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
Archive for January 2009
[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.
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.
