NYSE Relationship Management” team entitled “Nasdaq’s Midsummer Night Dream,” wherein the NYSE flips about the story, says, no, no, this is only right under the specific self-serving terms by which you want it to be right and not the self-serving terms by which we measure such shit, but, apparently, you’d be wrong.

There are a lot of words and numbers in there that are too painful to slog through unless you have an actual reason to care about this whole thing, which we really don’t, but confidential to the NYSE Relationship Management crew: when engaging in pissing wars, brass knuckles tend to speak louder than references to Shakespearean comedies. But, if you’re insistent on keeping them, at least go the distance and imply (by saying outright) that your enemy is not unlike Titania vis-à-vis “overly friendly” interactions with barnyard animals who he thinks can talk. That’ll show ‘em you mean business. Trust me, I’ve done this before.

Uh, anyway. The best part is the option at the end of the e-mail to take sides and “forward this important message to a friend,” which we think you definitely should, if you’re into standing up for meaningless causes (I know I am) or have been searching for high and low for new and innovative ways to cement your status as a true douche bag (guilty as charged on this one, too).

At this time, in light of Wachovia’s not so good second quarter, I want everyone to get up on his/her chair and shout “I love Wachovia,” while dancing, which is not only a team building exercise for WB first years but 95 percent of CEO Robert Steel’s master plan for pumping the stock. Unless of course you are planning on making some $$$ on what Bove thinks is an around the corner fall—lookin’ at you, Paulson—in which case, please proceed with your refrain of choice, “Let’s burn this motherfucker down.”

Merrill Lynch is really turning things around, post Holocaust of a second quarter. According to the Financial Times private jet use among the investment bank’s senior managing directors is being curbed slightly. The staff must now get permission from the division’s global head and prove that no cheaper means of travel is available. For those of you MER executives out there shivering in fear at the idea of boarding a plane of plebes without hermetically sealing yourself in a full-body condom first, take solace—the FT has crunched some numbers and apparently private jets can be a more cost-effective means of transport, if you’re making it a group thing. A Cesna Citation CJ3, carrying six passengers, costs $14,000 (€8,800) for a trip from Teterboro to Indianapolis, on to Cincinnati and back, whereas a last minute return ticket from Newark just to Indianapolis will set Thain back about $1,000 in first class. Also, we have it on good authority the U.S. commercial airline industry is seriously considering Ryanair CEO Michael O’Leary’s suggestion to add in-flight blow jobs to the menu. So there’s that.

Private jets grounded for Merrill’s top brass [FT]

Legendary Wall Streeter Ken Langone, who once attempted to purchase the New York Stock Exchange, hurled insults at the New York Times this morning on CNBC’s Squawk Box. He was describing an op-ed he’s been working on for the Wall Street Journal about his long battle with disgraced former New York governor and Eliot Spitzer. One of the co-hosts of the program asked him about whether he might try to get it in the New York Times.

“I don’t even try with the Times,” Langone said. “Why write for some newspaper you don’t even read? I mean, it doesn’t make sense.”

Wachovia’s dismal results raise questions about whether or not the company can remain independent. It’s second-quarter loss went beyond it’s $6.1 billion, for a total loss of $8.66 billion. The only upside is that the loss per share excluding write downs (Wall Street’s new favorite nonsensical financial measure) of $1.27 was in line with the numbers Wachovia telegraphed earlier this month.

Rumors that Wachovia may have to partner up have been circulating for some time now. Some are saying that the appointment of former Treasury official Robert Steel makes a sale of the company more likely. Steel has no commercial banking experience but a lot of experience in investment banking, which could mean he has essentially been hired as an in-house investment banker to arrange a deal for the company.

The main obstacle to a sale of Wachovia, however, may be the absence of buyers. Wachovia is the fourth largest banking chain in the US. It doesn’t have the kind of investment banking and trading portfolio that reportedly attracted some private equity buyers to Bear Stearns. And the biggest banks, JP Morgan and Bank of America, are busy digesting recent acquisitions. Citigroup is still facing pressure to sell off assets and unwind parts of its global megabank structure.

So it’s all too possible that Steel, whatever his intentions might be, will have to find a way out of Wachovia’s mess without help from a buyout-bailout.

Wachovia Swings To 2Q Loss; Dividend Cut To 5 Cents/Share [Dow Jones]

A Persian Gulf sovereign wealth fund has agreed to an $8 billion partnership with General Electric in a deal that will make it one of GE’s top ten shareholders. Abu Dhabi’s Mubadala Development and GE are cooperating on a commercial finance division focussed on the Middle East and African markets. The deal anticipates further partnerships in aviation and clean energy research.

Each company will contribute $4 billion of equity to the partnership over three years. At the same time, Mubadala Development will buy at huge stake in GE, the world’s twelfth largest company. Bank of America is the 10th largest shareholder of GE, with 1.2 per cent worth $3.3 billion at current prices. The largest institutional shareholder is Barclays Global Investors, which owns almost four per cent of GE.

Mubadala and GE in strategic partnership, $8 billion finance venture [The National]

Lehman’s fate still hangs in the balance of the marketplace, rising faster as the rest of the financial stocks rise and falling faster when they dip. This morning Bloomberg has a long article on the history of Lehman’s past brushes with death and, more interestingly, the history of its top man, Dick Fuld.

It’s worth reading in its entirety but one thing that’s not explored is the irony of the possibility that the Blackstone Group might be a buyer of Lehman. Blackstone was rumored to have mulled a bid for Bear Stearns, and many think that the buyout firm would be interested in Lehman if the brokerage stumbled. The irony is that Blackstone was founded by two former Lehmanites: Pete Peterson and Steve Schwarzman. Peterson left Lehman, which he ran for years after rising through its banking department, after years of struggling with its top trader, Lewis Glucksman. Fuld was a protege of Glucksman. A purchase by Blackstone would reverse the outcome of that decades old power struggle between bankers and traders.

Lehman Fault-Finding Points to Last Man Fuld as Shares Languish [Bloomberg]

Yesterday we explained that Bruce Wayne—who fights street crime and evil clowns by night—has all the markings of a corporate criminal. We even went so far as to explain that Wayne seems like exactly the “better class of criminal” that his nemesis The Joker claims Gotham City deserves.

Some of you fanboys disagreed!

But it turns out we’re not alone in seeing the criminality of Bruce Wayne. Smart lawyers and law professor types agree with us! And it’s not just criminality: Wayne—and his Batman alter-ego—bring up a whole host of legal issues. After the jump, a quick summary of Wayne’s white-collar criminality and litigation inviting ways.

What Cool New Stuff Is Apple Cooking Up? (GigaOM)
Apple shares got whacked yesterday because the company offered up a cautious outlook. On the conference call, it explained that that a “future product transition” would hit sales and margins, but CFO Peter Oppenheimer couldn’t get into details. All he’d say is that the company would do something aggressive on the price front. So maybe introduce a new, cool product at a real cheap price. Or maybe slash the current prices on something like crazy. This is perfect, since it has Apple fanboy’s tongues a wagging, not to mention the entire tech blogosphere. Any guesses?

Women Are Now Equal as Victims of Poor Economy (NYT)
This article seems to address a serious subject — the effect that the weak economy is having on women — but, man, the title. Straight out of The Onion. And everyone’s going to think that, not just us, who who thinks every headline is straight from The Onion. Anyway, the article’s point (it seems): Men started “dropping out” of the economy awhile ago. Basically sitting at home, giving up on the idea that they might ever get a job. Now women are too. According to BLS statistics, for the first time in decades, the percentage of women in the workforce has slipped.

Roche Bid Blindsided Genentech (WSJ)
Eventually the bell tools. The parent beckons. Come home. Your time out, playing upon the Elysian Fields must end. That’s Genentech. Following Roche’s offer for it yesterday, the Bay Area-based biotech didn’t have a response. But lower down, employees are surprised, and evidently the move comes as a total shock. Not that they’ll be able to do much about it. Roche is already kind of the parent. But you’d think parents would be more communicative with their kids.

A New Big Play for Alex Rodriguez (WSJ)
ATTN: A-Rod Haters. Here’s some new fodder for ya. The Yankees star has hired a talent agent from the William Morris Agency. He’s not giving up on his own superagent Scott Boras for baseball stuff. But when it comes to music videos, movies, TV shows, deodorant commercials and acoustic folk albums, a baseball agent isn’t the right man for the job.

$$$ Deals: Global M&A Brews 2008’s Top Week
In our M&A Roundup for the period ended July 20, four deals of more than $4 billion follow InBev/Anheuser, leading to the richest seven days in more than a year. [CFO.com]

$$$ NY gov. projects Wall St bonuses to fall 20 percent [Reuters]

$$$ CNBC Admits to Being a Closet Porn Channel [CWS]

$$$ The Chuck Norris Home Deduction [USNews]

As it turns out, married men are still allowed to drink in the Wall Street watering hole called Ulysses. One young woman apparently once met a JP Morgan banker there who turned out to be married and yet was less than forthcoming about his marital status.

Don’t you people know that you can’t get away with this anymore? The internet won’t allow it. What follows is the tale of a determined young woman who gathers evidence of her would-be suitor’s marital status from websites and, eventually, through calls to his home. The trap is sprung over a dinner with a friend watching nearby. What happens next is somewhat of a let-down however.

After the jump we give you the not all that exciting conclusion to this sordid (if all too common) tale.

Ladenburg analyst Richard Bove released a very helpful (if you’re looking for short ideas) report last week called “Who Is Next,” listing firms in ascending order of financial health. It was pretty grim (especially if you were anywhere near the top)! This upset a bunch of truth suppressors who proceeded to flip out, and Bove was strong armed into clarifying his outlook concerning the state of banking, saying that, actually, “the main thrust of [the] report is that the banks are in better condition than is generally perceived” and that the implication that there are significant problems in the financial system “was not the point at all.” It was also stressed that National City (NCC) and First Horizon (FHN) are “definitely not” in the danger zone.

Unfortunately, Bove didn’t have time to slog through the entire list and said nothing about Bank Atlantic, which was listed only a few slots better than IndyMac. A more self-assured/solvent bank probably would’ve let the snub fly but BBX is neither. Instead, for this most egregious presentation of facts, Bank Atlantic has slapped Bove/Landenburg’s ass with a lawsuit seeking damages for defamation and negligence. Bank Atlantic’s chairman Alan B. Levan also released a statement insinuating that perhaps others were unjustly maligned in the report as well, and rather cattily referred to Bove’s analysis in air quotes (“Although we do not know how many errors appear in the Bove ‘analysis,’ we do know about BankAtlantic”), which must mean they’re really pissed. Who is next (to sue Bove)? Haven’t done any “analysis” yet but we really want it to be IDMC.

Earlier: What I Meant To Say Was— BUY INDY

Dick Bove’s Going To Make You Rich

It seems that our obsession with Erin Burnett may not be accidental. According to her big New York Times profile, by none other than the highly influential Brian Stelter, Burnett’s rise to celebrity was carefully engineered by CNBC.

Erin nicely handles the question that is asked of any successful, beautiful woman: what role did her looks play in her success? This is especially relevant at CNBC, where many of their viewers are known to watch with the volume turned all the way down until important news breaks. “There is an element of TV that is visual. You can’t deny that,” she tells Stelter. “But you’re not going to be able to move to the next level without the passion, the contacts, the journalistic drive.”

And man does she have drive. Erin (notice how well programmed we are by CNBC that we feel comfortable calling her by her first name) started out at Goldman Sachs but immediately began gunning for television business news stardom. She wrote to Willow Bay, the co-anchor CNN’s “Moneyline” and landed herself the job of Bay’s assistant and then as a writer at the network. Later, she somehow turned a job writing a business plan for an internet media start-up at Citigroup into an on air job. (It seemed she pulled a Dick Cheney and chose herself for the role.) This caught Bloomberg TV’s attention, which got her noticed by CNBC.

One thing that the article doesn’t explore is Erin’s fascination with China, which she continued this morning on Squawk On The Street by announcing that she’s far more interested in seeing Mongol than Dark Knight. (By the way, this might be the official contrarian line of the week. Two hedge fund managers said exactly the same thing to us this weekend.)

Needing a Star, CNBC Made One [New York Times]

Even as Wall Street’s storied investment houses struggle to get back on their feet, cost-cutting and layoffs may be hurting their ability to recover quickly from financial turmoil. Many of the best and the brightest have already seen the writing on the wall and lit out for brighter territory, while those left behind may be so demoralized they are underperforming while awaiting another round of expected layoffs.

In a story in the City section of the Times on Sunday (you might have missed it because that section doesn’t get delivered to the Hamptons, where you have to read the Long Island news instead), former UBS mortgage analyst Andrew Slutsky explains the problem. “People were like, ‘Why bother working if I know I’m getting laid off?’” Slutzky says. “You remember senior week of high school? You don’t really do anything. You just kind of hang out. We’d reminisce about the boom days.”

Reminiscing is not a trading strategy, and Andrew is not the first person from whom we’ve heard this description. If Wall Street’s boom times are dominated by men acting on “animal spirits,” these days (to paraphrase Bruce Springsteen), many Wall Streeters have ended up like a dog that’s been beat too much.

Things are so bad that many aren’t sure whether it’s worse to keep a job or lose one. “The funny thing about getting laid off, having worked in this doom-and-gloom environment for the past couple of years, is that you don’t know who the winners and the losers are,” Andrew says.

(As an aside: Thanks for shout-out, man. Drop us a line if you want to write more about your life after the layoff.)

Wall Street Blues [New York Times]

The ad people in this asylum have a couple questions they’d like you to answer so please do so below sans “Why the fuck are you asking us this” since it obviously has to do with some sort of money-making (Ponzi) scheme they’re cooking up. Then, we can return to the important work of analyzing this man-on-mouse pic for clues re: where things went wrong.

Well, gang, I have to hand it to you. Despite some extremely disappointing early attempts to match the gastrointestinal fortitude of local hero Oyster Boy, you really redeemed yourselves. Not by the successful completion of some equivalent feat, of course, but by coming up with a bunch of decidedly not lame suggestions for OB’s next eating-related challenge. So— great job! Now, down to business. We’ve been in touch with OB and, so far, his three favorite missions are:

The recovery in financial stocks continues today, arguably proving that the SEC’s stern warnings against short selling bank stocks false rumors that cause stocks to go down is having its desired effect. (Rumors that cause stocks to go up, still seem to be immune from the SEC’s attention.)

Not everyone has been convinced that the investing public is too stupid to know what the editors of the New York Times know or, failing that, intimidated from engaging in the practice of spreading rumors. We’re cont convinced or intimidated, for example. And over at TheStreet.com’s video unit, they’ve even started special rumor programming, making the rumors moving markets at trading desks transparent to the broader public.

After the jump, this week in Wall Street rumors from TheStreet.com.

When the history books (by which we mean Charlie Gasparino’s, When Mooks Fail) look back at the fall of Bear Stearns, there will be a lot to lambast BSC management over. A lot. A whole lot. There will be one thing we can thank them and Jimmy Cayne’s thrice daily caramel macchiato habit for, however, and that is three less purveyors of vanilla bullshit latte cappa things. Last Friday, Starbucks officially issued a list of the 600 stores it will be closing over the next several months. Half of six Manhattan locations scheduled to be shuttered are located within two blocks of the dearly departed Bear Stearns 383 Madison Avenue headquarters. Will the oft patronized head shops, Frito distributors and providers of the Magic Eye posters in the area be affected as well? We’ll just have to wait and see.

Starbucks Closes 600 Stores. Will US Economy Survive? [American Madness]

Hedge fund investors in Apple are “very worried” about the health of chief executive Steve Jobs, according to the New York Post. At a conference earlier this year, Jobs appeared gaunt. Apple blamed the weight loss on an unspecified illness that required treatment with antibiotics.

Someone we know recently contracted salmonella, which was treated with the antibiotic Cipro. This resulted in weight loss very similar to that seen in Jobs. But some investors fear something more serious. Apple’s lack of disclosure about the health of it’s powerful CEO is rattling some investors. In October 2003 he was diagnosed with pancreatic cancer, a fact not disclosed for many months by the company. Apple is due to report its earnings later today.

Apple-A-Day Talk [New York Post]

Will prosecutors bring new charges against that two indicted former Bear Stearns hedge fund managers? The investigation into the collapse of Bear’s High-Grade Structured Credit Fund and it’s higher-leverage twin, Assistant U.S. Attorney Patrick Sinclair said in court on Friday.

Both Cioffi and Tannin are charged with misleading investors in the two funds. The case seems to rely on private emails expressing distress about the health of the funds even while the managers reassured investors. Both men could face decades in jail if convicted. Currently they are out on bail.

Former Bear Hedge Fund Managers May Face More Charges [FinAlternatives]

“This town deserves a better class of criminal,” Heath Ledger announces as the Joker in the new Batman film, Dark Knight. The caped crusader, police captain Jim Gordon and district attorney Harvey Dent set out to stop the Joker. Much of the film is dedicated to exploring what kind of criminal and what kind of hero Gotham City deserves.

Everyone now knows that Batman is a kind of antihero, a “dark knight” who is allegedly a better hero than Gotham deserves but exactly the one it needs. But what about the Batman’s alter-ero, billionaire playboy Bruce Wayne? Careful attention to the Dark Knight and its predecessor film, Batman Begins, seems to show that Wayne might be exactly the “better class of criminal” that the Joker describes.

After the jump, we explore the criminality of Bruce Wayne. (Very minor spoilers follow.)

It is over. The proxy fight between Yahoo and Carl Icahn has ended, not with a bang but whimper.

Yahoo this morning announced that the two sides had settled with a compromise board, our own Joe Weisenthal reports at PaidContent. Icahn himself elected to the company’s board at the upcoming August 1 shareholder meeting. The board will be expanded to 11 member, with the extra two board members appointed by the board from Icahn’s list of candidates, giving Icahn 3 of the eleven seats.

As we said last week, Icahn’s bid for control of the company seemed to suffer a mortal blow when Legg Mason’s Bill Miller announced he would support the incumbent slate. All along Icahn’s efforts was subject to a serious weakness: the dependence on selling the company to Microsoft, which has been playing its own cards close to the chest. It was never really clear whether Microsoft still wanted Yahoo or how far they would go to get it.

Yahoo Settles With Carl Icahn; Icahn To Control 3 Of 11 Seats [Paid Content]

Roche offers to buy rest of Genentech for (Telegraph)
Over years and years, Roche has had a hard time deciding what it wants with Genentech. First it bought a stake in the company back in the 90s, with an option to buy the whole thing (it did). Then it spun the company back out. And now it wants it all back again. Roche may be look a trader that has one stock down cold. They may not be able to play the whole market, but when it comes to trading the QQQQs or something like that, they time it perfectly. So now they’re offering nearly $44 billion for the company to get it all back. The $89 or so per share is above the $81 they closed at on Friday.

FDIC Faces Mortgage Mess After Running Failed Bank (WSJ)
Here’s a fun story: The FDIC, after it took over a failed back in 2001, continued to aggressively offer subprime and “predatory” loans. Of course, at the time, nobody thought this lending would be anything but wildly profitable, so the FDIC probably (reasonably) assumed that continuing to engage in the profitable aspects of the bank was simply the responsible thing to do. The lesson here is pretty straightforward, so we won’t insult your intelligence by spelling it out.

Eight years after Eve.com collapsed, a founder returns to the game (VentureBeat)
More and more, we keep seeing the founders of former .com high flyers get back into the game, which is pretty cool. The other day it was a Pets.com founder, back with a new startup. Not it’s the founder of once-hot makeup retailer Eve.com. Our wish, per usual: that that TheGlobe.com guys would try their hand at a social networking startup. One more time please.

China Aviation Industry’s First-Half Profit Falls 23% (Bloomberg)
The US isn’t the only place where the quickest route to becoming a millionaire is to start with a billion and invest in an airline. The industry is taking it on the chin in China too, due to rising fuel prices and slowing demand. The first is no surprise. The second is more of a bad sign. But it’s basically like here: inflation is no good.

$$$ How A Banker Earns His $25 Million Fee [Deal Journal]

$$$ Dan Gross: A Run on Your Money? [Newsweek]

$$$ Citi’s Dividend Debate [DealBook]

“In retrospect, it was so easy to take down Bear.”

Related: How To Kill A BankYour Ex-Wife

Get Shorties [NYMag]

As it turns out, the bear market and the collapse of the financial was totally predicted by Angelina Jolie’s skirts.

Fashion is always a mirror of society. Thus, in a strange forecast of what the Federal Reserve discovered in the banking system, overexposure and total transparency in the wardrobe has been followed by complex cover-ups and a downward spiral. Fashion designers now seem clairvoyant.

But you can hear his voicemail at the East Hampton home of Carl and Gail Icahn by clicking here.

Worn out by another ugly week in the markets? Don’t worry, you still have time to sign up for BeachComber, DealBreaker’s summertime email-only special newsletter.

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The next edition of BeachComber will published over email shortly. Sign up below by simply entering your email address. It’s free!

(Also, if there’s anything you’d like to see—such as league tables for nightclubs, Further Lane party invitation origami—let us know. We’ll be happy to oblige.)

With Legg Mason’s Bill Miller now supporting Jerry Yang and the current Yahoo board, and support for Carl Icahn’s board slate seemingly non-existent, it appears that Yahoo is all but guaranteed to win the proxy fight at the upcoming shareholder meeting on August 1st.

Yang, continuing the effort to whittle away the credibility of Icahn and Microsoft, posted a video this morning announcing that Yahoo was launching an advertising campaign on the site that “continues to make our case to stockholders.” At the top of the page, Yahoo posts the infamous quote by Icahn last year mentioned in their memo yesterday: “It’s hard to understand these technology companies.”

At this point, I would be shocked if Icahn stays relevant to anything surrounding Yahoo after the shareholder meeting on August 1st. His attempt to oust Yang has all but failed and Yahoo has painted him in a very negative light to shareholders. They have made it clear that they are willing to make a reasonable deal with Microsoft, selling the whole company for $33 per share, and selling the Asia unit. Icahn, who had previously declared support for the Google partnership when it was made, reversed course later on when he realized his share price was not increasing and decided to team up with Microsoft.

On icahnreport.com, Carl has made it clear that he will not be talking about the proxy fights he engages in, due to the murky legal waters that he would be waddling in.

His latest post today talks about the golden parachute, “a binding agreement between a company and an employee (most often a CEO but in some cases all the employees) detailing considerable benefits for the employee if the employee is terminated or retires.” Icahn is critical of the system, especially when it applies to a change in ownership or control of the company because it could cause significant conflicts of interest when the benefits are huge and a manager only wants to sell a company to receive his “parachute.” Golden coffins are “illogical,” says Carl, and mentions the Wall Street Journal article from last month detailing the lavish and outrageous benefits executives’ heirs receive if they die while still working.

—Teflon Travis

Don’t take this the wrong way, gang, but I think you’re all a bunch of pussies.

First year analysts: 65k. In lieu of any other information (about BNP bonuses/anything), please enjoy the following, on me:

Carl Icahn’s proxy fight to gain control of Yahoo’s board of directors may have suffered a mortal blow today. Legg Mason, which owns a 60.7 million share stake of Yahoo, announced its support of management’s slate of directors. While Legg Mason’s stake amounts to just 4.4 percent of the company, it probably carries far more weight than that due to its persuasive influence over other fund managers.

Legg Mason chairman Bill Miller endorsed the actions of the current board, adding some politesse that won’t make Icahn happy at all.

“In general, we believe it is appropriate for large shareholders to have representation on corporate boards if they so desire,” Legg Mason said. “Mr. Icahn’s slate includes people experienced in technology, advertising, capital markets and governance. We would prefer that the company and Mr. Icahn reach a mutual agreement on the composition of the Board and end this disruptive proxy contest.”

This is being read as a deathblow to Icahn’s proxy fight but Icahn is a wiley guy. Maybe he’s still got another trick up his sleeve.
Blow To Icahn: Legg Mason To Support Incumbent Yahoo Slate [Paid Content]

“First of all, I take exception to the ‘you guys’ comment. I did not create these C.D.O.’s.”

—John A. Thain, Merrill Lynch’s chief executive, responding to an analyst comment during the securities firm’s conference call Thursday afternoon. He was referring to mortgage investments that Merrill made under his predecessor, E. Stanley O’Neal.

Stan O’Neal, Are You Listening [DealBook]

Well, that’s some good news. After yesterday’s mess from Merrill, we were a bit frightened about what Citigroup would post this morning. But it turns out those rules of the road might be working.

Yes the bank didn’t have any earnings. It had losses. But those losses were much smaller than expected. Write downs amounted to just $11.7 billion, which is what some tiny bank like Merril does every fifteen weeks.

Let the chorus of “the worst is over” begin!

Mortgage Giant Freddie Mac Considers Major Stock Sale (WSJ)
So say people familiar with the matter… evidently the mortgage giant (sorry, troubled mortgage giant) wants to raise up to $10 billion in a stock sale. The idea is that maybe this would help avoid a government bailout. Instead, it would be the government getting bailed out, by not having to bite the bullet on this one. Certainly if they can find a buyer, that’d be great. They’ll probably end up paying through the nose for that cash. Meanwhile, to get a sense of how big this is: Freddie’s market cap is just a bit over $5 billion.

Citi Reports Second Quarter Net Loss of $2.2 Billion, Loss Per Share of $0.49, from Continuing Operations
Great news: Citi didn’t lose $2.86 billion as analysts had forecast. They only lost like $2.2 billion or $2.5 billion, depending on how you measure it. Evidently the stock is already ticking up a few points. The company was helped by some 11,000 layoffs in the first half of the year. 6,000 came in the first half of the ear.

Why Silicon Valley Should Be Worried (GigaOM)
As if we didn’t have enough to worry about over here… it looks like the punk economy may have completed its cross-country road trip, and is now taking in the sites at the Golden Gate bridge, messing up the whole tech economy out there too. Lots of bad news all of the sudden pouring in. Google was weak last night. Microsoft was pretty sour, especially in online ads. Other smaller firms have warned. There’s also been an increase in the number of companies diving headfirst into the deadpool, cause they weren’t able to raise their latest round. It’s kinda getting sucky out there.

As Price of Grain Rises, Catfish Farms Dry Up (NYT)
We’ll cap of your Friday Opening Bell with the most depressing story we’ve read all week. Evidently this economy is terrible for catfish farmers, many of which are going under due to high corn and soy prices. Honestly, that’s a little weird. Fish eating corn and soy? Fish? Really? Apparently so. Also, evidently margins at catfish farms are pretty thin, so there’s no room for some major cost spike. Old catfishhands are even losing their jobs. Read about it. It’s grim.

$$$ I’m converting my dollars to euros and so should you—Donald Trump [NewsGroper]

$$$ Merrill no longer headed to Ground Zero (just “zero”). [Curbed]

$$$ Shorting and the debate over financial regulation [TheDeal]

We’re against explaining broad market movements when we have no idea (and neither does anyone else),* which is sort of beside the point because, as cynical assholes, we’re not here to give theories, we’re here to shoot them down. Here are a couple that we can safely target—the alleged shortage of financial stocks to short and the idea that shorts have been massively covering.

Obviously, there has been a lot of talk that short sellers were having trouble locating stocks to short following the new emergency rule put in place by the SEC. This was allegedly causing the rates of rebates to change massively. Wrong, bitches (who thought that)! Wrong. All nineteen stocks on The List are still available and securities lending departments are having no problem borrowing.

There also doesn’t seem to be a classic short-squeeze thing going on, with shorts scrambling to cover their positions. As of this morning, polled prime brokers were saying that there was virtually no covering of the Royal 19.

*That’s not entirely true. There have been whispers that Jimmy Cayne promised to flash everyone if there was a sizable enough surge, but we weren’t able to get confirmation and didn’t want to start a rumor that would get anyone’s hopes up. Believe it if you dare.

Merrill Lynch managed to beat all expectations when it comes to the size of it’s write downs. Wachovia’s analysts estimated $5 billion, Charlie Gasparino had put the number at $6 billion, we had predicted a bit higher.

As it turns out, things are far worse than expected. Merrill posted a $4.9 billion second-quarter loss, it’s fourth straight quarterly loss. (This prompted the joke around DealBreaker HQ that four quarters equals a hole.) It is selling nearly $8 billion of assets in a scramble to raise capital. Write downs for the quarter amounted to $9.7 billion.

Many investors had bet that Merrill would show much better numbers, perhaps demonstrating that the brokerages were making a comeback. This bullish speculation, in part built off of good news coming out of Wells Fargo and JP Morgan, pushed Merrill’s share price up nearly 40% from where it traded just a few days ago.

Update: Moody’s downgrades Merrill’s debt from A1 to A2.

Earlier this week Citigroup chief executive Vikram Pandit summoned 60 executives to the megabank’s private country club in Armonk, N.Y. to present his plan to restore Citi’s lost luster.

We won’t bore you with the details of the plan. (But Eric Dash of the New York Times will do so, if you insist.) It’s mostly platitudes that seem unlikely to restore the lost morale of executives who’ve seen their fortunes plummet with Citi’s share price. The real problems with this plan begin before the details. They begin, in fact, with the title Pandit gave his plan—“The Rules Of The Road.”

What could be wrong with that?

UBS has promised to stop helping its US customers get out of paying taxes but Senator Carl Levin (no relation) says that’s not good enough—he wants their Nazi-sympathizing asses shut down. Clearly it’s never going to happen though of course it would be more than a little hilarious if it did. Crazy Carl told ABC news today that he thinks Federal regulators should revoke UBS’s banking license because “…no bank that goes to the extent that UBS has gone through to avoid doing what their agreements with the United States require them to do, should be allowed to continue to do business unless they clean up their act.”

Though Levin said he was deeply disturbed by a list of “secrecy tricks” UBS bankers used to carry out their scams, including fake charitable trusts, disguised business trips, foreign credit cards and code names for clients (including Adolf’s Stache and The Senator From Michigan), he did give credit where credit was due, noting that he was very impressed by banker Bradley Brikenfeld’s out of the box thinking when it came to smuggling diamonds into the US for a client, by hiding them in an empty tooth paste container.

Sen. Levin: Shut Down Giant Swiss Bank UBS [ABC News]

Circa two minutes ago, all of the computers on the 47th floor of the AB building, where the Fortress Investment Group’s offices are located, shut off. The TV’s are said to be frozen as well. The computer situation is apparently neither here nor there to those affected, but the No TV is a BFD to the FIG employees who’d been diligently watching the British Open on TNT. According to one of the victims, in lieu of having anything else to do, paper airplanes are being made. It goes without saying that we’ll keep you posted.

Related: Fortress Falls on Yet Another Drop in Profits

Those famous Swiss bank accounts may become a thing of the past. Testifying before a Congressional hearing on tax fraud, UBS chief financial officer Mark Branson said that the Swiss bank would no longer provide tax advice and private banking services to US customers.

The Senate’s subcommittee on investigations issued a report today claiming that tax dodges aided by foreign banks cost the Treasury about $100 billion per year. For the past six months the subcommittee has been investigating the practices of UBS and LGT Bank in Liechtenstein, which is owned by Liechtenstein prince Hans-Adams II.

Ten state securities regulators just showed up at Wachovia’s St. Louis headquarters, reportedly seeking documents on auction rate securities sales and marketing practices. Today’s “on-site investigation” follows over seventy formal complaints and Wachovia’s failure to comply with requests for information. If you’re readng this in STL and they haven’t gotten to your floor yet, start shredding and hide the marshmallows.