$$$ Egret-smuggler pleads not guilty. [FINalternatives]

$$$ Spitzer Madams’ Fortunes: One Goes Up, the Other Goes Down [NYP]

$$$ Jobs of the Day: Morgan Stanley needs an equity research associate. [DB Career Center]

On further reflection, we aren’t so opposed to “fairing up” executive compensation to be more in line with our national executive. Senator Claire McCaskill might be on to something here.

Let’s see here…

Cash Compensation:
Salary: $400,000

Cash Subtotal: $400,000

Room and Board:
55,000 square foot mansion, in historic Washington, D.C.: @ $100/sqft: $5,500,000/yr
Personal Chef / Kitchen Staff: $300,000 / year
Other Servants / Attendants: $500,000 / year

Subtotal: $6,300,000

Discretionary Use Of Private Aircraft:
(One of 2 Boeing 747-200Bs “Air Force One”):
Annual Costs: 120 hours @ $65,000/hr: $7,800,000
Annual Costs: 700 hours @ $65,000/hr: $45,500,000

Helicopter Fleet:
Annual Costs: 50 hours @ $5200/hr: $260,000

Aircraft Subtotal: $8,060,000
Aircraft Subtotal: $45,760,000

Other Personnel:
Personal Driver On Retainer (Defensive Tactical Driving Trained) @ $300/day $109,500
Personal Body Guards 35 @ $500/day $6,387,500
Use Of Personal Car 60 days @ $2000/day $120,000

Personnel Subtotal: $6,617,000

Annual Benefits Total: $59,077,000

Four Years of Same: $236,308,000

Pension And Related Benefits:
Present value of Pension Benefits ($200,000 per year): $2,251,556

Total Benefits: $238,559,556

Average Annual Benefits: $59,639,889

Also, think we need to strongly consider “pay for performance” here. This is a lot of compensation and I think clawbacks if the executive fails to pull us out of this recession are called for. I propose we institute a temporary “efficiency in government court” empowered to enforce pay for performance in the executive branch. The time to reward these employees for non-performance is over. Some accountability needs to be put in place. We won’t have them kicking sand in the face of taxpayers any longer.

Numbers came out today for most groups at Bank of Amerillwide, including capital markets and investment banking, with debt portfolio management coming next week.

- First year associates: 10k stub

-2nd/3rd year associates, VPs, MDs: down 75-80 percent, across the board, with associates to principals in global structured products receiving zero (and some MDs receiving basically zero); Conduit group— which had a record year— got zero; Real estate syndications got zero.

*We’re reminded that structured finance got zero last year as well. Give it up for just base, no bonus for 24 straight months and counting!

Germany and Britain called on Friday for a global economic watchdog with strengthened powers to prevent rather than react to financial crises that can spiral into worldwide recession.

Cooperation amongst international financial institutions has failed to ward off the worst financial crisis in decades and a new charter should be forged, German Chancellor Angela Merkel told the World Economic Forum in this Swiss ski resort.

“This may even lead to a U.N. Economic Council, just as the Security Council was created after the Second World War,” she said.

Will Russia and China get a veto?

Germany, UK urge global economic overseer [Reuters]

To: Global Investment Banking, Global Markets Group, Registered Global Commercial Banking & Global Product Solutions Associates, and Registered Technology & Operations Support Partners

From: GCIB Compliance & Operational Risk Management and GCIB Legal

Subject: Compliance Advisory - Block of Social Networking Sites, Wikis and Blogs

Pay and bonuses for executives at companies receiving federal bailouts would be limited in total to the U.S. president’s $400,000 salary, and a court would be created to restrain their “massive self-indulgences,” under legislation introduced by two senators.

“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer” by taking multimillion-dollar bonuses, said Democratic Senator Claire McCaskill of Missouri. Her proposed $400,000 pay cap for executives would cover salary, bonuses and stock options.

Lots and lots of things (and stuff). Some of it conflicting, some not. All of it fluid. Sayeth Gasparino:

I can’t remember the Treasury Department bailing out Steve Cohen and Art Sandberg. They’re bailing out Citigroup and Bank of America and the bailout plan they have on the table right now, at least one that’s been recently teed up in the press which is essentially this aggregator bad bank where you buy all the bad assets between $1 and 2 trillion. It’s been leaked out they’re looking to do this.

This thing, according to sources, telling CNBC, this thing is now officially been put on hold. It’s hit a major snag. They can’t figure out how exactly to make it work. It was the same problem back in September when we broke the story about the TARP when the market went up 500 points because it makes great conceptual sense. If the government cancome in and buy up all the bad stuff off the balance sheets of all the big banks. If this stuff can trade up it’s worth 50 cents on a dollar and not 22 cents on the dollar. Everybody’s happy.

Making that thing work has proven very difficult. The Treasury Department, the FDIC and the Feds recently, the last couple of days, have been having meetings with senior CEOs at the major Wall Street firms to price the stuff sold to this aggregator bank. You know, they’re more confused now than ever before. The feeling I get, at least these talks are ongoing. There was talk about a meeting this weekend with all the CEOs to try to do this thing. I heard that. That is not happening, at least as of 10 minutes ago. No meeting called. No way Wall Street expects that meeting to be called. They can’t figure out how to make this thing work. The pricing is at issue. If you hold the stuff, Wall Street holds it on the balance sheet, they can mark it up to their model 50 cents on the dollar. Or they sell it, the market says it’s 22 cents on the dollar. If the government buys it at 22 cents, most of the banks would take major losses. We’ll be back to where we were a couple of weeks ago. If the government buys it at 50 cents on the dollar, the taxpayer could be taking it on the chin. That’s the problem we have here. While they may shelve this aggregator bank, they may come up with some other alternative like insurance or some sort of guarantees on this stuff blanket across the board.

We suppose that just by asking the question the Financial Times seems to think so. To wit:

There is a popular cry for Ken Lewis to do a far, far better thing than he has ever done. But why should the boss of Bank of America’s head roll? There are two thrusts to the argument. The first is retrospective: Mr Lewis should be punished for inadequate due diligence before buying Merrill Lynch, which lost $15.3bn last quarter and sent BofA’s shares tumbling. The second argument looks ahead: Mr Lewis has so inflamed employee passions at both BofA and Merrill that he can no longer lead the combined bank.

Well fine. If the court of Bank of American Merrilwide can vote on it, so can Dealbreaker.

Bank of America’s CEO [The Financial Times]

From Breitbart:

The Justice Department says it foiled a plot by a fired Fannie Mae contract worker in Maryland to destroy all the data on the mortgage giant’s 4,000 computer servers nationwide.

The U.S. Attorney’s Office says 35-year-old Rajendrasinh Makwana, of Glen Allen, Va., is scheduled for arraignment Friday in U.S. District Court in Baltimore on one count of computer intrusion.

U.S. Attorney Rod Rosenstein says Makwana was fired Oct. 24.

Rosenstein says that on that day, Makwana programmed a computer with a malicious code that was set to spread throughout the Fannie Mae network and destroy all data this Saturday.

Feds allege plot to destroy Fannie Mae data [Breitbart] via Zerohedge.

Bloomberg is reporting that change, she is in the wind for the infamous “insurance like products.”

Dealers plan to overhaul credit- default swaps in March to curb risks in the $28 trillion market, making the derivatives more like bonds and creating a committee that will arbitrate disputes.

For the first time, the market will have a committee of dealers and investors making binding decisions that determine when buyers of the insurance-like derivatives can demand payment and could influence how much they get, industry leaders said yesterday at a conference in New York. Traders also will revamp the way the contracts are traded, requiring upfront payments to make them more like the actual bonds they’re linked to.

We are big fans of credit default swaps, and not only because we think John Paulson is so sexy. (He has this sort of quiet-genius charm that reminds us of someone, but we aren’t quite sure who). Of course, since they are the cause of the downfall of AIG, Lehman Brothers, the income inequality situation, the breakup of your favorite band, cats and dogs living together, or, in short, all that ills this country and the world, they might be legislated right out of existence. (We doubt this, but it is a wonderful dramatic lead in to the third act of the piece here).

We are looking forward to the world where the only finance products permitted go up forever, and where everyone makes above average returns. That future is before us, and Chairman Harkin will take you there. Hold on, the first drop is a bit bracing.

Credit Swaps Overhaul Planned for March as Dealers Curb Risks [Bloomberg]

A tipster hints that UBS, having now effectively gelded Investment Banking compensation but has not done much to the other units, in particular, Wealth Management. The story goes that UBS has been escrowing IB bonuses for some time, since they only pay once a year, and that while many of these are contractually guaranteed, a long sitskrieg between the Swiss monster and its employees, who are unlikely to quit until paid, has begun. UBS is sort of stuck in a political bind. Paying bonuses would be politically explosive (the Swiss National Bank is shareholder) but they are contractually committed to do so. Ouch.

One would think that UBS would just sell the Investment Bank if they wanted to be rid of it, but given the market, that might not be a viable alternative. So is it better to let the IB wither of its own accord?

At the same time, we are told, but cannot confirm, that UBS is on a Wealth Management hiring spree. This would make some sense, given the degree to which this unit has grown, and the fact that, certain tax evasion indiscretions that we pretty much expect of the Swiss aside, it has mostly kept its nose clean. It would, however, seem to conflict with the public appearance that the bank is suffering. Perhaps it would be better to say the investment bank, now quarantined like an Ebola patient, is suffering?

What the hell is going on over there at UBS anyway?

We don’t have to tell you that times are extremely tough. With so many individuals and institutions taking it up the A, it should come as no surprise that even the once most successful among us are cutting corners, where they think they can get away with it. Employees at Morgan Stanley are sharing computers, the staff at Citi are sharing pencils, and the ladies at SAC have been allotted ONE pair of stilettos per portfolio team. So Blackstone founder Steve Schwarzman probably didn’t think it was a big deal when he (or one of his deputies) decided to try and scam the FT, in a cost cutting effort. But Crab Hands THOUGHT WRONG. Cityfile reports that CH, I shit you not, is being sued by the FT for allowing employees to all share one log-in, rather than pay for separate online subscriptions.

Don’t say we didn’t warn you. Fortress has given a nice little 96% bath to investors in its IPO and has blocked redemptions.

Two years after commissioning the ski lift, Edens, 47, finds himself staring into an abyss of a different sort. He’s the chief executive officer of money manager Fortress Investment Group LLC. Edens and his partners became instant billionaires when the company, which manages $34.3 billion in private equity and hedge fund holdings, went public in 2007. The Montana-born Edens, who ski-raced in high school, could have paid for the gondola himself.

In the past four months the shares of Fortress have lost most of their value, falling 96 percent to $1.34 from $31 on Feb. 9, 2007, their first trading day. “There’s been a lot of hardship in the world since then,” says Edens in a rare interview.

The stock prices of a half dozen other publicly traded companies controlled by Fortress have also plunged.

Analysts are bearish on Fortress, even at a rock-bottom price.

The (very long) article on Bloomberg is worth a look. Particularly if you hate pretentious skiers.

Fortress Blocks Redemptions as Shareholders Lose 96% Since IPO [Bloomberg]

January 26, 2009

Dear Atticus European Fund Investor,

In recent discussions with many of you, it has become clear that the liquidity needs and risk appetites of some investors in the Atticus European, Ltd. and Atticus European, LP funds (together, the “European Fund”) have changed in response to the current market environment. For many investors, asset allocations and investment position sizes may need to be adjusted to reflect this new environment. As a result, we recognize that the European Fund’s directionally biased, equity focused investment strategy or an investor’s current position size in the European Fund may no longer be appropriate or desirable for some investors.

In light of the current environment that many of our investors are facing, and given the liquidity in the European Fund’s portfolio, I am writing to offer all investors in the European Fund a one-time special redemption right for their regular (non-designated) capital effective as of March 31, 2009. This offer is not prompted by any redemption pressure. For the current quarter, we have so far redeemed requests for less than 5 percent of the European Fund’s total capital, and, in fact, external investors are only eligible to redeem less than 20 percent of the European Fund’s total capital. Rather, this offer is prompted by my desire to ensure that the interests and expectations of investors align with the style and strategy of the European Fund. This offer is being extended to all investors in the European Fund (including all Atticus partners and employees) with the support and approval of the European Fund’s board of directors and investment manager. I believe the European Fund is currently well positioned to meet the needs of all investors who exercise this special redemption right without any adverse effect on those investors who elect to continue with the European Fund.

Muffie Benson-Perella (muffie AT muffmarkets.com) was an Associate in the Investment Banking Division of a “Bulge Bracket” bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. She concentrated in Contemporary French Poetry at prep school where she was awarded the exclusive premiership of the school’s “French Club.” Today, Ms. Benson-Perella is the Founder and Managing Director of “Muffie on Markets” (http://www.muffmarkets.com), a deep dive into capital markets, finance and investment strategy. She is also the Founder and Managing Director of Muff Cap, LLC., an invitation only, private investment vehicle for non-existent, prestigious and accredited investors only, employing an actively managed, long-short strategy.

There are few things as shameful as the deteriorating state of art and culture in this country. It will come as no surprise to my loyal readers, then, that the subtle, magnificent craft of portraiture appears utterly lost in a thick fog of mediocrity and a pretentious depthlessness. Of course, I can only refer to the latest visual representation of Marc S. Drier (for I cannot bring myself to call it a “picture” or “drawing” much less “art.”)

It is the essence of such representations that their creation at least attempt to rise to the level of their subject. In this case, admittedly, that is a tall order. The almost uniformly elegantly dressed Senior Partner of Park Avenue law firm Dreier LLP, Dreier presents a rich, complex texture, shot through with conflicts, dark veins of opposing forces, their churning opposition pressing the envelopes of the psyche, yearning for nothing but escape, escape, escape. Contrast the subtle signs of whirlwinds below the impeccable exterior with the rarely seen, but palpable, open, unshorn rouge and we can forgive him his undergraduate transgressions at Yale, for he certainly redeemed himself at Harvard Law thereafter, and this institutional combination, fatal in any weaker, less featured personality, permits Dreier to wear scruff like a bright ascot, an opportunity he occasionally indulges to juxtapose polished Fifth Avenue class with the suggestion that “That whole Yale thing” might not be that far from the surface, even after all these years.

There is a brazen yet subtle boldness in Dreier, the kind of audacity that mounts his brilliant deceptions in full view of the world, in the fishbowl of a glass-walled conference room, taunting the prospect of discovery as office staff who might at any time recognize him, call him the wrong name, plunge him into drowning, downward spiraling agony, walk by and casually glance through ethereal walls of glass that offer scant protection. The pulsing rhythm of office traversal, and throbbing mechanics of discovery. And who can deny the social genius of targeting Canadian Teachers and U. S. Real Estate firms as the foils of a fraud designed to sap the savviest of hedge funds? The very fabric of his machinations: wry social commentary.

From our chippies across the pond:

Tuesday was bonus day for CS in London: 1st yr S&T (equities, FI, research) analysts all got £5,250 (base is £45k if you have a masters, £36k if not). Pretty respectable all things considering. Directors and above are looking forward to enjoying their PAF units (toxic assets) as they vest over the next five years. Cash proportion of their bonuses remained the same (higher than most places incidentally), and people didn’t look too unhappy overall.

If anyone’s been searching in vain for an Upper East Side penthouse swathed in scandal, today is your lucky day. Personally, I’d prefer to sleep where, like, a cooler criminal slept (blood stains on the wall are a must) but surely some of you are in the market for an apartment where a white collar scam was hatched. Such as: 133 East 64th Street. According to the Post, top real estate brokers have been asked by Irving Picard, the trustee appointed to oversee the liquidation of Madoff Securities, to stop by Bernie Madoff’s place and assess its value, with sale proceeds, thought to be up to $10 million, going toward creditors. Is it awk that Bernie-boy, who we all know is trapped inside just like a prisoner, will be there while his pad (which includes four bedrooms, five bathrooms, and a library filled with cooked books) is sized up? Sure, but awkward in a good way, especially if Mads starts getting defensive about stuff like crown molding or, like a kid who doesn’t want his parents’ home to get sold, decides to scare people off, by throwing caution to the wind, and JO&C’ing in the family room.

As previously mentioned, both Goldman Sachs and Morgan Stanley will be conducting an additional round of population restructuring at their respective firms in the near (ca. April) and very near future (ca. February). The Journal pegs the reduction in workforce in the House of Mack at about 5 percent, and also describes the the expected bloodletting as merely under “consideration.”

Ex-Merrill Executives Got Burned by Madoff (WSJ)

Former Merrill chief executives Daniel Tully and David Komansky, along with former Merrill investment-banking chief Barry Friedberg, personally invested in hedge funds with Madoff exposure run by former Merrill brokerage chief John “Launny” Steffens, according to people familiar with the matter. The Merrill executives are the highest-level Wall Street victims of the scandal to surface until now.

[…]

Mr. Steffens had exposure to Mr. Madoff’s Ponzi scheme via investments made by funds run by Spring Mountain Capital LP. Mr. Steffens formed Spring Mountain in 2001 in partnership with J. Ezra Merkin, a top Madoff investor. Spring Mountain invested in three Merkin-led funds, and Mr. Steffens says he was aware of heavy Madoff exposure in one.

Big Bucks For SEC Boss (NYP)
“US Securities and Exchange Commission Chairman Mary Schapiro was to receive $5 million to $25 million in benefits when she resigned from the Financial Industry Regulatory Authority to join the government.

Schapiro had a $2.75 million salary as head of Finra, the US brokerage watchdog, according to disclosure documents. She also got $675,033 in deferred compensation and $184,600 in connection with sitting on the board of Kraft Foods. She resigned that seat Jan. 15 and reported holding Kraft stock worth up to $1 million.”

Cuomo May Seek Return of $4 Billion in Early Merrill Bonuses (Bloomberg)
Says a person familiar with the matter. And this time he might be serious!

Survivors’ Gilt (NYP)
US Airways Flight 1549 passengers are not happy with the “coveted” Chairman’s Preferred status CEO Doug Parker has offered them through March 2010. They want it for life, and death to all things geese.

$$$ Sun, sea and sewage in the playground of the rich in Dubai [Times Online]

$$$ Fortress Investment Group On The Edge Of Insolvency [Zero Hedge]

$$$ 1-2 Knockout Product Desk Introduces the “Short Human” Series of Structured Funds and Notes [1-2]

The mandatory reusable mugs arrive.

Earlier: Bank of AmerillWide Employees Stock Up On Contraband

Layoffs Watch ‘09: BAC Cutlery

MARIA BARTIROMO: JAMIE, THANKS FOR JOINING US.

JAMIE DIMON: MY PLEASURE.

BARTIROMO: CAN YOU CHARACTERIZE WHERE WE ARE RIGHT NOW IN THIS ECONOMIC SLOWDOWN, IN THIS TIGHT CREDIT ENVIRONMENT?

DIMON: YOU KNOW, MARIA, I THINK IT’S ALMOST IMPOSSIBLE TO DO BECAUSE I’VE NEVER REALLY SEEN PEOPLE FORECAST THE FUTURE. THE REAL INFLEXION POINT IS THE ECONOMY. YOU KNOW, WE’VE HAD A PRETTY SHARP DOWNTURN. AND I THINK IT’S BEING SEEN AROUND THE WORLD. AND THE REAL QUESTION IS DOES IT LEVEL OFF FROM HERE OR DOES IT GET A LITTLE BIT WORSE BEFORE IT LEVELS OFF?

BARTIROMO: AND YOU TALK TO SOMEONE LIKE NORO RUBINI (PH), HE SAYS THAT THE WORST IS AHEAD.

DIMON: HE MAY BE RIGHT. YOU KNOW, I MEAN, AS— AS A PRESIDENT OF A COMPANY, WE PREPARE FOR THE WORST AND HOPE FOR THE BEST. SO— YOU KNOW, I THINK THE BEST YOU’RE GONNA REALLY HOPE FOR IS TWO BAD QUARTERS AND THEN A— AND THEN A RECOVERY. I MEAN, IT COULD BE WORSE THAN THAT. BUT I THINK AT LEAST THAT IS IN THE CARDS.

BARTIROMO: SO EVEN WITH THE STIMULUS PACKAGE BEING TALKED ABOUT AND, YOU KNOW THIS EFFORT TO GET THE BANKS TO LEND, A LOT OF PEOPLE SAY, LOOK, THE BANKS STILL AREN’T LENDING ENOUGH. IS JP MORGAN LENDING?

DIMON: YES. SO I DON’T REALLY THINK THAT IS TRUE ABOUT THE BANKS NOT LENDING. AND IF YOU LOOK AT ACTUALLY AGGREGATE NUMBERS, THE BANKS’ BALANCE SHEETS ARE ABOUT WHAT THEY WERE BEFORE. I SPEAK TO A LOT OF BANKERS, A LOT OF BANKS MAKING LOANS. IN FACT, JP MORGAN ALONE IN THE LAST 90 DAYS HAS MADE OVER $150 BILLION OF LOANS, INCLUDING $50 BILLION— WHICH LIKE WE HAVE OUT TODAY IN THE INTER-BANK MARKET. SO I THINK WHAT HAPPENED IS A LOT OF BANKS ARE LENDING. BUT A LOT OF OTHER PEOPLE WHO LENT TO THE MARKETS, MONEY MARKET FUNDS, BOND FUNDS, AREN’T. SO I THINK PEOPLE GET A LITTLE CONFUSED ABOUT WHO’S OUT THERE LENDING AND WHO’S NOT AND— WE’RE— WE’RE GONNA TRY TO GET MORE INFORMATION OUT ‘CAUSE I THINK IT’S A GOOD QUESTION PEOPLE ASK IS, “ARE YOU LENDING?” AND— YOU KNOW, WE ARE.

The nice thing about having a bunch of branch offices, subsidiaries or related entities with a large corps of middle managers is that you have a huge cushion against the massive losses you will incur when you do such limited due diligence that you get snagged in a big Ponzi scheme. So no one here at Dealbreaker was particularly surprised when we got a totally unfounded tip which boils down to:

Santander cut through mid-management in the Boston office making it more arid than B. Arthur’s privates…or is that liquidity drying up faster than B. Aurthur?…well you know.

Color us unamazed.

Another round of cuts is said to be scheduled for February 10.

According to our vibrant tip-line:

[JP Morgan] open-sourced the CDS analytics engine because no one remembers which precise version of the “binaries” (compield source) code was originally handed over to Bloomberg to fuel the CDSW page. Seriously.

Earlier: Open Source CDS Analytics?

Via proxy! While we can’t get you up in Bernie Madoff’s grill (yet), we are offering Dealbreaker readers the opportunity to ask one of the Ponz. Master’s minions, “WTF were you thinking?” or something along those lines. Here’s the deal: a friend of DB, who is an investor in one of the Madoff feeder funds, is meeting with his firm in the near future, mostly to discuss them losing all his money. But he’s also graciously offered to pose any questions you people might have, time permitting. We won’t name the fund, on the off-chance they put 2 and 2 together, though you can probably guess. We’ll take the five best questions and forward them on (and provide a full report with Q’s and A’s once we have them). Real queries should be e-mailed here, ones that will categorically not be asked left in comments (to protect our devoted investor from inadvertent disclosure).

CNBC reports that managing directors in UBS’s investment management division will receive neither cash nor stock in ‘09. As for 2010? Bonuses shall be 100 percent stock, with a three year vesting period attached to 1/3 of the package. AND if UBS has a loss over those three years, clawbacks will ensue.

Related: Bonus Watch ‘09: BAC Get Bupkis

The Kind Of Perverse Genius Only The Swiss Could Develop

Want to knock off Bernie but the credit crisis has wiped out your “hitman fund”? No problem. Just get yourself a Bernie doll.

You bet, says Connecticut toymaker Emil Vicale, who manufactures patriotic “hero” and politically incorrect “villain” action figures out of his home workshop. Retailing for $149.99, his latest product is a “limited edition” Madoff doll featuring a fistful of $100 bills and a luxury wristwatch painted with real 24-karat gold.

“He’s wiped out people’s life savings, he’s destroyed their kids’ lives and their grandchildren’s lives,” says Vicale, who sells his creations at Herobuilders.com. “In other cultures, wouldn’t they just cut his head off?”

We are ordering one for the office, where it will sit next to our Cramer, our stuffed Greenspan figurine, and Xerox sent by an anonymous reader purported to be of Erin Callan’s ass with “December 2007” written on the back.

No word yet on the time line for a Marcus Schrenker paratrooper doll.

Bernie Madoff action figure flashes bling [The Boston Herald]

Everyone’s favorite she-males are safe and sound. We’re told the firetrucks at 72 Cummings Point Road earlier this morning were sent back from whence they came, when whatever caused the scare— and we have our unconfirmed guesses, natch— was deemed “a false alarm.” Also, supposedly it wasn’t 7 trucks but merely 1, a point we’re going to have to contest. When it comes to the big guy, you don’t take chances. The Stamford Fire (/Police/Pastry) Department knows this.

Announcer (in the most ridiculous announcer-ly voice I’ve ever heard): Please welcome Briannnnn Moynihannnnn, president of global banking and global wealth and investment management!

- We have to stay focused on our clients.
- How did I get here? In the old days I was a lawyer [goes through all the other jobs he’s had since then], and then they asked me to do this.
- A transition of this magnitude has never been attempted
- One of the toughest markets any of us will ever face in our business careers
- People keep telling me, like the old baseball adage, “Wait til next year.” But we have to keep performing.
- We’ve had to reduce staffing, which was unpleasant.
- We’ve had to reduce compensation
- We’ve had to defer compensation
- We’ve had too many media stories
Let’s talk about our accomplishments:
- We stabilized the mortgage market when we bought Countrywide
- We’ve created a great franchise with Merrill Lynch
- We’ve lost the superlatives to describe to clients how to navigate the markets. That’s why we need Mr. Sontag.

Turns the mic to Sontag.
- Introduces a bunch of names, one of whom is described as “the guy who gave me all my bad ideas.” Nelson Chai, etc.
- You, our team, bring our services to our clients.
- You do it, by leaving nothing to chance.
- The press is fascinated with everything we do.
- People are questioning our integrity and our ability to do business…[what I have to say to them] is, we made 4 billion dollars last year.

- Some guy named Bruce, head of capital markets, talks about Q4
- I don’t want to talk a lot about Q4, cause it was ugly.
- At a time when they (who are you calling ‘they’?) said banks weren’t lending, WE DID
- It’s more strategically compelling than ever for bringing BAC and MER together.

[A bunch of guys are trotted out in a dog and pony show, made to say what new and exciting things they have in the hopper for ‘09]

So these quotes sound made up but, per the Post, sources claim that Bernie Madoff has been complaining about the stringent terms of his house arrest at 133 East 64th Street. Supposedly the Ponz. Master has been telling anyone who’ll listen “I can’t go anywhere! I’m stuck here all day!” My fave gripe is probably the one about how it’s not fair that he can’t even run to the corner deli for something to nosh on. But it gets worse. The problem solvers in the group will likely suggest that there’s nothing left to do but JO&C with a little YouPorn to pass the time but he can’t even do that. Private contractors are apparently installing wiretaps on the penthouse’s phones and computers, meaning, as a person close to the situation points out, “If he surfs the Web…it’s going to be tracked.”

Long or Short Capital has penned a missive on Chairman Peterson’s anti-CDS legislation that bears reading.

It’s about time that someone put together a way to stop the CDS market cold in its tracks. The instrument’s ability to provide hedging for companies’ debt, improved liquidity in names, and more accurate information about the health of issuers is not only dangerous, but it’s overtly capitalistic (they might as well be called Credit Default Ronald Reagans), which we now know to be a mistake. A healthy economy doesn’t need an unfettered free market system — what it needs is a regulated command economy that ensures that houses (and everything else) are always affordable, especially for people that can’t afford them and that politicians are always in control of all economic and financial processess.

This particular zimbabwenomic reform comes from the chairman of one the most progressive committees in the house, and hopefully he and fellow zimbabwenomicist Barney Frank can push forward appropriate regulation of all markets, specifically, regulation that will prevent them from going down.

Between this and a repeat of the Hawley-Smoot legislation, we are in for good times over the next decade.

The big JD leaves town for a few days to pontificate and ski and the office just melts down and starts giving away critical intellectual capital. Boy is he going to be mad when he gets back.

In this particular case, to the gleeful joy of finance geeks everywhere, JP Morgan has assigned ownership of its Credit Default Swap Analytical Engine to the International Swaps and Derivatives Association, which plans to make it available as open source. That’s pretty sexy.

“J.P. Morgan has invested a lot of intellectual capital in this analytical engine. Its willingness to assign this to ISDA for us to make it available as open source to the entire industry demonstrates our collective commitment to the integrity of the CDS product,” said Robert Pickel, Executive Director and Chief Executive Officer, ISDA. “ISDA and its members are vigilant to public concerns around transparency. This is yet another measure of increased standardization in CDS.”

ISDA Announces Agreement [IDSA.org] via Alea

JP Morgan has “plenty of capital,” thank you very much.

And if you people don’t stop talking about this nationalization thing, you are going to fuck the whole thing up for us. Someone should just rewrite Basel II, make a nice speech about it and get the hell out of our way. I mean seriously.

Plus, we are the only people lending (to our related entities). So enough with this “you better start lending again” crap. You going to come up here and make me?

Anyhow, are we done yet? I’ve got some skiing I’d like to do.

JP Morgan says has ‘plenty of capital’ [Reuters]

There are apparently 7 fire trucks outside SAC headquarters in Stamford. We’ll keep you posted.

Remember all that noise, delivered with practiced and indignant huff, about lobby rules? About the hiring of former lobbyists, and how that was a bad thing^(tm) and would in no way be permitted in the new administration. Yeah, well, not so much.

It seems the boyish charm Banker in our big Monopoly game, Tim Geithner, wants to hire an old acquaintance who is a former lobbyist for Goldman Sachs.

We expect he will get his way. I mean its not as serious as paying your taxes or anything, and that (along with penalties and interest) is the sort of thing that’s obviously to inconvenient to bother with when there is important work to be done.

Obama’s hypocrisy showing [CNN]

Must you make her say it again? Stiletto spikes to all of your asses! You think this is funny? You won’t be laughing when she administers the testicle clamps!

Talks of creating a “bad bank” are once again gaining momentum, and accordingly, we feel compelled to repeat and review our thoughts on the subject. In brief, simply removing “toxic” assets from bank balance sheets will not directly cause banks to increase lending. Lending standards have tightened dramatically, and there is an unavoidable restructuring of risk taking place. Such causes money to come out of the system and lending to contract, with or without this “bad bank” structure. Lower asset bases, higher credit losses, and bloated expense structures will continue to pressure banks’ earnings power and capital creation. We remain cautious on the group.

At this point it pretty much looks like it’d be preferable to be laid off from Bank of Amerillwide than employed, compensation-wise. However, there is still some, shall we say, discontent among the former BAC’ers no longer lucky enough to be working under Ken Lewis, and in the reflected glow of Ang. Moz. An unofficial spokesman for the group writes:

FYI - maybe there is something in this issue; I’ve confirmed that Corporate and Investment Banking (CIB) employees who were cut last week were treated differently in NYC and Charlotte in severance pay. The NYC employees were all given 3 months + 2 weeks of pay * every full year of service (rounds down). The Charlotte employees were given a meager 2 weeks of pay * every full year…a huge difference.

Ford Reports 4th Quarter 2008 Net Loss of $5.9 Billion (PRNewswire)
“Net loss of $5.9 billion, or $2.46 per share, for the fourth quarter of 2008 amid a sharp global decline in vehicle demand; pre-tax loss of $3.7 billion from continuing operations, excluding special items.”

JPMorgan Exited Madoff-Linked Funds Last Fall (NYT)
The House of Dimon began pulling the millions of its own money it’d invested in the Ponz. Master in 2006 this fall, after “a wide-ranging review of our hedge fund exposure,” when JPM “became concerned about the lack of transparency to some questions we posed as part of our review.” Good call! Except now some investors who’d been advised to put money with Madoff are pissed they weren’t told to get out too, before, you know, losing everything. So that’s kind of awk.

Merrill Bonus Case Widens as Deal Struggles (WSJ)

New York Attorney General Andrew Cuomo is expanding the scope of his investigation into bonuses paid by Merrill Lynch, with the inquiry now likely to include whether directors and shareholders were misled about giant losses at the Wall Street firm, a person familiar with the situation said.

Mr. Cuomo plans to press John Thain, the former Merrill chairman and chief executive who was forced to resign last week from Bank of America Corp., on what he told Merrill directors about ballooning losses in mid-December, this person said.

In addition, Mr. Cuomo wants to know why the Charlotte, N.C., bank didn’t publicly disclose that Merrill’s condition was deteriorating. BofA Chairman and CEO Kenneth Lewis is likely to face questions from Mr. Cuomo about bonus payouts by Merrill, including what he told directors about them, according to this person.

[…]

The investigation is at an early stage, but Mr. Cuomo’s office is examining potential remedies such as trying to recover bonuses already paid, fines or alleging securities-law violations, the person familiar with the investigation said.

Weill Pitches In (NYP)
Citi is shouting from the rooftops/cockpit of the Dassault Falcon 7X that former CEO Sandy Weill has agreed to give up the perks of his retirement package, which include, among other things, a car and driver, plus use of the company’s jets, and an office in the General Motors building, which Citi was paying for.

$$$ Ex-Marine Launches Long/Short Hedge Fund [FINalternatives]

$$$ Wells Fargo Says Madoff Scheme Cost Bank $294 Million [Bloomberg]

$$$ Job of the Day: A “top tier HF in Greenwich, CT” is looking for a consumer analyst with 3-5 years experience. That could be you! Compensation, if the employer is who we think it is, includes deep-fried leaf cookies. [DB Career Center]

Possibly, if it can be inferred from the fact that he was still referred to as CEO/chairman on the most recent press release from Bank of Amerrillwide, post-board meeting. See you at Phil’s (or Sonoma), drinks on Moz.

First, it was the house on Mustique. Now, it’s being whispered that one of Fairfield Greenwich founder Walter Noel’s daughters and son-in-law (a FFG partner, natch) are mulling over vacating their place at 12 East 78th Street. It’s really too much to bear, unless of course you’re in the market for a $13.5 million townhouse with a “pale gleaming Indiana limestone facade” in which case, get in touch.

From the mailbag:

WFC 8K says misstated book value in press release this morning:

On January 28, 2009, the Company issued a press release regarding its results of operations and financial condition for the quarter and year ended December 31, 2008. The press release incorrectly reported book value per common share of $23.43 for the quarter and year ended December 31, 2008. The correct book value per common share for the quarter and year ended December 31, 2008 is $16.14.

Robert Rubin, who quit his post as senior counselor at Citigroup Inc. this month, said an accounting rule forcing companies to mark down assets every quarter to reflect market value has “done a great deal of damage.”

“I spent my whole life at Goldman Sachs believing in mark- to-market accounting, and having said that, if you look at the experience from the last two years, I think mark-to-market accounting has led to terrible vicious cycles in asset prices,” Rubin, the former U.S. Treasury secretary, said during a discussion at the 92nd St. YMCA late yesterday.

Yes, because it was the accounting treatment, not the toxic assets and years of building leverage, that required drastic markdowns. Who was responsible for draining the liquidity from the market? Poseidon?

Robert Rubin Says ‘Mark-to-Market’ Accounting has Done ‘Damage’ [Bloomberg]

Attention, Bank of Amerrillwide shareholders and employees: I know you’re probably all pretty prettay prettay down in the dumps right now but redirect your anger my friends, because Ken Lewis et al. are in no way to blame. In fact, no one really is. When you think about it, Bank of Amerillwide is a lot like a farm. You can work your damn hardest, and then some bad luck, or weather, could come along and wipe our all your great effort. I guess in this scenario, Countrywide would be, hmm, what, a stray horse that came along and shat in the mouth our crops and Merrill as…as what? Hmm? How about “the radioactive fallout of plutonium assets, drifting gently down to impregnate the soil with its poison”? Would that work?

For those of you wondering WTF I’m talking about, after the jump, an email sent from Chief Administrative Officer, Lewis right-hand man, and recently-subpoenaed Steele Alphin to a shareholder this morning, in response to said shareholder’s expression of disappointment in BAC, of late.

In our effort to bring you all things Ponzi, we couldn’t help but mention the article in the Journal that dedicates a great deal of formerly white space to the topic.

Federal and state authorities are reporting a growing number of financial scams that echo the alleged Madoff fraud, as strapped investors seek access to their cash amid increasingly hard times.

At least six suspected multimillion-dollar fraud cases have emerged this month alone, many of them alleged Ponzi schemes, in which investors are lured by promises of lofty returns but are actually paid off from new victims’ funds.

The piece is worth the effort, particularly given the fantastic irony of the circle sized Ponzi losses graphic that, doubtless, came from JP Morgan. (The Journal might understand geometry a bit better, however).

In Echoes Of Madoff, Ponzi Cases Proliferate [The Wall Street Journal]

It’s Davos time, and you know what that means. Every talking head with an opinion will be spouting off their big idea^(tm) of the day, their mouths forced to move at a rapid pace, opening and closing spasmicly lest an overeager reporter shove a microphone past the point that triggers the gag reflex. Soros, of course, is no exception.

“That (the “bad bank” proposal) will help relieve the situation, but it will not be sufficient to turn it around,” Soros said during a live interview at the Davos economic conference in Switzerland. Instead, Soros said he would create a “good bank” and re-capitalize the good assets.

If it’s not Soros talking about the effects of “the Lehman thing,” it is someone else talking about the effects of “the Lehman thing,” so really, couldn’t we just do without Soros for awhile?

Soros: ‘Bad Bank’ for Troubled Assets Is Bad Idea [CNBC]

Over the years there have been many steps in the finance professional supply chain that have resulted in a sort of “grade inflation” in finance. The CFA is not one of them.

A lower percentage of candidates passed the first test of the Chartered Financial Analyst exam, a three-step process aimed at gaining a hiring edge as job losses accelerate in the financial-services industry.

Thirty-five percent passed the initial test, down from 39 percent last year, the CFA Institute said in a statement today. Almost 50,000 people took the exam in December, a 25 percent increase from a year earlier, the Charlottesville, Virginia- based institute said.

For reference, the pass-and-remain rate for the SEAL program Physical Screening Test used to be 34%, before that got candied up and pushed to 40% in the last few years. (Is nothing sacred?) The drill instructors at the CFA Institute will have none of that, thank you very much.

“Since it’s a self-study program, it’s hard to say why pass rates increase or decrease,” institute spokeswoman Kathy Valentine said in an e-mail.

Candidates take the exam betting the certification can become a path to better jobs, higher salaries and a deeper understanding of finance. The not-for-profit CFA Institute recommends candidates spend at least 250 hours studying for each phase of the test. It costs about $2,500 to complete all three levels, which are given in June and December.

Did you fail? What was your major malfunction? Which segment of the creed did you blow? Ethics? Tenacity? Rigor? Analytics?

Oh, this is going to chap some Bank of Amerillwide hide. The FT reports that the firm plans to defer bonus payments to capital markets and investment bank employees this year, though a spokesman for BoA claimed he wasn’t aware of the news. The policy will affect payments of $50,000 or more, with staff that was supposed to receive cash-money next month waiting until February 2010 to get the first third of its bonuses, and the remaining two-thirds in 2011 and 2012.

Related? Setting The Story Straight On The Merrill Bonus Rage

And pay tribute to the most important day in history. January 28— the day, 46 years ago, Charlie Gasparino entered the world, guns blazing, singing “Funiculì, Funiculà” with gabagool, sopressata, and other Italian delicacies falling out his mouth. At this time I’m too overcome with emotion and gratitude for the cosmic generosity of the universe for sending us this angel (first Jesus and now Charlie “The Second Coming” Gasparino? Our cup overrunneth) to decide what to send. I’ve got some ideas, of course, but I need your help. Any suggestions would be greatly appreciated. What do you get for the man who gives everything?

Apparently the firm has been trimming the ranks of late. Supposedly four analysts, two traders, three PM’s and 12 other “random people” have been let go, with research, quant strategies and special situations taking the bulk of the hits in percentage terms. Those who’ve been spared are apparently still waiting to hear on compensation, now two weeks late and counting. But! CEO Andrew Feldstein is said to see “tremendous opportunities from here.” So that’s nice.

Related: We’ve Got A Plan (“The Plan”) For The Shit (“The Shit”) Hitting The Fan (“The Fan”)

Bloomberg tells you what we told you yesterday. Abhijit Chakrabortti has left the House of Mack.

American taxpayers do not have the monopoly on banker bonus outrage. Apparently the Swiss are blowing a gasket over UBS’s decision to dole out $1.77 billion to its staff (or about $22,000 per employee, which is about 80 percent less than the bank paid last year), after taking money from the state. The Social Democratic Party has called for Eugen Haltiner, president of the Federal Financial Market Supervisory Authority, and said in a statement, “the bankers’ arrogance knows no limits,” describing the payout as “incomprehensible.” At left, the UBS building in Zurich after an “incident” earlier this month. Click for more.

It’s poss! As you already know, Bank of America’s board will meet today for a regularly scheduled meeting, with one topic of discussion likely being Ken Lewis’s future with the firm. A person “close to the board” told the Journal that the CEO’s job “is in no danger,” but another person, also in close proximity to the situation, hissed that everybody needs to pipe down and “wait until Wednesday…you’ll get your answer then,” which sounds ominous. Plus, since Friday, certain revelations have come to the bank’s attention like, among others, what role Lewis’s right-hand guy, Steele Alphin, played in the whole Merrill/Thain sitch, and the matter of KL dyeing his hair.

In related news, it seems Lewis may join Team Touched by Andy, with sources telling the Post a subpoena is coming his way.

As previously mentioned, last Friday Bank of Amerillwide chief Ken Lewis celebrated firing John Thain with half-priced scotch at Sonoma Restaurant in the BAC corporate center. Nothing really scandalous there (besides his terrible tipping) but the event apparently came as a shock to the regulars at Phil’s Tavern, who Mr. Lewis has seemingly been running around on. From the mailbag:

The story about Ken Lewis drinking at Sonoma at 6:30 on a Friday was a surprise to those of us in Charlotte because up until recently he could be found at Phil’s Tavern, a dive bar next to HQ, several days a week drinking scotch with Steele Alphin.

Wells Fargo has big loss as it adds to reserves (Reuters)
“The quarterly loss at San Francisco-based Wells Fargo, not including Wachovia, was $2.55 billion, or 79 cents per share, compared with a profit of $1.36 billion, or 41 cents, a year earlier. Revenue fell 4 percent to $9.82 billion.

The company also said the former Wachovia Corp, which it bought on December 31, lost $11.17 billion in the fourth quarter, largely to boost loan loss reserves as well as investment writedowns. Before Wells Fargo outbid Citigroup Inc to take control, Wachovia nearly collapsed as losses soared from troubled mortgages.”

Boeing Posts Quarterly Loss on Strike Impact and Charges (PRNewswire)

Fourth-quarter net income declined to a loss of $56 million, or $0.08 per share, reflecting the now-settled machinists’ strike (EPS impact estimated at $1.09 per share), a charge related to the 747 ($0.61 per share) and a litigation-related reserve ($0.09 per share).

Revenues for the quarter declined 27 percent to $12.7 billion, due primarily to the effects of the strike which reduced commercial airplane deliveries by approximately 70 units and revenues by an estimated $4.3 billion.

For the full year of 2008, net income fell 34 percent to $2.7 billion, EPS was $3.71 per share, and revenue fell 8 percent to $60.9 billion. Full-year results were impacted by the strike, the 747 charge, the litigation-related reserve, and higher costs for AEW&C announced in the second quarter, which together reduced full-year EPS by an estimated $2.56 per share. This was partially offset by lower pension and deferred compensation expenses.

“The progress we made in many areas of Boeing during 2008 was outweighed by the impact of the strike and our performance on some key development programs,” said Chairman, President, and Chief Executive Officer Jim McNerney. “Our imperative going forward is improving execution where it needs to be improved, maintaining strong performance across all our production programs, and preserving our financial strength to grow in these challenging economic times.”

Tax-evader Not So Popular In Davos (Bloomberg)
Meouch: Boy-toy Treasury Secretary Tim Geithner’s Yuan call was characterized as “economic suicide” by Morgan Stanley’s Asia Chairman Stephen Roach, before a panel in Davos today. “I’ve never seen an economy in recession voluntarily raise their currency,” Roach added. “It’s horrible advice.”

Eating Out, With T. Boone Pickens (Dallas Morning News)
Want some of that shit? TBP is auctioning himself off on eBay. Bidding starts Monday, at $100,000, and last ‘til February 12. Good luck to all.

Behind Citi’s Decision to Scrap New Jet Plans (FT)
Mentioned yesterday but confirmed: it was those meddling bastards over at Tim Geithner’s Treasury that guilted Citi into saying it has “no plans to take possession” of the Dassault Falcon 7X.

Stimulus Bill Near $900 Billion (WSJ)
Expected House vote today. Includes: “a $365.6 billion spending measure for such brick-and-mortar projects as highways and bridges; a $180 billion measure to boost jobless benefits and Medicaid, among other things; and a $275 billion tax-relief package, which includes a plan to give a $500 payroll tax holiday to all workers, a proposal from Mr. Obama’s presidential campaign.” Also: ” ‘I would love to not have to spend this money,’ Mr. Obama said, according to individuals familiar with the president’s meetings with Republicans.”

Stephen Schwarzman’s Maverick Proposal (DBook)
Crab-hands wants more leverage.

OPEN LETTER TO INVESTORS IN STEEL PARTNERS FUNDS

Carl C. Icahn
767 Fifth Avenue
New York, New York 10153

January 23, 2009

Dear Fellow Investors:

As you know, Steel Partners has announced the “WebFinancial
Solution” which we believe would be extremely detrimental to all of
our investments in Steel Partners. I am against that transaction and
a lawsuit has been filed to oppose it in Delaware.

I believe it will be beneficial for all investors in Steel Partners
to meet to discuss the “WebFinancial Solution.” Because Steel Partners
has refused to make a list of investors available to us, we ask that you
call either Susan Gordon (212-702-4309) or Sue Zippo (212-702-4310) at
my office. Please provide them with your name and phone number. We
will then contact investors and arrange for a meeting.

Steel Partners’ actions to date and plans for the future are
significant events for all of us and I strongly believe that we should
meet to share our thoughts and concerns.

I look forward to meeting all of you.

Very truly yours,

Carl C. Icahn

HT: 1-2

$$$ Harvey Pitt on Madoff and reforming regulation [The Deal]

$$$ AIG Said to Pay $450 Million to Retain Swaps Staff [Bloomberg]

$$$ Will Former Lehman CEO’s Sale of Mansion to Wife for $10 Actually Protect It From His Creditors? [TPB]

$$$ Calling all former Lehman Brothers and Sisters: A writer at GQ wants to talk to you (anonymously, if you’d like). Interested? Get in touch.

Abhijit Chakrabortti, Morgan Stanley’s chief global and U.S. equity strategist, apparently quit the House of Mack this afternoon. No word on where he’s headed.

At which southern Connecticut hedge fund did the following conversation recently take place?

Third party (making routine inquiry): How many PMs do you have?

Manager: 75.

Investor Relations: No, 80.

Manager: (surprised, confused though that could’ve been the low blood sugar) Really? (composes himself) Hm…go fire some.

And scene.

CNBC touched on a dirty little rumor. “Hedge fund manager” Nicholas Cosmos once owed $139k to the Genovese crime family, an amount that was at least partially paid by members of the Gambino family.

This could mean he was seriously connected. Or just that he was in the construction business and an obsessive gambler. Take your pick. Says a friend of Dealbreaker “Yes, yes, you can see it in the eyes.”

Says CNBC in a Charles Gasparino exclusive:

A former Genovese family associate, Michael Durso, who is now in the federal witness protection program, and another associate met Cosmo in in the late 1990s, sometime around 1997, and it was at that time when they put pressure on Cosmo to pay around $139,000 owed to loan sharks connected with the Genovese family, according to people with knowledege of the matter.

At one point, members of the Gambino family intervened on Cosmo’s behalf and paid some of the debt, these people said.

Durso, these people say, has been in contact with the FBI about his alleged involvement with Cosmos. An attorney for Cosmo when informed about the alleged connections with New York crime families had no comment.

The rumor we heard is that Merrill never actually took any TARP money. Paulson strong-armed them, made a lot of noise, but they never actually got a check. This would make a lot of the skewering they have been taking from the likes of Andrew Cuomo, false.

We, of course, are instantly suspicious. Did they take money that, technically, wasn’t under the TARP umbrella (how’s that for mixed metaphors?) or somesuch dodge? Or have they really enjoyed no government assistance in this respect at all. Why aren’t they screaming bloody murder about this?

We know someone out there knows. Find us.

On Friday, Wharton held its annual private equity and venture capital conference. Unfortunately there was no need for cops to intervene this time around, though there was a DEA officer on hand keeping an eye on speaker Andrew Sorkin. We sent correspondent Jeff Horwitz to check it out. Here are his findings.

The depressing state-of-the-industry talk at Wharton’s Private Equity conference starts in the line for coffee. The title of this year’s event is “Multiplicity without Rhythm,” which is an M.C. Escher allusion meaning that everything is going to hell at once.

At the morning networking session at Philly’s Park Hyatt Bellvue Hotel, a number of attendees swapped stories about last year’s excitement, when angry SEIU activists with bullhorns bawled AT Carlyle’s David Rubenstein for profiting on the backs of the poor and sick.

In hindsight, being vilified for making money doesn’t seem so bad. Wharton has a cop posted outside the main ballroom of the Bellvue Hotel this year, but there weren’t any protesters to be found. Still, you can’t be too careful: It’s always possible some belligerent pension funds might have shown up to demand their money back.

But that’s getting ahead of things.

We are annoyed that more white collar criminals have not been reading the first part of the Dealbreaker guide: How To Properly Escape Capture Following Your Massive (or Relatively Massive) Financial Fraud. The latest slacker is Arthur Nadel, the Sarasota “hedge fund adviser” who skipped out with such ninja-like disappearing skills that the local constabulary decided to give up the chase when it was clear that he “did not want to be found.” Those skills apparently were insufficiently honed to carry him in the big leagues, as he surrendered to the FBI in Tampa earlier today. (Florida is an interesting choice as his green Subaru was found in the airport parking lot- we were not fooled by the “park the car in the airport and take no flight” trick).

Bloomberg hints that Madoff, and the attention to scandal around it, may have indirectly contributed to the discovery:

The fraud may have been uncovered because of the unrelated arrest on Dec. 11 of fund manager Bernard Madoff for duping investors out of $50 billion, the FBI said in a criminal complaint.

After years of rebuffing requests from an unnamed partner for an independent audit of his funds, Nadel agreed to one on Jan. 8, FBI agent Kevin Riordan said in a criminal complaint. Nadel fled six days later after telling his wife how to survive financially without him, Riordan said.

Ah yes, the dreaded “independent audit.”

Nadel, Missing Hedge Fund Adviser, Arrested by FBI [Bloomberg]

It’s bonus day over at the marginally less tax-evading Swiss bank in town! Unfortunately, we were only sent a cryptic note that the treats were “not good,” leaving us to wonder if this means flat year-on-year or 2 free passes to the Shake Shack (the latter being preferable). Know something (Dougan)? Let us know.

Charlie Gasparino reports that John Thain’s inner circle at Merrill “is in the process of being purged.” Dun-dun-dun. The circle jerk includes Noel Donohue, head of risk management, Mary Lee, JT’s chief of staff, and Margaret Tutweiler, head of communications and corporate affairs. All are gone as of today. The fluffer and Mariachi band, who are said to travel with JT at all times, are rumored to be on the way out themselves. In related news, Gasparino is hearing about emails regarding who knew what and when, that Andrew Cuomo is said to be interested in.

Amazon $75 Gift Card [EBay]

We have spent a lot of time pondering the Made-off case, as you well know. And several things are very suspicious. Key among them, how much did Ruth Madoff know and when did she know it? How many toner cartridges does it take to produce 20 million documents? Who stores documents in a warehouse in Queens? What exactly was this secretive seventeenth floor? Given that Bernie and Ruth were reportedly a very tight couple, how could she be in the dark, really?

But investigators have discovered, according to a person close to the case, that the funds from the advisory business were in fact comingled with Madoff’s personal funds and with a market-making fund in which he, as a broker-dealer, executed orders for customers. It was Ruth Madoff who oversaw the books on all three of these accounts, and it was the comingling of money from them—contrary to regulations that require such accounts to be kept separate—that enabled the elaborate shell game. It also meant that some investors’ money was not invested for their own benefit but went into Madoff’s personal assets.

Behind every great Ponzi scheme, there is a scheming wife?

There are, of course, a great number of mysteries remaining still. Consider:

The Financial Industry Regulatory Authority has reported that there is no record of Mr. Madoff’s investment-advisory firm placing any trades. “What did all those people do on the secretive 17th floor if they weren’t executing trades?”

I mean, do we have to spell it out for you?

Partners in Crime? [The Daily Beast]

From: vikrampandit@citi.com

Sent: Tuesday, January 27, 2009 11:53 AM

Subject: Realignment Leadership Team

Dear Citi Colleagues,

By now you’ve had some time to learn more about our plan to reduce our balance sheet and simplify our organization. The realignment we announced on January 16th will give Citi the widest range of options going forward as we continue to strengthen our core franchise. You can learn more about it here.

We’ve made quick progress on this reorganization and I thank you for all of the hard work that has already been done.

To ensure our success, we need the right people in charge who will be accountable for the performance of their business. I’m pleased to announce some of the members of the leadership team who will be directly responsible for driving and managing excellence in each of these business units around the world.

First, storm the offices. Then, smack your alleged perpetrator right in the mouth. Then, when you are really mad, jump on http://www.scamvictimsunited.com (which bears a very artsy logo that looks like it was lifted from an autism support website and includes the cautionary label: “Warning - Our site is being used in scam emails!”) Make sure to peruse their message board when you visit. It’s sort of the Yahoo Message Boards of fraud and the collective content there is enough to make you cut up all your credit cards, shred all your checks and move to an isolated cabin with no phone or internet just outside of Lincoln, Montana.

It seems the subject of our story yesterday, convicted scamster Nicholas Cosmo of Agape World (no, I’m not kidding) had piqued the curiosity of prospective investors before. Reuters dug up a post on Agape World from March 2008: “Has anyone invested with Agape World Inc? They provide bridge loans and offer investors 13-14% returns? When my brother was telling me about it, it sounded kinda fishy and risky….” Seriously, people, what is it with the fish?

While the fisticuffs were entertaining, Reuters dashes any hope of flight from Mr. Cosmo.

“Nicholas Cosmo took the advice of an attorney and complied with an arrest warrant,” said Al Weissmann, spokesman for the U.S. Postal Inspection Service, which is investigating Agape World and Cosmo along with the FBI.

I would have loved to have been in the room for that discussion.

NY financier arrested in purported $400 million scam [Reuters]

Charlie Gasparino reports that Attorney General Andrew Cuomo has subpoenaed John Thain and BAC chief administrative officer Steel Alphin for testimony, to find out “what they knew and when they knew it.” He can start here.

Or he might keep his job. Who knows, really? What we do know is that the Bank of Amerillwide CEO is scheduled to meet with the board tomorrow, and 24 hours is more than enough time for *someone* to leak evidence of the scatological variety to Charlie Gasparino that says KL’s gotta go. According to NAB bank analyst Nancy Bush, who prognosticated Friday that Lewis would be gone by the end of the week, “We cannot rule out the possibility…that the roles of Chairman and CEO might be separated and a new CEO named in the near term, as we think that it is highly unlikely that large shareholders and other important constituencies are going to be happy with the preservation of the status quo.” Either way, you can be sure to find Lewis here post-meeting, with former Countrywide CEO and current BAC wingman-in-residence Angelo Mozilo.

It’s just that his success has made him a target, you see. That explains the new accusations that have emerged in the case against Paul Touradji and, if nothing else, provides us with the best case names and the most Godfatheresque dialogue we have ever encountered in a civil suit. That’s saying something.

Now it seems that, faced with rather stinging accusations by Gentry Beach (we know, we know) over some unpaid bonuses, our cranky hedge fund manager is said to have approached another employee and offered him $30 million to scribe out a nasty letter about Beach. Supposedly, the Godfather of 2 and 20 breathed something like:

“…things can go one of two ways for you now: Your life can be easy and financially secure or you can make it very difficult on yourself.”

Authorities have put a double watch on stables in the area in case a horse’s head becomes involved.

Touradji Case Includes Bribery Charges [The New York Post]

Earlier: No, Gentry Beach Is Not Just The Waterside Property Of An Island Plantation On A British Protectorate

January 27, 2009

Dear Stark Investor,

If necessity is the mother of invention, then distress must be the grandmother of necessity. For it is distress that begets the necessity for action which, in turn, begets an invention to address that necessity.

As we all know far too well, Grandmama Distress went nuts over the past year, leaving opportunity in her wake. Issues regarding liquidity, financing, and redemptions forced
many good organizations to suspend fund redemptions and consider strategic options. In the Tundra sections of the past few monthly commentaries we have alluded to such situations with increasing specificity. That is because for the past several months we have been in selective communication with a number of managers with the goal of determining if some action could be taken, some invention if you will, that could be mutually beneficial to both their and our investors. In particular, discussions with one fund took on increased seriousness over time.

As a result of those discussions, analysis and due diligence by both sides, we are pleased
to announce that we have reached an agreement with Deephaven Capital Management. Although there are certain closing conditions that must be satisfied, we currently expect that the transaction will close at the end of February.

This whole John Thain, Ken Lewis Rumble in the Bronx has been thrilling but clearly there are lesser-known, more hilariously-named cast members to speak of. Let’s start with Steele Alphin, chief administrative officer at Bank of America, and essentially Lewis’s right hand guy. He also served as Thain’s ambassador into the BAC world. For instance, we’re told it was Alphin who set the aggregated compensation level for Merrill bonuses, and convinced Thain to change the cash/stock breakdown from 60/40 to 70/30, because it would help BAC’s balance sheet (the cash coming from MER, the stock coming from BAC). Oh, and Steele’s also the one who can say definitively, despite attempts to leak stories to the contrary, that Thain never asked, per se, for a $10 million bonus.

Everyone’s flying coach! And by “everyone,” we of course mean the peons. Vikram and Co. will get their private jet yet.

From: Morgan McKenney, CFO - Global Transaction Services

Sent: Monday, January 26, 2009 6:54 PM

To: *AA All Global Transaction Services Employees

Subject: GTS Expense Restrictions

Dear GTS Colleagues:

Given the challenging macroeconomic environment globally, we are implementing a number of additional expense restrictions within Global Transaction Services, effective immediately, to ensure that we are pursuing all options to save on expenses that will not have an impact on our ability to execute for our clients with excellence.

Key areas of expense restrictions are summarized below, and will be added shortly as a link to the Citigroup Expense Management Policy (CEMP). These changes are more restrictive than the CEMP and will save our business millions of dollars this year. Thanks in advance for your support in adhering to these restrictions. Please contact [redacted] with any questions.

Air Travel must be non-refundable coach/economy class with 7 day advance purchase, unless otherwise indicated below:

I know all you people want is to see Vikram Pandit and his pals flying in style but it looks like that may not happen. Or maybe it will! I really don’t know what to believe. Yesterday, in response to questioning regarding Citi’s possible acquisition of a $50 million, French-made Dassault Falcon 7X, Bill McNamee, head of CitiFlight Inc., told the Post, “Why should I help you when what you write will be used to the detriment of our company?” which translates to “hell fuck yeah (HFY), we bought that bitch and I’m sorry, we’re not sorry we did.” Then Senator Levin (D-MI)— no relation— got worked up over the use of taxpayer money going toward’s Count Vikula’s late in life dream of joining the mile high club, and Obama (via spokesman Robert Gibbs) noted that private jets aren’t “the best use of money,” and Rep. Frank threw in his two cents, and we had a scandal on our hands.

Now the Big C has a statement out claiming it has “no plans to take possession” of the aircraft. But at the same time, Citi spokeswoman Shannon Bell told the Post that the bank is “exploring all of its options,” including “the potential lease of the aircraft,” and presumably also the potential not-leasing of the aircraft. Plus, Bell also reminded us that C is in the process of selling two planes, so, really, if you think about it, they’re down one, and need this thing.

UPDATE: According to Steve Liesman, Citi put out it’s backtracking statement after receiving a call from a Treasury official last night.

Senate Confirms Geithner (MarketWatch)
The Senate overlooked a minor tax inconvenience and relative inexperience to pull behind Mr. Geithner late Monday in a 60 to 34 vote. As has been pointed out before, Geithner carries on in the Goldman legacy (even if it is once removed), so there’s no worries for the Broad boys. President Obama on Geithner’s uniqueness:

“The president believes he [Geithner] has unique experience, unique intelligence and a unique background to tackle the economic crises that we face right now. He will be a tremendous leader,”

A Bad Showing At Nomura Holdings (Reuters)
The Japanese powerhouse showed down $3.8B Q4 on the heels of buying Lehman Brothers’ operations, exposure to Iceland, and Madoff.

“Nomura said it would cut some executive bonuses and salaries, not pay a dividend for the current quarter and may sell businesses as it integrates the Asian, European and Middle East operations it bought last year from failed Wall Street bank Lehman Brothers”

Tuesday’s Pirate Update (BBC)
The head of the Indian Ocean Tuna Commission is screaming bloody murder over the 30% decrease in Tuna production due to piracy, which (according to some economic law or another) means higher Tuna prices.

Yes, ladies, it appears the damn Pirates are snatching up all the Tuna.

Fannie/Freddie May Have To Seek Additional $51B (Reuters)
Freddie is probably going to have to absorb another $35B (we’re going high side here) in preferred capital after its rather large subprime portfolio took another round of losses in its most recent quarter, leaving a paltry $16B for Fannie. The loss will mean that Freddie has still only used about half its initial $100B allowance, though the need tramples the expected needs as predicted by Barclays ($26B).

Paulson & Co. Scores Big On RBS Loss (Bloomberg)
In a move sure to draw ire from some corner of the universe, Paulson has effectively shorted the shit out of RBS for a gain of $420MM over the trailing Quarter (roughly).

“Paulson held a short position of 0.87 percent in Edinburgh- based RBS on Sept. 19, according to regulatory filings. The shares traded at 213.5 pence at the time, and Paulson’s disclosure indicates he borrowed almost 144 million RBS shares with plans to buy them back at a lower price. He reduced his short position to less than 0.25 percent, or about 98.6 million shares, as of Jan. 23, according to a filing yesterday.”

$$$ CEOs Dropping out of Davos [Portfolio]

$$$ Bernie Madoff Pissed Off the Wrong Trust-Funders [Daily Intel]

$$$ No jet for Vikula? [zerohedge]

MARIA BARTIROMO: Thanks very much. Well, while I’m in Davos, Switzerland, right now covering the World Economic Forum, John Thain is in New York City. And he joins us now with this exclusive interview to talk about the events of the day. John, thanks very much for sitting down with us. We appreciate your time.

JOHN THAIN: It’s no problem, Maria. It’s happy— I’m happy to talk to you.

MARIA BARTIROMO: Last week you were asked to step down from your job of running Merrill Lynch, just three months after agreeing a deal— to a deal with Bank of America. Can you tell us what happened?

JOHN THAIN: Well, Maria, I would first say I was surprised. We were only 20 days into the combination. I had agreed to stay because I thought there was a great opportunity— for the companies. I thought the strategy made sense. And I thought I could help a lot with the transition process. And it’s always difficult when you’re combining two organizations. And I thought— my ability to try to help— with that transition and— and help build the team going forward would be— a good opportunity. And, frankly, the first 20 days, the results were very good. So I— I was surprised.

Financial News reports that more than half of SAC Capital’s London staff has left the building since October, including partners James Van Den Bergh and David Morant. It was not made clear whether the departures were voluntary or precipitated by scar tissue associated with having a deep-fryer thrown in one’s direction, but we have our guesses. If anyone has anything to get of his (or her or his/her) chest, do not hesitate to get in touch. In more joyous, sheet-cakes for everyone! news, former Deutsche Bank executive Drew Lubin has joined the London team. Please do your part to make him feel welcome.

Do we even have to go through the exercise of putting this through Equity Private’s Guidebook for Financial Fraud Analysis (1st Edition)?

New York and federal officials are investigating a Hauppauge investment firm that has indefinitely halted payouts to clients, citing setbacks on commercial real estate loans.

The firm, Agape World, specializes in short-term, high-yield loans to developers and builders, offering investors returns of as much as 14 percent in as little as 72 days.

The firm’s founder, Nicholas Cosmo, told investors on a 1 p.m. conference call on Friday that three borrowers had defaulted on loans, forcing the halt in payments. Cosmo told more than 150 investors on the call that he had hired a law firm to foreclose on the projects and recoup investments, but that the process could take as long as one year.

“My job is to make sure that principal is paid back in total,” Cosmo said on the call.

Cosmo did not immediately respond to e-mails seeking comment. Attempts to reach him by phone were also unsuccessful.

Agape clients invested between $5,000 and $3 million each to fund what are known as bridge loans that usually lasted 10 to 12 weeks, but which could extend for several months.

Need I go on? Really? Alright.

In 1999, Cosmo was sentenced to 21 months in federal prison and ordered to pay $177,000 in restitution for his role in defrauding investors of a Long Island securities dealer. The court also ordered him to undergo gambling therapy as part of his sentence.

Cosmo founded Agape World soon after his release from prison in August 2000 with money from family and friends.

This is my favorite part though:

Entrepreneur Magazine last year named Agape one of America’s fastest-growing companies.

Then there’s this:

Angry victims of an alleged Ponzi scheme stormed the Hauppauge offices of Agape World, and one of them socked owner Nick Cosmo upside his head Friday.

I mean, you can’t make this stuff up.

Update:

Posted by Anal_yst, Jan 26, 2009 4:20PM

This.Is.Awesome!

Want pics of the carnage asap!

Your wish is my command. Pics after the jump.

LI investment firm halts payouts, under investigation [Long Island Business News]

Agape investor packed a punch [LI Biz Blog]

You have to hand it to this guy Dreier. He really managed to scam some sharp folks. Or perhaps we have a very over-inflated view of the collective sharpness of hedge funds with famous names and big AUMs.

Elliott’s losses tied to the fraud accounted for less than 1 percent of the money it oversees, according to a person familiar with the firm.

“Elliott has been deceived more than once over the years, and it is likely to happen again in the future,” the fund said in the letter.

Elliott Hedge Fund Bought Fictitious Securities From Dreier [Bloomberg]

Earlier: Would You Give $50 Million To This Man?

What follows is a photograph of Philip Toub, Fairfield Greenwich partner, son-in-law of Walter, and husband of Alix, at a Pimps and Hos party. Don’t know when it was taken (last night?) but that’s pretty much immaterial. PT is on the left.

Performance for everyone’s favorite “he is a Tiger cub” “he isn’t a Tiger cub” through January 23^rd:

None of the funds provided by this Act may be made available to the State of Illinois, or any agency of the State, unless (1) the use of such funds by the State is approved in legislation enacted by the State after the date of the enactment of this Act, or (2) Rod R. Blagojevich no longer holds the office of Governor of the State of Illinois.The preceding sentence shall not apply to any funds provided directly to a unit of local government (1) by a Federal department or agency, or (2) by an established formula from the State.

The Stimulus Bill [Read The Stimulus]

The Blagojevich Provision in the Stimulus Bill [National Review Online]

Our favorite Target-lover held his annual investor dinner last Thursday. For those of you who couldn’t attend, the presentation is after the jump. Later, we’ll simulate what it was like to eat pasta with Ackman, Lady and the Tramp-style, which he took the time to do with each and every guest, because unlike certain other managers, he works hard for the money.

Her father and husband may have lost everything, but Marisa Noel Brown still up to get down. Guest of a Guest reports that the youngest Noel girl is hosting a soiree this Thursday at the Doubles Club in the Sherry-Netherland Hotel. Walter Noel, on the prowl for new investors, set to attend. RSVP today.

What will we miss most about the last few years? Well, the list is long, but high up on it is Bill Ackman’s skewing of MBIA. That trade was a brutally long campaign, and caught Ackman a lot of flak from MBIA’s PR efforts, but it paid off in the end. Apparently, he has unwound it, finally. Waiting on the last two dollars might have been bouncing the rubble. After a 78% drop in 2008, I’d think about unwinding too. Then again, while he’s been in MBIA with Pershing Square for some time, his short view on the stock dates back much longer: seven years or so.

Ackman first thought MBIA’s stock and bonds would fall in 2002 when he oversaw Gotham Partners, a New York-based investment firm. He wrote a 62-page report casting doubt on the AAA ratings at MBIA’s insurance unit, and last year seven bond insurers lost top rankings as losses on securities backed by subprime mortgages soared.

Sexy graphs after the jump.

When we were informed last month that Citigroup was putting two of its corporate jets up for sale, the reaction was pretty much “What the fuck is this shit?” First off, as everyone here knows, private jets are an essential component of Citi’s business model. Second, the firm had already instituted its ban on color copies, so we were under the impression that things were back on track, making-money wise. Some calls were placed and Saudi Prince Alwalweed promised to make his superjumbo available, but it looks like we may not have to rely on the kindness of the Shareholder 4 Life. The Post reports that the Big C is soon to be the proud owner of a brand spanking new Dassault Falcon 7X. There are apparently just nine of these French-made toys in the U.S., which, for a mere $50 million, will transport Vikram Pandit and 11 of his closest pals in a style they deserve.

We all know what will pull us out of this nose dive: $1 trillion in direct stimulus. Huzzah! What is less well advertised is what sort of strings will be attached.

When Paulson announced to several of the large banks that they were going to get bailout money and like it, a few had the temerity to ask what the conditions were. Of course, anyone who made such a comment was just opening themselves up to accusations that the developing (but not described) restrictions on executive pay were the motive for the rejection. That silenced about everyone. The institutions took the money. Some more grudgingly than others.

Fast forward. Surprise! Now anyone with public money is bathing in the gelatinous “squish” of a million squirming appetites, forced to submit to a literal morass of legislative tentacle sex with hundreds of pet projects, social theory experiments and personal causes (from the left and the right), not to mention the utter chaos and unpredictability of having every idiot in the House pop off about what new rule you should be following this week. Predicting what is or will be expected of you (or what you may or may not be paid) is a nightmarish prospect.

The typically good Falkenblog examines the consequences of these sorts of situations against big stimulus plans:

To see the problems, note that for the past 15 years, every bank merger would have to by approved by regulators, who were keen on making sure these banks were making adequate recompense for red-lining and other policies. Thus, consider this press release from when Washington Mutual acquired Dime bank in 2001:

In connection with its merger with Dime, Washington Mutual recently established a ten-year, $375 billion community commitment which targets funding to low- and moderate-income borrowers, and minority borrowers, as well as direct investments and other forms of support in communities where the company operates, including the greater metropolitan New York area. One of the largest community commitments of its kind, the ten-year pledge will be implemented with the assistance and support of a variety of non-profit community partners.

Now, WaMu hade [sic] about $250B in assets at this time. Pledging $375B for low-income borrowers staggers the imagination. If the entire banking sector was making these pledges, how, possibly, could one actually meet this objective without creating a huge system of favors, with vested interests at every level (government, business, nonprofit, regulatory, academic)? More importantly, how could it not end in a huge number of bad loans? That it took so long to implode is the most amazing thing. When it finally blew up, those responsible for the mess would say, like “it was perverse that Freddie Mac and Fannie Mae, the two biggest providers of money for U.S. home loans, have been encouraged to put people into homes that they end up losing.” That was Richard Syron, who was head of the Boston Fed when it ‘proved’ that existing residential lending was discriminatory and too conservative back in 1992, and was rewarded as head of Fannie Mae, where he pocketed $38MM for running it into the ground.

Falkenblog goes on to wonder what perverse incentives $1 trillion in stimulus might leave our heirs with. Not a bad question considering we are well on the way back to lending requirements (all of them loose) for any TARP institution.

Will we never learn?

Big Government’s Big Effects [Falkenblog]

Typically when Congress can’t get the political backing to actually pass a bill to pay for something, they do the next best thing: get the political backing to guarantee something, or insure any losses. At the very least this reduces the cost of capital for the activity. Throw some tax benefits in and you go a long way to encouraging the behavior you are trying to stimulate. So potent can the effect be that you don’t even necessarily need a direct guarantee. (The “too big to fail” condition and the “implicit guarantee” of a Fannie Mae is a good example here).

Alea points us to a Financial Times piece this morning that hints at the use of that kind of backing. To wit:

Forcing institutions to raise capital, be it private or public, at panic-driven fire sale prices threatens enormous dilutions to already shell-shocked shareholders, further exacerbating uncertainty and fuelling the downward spiral. This is self-defeating.

The question then is whether it is feasible to run a (nearly) capital-less financial system until panic subsides. If it is, then a solution to the financial crisis is in sight since it would free up trillions of dollars of hard to raise funds, covering more than even the most extreme estimate of losses.

I believe it is feasible to run such a system for a while, because, essentially, distressed financial institutions need (regulatory) capital for two basic purposes: To act as a buffer for negative shocks, and to reduce their risk-shifting incentives by exposing them to their losses.

However these two functions can be replaced, respectively, by the provision of a comprehensive public insurance, and by strict (and intrusive) government supervision while this insurance is in place.

We call the plan “Back Up and Bully.”

The problem with this level of insurance is that while it preserves public capital (and prevents dilution) you can write a lot of insurance before anyone starts to notice that you are on the hook for, well, a lot of insurance. (See e.g., Fannie and Freddie).

Caballero is thin on details, particularly the part about how the day-to-day operations of a “capital-less” bank work. We wonder after these details. In the present situation a good share of the capital being raised is likely to actually cover losses. An interesting side effect of mark-to-myth accounting is that you might not trigger capital and margin calls based on those marks right away, but they could well be coming in short order. We tend to think that the Treasury knew a bit more than it was telling about the state of bank balance sheets early in the crisis. A capital-less solution might not be as practical as it looks here. Still, it’s fun to dream- and not every case is a lost cause for this solution.

A capital-less financial system [The Financial Times]

Investors don’t know it yet but apparently a decision was made internally last night to suspend redemptions at Union Bancaire Privée for 3/31/09, with the funds being “restructured.” Since *someone* went public with his pyramid scheme, requests for money to be returned have hit $7.5 billion.

Related: UBP’s Primer On Madoff

The title’s supposed to come with some sort of job security but at least one analyst has gone on record to say that Ken Lewis is finished. NAB Research banking analyst Nancy Bush told the Journal, “I think his job is in jeopardy. I think he is gone next week. He is rearranging the deck chairs before he gets thrown overboard.” And though throwing John Thain under the commode on legs was supposed to strengthen his position at the top, even best buddy Angelo Mozilo, former Countrywide CEO and current BAC men’s room bookie, is taking bets this morning regarding Lewis’s future with the firm. So.

Among other things! Maria Bartiromo reports that in a memo to top Merrill executives last night (the ones that are left and the dearly departed), John Thain (kind of) apologized for the $1.2 million renovation to his office, and said he’d pay the bank back. According to JT, the redesign was made “during a very different world” and, BY THE WAY, wasn’t just his office but also a couple of conference rooms. Nonetheless, it was “a mistake in light of the world we live in.” Oh, and he says losses in the 4th quarter were all Stan O’Neal’s fault, and that Bank of America found out about them at the same time as Merrill. Suck it, Ken Lewis.

Full memo after the jump.

Earlier: John Thain To Get Canned For Having Fabulous Taste?
Related: Let’s Be Clear: I Am *With* These Idiots, Not *Of* These Idiots

[Friday, 6:30 PM: Bank of Amerillwide CEO Ken Lewis pours one out for John Thain during “half-price scotch night” at Sonoma Restaurant in the BAC Corporate Center]

BofA had role in Merrill bonuses (FT)
It appears the attempt to scapegoat Thain over the bonus debacle has failed miserably, and if anything come back to bite the bank in their collective asses. FT has it that not only did the bank know about the bonuses, but that they consulted on when and how the payouts should be approached, moving the structure from 60/40 cash/stock to 70/30 which is in like with BAC’s payout structure.

It looks like the southern-based-bank skipped the classes on how to set up a fall guy; I can promise you one of the initial steps is “don’t leave a paper trail proving you actually did all the work you’re getting him to take the fall for.” It’s actually up there in importance with “wear a black mask when robbing a bank” and “never give the cops your real drivers license when faking your death post plane crash.”

Barclays: “We’re Okay. No Really, We’re Great.” (Bloomberg)
Though there are those that would disagree, Barclays may find its way to being the one solvent major British bank. While it’s true the bank has written down $11B, they’re now saying they exceed capital requirements by £17B and that they’re going to report record revenue.

Icahn Continued Battle With Steel Partners (Reuters)
The story goes like this: Steel Partners gated redemptions last fall, which trapped a metric ton of Icahn’s cash. Icahn calls them, asks for his cash back politely; they said they’d get back to him - something about putting together a plan by February. Then, last week, Steel Partners announced they were planning on going public - which is when Icahn went shit-pot crazy and started screaming about Steel Parteners pulling a bait and switch.

You have to ask yourself what you would do in a situation like this: Sue? A Press Release/Positioning Statement? Write a letter and put it out on the wires (PRNewswire) calling for the other investors at Steel Partners to give you a call at his office so they can co-ordinate how to go forward?

Icahn went for the lawsuit and the press release, and the world’s a better place.

$$$ Dick Fuld: Protecting the Assets That Remain! [Cityfile]

$$$ Thain to walk away with ‘modest’ $1.5M [Investment News]

$$$ Auto Lease Trade-In Site Magnanimously Offers To Help Bernie Madoff Out Of Leases [Jalopnik]

Hop in the Delorean, we’re gunning this baby to the douche-tastic (but much loved) days of 2007. Put on your sunglasses cause we assure you, second-hand embarrassment will ensue:

Broke bankers and struggling models mobbed the rooftop of the Empire Hotel last night for the latest installment of Fashion Meets Finance. A tipsy brunette on crutches was trying to put her Burberry coat on so she could leave, but guys wearing suits sans ties kept jostling her as they moved past.

The party was billed as a return to the halcyon excesses of 2007, and enough unemployed finance types fished the necessary change from their couch to pony up for a bottle of Absolut. Liz, a 20-something fashionista in a low-cut black cocktail dress, eyed them skeptically and said, “just look at all the douches in those seats. They’re all so broke.” A line-up of seven models was in the DJ booth nodding to anemic dance music.

One of them, Sabrina Roberts, a six-foot Afro-Chinese stunner wearing a tiny creme-brulee-colored dress—told me she wasn’t giving up on finance dudes. “One, they’re more interesting; and two, can you imagine if everyone was in fashion?” I asked her if she had ever thought of dating so-called normal people. She twirled around, took a sip from her champagne flute and asked happily, “How do normal people pay for champagne?”

Graphic assault to the senses after the jump (via pictures from one of our readers who braved the storm).

This is the sort of bull of such magnificent proportions that I don’t even want to pass it on but here it is. Goldman Sachs president and co-chief operating officer, Jon Winkleried, has been forced to cut the asking price of his Nantucket waterfront home a whopping 30 percent. In October, Winks put the vacation place, set on 5.9 acres on Cathcart Road, which he bought in 1999 for about $6 million, on the market for $55 million. No bites, and now, per the Journal, Winkle has been reduced to practically giving the spread away, currently priced at $38.5 million. A time-share situation, wherein Warren Buffett’s would pay $5,000/week for 6 weeks/year (with a few buxom prosties as WB’s special preferred dividend), in the hopes that others will pay $1 million/week, is said to be gaining ground as Winks’s Plan B.

Goldman Official Cuts Nantucket Price by 30% [WSJ via Cityfile]

Footnoted is carrying a rather interesting post that notes the SECs continued interest in John Thain and his employment arrangements even before he was revealed as an affluent and enthusiastic connoisseur of expensive interior decor advice.

But it turns out the SEC has been asking its own questions about Thain, judging by a series of comment letters that have recently been made public. This letter dated Oct. 22 and sent on behalf of Bank of America (BAC) from high-powered law firm Wachtell Lipton responds to a letter sent by the SEC on Oct. 15 which raised 24 questions about the merger between BAC and Merrill. Here’s question #20:

Please provide a total dollar amount (estimated, if necessary) for each individual officer or director who stands to benefit from the merger. Please include a discussion regarding Mr. Thain’s continued employment arrangement with Bank of America and any similar arrangements with other Merrill Lynch officers and directors. Please include how these decisions will impact compensation for each individual.

That this information wasn’t part of the original filings and that the SEC had to ask for it to be included speaks volumes about this deal. In that same letter, another question focused on the fairness opinion — something we footnoted back in December.

A week later — on Oct. 29 — Wachtell Lipton sent another letter in response to SEC questions, including this one on Thain’s compensation once he joined Bank of America.

We note the 8-K filed by Bank of America on October 8, 2008 regarding Mr. Thain’s employment. With regard to Mr. Thain or other officers you have offered to retain, please include any compensation arrangements Bank of America has agreed to in connection with their continued employment.

Response:
The Staff is supplementally advised that the disclosures on pages 10, 69 and 75 of the Amendment continue to be accurate; as disclosed on pages 10 and 75, Bank of America has not reached agreement with Mr. Thain or any other executive officers of Merrill Lynch on compensation arrangements in connection with their continued employment following completion of the merger.

Uh oh.

The SEC was also asking questions about John Thain… [Footnoted.org]

(Emphasis ours)

In the depths of hell? Maybe! Though it’s become something of a parlor game to try and figure out who exactly will put a successful contract out on his head (Colombians? the Noels? Ruth Madoff?), it turns out Bernie-boy may get the job done himself. Page Six reports that several sources say Madoff may be suffering from pancreatic cancer. It would be distasteful of us to run a poll asking you to democratically determine if this is part 1 of a ‘fake my death’ scam but if you want to go ahead and let us know what you think, we’re not gonna stand in the way.

So, this is awk. If you thought Ken Lewis only dismissed employees from Bank of Amerillwide for spending 90k on rugs, you thought wrong, kemo sabes. Other fireable offenses in KL’s mind seem to include the ability to identify cesspools pools fit for being consigned to the scrap heap of corporate history. We’re told that Lewis, with the backing of former Countrywide CEO and current BAC fluffer Angelo Mozilo, got rid of Merrill bank analyst Ed Najarian after the firms merged research teams, despite the fact that his BAC counterpart, Ken Usdin, mostly covers the smaller firms, as does Heather Wolf, who was kept on from Merrill. Apparently the reason being cited by people who discuss these sorts of things is Najarian’s sell call on Bank of America, though we’re counting on one of you pick up the gauntlet thrown down by Charlie Gasparino, and find us some damning evidence of the scatological variety.

Reaffirm Sell [PDF]

The latest quest for financial weapons of mass destruction (hint: try looking in Syria) has a concerted push against Credit Default Swaps. Michael Lewis, cranky former banker turned cranker former writer slaps them with a left handed insult or two in The Atlantic last week, and random blogs ranging from The Market Ticker to Deal Journal to the electronic memo press at Wachtell Lipton Rosen & Katz regularly throw up missives bemoaning the very existence of the CDS market.

This from The Market Ticker:

“Naked” CDS, that is, swaps written or purchased not to hedge a bond or other business relationship but instead to speculate on the firm’s fortunes are effectively the same thing as a naked short, in that there are NO boundaries on how many CDS contracts can be written against a firm and by having them cash-settle they amount to nothing more or less than a gambling contract with no limit as to the leverage that can be employed.

We tend to be highly skeptical of any efforts to reduce pricing information. That is effectively what this is. Short selling bans and CDS bans only really reduce information available to the market. It is amazing to argue that credit default swaps (about the only counter balance to the insanity that was rating agency analysis) in the hands of evil hedge funds somehow precipitated the destruction of firms that were otherwise on the soundest of footing. Returning to Mark-To-Myth accounting and abandoning “What My Assets Are Really Worth At The Time Of This Writing” accounting amounts to the same insanity. Anyone who claims that such marks are “unrepresentative because they are at fire sale prices” is merely imposing their long-term price forecasting on accounting policy. We’ve seen how well these long-term forecasters predict prices, so we’d like to pass on that plan, thanks.

What most anti-short, anti-CDS proponents miss is that a firm with sufficient capital, a reputation for transparency and limited spin doctoring shouldn’t have to worry about short-sellers or credit default swaps- or should use the dip caused by such panic to buy back shares and move on. If pricing information on a thinly traded CDS contract somehow swings equity prices in dramatic ways it is because the market gives the disclosures offered up by management and ratings agencies almost no weight. This is exactly as it should be. When you are in a leveraged business, credibility is absolutely essential. Lehman didn’t fail simply because it was heavily leveraged. It failed because no one believed Erin Callan anymore and even a seriously interested party like David Einhorn was so obviously making so much more sense than Erin and the Lehman PR apparatus. Does anyone still doubt that the Lehman at $0.00 was the wrong price for that firm at the time?

Time to face facts. Propping up failed firms by artificially inventing prices (we are looking at you, Treasury) and then removing any ability of the market to contest those marks is Fantasy-Capitalism. We are all for a rich fantasy life. (Without it we wouldn’t have Marcus Schrenker). This said, we’d like it kept out of our Capitalism Cheerios, ‘kay, thanks. The CDS market is effectively the only market that was getting it right in the second half of 2007. Gutting it is a bad, bad idea^(tm).

Obama was talking stimulus packages earlier this morning, when he took a moment to caution that “taxpayer money should not go toward renovating offices.” Oh, yes, he went there. It might’ve been no big deal to the former MER CEO 24 hours ago, but now that he’s unemployed, this exactly the sort of stuff that’ll get the currently couchbound* John Thain to lean forward** in his sweats, almost spilling his glass*** of Sunny Delight, tell his buddies (Prince, O’Neal) playing XBox in the other room to “shut the fuck up, I want to hear this!” and nudge Cayne to drop the grav-bong**** and turn up the volume.

What was JT feeling when the President publicly slapped him on the wrist? Embarrassment? Shame? None of the above. Pride, my friends. Also getting off on the mention? Charlie Gasparino, who, by several leaps in logic, can now tell people Obama follows his work.

*Green upholstered duchesse c. 1770 ($92,000)
**toward the 55” Sony Bravia LCD flat panel ($6,000)
***Colbalt Blue Drinking Glass from the Michael Graves collection ($960)
****Swarovski-encrusted (not disclosed)

Not sure if it’s actually characterized as ‘layoff’ when your boss is (maybe) going downtown but we can quibble over semantics later. According to our resident Madoff expert, “people on the 17th, 18th, 19th floors started being let go yesterday, continuing this morning…included in the dismissals was Ron Hooey, who was a high paid friend of the Madoffs.” No word on whether or not Bernie-boy was there to see them off, though, let’s be honest, if he wanted to find a way to be there, he would. Regarding bouncing back, an unlikely rumor has been going around that the legal departments of some big firms have enacted a moratorium against hiring ex-Madoff employees, though we’ve been told that 3-4 PMs have already secured new jobs.

The quest to turn lead to gold is an old one, and as such we generally treat claims to have discovered the Philosopher’s Stone with skepticism. Great alchemists as memorable as Sir Isaac Newton have met with ignominious failure (and developed life-long cases of cracked, sulfur smelling, chemically burnt skin to boot). So, when Barclehs announces the discovery of the financial Philosopher’s Stone, we did that little closed-mouthed sniffle-laugh and switched into skim-mode.

Barclays Capital, the investment banking division of Barclays PLC, today announces that it has completed the integration of the North American businesses of Lehman Brothers acquired in September 2008. As the final step in the integration, it has strengthened the leadership of the expanded firm by promoting eight senior Managing Directors to its Executive Committee.

Bob Diamond, President, Barclays PLC, said: “The completion of the integration is a significant milestone for our clients, shareholders and employees, four months after announcing the acquisition. Our clients now have the benefit of a fully integrated investment bank able to offer the full array of risk management, financing and advisory products. We are now operating as one firm using our business principles to manage risk, manage costs and stay close to our clients. As we said, we targeted breakeven for the acquired businesses in 2008, and in fact they are already contributing to the bottom line.”

We did, however, notice that grim reality must be setting in. After all, who targets “breakeven” for the discovery of the Philosopher’s Stone?

Barclays Capital Completes Integration of Lehman Brothers; Expands Its Executive Committee [Barclehs AlchemyCapital]

Supposedly a gaggle of Goldmans will be shown the door next week, though it’s unclear if the reduction in headcount is part of the cuts that were mentioned for January back in December, or just Blankfein flying by the seat of his pants. An additional round is also rumored to be in the works for April.

Schapiro Approved as New SEC Chairman (Reuters)
Apparently the New SEC doesn’t take shit from anyone, and maybe carries nightsticks. At her confirmation hearing yesterday, Mary Schapiro vowed— and she actually said this— to ‘take the ‘handcuffs off’ the SEC’s enforcement division and go full force against anyone who violates investors’ trust.”

Citi Directors To Leave (FT)
“Citigroup is to revamp its board with the departure of long-standing members Kenneth Derr and Franklin Thomas following criticism of its ability to supervise the troubled company’s executives and strategy, people close to the situation have said.”

What We Have Here Is A Three Pronged Approach (WSJ)
Apparently what we’re looking at is the following:

1) Stemming Foreclosures.

2) Revamping Existing Efforts.

3) Purchasing of Assets.

Pulling the assets off the books is going to help, but it’s not going to help as fast as the government thinks it will; there would be at least a two quarter bleed before the banks would consider loosening restrictions in re: liquidity.

That being said, we haven’t seen anything concrete on the “Stemming Foreclosures” side yet, and I don’t have a clue what the “Revamping” prong even means.

Google Beats Expectations (Reuters)
“Excluding one-time charges, profit was $5.10 a share, beating the average analyst forecast of $4.95 according to Reuters Estimates.

Revenue rose 18 percent to $5.7 billion — a shadow of the 50 percent growth levels that Google used to enjoy, but considered by analysts to be a robust performance given the weak economy and corporate cutbacks in advertising spending.”

Bankers And Regulators Call It What It Is (Bloomberg)
The idea that just because you avoid the word nationalization it isn’t in play is annoying; the bottom line here is that the government has in fact nationalized some of the banks. Look at it like this: arrest in many states is defined as the inability to leave. Now, the police won’t directly place you under arrest in most cases until they’re done questioning you about whatever heinous thing you did/peed on. But, should you be snarky and insist on departure, they will (usually) cuff your ass.

No one in the government is calling what’s going on nationalization until the banks decide that they can act autonomously again. Or, as Jon Bruss puts it: “When the Treasury tells a bank to pay a penny a share vs. its old dividend, you know who’s calling the shots.”

Pfizer In Talks To Buy Wyeth (WSJ)
The combination of the two companies would provide for a pharmaceutical powerhouse, one would hope they will use their newfound power for the ultimate good: the panacea for STDs.

“Pfizer, the world’s largest drug maker by revenue, would likely use a combination of cash and stock for the acquisition. Details on price haven’t been worked out, but Wyeth has a market capitalization of about $52 billion and premiums in the sector have averaged just over 20%. That would put the value of the deal at well over $60 billion.”

$$$ Cuomo Scrutinizes Merrill Lynch Bonuses [Deal Journal]

$$$ Buffett Hints at Buyback of Berkshire Shares [Dealbook]

$$$ Meredith Whitney: America’s banks need to sell “crown jewels.” [FT]

DB CooperMarcus Schrenker was arraigned today and quickly pleaded “not guilty” to the charges of intentionally destroying an aircraft and faking a distress call. His public defender (wow that sucks), obviously reacting to the “not guilty” plea, has indicated that he has “reasonable cause” to believe Schrenker is suffering from a mental condition. (We are guessing acute Gottagetawayfromthiscastratingbitchwiththecashitis, but the situation is fluid).

Pilot pleads not guilty in plane crash death hoax [CNN]

As many of you have pointed out, the JP Morgan chart we posted earlier was entirely divorced from even a remote understanding of geometry. We have undertaken to correct the “off by one dimension” error, but owning to time constraints, we are only able to bring you the correction for Citigroup.

From: ML COMMS GROUP ALERT

Sent: Thu Jan 22 14:27:52 2009

Subject: Moynihan to head Global Banking and wealth management; Montag to report to CEO

And here’s what they’re doing about it!

Related: Angelo Mozilo More Or Less Suggests Bank Of America Stock Up On Lube

I think RBS is my favorite.

The US Securities and Exchange Commission on Wednesday accused Arthur Nadel, a missing Florida-based hedge fund manager, of falsely overstating by about $300m the value of investments in six funds he advised.

The actual value of the hedge funds’ assets is only about $506,000, according to the SEC’s complaint, which was filed in a Florida district court on Wednesday. Mr Nadel also recently transferred $1.25m from two of the hedge funds to a secret bank account, the SEC alleged.

Honestly, is no one immune?

Publishing BAC research analysts, who were guaranteed their bonuses last year after the debacle in February of 2008, were informed that their bonuses would be paid entirely in restricted stock, with no cash component.

John Thain isn’t the only one out of a job. Apparently all Bank of America equity research 1st years were laid off today.

Charlie Gasparino reports that John Thain is to leave Bank of Amerrillwide, effective immediately. Tom Montag leaving, too.

Update: BoA claims Montag is staying.

As previously mentioned, Ken Lewis is supposed to be holding an “emergency” meeting right now to discuss John Thain’s future, or lack thereof, at Bank of Amerillwide. As recently as an hour ago, most of you probably thought the meat of the conversation would be the matter of Thain selling Lewis a heaping pile of garbage. NO LONGER. Per the game changing bomb dropped by CNBC’s Senior Interior Decorator Charlie Gasparino moments ago, re: Thain spending 90k on an area rug for his office, we have it on good authority that the first issue on Lewis’s agenda is the following surveillance shot of JT “hard at work.” Be interesting to see how Thain explains this.

“Don’t try that ‘Mr. Pink’ stuff with us. We’ll hunt you down like the mongrel dog you are.”

South Korean prosecutors indicted a blogger on Thursday who had warned of financial doom for the country with critics saying he was targeted because his gloomy forecasts upset the government battling an economic downturn.

The blogger, writing under the pseudonym Minerva, became a household name for his predictions of sharp falls in the won and the local stock market and the collapse of U.S. investment bank Lehman Brothers. Prosecutors said he hurt the local currency by posting incorrect information online.

“The suspect in this case was indicted on charges of false information on two occasions,” an official at the prosecutors’ office said by telephone.

As South Korean markets tumbled late last year amid the global downturn, the main financial regulator warned it would crack down on what it considered malicious rumors and some economic analysts say they have come under pressure from authorities not to voice negative views on the economy.

South Korea’s “prophet of doom” blogger indicted [Reuters]

CNBC’s Senior Interior Decorator Charlie Gasparino dug deep and reports that upon taking over at Merrill last year, John Thain spent $1.22 million redecorating his office (itemized receipt after the jump). We don’t really care either way if JT “gets” to stay at Bank of Amerillwide or not, but please for the love of Angelo Mozilo (who, btw, didn’t get any heat for converting his office into a Hollywood Tans in ‘89), if he does, can it be over the issue of spending $35k on a Porta Potty? This is something we want, nay, need, to hear Ken Lewis get worked up over. If that can’t be arranged, we’ll settle for Lewis sending a bunch of men over to Thain’s office to pee on, and then steal, the 90k rug.

Someone famous once asked, “What separates China from the rest of the world?” and then promptly answered, “Accountability.” That author was referring to the Chinese death sentence handed down to the 62 year old top food and drug regulator for taking bribes. Just so you don’t think they were messing around when they said “death,” the guy was executed without fanfare less than 60 days after the sentence was read.

That was in 2007. Not much has changed, well, except some vertical death sentence integration:

The former chairwoman of China’s Sanlu dairy was sentenced to life in prison and three others received death sentences Thursday in a tainted milk scandal that killed at least six infants and sickened nearly 300,000 others.

Tian Wenhua and three other Sanlu Group executives were put on trial for producing and selling fake or substandard products after their arrests in late September.

Tian, who pleaded guilty in December, received a life sentence Thursday. Former deputy general managers Wang Yuliang and Hang Zhiqi received sentences of 15 and eight years, while Wu Jusheng, a former executive heading Sanlu’s milk division, was sentenced to five years in prison.

In addition, Sanlu, Tian and Wang were ordered to pay multi-million dollar fines.

The court also sentenced three people to death, including a suspended sentence pending a review, and two others to life in prison. Six more received prison terms of five to 15 years each.

A list of sentences handed down by a Chinese court Thursday in China’s tainted milk scandal.

Sanlu Group
— Tian Wenhua, former chairwoman: life, $3.6M fine
— Wang Yuliang, former executive: 15 years, $3.5M
— Hang Zhiqi, former executive: 8 years, $133,000
— Wu Jisheng, former executive, 5 years, $88,000
— Company: $7 million fine
Producers
— Geng Jinping, milk producer: death, assets confiscated
— Geng Jinzhu, milk producer, 8 years, $73,000
Middlemen
— Zhang Yujun: death
— Gao Junjie: death; sentence suspended 2 years pending review
— Zhang Yanzhang: life
— Xue Jianzhong: life
— Zhang Yanjun: 15 years
— Xiao Yu: 5 years

Many of the defendants — including one who received a death sentence — were middlemen who sold melamine to milking stations that added the chemical to the milk.

Parents outside the courthouse were outraged by the sentence that spared Tian’s life. A mother who’s baby died from contaminated milk said she wanted Tian shot to pay for the life of her child.

Make no mistake about it. China does not fuck around.

Try accelerating some bonuses over there and I bet you get your ass handed to you (literally) before you die of massive hypovolemia, have your assets seized, your body boiled down for its essential oils, your children sent off somewhere to be ground up and sold, the proceeds sent to the victims and a bill for processing services sent to your estate with penalties and 8% per month in late fees.

I do have to wonder though, with all this accountability (China has been handing down death sentences like this for some time) why is it that I still can’t get a tube of toothpaste from the place that won’t kill me? (I’ve since switched to Tom’s of Maine). If China can’t eliminate greed (and we are talking naked bribery and corruption here, not someone front running clients or stacking the board with old fraternity brothers) with the liberal use of the death penalty, how exactly is the present administration (or any other) going to stamp it out in the present (semi)capitalist system?

Hint: It can’t.

No my friends. We must learn to harness this great power. Properly refined, a certain otherwise un-noteworthy area in Connecticut could provide enough killogreed-hours to power the entire Northern hemisphere.

Death sentences in China tainted milk case [CNN]

A breathless Charlie Gasparino reports that Ken Lewis will conduct an “emergency meeting” with Thain to “discuss his future at B of A,” circa 11:30 this morning, with former Countrywide CEO and current Bank of Amerillwide administrative assistant Angelo Mozilo taking notes. “Discuss his future” kind of sounds like Lewis is going to take his belt off, which makes me nervous for JT, but let us not forget THIS:

What do you do when your firm is on the verge of being absorbed, you are about to announce massive quarterly losses and the government might impose salary restrictions? Why, announce bonuses early! That was easy.

Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later - usually late January or early February, according to company officials.

Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.

It will come as no surprise that we love bankers. Yes, we mean you. Without your antics, where on earth would we be here at Dealbreaker? Still, there must be some limits to the shifty imaginations lurking under those big, blue eyes. No? At some point someone has to say “enough is enough” and buckle down to admit that maybe the institutional decision to hold 30:1 leverage, and the structural changes you’ve made over the past ten to fifteen years to become a securitization clearing house, routinely torturing Basel to within inches of its life, might not actually have been the way to eternal glory and a spot in the great hall at Valhalla (where the time will be spent underwriting Bowie bonds on hunting ventures, no doubt). Someone had to say that. Someone had to, ever so gently, put a toe on the brakes.

Unfortunately, in this case, that someone was John Thain.

It looks like the fantasy that tech was going to pull everything out (did anyone really believe this) has been torpedoed twice, is dead in the water and is listing 12 degrees to port.

Microsoft Corp. will cut 5,000 jobs, or about 5 percent of its workforce, as the global recession eats into demand for software.

The reductions, Microsoft’s first companywide firings, will take place in nearly all areas, including research, sales and marketing, the company said today in a statement. The measure, announced with the company’s second-quarter earnings, will save $1.5 billion, Microsoft said.

Chief Executive Officer Steve Ballmer is under pressure to reduce costs as sales growth dries up in what may be the worst recession since World War II. The company’s Windows division, which accounts for about a quarter of sales, is suffering after personal-computer shipments rose at the slowest rate in six years in the fourth quarter.

Doing the monkey-boy dance isn’t likely to save things for Microsoft, which, like it or not, faces increasing irrelevancy and timing of a product cycle that isn’t doing it any favors. Vista is a disappointment and Windows 7 isn’t likely to help much. There are just so many new tricks you can squeeze into an operating system and until Windows cooks perfect toast in the morning, we’ve hit the point of diminishing marginal returns. This, combined with the Microsoft-Intel chain gang effect puts old Steve in the spotlight while chained by the ankle to Woody Allen. There are fates worse than death, but not many.

Microsoft Cuts 5,000 Jobs as Recession Curbs Growth [Bloomberg]

Merrill has apparently converted itself into a slaughterhouse this morning, with “rates getting annihilated.” Regarding yesterday’s BoA cannings, a bit more color:

Citi Wants More, So Sayeth Parsons (BBC)
The $306B guarantee of assets last year wasn’t enough so far as Mr. Parsons is concerned: he wants the assets off of his sheets for good. The conversation came about when Parsons started making comments to the affect of lending and why they aren’t doing more of it, and somehow ended with this: “It’s not a situation of, you do this for me, and I’ll do that.” This, as I’m sure you’re aware, is effectively like saying “I maxed out my credit cards on Hookers, take those off my hands and I’ll donate to the charity pool”… “except I might not.”

AIG Remains Active In Dissolution (FT)
AIG has been making headlines lately with their active spin-off and sell strategy, valuing companies and finding perspective buyers more quickly than I had imagined was possible. Having not yet found leniency in the government structured payment requirements (as mentioned, they were looking for stock in the sell instead of cash only), they appear to have developed a sustainable model in rent-to-own - the question now becomes one of who can afford to absorb this stuff; $20B isn’t change these days.

“Prospective bidders include: China Life, the world’s largest life assurer; HSBC, the UK-based bank; Prudential, the UK insurance group; as well as Prudential Financial of the US.

ManuLife Financial, one of North America’s biggest insurance groups, and Allianz of Germany have also requested information.”

More Merrill Mayhem (DJNewswire)
One has to wonder if the exits were strategic negotiations on the part of BAC, or just angered employees heading for the hills. Either way, ML Asia is projecting a flight of confidence from its upper ranks, as evidenced:

“Ajay Sawhney, head of regional leveraged finance, has left Merrill in Singapore, one person told Dow Jones Newswires.

Jon Pratt, head of Asia Debt Capital Markets, left the firm in Hong Kong recently, while Rahul Malhotra, head of the bank’s Global Wealth Management Asia Advisory unit, has left the Singapore office, another person said.”

Sortable TARP Map (WSJ)
While we’ve seen these on lunatic fringe sites, this one is actually kind of fun. You’ll notice that there’s eight states that didn’t take TARP funds, so good for you: it turns out being boring DID actually pay off.

Math Could Have Proved Madoff Was A Thief (FT)
In a fleeting moment of genius, someone said let’s bring in a risk manager to see if thing would have tested out..it didn’t:

“A study to be published on Thursday by Riskdata, a risk management specialist, argues that Mr Madoff’s returns are called into question by the bias ratio - a mathematical technique that identifies abnormalities in the distribution of a series of investment returns.”

UBS To Cut More Jobs (Bloomberg)
Today, on the daily UBS update, we see that they’re looking at cutting Securities and more Debt people. When asked, Dirk Hoffmann-Becking responded:

“The end-game result I expect for UBS’s investment bank is a business entirely focused on equities, equity underwriting, merger advice and foreign exchange”

Bank of America Accused by Investor of Undisclosed Merrill Loss (Bloomberg)
Some BAC shareholders are miffed over not being told MER was a pile of garbage pre-merger.

$$$ Maria Bartiromo sticking with the peacock [NYP]

$$$ Dimon Bought $11.5 Million in JPM Stock Last Week [Bloomberg]

$$$ Why Do I Keep Having to Repeat Myself? [1-2]

$$$ “Falsely no doubt”? Considering the “rumor” originated in the fucked up imaginations of this here website, I think we’ll be the ones determining what’s false and what’s not, thank you very much. (And false it is not. The big guy really did task his top employees with shutting the Kogans down. Confirm it as 203-890-2000.) That is all. (Steve backs me up on this, btw.) [FWIW via ZeroHedge]

Citi Names Richard D. Parsons as Chairman of the Board of Directors; Sir Win Bischoff to Retire

Citi today announced that Lead Director and Chair of the Board’s Nomination and Governance Committee, Richard D. Parsons, will succeed Sir Win Bischoff as Chairman of the Board of Directors, effective February 23. Sir Win, who has been with Citi since 2000, said he will not stand for re-election to the Board at Citi’s next Annual Meeting and will retire from Citi later this year.

Citi Chief Executive Officer Vikram Pandit stated: “Sir Win has been an outstanding Board member and Chairman as well as a trusted advisor to me during my time at Citi. He agreed to take on senior leadership roles at Citi more than a year ago during a critical time for the company, and over the years has made very substantial contributions to this global enterprise. We thank Sir Win for his wise and sage counsel, as well as for his insightful guidance, and wish him nothing but continued success for the future.”

Mr. Parsons stated, “It is an honor to succeed Sir Win. He helped guide Citi during its period of stellar growth, and later was drafted to lead the company at a tumultuous time. The Board is especially grateful that he met that challenge with distinction. I look forward to continuing to work with the Board and management of Citi in my new capacity as we continue to strengthen the company’s core franchise and build value for our shareholders. As always, we will strive to provide superior service to our clients and maintain a dynamic workplace for our employees.”

Consumer Reports Reports:

For example, at the liquidation, a 50-inch Panasonic plasma TV was discounted to $1,800, a $200 savings. That might sound like a bargain, but if you check the circular you’ll see that Circuit City had planned to cut the price this week by $500. What’s more, we found the same model online for $1,365, including free shipping.

An HP all-in-one printer, at the liquidation for $270, was scheduled to be on sale for $150. And we found it as low as $135 online. A Garmin GPS system, discounted to $225, was $160 in the circular and $141 online.

Despite the modest discounts, the checkout counter was mobbed. We repeatedly overheard salespeople telling customers that they had run out of merchandise. Shoppers were undeterred by signs proclaiming that all sales are final; that the store no longer was accepting the Circuit City credit cards, personal checks, or coupons; and that it wouldn’t match competitors’ prices.

This is either massive genius, or complete incompetence, depending on how the liquidation goes.

Bargain Hunting? Not So Much [Banker Gone Broke]

Stub: 7.5k
2^nd year analyst (which at JPM means started training July ‘07): 60 (top), 40 (middle), 12 (bottom).

Earlier: Comp Watch ‘09: JPM

Ken Lewis just bought 200,000 shares of BAC, we understand. It’s up over 30% today already (but most financials are spiking today). Vote of confidence? Cheap way to telegraph a vote of confidence?

Have you considered Sarasota, Florida?

Culturally elegant and brimming with adventure, yet laid back and tranquil. This is a vacation destination like no other.

Wrapped with 35 miles of silken beachfront, Sarasota is a package of rich cultural history, sun-drenched islands, natural treasures and unlimited discoveries. Come … get to know Sarasota and Her Islands and see for yourself what makes this area so remarkable.

You’ll come for the white sands and breathtaking sunsets, but find there’s so much more to discover in Sarasota and Her Islands when you go beyond the beaches. Family festivals and activities. Arts, music and film. Romantic, gourmet dinners. Golf, sailing and fishing. World-class shopping. Weddings full of wonder.

Our lax attitude towards living mirrors our lax attitude to law enforcement. You will be pleased to know that our easy going law enforcement officials spend little time running down white collar crime. In many cases simply the expression of the desire to be left alone is enough to prompt our officers to pursue other, more rewarding opportunities. Police have already given up looking for our latest distinguished visitor, the now missing hedge fund manager Arthur Nadel as it is clear “he doesn’t want to be found.”

Our inviting atmosphere and easy to live with regulatory environment, combined with a high concentration of high net worth individuals nearing the end of their intellectual and cerebral lives makes Sarasota an ideal place to relocate. Come find out for yourself that sunshine and shady characters go hand in hand!

Nadel ‘Doesn’t Want To Be Found,’ Sheriff Says [FinAlternatives]

Not that we’re not thrilled with your genius decision, but, without digging too deep, can we just ask, why the change of heart? Does it really appear as though we’ve figured out how to make this thing work, or did ‘09 just feel like your year to make some risky decisions, and unprotected sex with a junkie wasn’t feasible at this time?

The U.S. Securities and Exchange Commission on Wednesday charged missing fund manager Arthur Nadel with defrauding investors at six Florida-based hedge funds.

The SEC said Nadel provided false information to investors about the funds’ returns and overstated the value of the investments by about $300 million.

Nadel, the 76-year-old head of a Sarasota fund management company, was reported missing by his family a week ago. Two days later investors began complaining to police that possibly hundreds of millions of dollars were missing from the funds he ran.

The fact that this guy, at 76, has managed to put our 38 year old DB Cooper wannabe to shame (the last sign of Nadel was his green Suburu found in the airport parking lot- which makes me think he is driving to Mexico in another vehicle while police waste their time looking at ticket records) makes him the leading candidate for the Dealbreaker Ponzi Escape Award (sponsored by the Dealbreaker Guide: How To Properly Escape Capture Following Your Massive (or Relatively Massive) Financial Fraud. Part II is presently in development!) We are still deciding on a trophy design. Feel free to put your suggestions (as well as any nominees we may have overlooked) into comments.

US SEC charges missing Florida fund manager [Reuters]

Bloomberg Reports:

A former Texas bail bondsman who told investors he ran a $45 million hedge fund and installed a swimming pool at his office was sued by U.S. regulators for allegedly operating a Ponzi scheme.

Ok, just stop for a second. Let’s deconstruct this one using Equity Private’s Guidebook for Financial Fraud Analysis (1st Edition).

Purported Hedge Fund Manager (Section 2: Base score: -1):

1. Former (-1)
2. Texas (-3)
3. Bail Bondsman (Not in the guidebook, use Section 4.5(a)(c): “The analyst should use her discretion in assigning a Purported Hedge Fund Manager element score. For reference the element ‘White Eyeshadow (male)’ is ranked as a -6). (Use: -4)

Environmental Signs Of Affluence:

1. Swimming Pool at Office (No direct rule. Author likely did not anticipate such a development. Use Section 3.4 as a guide: Accoutrements of leisure in the place of business. Pool table: -2. Liquor cabinet: -4). (Use: -7)

Hmmmm ok. Continue….

Rod Cameron Stringer of Lamesa misappropriated millions of dollars from investors since 2001 while touting a stock-trading strategy he said had annual profits of as much as 61 percent, the Securities and Exchange Commission said in a statement today, announcing the suit at federal court in Lubbock, Texas.

Rates Of Return:

Purported Annual Rate of Return: 61% (Section 7.5(a)-(d): Select from the following sliding scale where returns are claimed for more than one year) (Use: -14, see below)

[…]

55%-59% (-12)
60%-64% (-14)
65%-69% (-16)

[…]

A judge froze the assets and appointed a receiver to recover investor funds, the agency said. The location of investor money “is presently unknown,” the SEC said, noting some was used to finance a horse-racing partnership, buy a boat and build the pool at Stringer’s office.

Social Climbing Behavior:

Socially Elevated Endeavors: (Section 15(g): Equestrian (Use: -5)

Miscellaneous:

Unusual Firm or Owner Name: (Section 36: Examples provided: Vortex Capital Management, LLC, Tornado Partners, LLP, Mr. Nemo, Mr. Incognito, Mr. Shade E. Figur: Use: -5)

“Mr. Rod Stringer” (Use: -5)

Total: -36

Section 52: Impact of Scores:

-25 to -29: Very High Probability of Fraud (Consider notifying authorities outright).
-30 to -34: Very Very High Probability of Fraud (Notify Federal authorities immediately).
-35 to -39: Near Certainty of Fraud (Immediately solicit investment from Ken Lewis, seek referral fees).

Hedge Fund Run by Ex-Bondsman Is Ponzi Scam, SEC Says [Bloomberg]

Greenlight held its thirteenth annual partner dinner at the Museum of Natural History last night and the take-away, as previously prognosticated by us, is that David Einhorn is BACK. IN. THE. GAME. We say this not based on performance numbers, but on circumstantial evidence, that being the Green Lantern’s decision to send investors home with a very special gift: If You Try To Please Everybody, You Will Lose Your Ass, a book by DE’s father, Stephen Einhorn. Now, the cynical assholes among us will be quick to suggest that free books were all Einhorny could afford to distribute. WRONG-O.

The real implication is this: when you’ve got the the pair to offer investors anything less than “Sorry for losing your money” blow jobs, it’s ‘cause you’ve got something big (positive territory returns) on the horizon. Porno-Dave is going to be huge in ‘09.

Could it be? Is the Donald about to fire bankruptcy? That’s what our totally unfounded (and usually spot on) sources claim. I have to say, looking at that monstrosity of a tower on the river in Chicago, I am unsurprised. (Let’s not even start on the Atlantic City casinos). We’d love to say Donald is everything that’s wrong with this country, but at least the guy tries to pay off his debts in bankruptcy (all of which so far have been limited to corporate bankruptcy though he had a close shave in the ’90s) and he’s certainly had a lot of experience in the field, so things are looking up for his creditors (maybe). So really, when you think about it, it’s actually Donald’s hair that is everything that is wrong with this country.

Re: Bearpont Morgan Chase employees being compensated (partially) in stock, we’re told 50% of the worthless portion (JK…JK I’m serious) of their bonuses will vest after two years, and the other 50% after three. In related news, the House of Dimon has instituted salary freezes for all worker bees making over 60K, including those who’ve been promoted (“new positions take effect at old salary”). The freeze was rumored as early as September, but MDs apparently claimed as recently as two weeks ago that promotions would go through “at less than expected salary bumps but increases still, and also that standard raises across business lines were coming. Now they’re saying we will be taken care of mid-year, ‘once the pressure is off,’ but no one has their fingers crossed.”

On the one hand: that’s cold, Dimon. On the other: it could be worse?

Earlier: Bonus Watch ‘09 JPM

From the front lines of what is apparently turning out to be a massacre: “I’m hearing that 80% of BofA IB is being let go…and the head of BofA REIB covering hospitality was definitely canned.”

Earlier: Cutters At Bank of Amerillwide

10:48 am: Tim Geithner is that boring English literature substitute teacher who reads in a staccato, not quite monotone, like its the first time he’s read out loud in public and he’s really distracted by the blond in the front row who sprouted about three years early. (Be that Dave or Dana, we don’t yet know).

His opening statement was a snoozer too.

Sez Geithner: “These were careless mistakes, they were avoidable mistakes, but they were unintentional. I have gone back and corrected these mistakes, and paid what I owed.”

Well, he’s one step ahead of an illegal immigrant then.

I think he thinks that if he keeps repeating “These were careless mistakes, these were avoidable mistakes,” it will all be ok. He’s said it now five times.

10:56 am: “Did you use software to prepare your tax returns?”

“I did.”

“What brand did you use?”

“…I used Turbotax to prepare my returns.”

Hah.

11:12 am: Who is this “John Kerry” person? He looks and sounds really familiar…. Nevermind. He must not be important. CNBC picked his time slot to break in to split screen and argue about Geithner’s lack of a plan and tax cheating.

Please tell me John Kerry didn’t just quote Paul Krugman. He did. Damnit. That guy is going to be impossible to live with now.

This exchange pretty much sums up the major issue we all face:

John Kerry: How exactly are you going to fix the “Zombie Banks” Paul Krugman refers to?

Chairman: You have negative twenty seconds.

Geithner: You’re right, Senator, the economy of the United States is very complicated. Thank you for your time.

I mean are you kidding me? This is the best this country has to offer? John Kerry quoting the likes of Paul Krugman, who, himself, stole the 10 year old term “zombie bank” from the EJ Kane order to be told by the Chairman that there are “negative twenty seconds left” and have the pretty boy tax cheat who wants to run the IRS but uses TurboTax to prepare his complex, multi-employer and NGO reporting tax returns admit that the United States economy is complicated? What the hell is wrong with these people?

11:37 am: “Mr. Geithner has been involved in about every flawed action in the recent administration….”

Here we go.

“Mr. Geithner does not provide a satisfactory explanation for the [tax] problem.”

Still, the Chairman, Senator Max Baucus, makes no apologies for trying to help the new administration get its economic team up and running.

11:45 am: I believe I have detected a pattern.

Senator: I am irritated that [tax reform / market pricing / the TARP / Zombie Banks / entitlement reform / local banks / the notice of this meeting] is not being addressed. Can you comment on that?

Chairman: You had 30 seconds, 25 seconds ago.

Geithner: Yes, the financial system is complex.

Huzzah!

12:07 pm: CNBC seems to think its all fine, this tax evasion (let’s face it, he didn’t pay it because he got away with it past the 3 year audit scope limit and he never planned to until he was vetted and someone told him to clean his fucking act up) since he apologized, and he is telegenic so let’s just move on. Nothing to see here. Move along.

12:12 pm: Geithner: I’m cracking… the… safe…. I’m cracking… the… safe.

That is so annoying.

12:24 pm: Geithner has morphed three times in this hearing. Now he reminds me of those Furby dolls- the ones that were banned in the CIA and NSA buildings because they recorded and repeated voices. Geithner seems to just spit out the same things over and over again. “Catastrophic failure.” “Careless mistakes. Avoidable Mistakes.” “Financial system… complex.” “Absolutely critical.” “Very important concern.”

We are confirming a robot.

After losing 26.80% in 2008, most if not entirely due to the wrongness of the markets, which apparently didn’t get the memo that Perry People are not to be fucked with, we are back, my beautiful babies, and ready to dominate. You know it, I know it. We’ve identified the many, many holes in this bitch and are just standing by, ready to plug the shit out of them. Thinking men that we are, however, we would be remiss if we did not reflect on wh