$$$ Talking Shop With a Vulture Investor [Daily Intel]

$$$ Criminal Complaint HAS Been Issued For Sir Allen [Clusterstock]

$$$ “A former Chicago nightclub owner whose investment firm, Tsunami Capital, was sued by the federal government amid fraud allegations, has been indicted for allegedly running a Ponzi scheme, authorities said today.” [CBN]

$$$ “Oppenheimer: Dropping Coverage

Summary: We are dropping coverage of the U.S. banks and brokers sector, owing to a
reorganization of analyst coverage.

* The decision is unrelated to any awareness on our part of any material change in the fundamental condition of the firms. Rather, it stems from a reorganization of our financial services coverage.

PERFORM
American Express(AXP $12.57)
Bank of America(BAC $5.32)
Capital One Financial Corporation(COF $12.98)
Charles Schwab(SCHW $12.92)
Goldman Sachs Group, Inc.(GS $92.15)
JP Morgan Chase & Company(JPM $23.05)
Morgan Stanley(MS $21.33)

UNDERPERFORM
Citigroup Inc.(C $2.46)
UBS AG(UBS $9.64)
Wells Fargo & Company(WFC $14.40)”

Thank the heavens the FBI and a receiver are on the case. If the SEC were in charge we would have found assets of -$1.8 billion by this time. Yes, we could be angry. We could be very angry indeed. Fortunately, cooler heads have prevailed, and instead we have begun the slow process of financial fraud recovery. Specifically:

1. We admitted we were powerless over Ponzi schemes and fraud—that our lives had become unmanageable.

2. Came to believe that a Power greater than money could restore us to sanity.

3. Made a decision to turn our will and our lives over to the care of unemployment checks as we understood them.

4. Made a searching and fearless moral inventory of our assets.

5. Admitted to the bank, to ourselves, and to another investor the exact nature of our wrongs.

6. Were entirely ready to have the bankruptcy judge remove all these defects of character.

7. Humbly asked Him (the judge) to remove our shortcomings.

8. Made a list of all creditors we had harmed, and became willing to make amends to them all.

9. Made direct amends to such creditors wherever possible, except when to do so would injure them or others.

10. Continued to take personal inventory and when we were wrong promptly admitted it to our auditors.

11. Sought through our attorney to improve our conscious contact with Him as we understood Him, pleading only for knowledge of His will for us and the power to carry that out.

12. Having had a financial awakening as the result of these steps, we tried to carry this message to others, and to practice these principles in all our affairs.

So, this news seems… well… beneath us. We’d write more, but we have a meeting to go to.

The court-appointed receiver overseeing the financial empire of Texas billionaire Allen Stanford, who is charged with fraudulently selling $8 billion in certificates of deposit, has located $90 million in assets so far, an FBI agent said on Friday.

Stanford receiver finds $90 million in assets: FBI [Reuters]

Yes, on a day like today (we’ve seen over 2% down on the S&P 500, about break even, and back to 1.25% down) we figured it would be the prefect time to play “guess today’s Dow close.”

It’s 7138 right now. What say you, Dealbreaker?

Same rules as always. Closest without going under.

Go.

Question: What is a Side Pocket?

To: Our Investors and Other Interested Parties

Re: Mid-Quarter Update - Establishing Special Investment Portfolio

As our investors know, we have made every effort to steer clear of the common problems in our industry in these unusual times. We responsibly managed liquidity during the 2008 market downturn and timely honored investor redemptions exceeding 35% of capital in January 2009, rather than exercising our “gates” or suspending redemptions, because we have always understood the value of investor relationships. We have also made a special effort to keep our investors informed of how we are navigating the current environment.

We also note that 2009 has started well for each of our funds. We have seen the rebound of certain long positions that were greatly oversold last year plus continued success with short positions. We are cautiously optimistic that 2009 will be a year that rewards those still willing and able to take calculated risks. A down market will surprise no one and we believe the panicky swings of 2008 should be less severe and less likely.

As unjustified as it strikes us, however, our efforts to navigate these trying times without disadvantaging our investors has left us in the position of being a source of liquidity while many other funds exercise gates or suspend redemptions. For now we therefore continue to see considerable redemptions. For JANA Master Fund, investors plan to withdraw a further 20% of capital, approximately, at the end of the first quarter. For JANA Piranha Fund, such indicated redemptions exceed 30%. Nevertheless, we still consider the gating or suspending of redemptions to be unwarranted given the good overall liquidity profile of our portfolios, which we will work to maintain.

However, to ensure fair treatment of all investors, we have determined that it is necessary to segregate some less-liquid investments in our overall portfolio. Even within the context of a very liquid overall portfolio, if we were to permit these investments to grow as a percentage of capital due to redemptions, this could restrict our ability to invest for optimal results and leave our continuing investors overly concentrated in such less liquid investments.

Does anyone else find it interesting that, while the Mets managed to seal their stadium naming deal with Citibank, the Yankees are shit out of luck?

The Yankees and troubled Bank of America have ended talks for a major sponsorship deal for the new Yankee Stadium.

The Yankees were reportedly close to a lucrative signature sponsorship deal with the Charlotte, N.C.-based bank in September that would have approached the $20 million per year Citigroup has agreed to pay the Mets for naming rights to Citi Field.

[…]

Stadium sponsorship and other sports marketing deals by banks that have taken bailout money - such as Citigroup’s current 20-year, $400-million naming rights deal for Citi Field - have come under fire from some in Congress who see them as examples of corporate excess at taxpayers’ expense. Other lawmakers see these deals as legitimate business and marketing expenses.

Funny how that worked out, eh?

I’m going to resist the temptation to call Ken Lewis Barney Frank’s bitch, but you know that’s what’s on my mind. I mean really. What’s next? Taking away the tax deferral and capital gains advantages of carried interests in general partnerships?

Yankees, Bank of America end stadium sponsorship talks [Newsday.com]

Do you think CNBC overlord Immelt personally put in a special request for the 10-boxer to accompany the GE news?

Through no fault of its own but solely due to “unprecedented market volatility and disruption to the financial system,” Highland Capital’s had a bit of trubs lately, which have unfortunately snowballed into the firm closing three funds since October (most recently the CDO Opportunity fund, last week). Don’t count them out yet though, cause it appears the Texans have discovered the antidote to massive failure.

Highlanders,

Drug Crafters will be at our office on Friday, March 6th from 10:00am - 1:00pm in the Par West Conference Room located on the 7th floor offering B-12 Injections. You don’t have to sign up for a certain time, this will be come as you go. Please read below and attached information on the Vitamin B-12 Shots.

Thank you!

February 24, 2009

Dear clients and valued partners,

I wanted to give you a brief update on the status regarding the sale of our market making operations. We have continued to make significant progress working with Lazard Frères &Co. LLC and are happy to report that a sale appears in reach. I can not release any of the details until the trustee files an application with the bankruptcy court seeking approval of a proposed sale, but I am encouraged that we should have new ownership in place shortly. All of the employees critical to our market making operations are still on the payroll, are supporting the sale process, and are excited about the prospect of getting back to business.

HAINES: You’re telling me you’re happy having these people looking over your shoulder?

CRITTENDEN: I have to tell you Mark, we are appreciative of the investment that the government has made in us. You know, they’ve made a significant commitment to the company. As you know, $45 billion.

The bank has “no time frame” for naming new directors, which Dick Parsons told Thompson when he was “crossing the street.” The situation is fluid.

Update: Okay, this actually is breaking. Parsons apparently also told Thompson that the Big C’s management has its “arms around” the situation. Gasparino to add more color on the reach around asap.

Yes, we spend a lot of time poking fun and making light of unpleasant subjects. (Wal-Mart has been a frequent target). Unfortunately, sometimes there is just no raising what are beyond dismal and sad tidings. Beyond all the joking and high-finance hijinks, there are some things that remind us that there is an undercurrent of real suffering in the present downturn. Other than to relay this news, I have no idea what more to add:

A 58-year-old Wal-Mart employee who said he “couldn’t take it anymore” lit himself on fire outside the Bloomingdale store where he worked late Thursday night and was later pronounced dead at a hospital, authorities said this morning.

The Carol Stream man, who worked the overnight shift, was in a parking lot of an adjacent sporting goods store in the west suburban strip mall when he set himself on fire with lighter fluid around 10 p.m., said Randy Sater, a watch commander with the Bloomingdale Police Department.

At least 10 people, including some teenagers, witnessed the suicide and several attempted to help the man by throwing their coats on top of him in an effort to put out the flames, he said.

“He said he didn’t want any help and threw the coats off,” Sater said.

Wal-Mart worker burns self to death in parking lot [Chicago Breaking News]

No one likes a downer (well, how about: “only old WASP crones really appreciate the importance of a good downer.” I know several, many since expired, who raved against the Schedule I scheduling of Methaqualone in 1984. One even called her attorney and asked about lobbying against the decision. No, I’m really not kidding). Be this as it may, (we have to pander to our aged, female WASP readers, you understand) we are duty-bound to report to you that Citigroup has broken the “double buck.” Sure, this isn’t as exciting as “breaking the buck,” but, in light of Pandit’s graceful first-half-of-third-act performance, we could no sooner fail to cover this than ignore the slow sinking of the Titanic if we found ourselves on the scene for that disaster. (I personally would have thrown Billy Zane off of the lifeboat, but that is something of a personal matter).

So… do we have to put up a poll? Is anyone even remotely as torn about the prospects for NYSE:C as we?

More cuts a-comin’ at BlackRock. Round 2 of project population restructuring will apparently be “aimed at more senior employees” and is expected to result in around 250 to 300 employees (approximately 5 percent) being shown the door (the first round of bloodletting affected about 8 percent of the team, bringing the headcount down to 5,500 from 6,200). Target date: “sometime in March,” possibly as early as Monday.

Earlier: Layoffs Watch ‘08: BlackRock

Though likely reeling from the recent blows to his Target holdings, Bill Ackman isn’t going to go quietly into the night any time soon. The New York Times reports today that our activist hero (we love you BA!) is in talks with Target to add (and subtract) some board members.

We agree with the big BA that Target is badly undervalued, but only because we think people under-appreciate the value of ordering from a wide selection patio and garden furniture online (nothing like a little bit of South Bali collection to round out the condo on the 6th floor you might have to vacate any day now).

We are going to ignore the fact that you sold a bunch of Target calls this month. That’s just positioning. We know, we know.

Ackman Talks to Target About Board Seats [The New York Times]

Pour out some estrogen for Stamford tonight. Apparently the big guy is planning on showing 30-40 of his back office babies the door. On a preemptive note, I don’t want to hear back office doesn’t count— all Little Steves count.

Not 5 minutes in and the Dow is down 1.2% 1.6%, another little bit and we will be flirting with 7000. The S&P 500 down 1.5% over 2% and the bailout index down over 8%. Ouch. It will likely prove an interesting Friday.

Unhelpful is the news that: “The U.S. recession deepened a lot more in late 2008 than first reported, as fourth-quarter GDP was revised down to a 6.2% contraction at an annual rate from 3.8%.” Nice 60%+ revision there, folks. Keep up the strong work.

GDP Shrank 6.2% in 4th Quarter, Deeper Than First Thought [The Wall Street Journal]

From: vikrampandit@citi.com

Sent: Friday, February 27, 2009 7:51 AM

Subject: Memo from Vikram

Dear Citi Colleagues,

Earlier this morning, we announced an exchange offer for our preferred stock that I believe will enhance our capital position and bolster public confidence in Citi, and by extension, our financial system. You will find additional details on the offering in the news release here.

As you’ve heard me say, we and our regulators were focused on Tier 1 as the capital that supports our businesses — and based on our Tier 1 of 11.9%, we have been very well capitalized. However, there is now a greater focus on tangible common equity (TCE) ratios, and that has translated into a market confidence issue.

Mail call:

“If you read the news it says that Ken Lewis had to take the corporate jet ‘because of the timing of the meeting’ with Cuomo yesterday. Ken Lewis was sitting in a hair salon called Emerson Joseph in Charlotte at 10:00 am, taking his sweet time, being groomed. More than one person I know saw him. So self-righteous! I’m not against the corporate jet, or his grooming habits for that matter - but that bank lies about everything all the time and always gets away with it.”

Tickle A Vickle in the house.

Apparently the reaction inside Citiville to the whole gov thing has been “Overwhelmingly positive!”

“We’re committed to rebuilding as much value as we can, as quickly as we can.”

Vik hands the mic to some guy named Gary.

“This move will allow us to rebuild shareholder value.”

“We’ve cut a lot of costs…we’ve cut our headcount by 52,000 people…we’ve reduced assets from $413 billion.”

“We’re making excellent progress on the Citi Corp. split.”

“January was good…The quarter’s far from over though, and things could get ugly

“Does the announcement today mean we don’t have to raise more capital? That was the goal. But things beyond our control could happen that could mess with that.”

“The potential outcome of the transaction could vary substantially.”

U.S. to Take Big Citi Stake and Overhaul the Board (WSJ)
“The deal, announced Friday morning, is designed to ease jitters about the soundness of one of the world’s largest financial institutions. The Treasury has agreed to convert some of its current holdings of preferred Citigroup shares into common stock, a move that could better protect shareholders against future losses.

As a condition, the government is demanding that the New York company overhaul its board of directors. Citigroup’s board will soon include a majority of new independent directors, the company said Friday. Chief Executive Vikram Pandit is expected to keep his job under the agreement.

Citigroup said it will offer to convert as much as $27.5 billion in preferred stock not held by the federal government to common stock, with the U.S. agreeing to match up to $25 billion of the conversions.

The size of the government’s new stake will hinge on how many preferred shares private investors agree to convert into common stock. Assuming the maximum amount of conversions is made, existing common shareholders would see their holdings diluted by nearly 75%, with the government becoming the largest holder at 36%.”

Stanford CIO Taken Down By Obstruction Charges (WSJ)
It’s off to the pokey (or whatever they call chick-prison) for Laura Pendergest-Holt, Stanford’s CIO. We wish her the best, and offer this advice:

1. Punch whoever is sitting across from you in the transport van. You have to let everyone know you mean business from day one.

2. Shivs are weak. Whenever possible, opt for gasoline and a match. (Don’t use all the gasoline for violence, you can drink it too.)

3. Nobody did what they’re in for.

4. Take plenty of Mackerel with you.

“A Federal Bureau of Investigation affidavit filed in U.S. District Court in Dallas alleges Laura Pendergest-Holt, Stanford’s chief investment officer, misled Securities and Exchange Commission investigators who took her testimony in the probe of alleged fraud at Stanford International Bank, Mr. Stanford’s Antigua-based offshore bank.”

Career Advice From Our Friends At CNBC (CNBC)
As we continue our series on education and figuring out what the fuck is next, we land at CNBC to explore how to change a job. I’m not going to lie, I didn’t read the whole thing: My left eye actually started bleeding, and my ears started ringing. If you should chose to actually read the article, you’ll find such hidden treasures as “eyes wide shut” and “I’m a pragmatist so I believe in having a solidly laid plan”. That said, I’ve broken down (the gist) of the piece for you:

* There appear to be a lot of people wanting to quit their jobs because they believe in some utopian fairy tale sense of happiness where rainbows fly sprout from unicorn asses.
* Those people should go to community college to get the necessary education to change their careers.
* Save some money because this is a bad decision and you’re going to be poor (possibly homeless). Note: I’m not sure the man in the picture at the top of the page isn’t living out of that box.
* Starting your own business is scary.
* You can hire a career counselor to advise you on what you should be doing with your life (I suppose we’re assuming the Community College doesn’t offer career advice?)
* And finally, make contacts (3 a day) and ask those people if they’re happy with their jobs.

Cuomo’s Back In The Press (Reuters)
Best tagline for a Cuomo mug/shirt wins the heartfelt adoration of the staff, and possibly some loot (as yet to be determined).

“Executive compensation is a burning issue in the financial industry and challenges to pay are being led by New York Attorney General Andrew Cuomo, whose office deposed former Merrill CEO John Thain on Tuesday for a second time over $3.6 billion in bonuses.

“I answered all the questions to the best of my knowledge and hopefully brought some clarity,” Lewis told reporters after he gave a deposition in Manhattan to Cuomo’s lawyers on Thursday that lasted about four hours.”

The Auto Supplier Bailout (Bloomberg)
“The Obama administration is looking for a way to prop up struggling auto-parts suppliers, possibly through a lending facility to centralize aid to hundreds of companies, a person familiar with the matter said.

Finding a mechanism to offer assistance is pivotal, because there are so many partsmakers it would be difficult for the Treasury to administer loans directly, said the person, who asked not to be identified because the planning is private.”

$$$ Buyout, Hedge-Fund Managers Could Pay $24 Billion More in Taxes [Bloomberg]

$$$ Beware False Bottoms in Home Prices [MoN]

$$$ SEC alerted about Stanford in 2003 [FT]

$$$ Elie Wiesel Has an Idea for How to Punish Madoff [Daily Intel]

What is mostly amazing is that it took so long, but the head of Iceland’s central bank, having refused to fall on his sword, is expected to be shown the door tomorrow. The United States is somewhat rare in isolating the head of its Central Bank from political removal- though I suspect if Congress really wanted to remove a Chairman badly enough, it could be done. In this case, however, Oddsson (the Central Banker in question) may be something less than culpable.

Iceland’s parliament passed a bill Thursday that will oust the country’s central-bank chief, David Oddsson, who is widely blamed for a banking-system collapse that has wreaked havoc on the island’s economy.

Mr. Oddsson, Iceland’s prime minister from 1991 to 2004 and central-bank chief since 2005, had refused to quit, despite appeals from new prime minister Johanna Sigurdardottir and regular public protests demanding that he go.

Ironically, and as the Journal article points out, much of the central bank’s decision making power was legislated away some years ago, but when someone has to go, they have to go. It’s cold outside in Iceland nowadays too.

Given Oddsson’s claim that he warned repeatedly that banks were severely overextended, it is probably worth reflecting on the wisdom of introducing the whim of political accountability to central banks in light of Iceland’s case.

Iceland Parliament to Oust Central Bank Chief [The Wall Street Journal]

Oh hey, just messin’ with ya about those job cuts from the House of Dimon earlier. Though Bearpont Morgan Mutual said this morning that cuts from the WaMu acquisition would clock in at about 12,000 total, that number was apparently revised to 14,000 this afternoon. NBD.

Yes, golf is fucked, but we are much more worried about the decline in gambling. First, removing the privately collected math tax is likely to continue to pound the economy and housing markets in the Southwest into even smaller pieces of rubble. Second, we are going to lose the positive redistribution effects that pull capital away from the mathematically challenged, or those who can afford to piss cash away, and dump it onto the hard-working employees in the gambling industry. Yes, many stimulus benefits come from the wheel, but these math-tax and super-wealthy clients also support the many small businesses and entrepreneurs in the retail narcotics and unregulated adult entertainment industries.

Of course, these devastating effects are a direct result of Congressional and executive branch scorn:

The negative publicity associated with Las Vegas is spurring cancellations across the city, already hurt by the U.S. recession, Wynn Resorts Ltd. Chief Executive Officer Steve Wynn said earlier this week. The chairman of “one of the healthiest companies” in the U.S. paid a $3.3 million fee to scrub a $5 million sales training event, he said.

Cancellation fees won’t last forever. We aren’t sure what solution there is but to provide a sin-bailout. In these desperate times it is only fair, after all- particularly to those employees working their way though college now that subsidies will be undergoing upheaval.

Bank of America Moves Health-Care Event From Vegas [Bloomberg]

Does it frost anyone else’s cookies that the FDIC comes out with a “list” of 252 “problem banks” (up 47% from the third quarter) but refuses to name names? Really, what’s the point? (Yes, we’re aware of the potentially dire consequences of calling banks out but this is about entertainment value.) Anyway, since SheBair insists on keeping it under wraps, let’s decide here who’s on it, or should be. Hopefully a note from the woodland creature will be forthcoming.

Related: “Who Is Next?”

So what happens when your federal agency get publicly skewered with the most detailed, scathing (and likely accurate) verbal disemboweling this side of a re-run of “The Equalizer?” Why, you get double digit budget raises, of course.

The Securities and Exchange Commission is expected to receive a 13% funding boost next year, bringing its 2010 budget to about $1.02 billion.

The boost comes after several years of static funding levels and at a time when the SEC has been criticized sharply for inadequate oversight of the markets and enforcement of securities laws.

The administration said the SEC would use the additional funding to increase staff and its use of technology to “pursue a risk-based, efficient regulatory structure that will better detect fraud and strengthen markets.”

SEC May Get 13% Funding Increase [The Wall Street Journal]

As you know from the Opening Bell, change is in the wind for student loans, but not exactly in the way we expected. Sallie Mae is down 40% today on the news that subsidies for student loans may well be a thing of the past if Obama’s budget gets its way.

It will come as no surprise that we are hardly fans of subsidies, but we are hard pressed to find a subsidy we like better. True, this may have the effect of deflating the bubble in higher educational costs, but Sallie is only about a fifth of the size of Fannie.

This isn’t exactly the place we’d look to shock the system just now. (Now that we think of it, however, it would get a bunch of those snotty college kids and MBAs into the workforce filling potholes).

Hmmm. Dumb the country down. Reduce the number of property owners. This way we could make millions of jobs building dams and manufacturing solar panels by hand. Could work.

Obama Calls for End to Loan Subsidy for Sallie Mae, Citigroup [Bloomberg]

I know you guys think we get off on writing about all of Wall Street getting laid off, but in truth, it’s really just as much a buzz kill for us as it is for those being shown the door. So we’ve decided to do something about it, in an admittedly self-serving effort to cheer ourselves up (it’s weird, but making you feel good makes us feel good). And here’s what it is: WE’RE BRINGING BACK THE SANDWICH FAIRY.

For those of you who need a refresher, TSF was introduced decades ago (actual time: April ‘08), after a hero named Oyster Boy successfully downed 244 oysters in one hour at Ulysses (we started by sending OB a congratulatory cheesesteak from Delmonico’s and from there it escalated into sending lunch to any old financial services hack each week). We had a good run, but with the summer’s close and the world falling off a cliff last fall, the sandwich welfare program fell by the wayside (I blame Fuld).

Now feels like as good at time as ever as to bring that shit back. Know someone who you think deserves a visit from The Sandwich Fairy? Send your nominations to tips at dealbreaker dot com. We’ll start tomorrow, and do this weekly, perhaps upping it to daily if I get ambitious. (Please be advised that while TSF loves you all, she only makes stops in NY/NJ/and CT. And do us all a favor and review TSF Guidelines.)

“Hey, Charles, how are ya? It’s Allen, I was wondering if… Allen Stanford. Sir… Allen Stanford. Yeah. I know. I know. Well, I’m sure you know that we sure could use a little help. We sure could. Well, come on now. I don’t think those charges are credible. That’s right. No way that stands up. Look, we’re calling everyone and reminding you about all those favors we did and all those parties we had and… Well, Charles, I don’t think that was anyone’s fault but the valet. That’s right. Well, ok, I hear you on that too, I know, but it was just my knee. Really, there wasn’t anything to it. Nothing. Anyhow, I was hoping that you might consider being a character witness, you know. I just need someone to… hello? Hello? Charles?”

Accused fraudster and Texas billionaire Allen Stanford has been making calls to his Caribbean base of Antigua to try and gain support and allies, CNBC has learned.

Stanford, head of Stanford Financial Group, was charged with orchestrating an $8 billion fraud. He attempted to get a one-way flight out of the country to Antigua, where his offshore banking operations are based.

Of the money Stanford allegedly swindled, as much as $1.5 billion belonged to U.S. investors, who recouped most of their investments through redemptions that began to pour in following the Bernie Madoff Ponzi scheme.

Stanford Makes Calls to Antigua to Gain Support [CNBC]

The aforementioned population restructuring at the House of Blankfein is said to be going down circa now. Presently filling the conference rooms are research and equity sales.

I don’t know if I ever told you guys about this but I’ve got this game I like to play with myself sometimes called “Middle-aged fraudster Or Pre-Teen Princess?” Occasionally I get tripped on trick questions, the answers of which turn out to be “confused adolescent boy” but my track record’s prettay prettay prettay good. Basically I’m kind of a pro at this, bested only by Larry Robbins, who’s like crazy good. Today, though, I have to swallow my pride and tell you that I straight-up failed this one. Answer: “[They spent their allowance on] ponies and an $80,000 collectible teddy bear.”

Antigua and Barbuda Prime Minister Baldwin Spencer, he of “I’m not sure if Allen Stanford’s here but my gut feeling is probs not,” needs your help. His gov wants to meet with employees of Sir Stanford’s companies in the area, but is having trubs with the logistics, namely an appropriately-sized space and sufficiently festive food.

“It’s quite a lot of employees, we have to find a venue,” PM Spencer said in an interview with the Antigua Sun. “And how do you feel about shrimp puffs,” he asked us in our minds, knowing we know a guy. Also causing Baldy sleepless nights is what to do with the employees once they get there. Twister, sure, and perhaps an after party key party, but what else? As of now he’s drawing blanks.

Spencer explained that they want to have something tangible to tell the employees. “We recognise that a number of critical questions will be put to us. The whole idea was to generate some degree of confidence and to let the employees know that the government will be doing all that it can within pragmatic and practicable areas to bring assistance,” Spencer said. “It is a complicated issue, not a straight forward matter but we are interested in the welfare of the employees.”

While we can’t be of any assistance there (and given that we’re of the Wall Street CEO school of inspiring confidence via memos free of any actual deets, we don’t want to be), but we do have some ideas re: a space to throw the thing. Mind you these are merely jumping off points, and surely you can do better, but just to grease the wheels, what about:

So unless you just crawled out of bed still in your Greenspan Underoos because you no longer have an office to go to, you probably know that General Motors is looking at a 2008 loss of $31 billion. Don’t worry though, because this is about what we expected.

Perhaps it is our cynical side, but does anyone really believe that these firms are going to be anything but a huge gravity well for cash for the next 20 years? In all seriousness, under what scenario is it possible to imagine that anything resembling General Motors can even arguably make back a fraction of what has been and will be dumped into it in the next five years?

In 2006, Nissan- the best of the Japanese manufacturers that year on this metric- pulled in about $2,100 in profit per car (Honda and Toyota were in the $1,200 - $1,500 range). Assuming General Motors could manage to recover Nissan’s margin (and this is Disneyland levels of fantasy) they would have to push over 14 million vehicles out the door just to cover the 2008 loss. For perspective, GM sold about 8.3 million vehicles in 2008 with more than a dozen brands, and not only have they been forced to cut capacity and brands, but demand might not even get that good again.

Ok, that’s probably not a fair analysis, since the $31 billion is sunk cost. Surely, we aren’t going to have to dump that much money into GM again… right? Ok, what about the $12 billion in underfunded pension liabilities yet to come? The $[whatever] billion in cash they are about to ask for? The however much they burn through in the next five years?

It might be time for GM to punt.

General Motors Corp posted a nearly $31 billion loss on Thursday for 2008 and said its auditors were likely to cast doubt on its viability as it seeks an expanded federal bailout to stay afloat.

GM, which asked for up to $30 billion of U.S. government aid, posted losses in all of its major units during the fourth quarter and it burned through $6.2 billion of cash. Revenue plunged by more than a third.

GM posts massive loss, auditor may question viability [Reuters]

Cuts are said to be going down circa now at Bank of Amerillwide, with associates in High Grade Capital Markets bearing the brunt of the cannings, as well as at least a gaggle of asses in LevFin Syndicate. Apparently analysts are “at risk” today through early March, with VPs and above, who weren’t shown the door by January 21, getting the axe at the next round in May.

“Nothing to see here. Move along, move along! Sign that the economy might have to reset itself? No, no. Not that at all. Quite the reverse. You people see problems, I see opportunity.”

In reality, it seems pretty clear that the economy needs to do some major adjusting. Unfortunately, there is simply no quick fix. Equally unfortunately, expectations seem so high (even Bernanke was talking beginnings of a recovery at the end of the year) we wonder if there isn’t a rather big disappointment ahead.

New U.S. claims for state unemployment benefits unexpectedly jumped last week to a 26-year high while total claims cracked the five million mark for the first time ever, the latest evidence that the already severe recession is deepening as it extends into its second year.

Separately, durable goods orders plunged in January, a sign of future demand fell, and a barometer of capital spending by businesses dropped, according to data showing how the recession is battering the factory sector.

Initial claims for jobless benefits rose 36,000 to 667,000 after seasonal adjustments in the week ended Feb. 21, the Labor Department said in a weekly report Thursday. That’s the highest level since Oct. 2, 1982, although the labor force was much smaller then.

Total Jobless Claims Top 5 Million; Durable-Goods Orders Drop [The Wall Street Journal]

Bearpont Morgan Mutual said today it expects cuts from the Washington Mutual acquisition to clock in at about 12,000 total. Boy-toy CEO Jamie Dimon to forgo the razor indefinitely in show of solidarity.

As you know, Ken Lewis is set to have a little chat with Andrew Cuomo today, re: Merrill bonuses. And while we know precious little about how it’ll all go down, save for the inside info that John Thain left some used gum for KL on the seat after his meeting yesterday, and the hope that Lewis will respond to every one of Andy’s questions with the same line he used with Waters (“I don’t understand what you’re talking about”), we can take a sec to come to a consensus on one thing. What sort of brain food the Bank of Amerillwide CEO will eat for breakfast before going into battle. So.

*Went down to the hotel bar last night to ease his nerves and who should he find drinking alone but Andy Cuomo. It’s awk at first, sure, but before long they’re agreeing over how silly “this whole bonus thing is,” introducing themselves as business associates from out of town to unsuspecting women at the bar and cracking jokes at Thain’s expense. (Cuomo: “No, no seriously, you shoulda seen him today, cracking under the pressure, the fruit.”)

Collective sigh of relief, people: after many sleepless nights filled with worry over the fate of Vikram Pandit, it appears as though everyone’s favorite jolly elfin’ CEO will remain safely ensconced in the Tickle a Vickle booth at 399 Park Ave. The Post claims today that “no one expects a shake-up in Citi’s executive suite to be a condition of the government raising its stake in the bank and all efforts are being made to avoid even the slightest appearance the feds are nationalizing.” And while we take offense to the insinuation that the only reason Pandito’s not getting canned is because he’s being used as a pawn in their little mind game, and not ‘cause they realize full well that they’ll be hard-pressed to find a replacement that comes with both V to the P’s business acumen and belly built for rubbing, we’ll take what we can get. (And have it on good authority that Ken Lewis, upon hearing of this added layer of job security pursuant to the ‘n’ word, will be changing his tune re: confidence in the future of BAC.)

RBS Unveils $34B Loss (Reuters)
“Royal Bank of Scotland reported the biggest loss in British history on Thursday and said the government’s stake could rise as high as 95 percent after it stumped up billions to insure the bank’s risky assets.

RBS also unveiled plans to cut 2.5 billion pounds ($3.56 billion) in costs as part of a restructuring plan which will see it exit or reduce its presence in 36 of the 54 countries it operates, which could see 20,000 job cuts.”

UBS appoints ex-Credit Suisse head as CEO (Reuters)
Marcel Rohner out, Oswald Gruebel in.

Citi Closing On Deal With US Government (WSJ)
It looks like this deal for 40% ownership could go down today. Thoughts? Concerns? Secret island where we can all go if shit gets bad?

“Citigroup Inc. is closing in on an agreement to boost the federal government’s stake in the company to as much as 40%, according to people familiar with the situation. A deal could be announced as soon as Thursday.”

A Look At The Stress Test (WSJ)
The plan calls for banks being able to operate under 10%+ unemployment and as much as 25%+ decline in housing prices, and if they can’t, they either have to raise private funds or take the Government cheddar. I can appreciate the Administration wanting to secure banking, for you know, the people, but forcing banks to take money at 10% is fundamentally fucked up.

“Economists said most of the nation’s largest banks will likely have to raise capital under the economic assumptions that regulators plan to use. The stress test assumes an unemployment rate averaging 8.9% in 2009 and 10.3% in 2010. Because that is an average for a whole year, the test envisions the jobless rate reaching higher than those levels on a monthly basis during these stretches. It was 7.6% in January”

Government To Step It Up In Student Loans (NYT)
There’s two parts to this (relative to us). Firstly, if student loans had been able to fail we would be faced with a mass of students looking for jobs in what’s arguably the worst economy in like 2/3 years. Secondly, more bankers are going back to school (for whatever reason) here recently, and given the combination of severance packages and greed I’m pretty confident some of you are going to be looking to explore the “free money for now” route.

Geithner Blames Bankers For Loss Of Confidence (CNBC)
No, and that’s fair - we blame the Government (in part).

Liddy Pleads For Forgiveness As AIG Unravels (Bloomberg)
It’s cool Liddy. No worries. No one in finance really expected you to pay that shit back anyway, the terms were ridiculous. And yes, we understood given the circumstances you weren’t really in a position to negotiate. Do this, if you’re going to go out: do it with a bang. I mean pro’s for everyone, all over the place. Fill the office. Distribute coke with snow blowers. GO TEAM!

$$$ Luxembourg attacks UBS over Madoff fund [FT]

$$$ “When guys lose jobs, the TV, den and gym win. Women? Sex? Not so much.” [Newsweek]

$$$ Stop TARP banks from spending on lollipops [The Deal]

If you dozed off for just a second, you missed it.

Federal Reserve Chairman Ben S. Bernanke said accounting standard-setters need to figure out how the mark-to-market rule blamed for worsening the global financial crisis should be followed when assets aren’t readily traded.

The rule, which requires companies to write down assets every quarter to reflect market value, is “a good principle in general” and shouldn’t be suspended entirely, Bernanke told the House Financial Services Committee today. “Accounting authorities have a great deal of work to do to try to figure out how to deal with some of these assets, which are not traded in liquid markets,” he said.

Yes, indeed. If numbers aren’t looking like what we want, we’ll just make up some numbers and call it all good. Perfect!

Tim Geithner was seen to nod vigorously from the Green Room where he watched today’s testimony, until an aide whispered to him that Ben wasn’t talking about tax returns.

Bernanke Says Mark-to-Market Accounting Rule Should Be Improved [Bloomberg]

Ken Lewis had something big to say about Bank of Amerillwide today but rather than put it in one of his famous memos, his disseminated the word via Bloomberg TV, presumably because he didn’t want an e-record of having ever said it. Also, because bourbon to Boone’s he was drunk and that can make typing difficult.

Bank of America Corp. Chief Executive Officer Kenneth Lewis said Merrill Lynch & Co. and Countrywide Financial Corp., the two acquisitions that some analysts say helped push down the bank’s share price, have been “stars” so far this year.

Lewis, speaking today in a Bloomberg Television interview from his Charlotte, North Carolina headquarters, said Merrill will be “a thing of beauty” over the long term. Merrill, the New York-based securities firm, lost $15.8 billion in the fourth quarter.

You can’t swing a former BSD these days without hearing about how “the markets” got their “hopes up” about what was going to come out of the government and once the Treasury/White House/Fed opened its collective trap the apparently overly sensitive “markets” got their rainbow and pony hopes dashed to the wind and boo hoo, watch as we cry about it. Today one crucial aspect of the gov’s plan has been revealed, and with T-15 minutes to go til the close, let’s see if it lived up to all your dreams, or if you’ve been once again disappointed and are going to proceed to act out and throw a temper tantrum over it. Details of the big reveal after the jump.

You know, we had our ticket ready to go, especially after we saw the big lines in Antigua. We figured we had to hurry. We had the sunblock and the bulletproof vest packed. Unfortunately, it looks like our preparations were all for nothing.

Now that we think about it, how is Allen Stanford going to flee to Venezuela when he’s (potentially) screwed them out of $2.5 billion? That wasn’t so sharp, Sir Allen.

Venezuela is unlikely to help investors faced with the loss of billions of dollars deposited at the discredited Stanford International Bank, Finance Minister Ali Rodriguez said on Wednesday.

The OPEC nation’s bank regulators say Venezuelans may have invested up to $2.5 billion in high-yield certificates of deposit at the Antigua-based unit of a global financial network owned by Texan billionaire Allen Stanford.

Venezuela says no plans to help Stanford investors [Reuters]

You (et al) had to stick your nose(s) in the Northern Trust trough, didn’t you, you meddling bastard(s)? Now you’ve gone and scared Morgan Stanley off, a firm which, you should be reminded, canceled Christmas this year. And now, because it’s apparently a crime to kick back and whack a few, this. I hope you realize John Mack’s going to have to bring in a boatload of Sicilian pastry desserts to make this up to the team.

Now I realize that it seems difficult to follow the complex financial machinations that we are performing to pretend we aren’t nationalizing anyone’s bank but I do wish you’d listen Ken, it’s perfectly simple, if you’re not giving your bondholders a hair cut, you don’t have to put your executive’s bonuses down on the lower peg, you just collect the treasury bills before you do your Congressional hearing prep after a taxpayer approved lunch at McDonalds when you’ve written your resignation letter before the shareholders meeting, move your own bonus down a peg, greet the auditors and report to Mr. Geithner before lunch that you’ve got your preferred shares dividend payment and of course your conversion to common documents.

The Treasury Department on Wednesday launched a new program that would provide capital injections into the nation’s 19 largest banks based on a “stress test.” According to the “stress test” approach, government regulators are looking at each financial institution’s balance sheets and capital needs over the next two years and evaluating how much capital the company will need over that period. Based on that analysis the government would let institutions exchange taxpayer-funded preferred shares for common shares when losses that were forecast by the stress test actually occur.

Treasury: New bank infusion can convert to common equity [Marketwatch]

The revolving door to the give-away party has started to turn, beginning with Chrysler which, after smashing through the floor of their own “worst case scenario” is back looking for $5 billion or so. Just to tide them over, you understand.

Three top Chrysler LLC executives are to meet today with President Barack Obama’s automotive task force to discuss the automaker’s request for an additional $5 billion in federal aid, people familiar with the matter said.

Chief Executive Officer Robert Nardelli, Vice Chairman Tom LaSorda and Chief Financial Officer Ron Kolka will meet with the task force, the people said. Chrysler, which received $4 billion in federal loans, said Feb. 17 it needs the extra funds to avoid an “orderly wind down” of the company. The third-largest U.S. automaker said it lost $8 billion last year.

Really, at this point, should we be trying to avoid an “orderly wind down?”

The 10-member panel, led by Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers, has the power to force a bankruptcy filing by Chrysler or General Motors Corp. Chrysler and Detroit-based GM have received $17.4 billion in U.S. aid and are requesting as much as $21.6 billion more in low-cost federal loans.

Chrysler’s Nardelli Meets With Auto Task Force Today [Bloomberg]

Or is it our best interest? I always get those two confused.

It’s a fine line, to be sure, but that’s what Frank Lautenberg is trying to ascertain and maybe recoup some losses in the process. The octogenarian senator’s family foundation has sued Peter Madoff, brother of Bernie, and chief compliance officer at Madoff Securities, a job which either entailed aiding and abetting the elder Mades in ripping off Kevin Bacon et al, or building elaborate towers out of sugar cubes for the last number of years. Here’s the complaint, via Dealbook. Obviously you’ll all agree that the best of the 17 “obvious material red flags evidencing the BMIS giant Ponzi scheme and repeated alerts of fraudulent activity that were recklessly ignored and/or not disclosed and/or consciously disregarded by Peter Madoff” is the one about no one being allowed on the office’s 17th floor, known as “THE CAGE.”

Lautenberg Foundation’s Suit Against Peter Madoff

Bloomberg reports that Westgate Capital founder James Nicholson has been taken into custody by FBI agents, for allegedly dabbling in some securities fraud as early as 2004. Westgate’s only down month— working under the assumption they’re not messing with us— was back in September 2001, when they returned -0.64%, which a reader suggests was out of necessity to be seen as patriotic.

Westgate Strategic Growth Fund [PDF]

Well, they sure figured out how to avoid getting White Collar Criminal friendly Sarasota involved in the prosecution of accused fraudster Arthur Nadel. They charged him in New York as he traded through a brokerage in the city. Woops. And while we are at it, we’ll note that it looks unlikely that he is going to be able to swing penthouse arrest.

A U.S. judge set a $5 million bond, house detention and other conditions of bail on Wednesday for accused hedge fund manager Arthur Nadel, who authorities say was on the run for two weeks in January before the FBI arrested him.

Nadel’s lawyer indicated that his client will not be able to meet the conditions of release set by Judge Denise Cote at a hearing in U.S. District Court in Manhattan.

U.S. judge sets bail conditions for fund manager Nadel [Reuters]

Perhaps in order to give him a day off from memo-writing, former Bank of America chairmen and CEOs Hugh L. McColl Jr., and Thomas I. Storrs have picked up where Ken Lewis left off yesterday, to reiterate, ad nauseum, that NOTHING IS FUCKED at BA to the C. In an editorial printed in today’s Charlotte Observer, McC and Storrs insist that “Bank of America’s final chapter won’t be written for a while,” in response a hideous suggestion that the firm would be better off if KL hadn’t acquired an asbestos company last spring, and another one this past December, and that it may or may not bite the big one. This is what it’s about people. Sticking your neck out on the line. Chuck Prince’s rousing endorsement for Vikram Pandit is said to be forthcoming, and though the timing’s a bit off, Stan O’Neal’s said to be crafting a few words in defense of John Thain, as well. And when he emerges from the back of a van he’s been hotboxing for the last several hours, Jimmy Cayne will probably have some rambling bit of incoherence about Jamie Dimon, and the nearing one-year anniversary of a certain buy.

We found it disheartening and disappointing in the extreme to read the Observer’s screed against Ken Lewis and Bank of America. At this moment of great economic uncertainty and tremendous pressure on the bank, the Charlotte Observer decided to pile on. The decision was both mystifying and unhelpful.

10:03: Congresscritters wander into the hearing room.

Frank: There is no option other to work with the existing system. Sure, we have to bail out the bankers that you hate, but this is the first important step in totally revamping the financial system in the way we think it should be reconstructed. So just relax, jumpy public you. Relax. There will be plenty of time for hangings (easy there Waxman, we haven’t forgotten your dreams) once we [put out the fire/let the flood waters recede/quell the masses]. Really, what I’m trying to say is that without universal healthcare we just have no way to fix anything. Right? Right, ‘kay-thanks-bye.

Paul: I’ve been telling you idiots that this system has been doomed to failure for decades. Inflating this bubble again is a total misunderstanding. Hey, did you notice I shined up my congressional pin this morning? I was sort of expecting the cameras today, you know.

CNBC: Ok, we were here to watch the Beard, not you idiots. BREAKTIME.

(We should have just stuck with CSPAN).

Beard: Let me read from a dense stack of old economic texts with current events woven in to convince you that they are relevant to our activities over the last several weeks.

Dealbreaker Commenter: The guy over Bernanke’s right shoulder has an incredible amount of red hair.

Editor: That’s John Thain in disguise.

Barrett: How about judicial cramdowns? Huh?

Beard: Yeah, I’m going to just dodge that question, thanks.

Kanjorski: Hey, so the rumor is going around that we weren’t on the verge of disaster, and I’m sort of fearful that this will be used to argue that we are a bunch of idiots likely to do more harm than good. So, can you reassure us that we were totally fucked?

Beard: Yes… well…

Frank: You! With the pager! I’m going to stick this gavel where it doesn’t shine if you don’t turn that thing off.

Beard: Yeah, we were fucked. Seriously.

Paul: Seriously, what has to happen for you to think that stimulus might be a worthless joke or even a dangerous mistake?

Beard: Well, if inflation goes crazy, I’ll know I was wrong.

Paul: So if I were to ask you…

Frank: Nope! Time to vote! Everyone head for the playground! Not you, John Thain in disguise. You sit right there.

Crickets…

Frank: Sit your asses back down and let’s go.

Maloney: Hey, Obama got a lot of applause when he said the bank bailout was not about helping banks but about helping people. So, what do you think? Oh, and I have some homework for you to complete.

Perp walk in Greenwich: CNBC reports that Paul Greenwood and Stephen Walsh, principals of WG Trading are being held in FBI custody, for allegedly “‘mismanaging” clients’ money to the “sum of possible hundreds of millions of dollars.” No word on (yet) on which special needs community was targeted.

…is that a woman named Hayley Boesky, daughter of Ivan, will be heading TARP. Now, on the one hand, the most glaring reason this possibly smacks of BS is that Kashkari still has the job. On the other, Boesky Jr. did work (closely?) with Geithner at the NY Fed and she’s also an ex-Goldman MD, which might (or might not) still count for something. Perhaps she’s not heading but assisting? Or consulting? Or none of the above? Know anything about it (this or the whispers that Mike Mike Milken’s nephew will be taking a position as Bernanke’s administrative assistant)? Get in touch.

Update: Thanks to one of our more Google-savvy readers, we’re told the Haley in question is not the daughter of Ivan. Which is disappointing.

Update II: TALF, not TARP.

It’s Dutch auction time, for the multi-strategy fund. Letter to follow.

Bad Bank Program Probably Won’t Save RBS (Bloomberg)
RBS’s attempt to shed bad assets into a government insurance program, which is fundamentally the same thing as our Bad Bank program, probably won’t save them from nationalization. Because I’m an American, and therefore everything is about me, I have to wonder if our program’s structure is significantly different, or if our banks precarious situations are significantly different to warrant my belief that the same thing won’t happen to them. Aside, we should all stop being so serious for a minute and think about Vikram et al in kilts.

“”This is prolonging the inevitable and the inevitable is nationalization,” said Tom Kirchmaier, a corporate governance lecturer at the London School of Economics. “It will instill some trust, but I doubt it will solve all the problems with the banks. We still haven’t seen the worst of the real economy.”

Insider Trading Nets Broker Five Years (NYT)
“Mr. Tavdy and the former UBS AG executive, Mitchel S. Guttenberg, were among 13 people charged in 2007 in what authorities then called one of the most pervasive insider trading rings since the 1980s.

It included former employees of Wall Street businesses such as the Bank of America Corporation, Morgan Stanley and Bear Stearns. All 13 pleaded guilty.

In handing down the sentence, Judge Batts noted that from 2002 to 2006 Mr. Tavdy made “millions of dollars for himself and others by abusing insider information.” She added, “this is not a case of an isolated incident.”“

Merrill Surprises BAC With Debt, BAC Cries. (FT)
Relationships are hard. I mean Christ, I once bought a girlfriend a cake that said “Sorry I killed your dog” - I thought it was a perfectly reasonable joke, she didn’t (I hadn’t really killed her dog).

It looks like Merrill is getting hung out to dry here, which is a pathetic move; BAC should be castrated for letting this go down.

“The additional $500m in losses appear to have come from the discovery that Merrill used a flawed model for measuring the value of derivatives that were used in its hedging strategy.

Auditor Deloitte & Touche concluded that Merrill had “not maintained effective internal control over financial reporting” as of the end of 2008.”

Fidelity Chief Speaks Up (WSJ)
“In a rare public rebuke of the financial-services industry, Fidelity Investments Chairman Edward C. Johnson III called 2008 a “period laced with toxic investment waste and the casual use of other people’s money by a number of institutions.”

In a letter to shareholders issued Tuesday, Mr. Johnson blamed the economic climate on “well-intentioned policies…which made money ridiculously easy to obtain.”“

Apple Downgraded

“Before the market opened, Shebly of Calyon Securities lowered his rating on Apple’s stock to underperform, or sell, from outperform, or the equivalent of buy. Seyrafi sounded hesitant about Apple (AAPL 90.25, +3.30, +3.8%) in a research note, in which he cited several circumstances for his concerns about the challenges and issues facing the company.”

Those reasons include but are not limited to: Apple’s shit is expensive, and Jobs isn’t anywhere to be found.

AIG May Give Up On Plan To Sell Off (Reuters)
Here’s the plan: since we can’t find any buyers, we’ll just stop looking. Fuck everyone: let ‘em come for it.

“AIG is proposing additional ways to reduce the company’s debt to the U.S. government, including handing over stakes in some operations directly to the government, a person told the news agency.”

$$$ ‘Johns’ go to school, get charges dismissed [Charlotte Observer]

$$$ Latest calculator on nationalization [BV]

$$$ Grassroots: I am with Rick. [FW]

$$$ Checking in on Chuck Prince’s Golf Game [Cityfile]

$$$ Barney Frank Demands Immediate Repayment Of Northern Trust Boondoggle Money [zero hedge]

Things like “crucial details” are yet to be hammered about but NBD, this thing is as good as done, according to the Financial Times.

Citigroup and the US Treasury are nearing agreement on a deal that would give the federal government a stake of about 40 per cent in the troubled bank in exchange for bolstering its depleted capital base.

People close to the situation said no agreement had yet been reached and the government had yet to give its approval to the plan proposed by Citi, which stops short of outright nationalisation. But they added that negotiations between Citi’s executives and Treasury officials had made progress since the weekend and an announcement could come as early as Wednesday or Thursday.

Fortunately for all you evil doers out there, the various bail out provisions in the works (or already implemented) stand to benefit you too. Times are hard on fraudsters these days. Your Ponzi scheme is in danger of running out of cash, withdrawals are up, and due diligence has seen a huge growth spurt in the wake of Madoff and Stanford. What is a white collar criminal to do in this recessionary environment?

Steal TARP funds, of course.

“History teaches us that an outlay of so much money in such a short period of time will inevitably draw those seeking to profit criminally,” Mr. Barofsky said in testimony for the afternoon hearing obtained by Dow Jones Newswires.

Federal regulators have already seen evidence of alleged TARP-related crime. In late January, the Securities and Exchange Commission charged a Nashville-based firm with defrauding investors of at least $6.5 million by claiming their money was invested in the TARP and other securities that didn’t exist.

“If, by percentage terms, some of the estimates of fraud in those programs apply to TARP programs, we are looking at the potential exposure of tens if not hundreds of billions of dollars in taxpayer money lost to fraud,” Mr. Barofsky said, noting that the total amount of money potentially at risk in TARP-related programs is approximately $2.875 trillion.

Hey, stimulus is stimulus.

TARP Fraud Could Cost Taxpayers Billions, Watchdog Warns [The Wall Street Journal]

I guess you could say that this is to be expected, but it’s the sort of malarkey we’d expect of a more Charlotte-based Ken and not our preferred K out (mid)West. Supposedly our favorite Chicago hedge fund has put a clause in bonuses to keep people loyal ‘til at least June (when the majority of their goodie bags will be paid out), though “some ship jumping has already begun.” Also hideous: apparently bonuses this year were “in-line” with the rest of the Street, which is common, and uncool.

UPDATE: Au contraire: we’re told that Citadel’s bonuses were paid in their entirety in December and that they came out of KG’s pocket.

We suspect that when Harry Markopolis called FINRA “corrupt,” he at least seems to have hit the nail on the head:

Two employees of Allen Stanford’s financial business, which U.S. regulators have accused of massive fraud, held advisory roles at a watchdog group overseeing U.S. broker-dealers aimed at preventing abuses.

Lena Stinson, director of global compliance at Stanford Financial Group, is listed as serving on the membership committee of the Financial Industry Regulatory Authority, or FINRA, which describes itself as the largest independent regulator of U.S. securities firms.

Frederick Fram, the chief operating officer of Stanford Group Holdings, serves on the FINRA continuing education content committee, “where he participates in creating material for the Regulatory Element continuing education program,” according to a biography on Stanford’s website.

Entertaining. Of course, don’t forget:

On Tuesday, FINRA named Richard Ketchum as its chief executive officer. He replaces Mary Schapiro, who resigned after she was confirmed as chairman of the U.S. Securities and Exchange Commission.

Stanford workers have ties to regulator FINRA [Reuters]

Yes, we heard about the soirees thrown by Northern Trust last week, but seeing as though the bank received a measly $1.6 billion in TARP money, and there were no facials to speak of, we didn’t so much give a rat’s A. Others beg to differ, calling the thing an idiotic outrage, and surely Rep. Elijah Cummings is working on some zingers for the organizers of the thing in a Congressional holding room where Barney Frank keeps his people locked up and riled up (Maxine Waters is there, being spoon-fed a cocktail of uppers and downers, as is Rep. Rosa DeLauro, chewing on a piece of leather) so here it is, strangely courtesy of TMZ:

Charlie Gasparino points out the most important aspect of the maybe Citi-Gov deal that has been entirely, shamelessly, overlooked thus far. If the US takes a forty percent stake in the Big C, it’ll displace Prince Alwaleed as the single largest shareholder. First off, taking the Prince’s feelings into consideration, this is devastating. Sure, in the beginning, Vikram et al will probably act as though ‘leed is still important to them but you know before long Pandito will be all, “I actually gotta take this call,” heretofore NEVER interrupting the Prince during one of their marathon phone conversations. After a while, he’ll be “some guy we used to know in Saudi Arabia.”

Brushing those tears aside, however, an important question must be answered. According to CG, when Alwalweed would say ‘jump,’ Citi would ‘jump three feet, so you’ve got to multiply that by ten for the government and it’s 30 feet’ (the math behind this apparently being that Al has an approximately 4 percent stake and 40/4 = 10 * 3 = 30 ft). But obviously there’ll be other preferred treatment besides jumping associated with having your tentacles in C, and we need to determine now what kinda sick stuff the senior staff and board are willing to do. Wining and dining, sure, but are we also talking, like, A to O?

In the table below, we summarize the number of stocks in each sector that currently do not meet the $3 bln market cap threshold to be eligible for inclusion in the S&P 500. In the Consumer Discretionary sector, over 40% of the stocks currently have market caps of less than $3 bln. For the index as a whole, nearly 27% of the stocks that are currently in the index would not be eligible for inclusion if they were being considered today. Fortunately for them, S&P doesn’t automatically kick companies out of the index when they fall below the market cap threshold. And since there aren’t many companies outside of the index that could replace the ones that no longer would qualify, the only thing S&P can really do is lower the requirements.

A lot of people have been trash talking our new Treasury Secretary for not being off book during his big Congressional debut a couple weeks back, for not moving his ass quickly enough, and for squeezing too tightly. Well guess what, tough guys? It’s not his fault!

Whereas Paulson had a stenographer, driver, and fluffer, T. Geith is working all by his lonesome. According to ABC News, the lil’ fella is “sitting over there by himself and does not have a staff,” though actual estimates put the number at “probably ten to twenty percent” of what it should be. Apparently one major factor in the lack of Little Geiths is that they need people who have “financial expertise” but can also pass what is likely a ramped up vetting process, due to some awkward moments with Turbo Tax made public. Does that sound like you? Have you longed for the opportunity to whisper sweet nothing’s in those elfin’ ears*? Take one for the team and get in touch.

*They look bizarrely unpointy in the one above but you know what I’m talking about.

I wonder why citibank.com is broken.

Update: Pandit plugged it back in.

Update: Pandit tripped over the plug again.

HT: guest.

Take heart, Merrill investment bankers stationed in New York: while the awkward conference room conversations are said to be currently taking place for your counterparts in London, your box of tissues moment is apparently not going down ‘til next week.

Indeed, the size is barely comparable, but it continues to grow interesting to watch who finds themselves caught up in scandal via a connection to “feeder funds” or feederesque funds for fraud. (Of course, its not at all clear that this is what was going on here, since, at least on these facts, it doesn’t look like Stanford was managing the capital in question, but the connection is interesting).

A fund of hedge funds run by two members of Vice President Joe Biden’s family was marketed exclusively by companies controlled by Texas financier R. Allen Stanford, who is facing Securities and Exchange Commission accusations of engaging in an $8 billion fraud.

The $50 million fund was jointly branded between the Bidens’ Paradigm Global Advisors LLC and a Stanford Financial Group entity and was known as the Paradigm Stanford Capital Management Core Alternative Fund. Stanford-related companies marketed the fund to investors and also invested about $2.7 million of their own money in the fund, according to a lawyer for Paradigm. Paradigm Global Advisors is owned through a holding company by the vice president’s son, Hunter, and Joe Biden’s brother, James.

No word yet on the fate of the Stanford Capital Management Alternative Suction That Will Pull Your Insides Out Core Opportunities Fund.

We shouldn’t be at all surprised that these frauds ensnare political luminaries. To a great extent, they require a visible association with political luminaries to preserve themselves, shield them from scrutiny, and to lend the endeavor a shiny coat of legitimacy. After all, if SenatorVice President Biden’s family is involved….

Of course, Antigua knows the smackdown is coming.

“The Americans have a tendency to act in such a big manner,” Mr. Simon said. “It’s a very, very serious situation. One has to look at it from a nationalistic standpoint.”

You almost want to feel sorry for them. But not really.

Stanford Had Links to a Fund Run by Bidens [The Wall Street Journal]

Antigua Is Hurt by U.S.’s Crackdown [The Wall Street Journal]

So, on the one hand, it’s nice that Ken Lewis hasn’t gone radio silent on his minions, while rumors of the ‘n’ word persist. On the other, he says the same thing every day (and probably uses a form letter with some minor tweaks…these things are labor intensive and Happy Hour starts just after 4). Via Deal Journal, the latest:

I want to address any questions about Bank of America that may be arising as a result of the news that at least one of our competitors is now in discussions with the government to negotiate an enhanced public stake in their company.

I have said repeatedly that our company does not need further assistance today and I don’t believe we’ll need any more in the future. That includes the potential conversion of the government’s preferred shares into common shares that would dilute existing shareholders.

When credit default swap sellers move to quoting upfront prices, the writing may be on the wall. Today’s graffiti victim? Citi.

Sellers of credit protection in the credit default swaps market were asking to be paid on an upfront basis to insure Citigroup’s subordinated debt on Tuesday, traders said, a sign of greater perceived risks at the third-largest U.S. bank.

Five-year credit default swaps on Citigroup’s subordinated debt were quoted around 9.5 percent upfront, or $950,000 in upfront costs to protect $10 million of debt, plus annual payments of $500,000 a year, according to a trader.

There are so many things to watch during this slow-motion train wreck that it is hard not to miss something. We’re running out of popcorn here, people.

Citigroup sub CDS moves to upfront basis - traders [Reuters] via Alea

Cuts are apparently going down today in ML investment banking across the pond. They’re expected to continue into tomorrow, affecting analysts and associates. No word on severance.

Page Six casually wonders today, “Which morning cable TV show hostess took off a week recently to get her eyes done and her breasts enlarged?” Now, they could be referring to any old news babe, but let’s be honest, the Post uses its column inches to go after Fox Business “rival” CNBC. So that narrows things down nicely. But whose T&E are we talking about here? For obvious reasons, Michelle Caruso-Cabrera is out. I think the Money Honey had a few days off last week, but she’s not on in the morning (she is, however, sporting a new haircut, mentioned several times this week by D. Rat, which may be an attempt to distract us from other changes). And then there’s Erin Burnett. Allegedly she was in China last week on assignment— or was she? Also “on assignment” was Rebecca Jarvis, down in Antigua, supposedly looking for Sir Allen Stanford though, quite suspiciously, always had her face and body scrambled when appearing on-air, which the Peacock would have us believe was due to satellite trubs. So, you tell us:

Big Ben, Live:

Ben: Sorry I’m late. Was helping Geithner with some math problems, and as you can see, my wife’s cat puked on my tie.

Dodd: Here is how this hearing works. I grandstand for a few minutes, then I will tell you how fucked we are and exactly who was responsible. I will use words that suggest disease, maybe “cancer” here. Then you will explain how I am exactly right and how fucked we are (I expect you to use hand gestures here. You will remember that I love pointing at things.) Oh, my tie is dipped in the blood of republicans, you might notice.

Shelby: I’m glad you are here in your capacity as Chairman of the Fed so I can tell you about the Fed’s balance sheet. Oh, and my colorblind manservant picks out my ties.

The Beard: You bitches forgot about the breaking of the buck in a large money market fund and the commercial paper clog in your little pre-prepared history that your congressional aide copy-pasted from Wikipedia two hours ago , didn’t you? Of course you did. You are not the Chairman. I am the Chairman, damnit!

Bullshit in 4… 3… 2… “The Federal Reserve is committed to keeping Congress and the American Public informed on these matters…”

Now I will drone you into complacency to lull you into a semi-comatose state and keep CNBC on its toes wonder if they should cut out to an 8-way split screen.

Dodd: Woah. You almost got me there. So, am I to understand from a few obscure passages in your written testimony that you think there might be just a little bit of hope somewhere? I mean, I have to tell the American People something good here. They are going to storm the Capital with torches. Who is going to lead us out of this recession?

Beard: Hey, is that Elvis over there?

Shelby: [super long statement disguised as a question]

Beard: That’s a very long question, Senator Shelby.

Bunning: Hey, joker, when are you going to show us your balance sheet and when are you going to tell us who you lent to so we can jump their shit?

Beard: Hundreds of years of central banking experience tells us that we really shouldn’t be sharing loan data when it comes to short term collateralize liquidity.

Schumer: We should be regulating hedge funds, right?

Beard: Yeah, it was the larger firms that caused the issues here, not the small ones.

Schumer: That doesn’t answer my question. I ask you about small firms, leveraged firms, you answer with large firms.

Beard: Yep. I know.

(CNBC points out that bank stocks are rallying- relating this to The Beard’s “moral hazard is just the nature of the beast” comments).

Martinez: Ok, ok, how are we going to reinflate the housing bubblerescue the housing market?

Click to view
Meanwhile, Bubba told Becky this morning that it is “clear the Treasury Department and the White House don’t want to nationalize the banks,” that we have to “get a floor under these assets” and that Becky must “back that ass up.”

Press Secretary Gibbs said Friday that the White House is all about a private banking system BUT one senior administration official, while reiterating that line, seems to be trying to send Andrew Ross Sorkin a message. What is it girl? Rahm’s fallen down the well?

“We absolutely believe that our private banking system is best off being in private hands and we are trying our best to keep it that way,” said one senior administration official, who spoke on condition of anonymity. But, he continued, the government is already deeply involved in propping up the banking system and may have no choice.

Officials said they were bracing for the possibility of new problems that might indeed require the government to take a more aggressive stance.

“Given our involvement at this particular stage, there is an element, a possibility over time, that we will end up with some ownership of these institutions,” the official said. “This is really about aggressive anticipatory action. It is an acceptance that the future is uncertain, but that we can plan on a certain basis for it.”

Thain Can Testify, Cuomo Soils Pants (Reuters)
The fun just doesn’t stop boys and girls: it looks like Cuomo has won the right to question the ever living shit out of Thain (and by extension, perhaps anyone else?) in re: who got what, pay scale wise. It’s comforting.

“A judge on Monday ruled that former Merrill Lynch & Co Chief Executive John Thain is free to disclose the names of individuals who received bonuses awarded by the former investment bank before it was bought by Bank of America Corp.

The ruling by New York State Supreme Court Justice Bernard Fried is a victory for state Attorney General Andrew Cuomo, who filed a motion in court on Monday to compel Thain to testify about bonuses awarded to individuals other than Merrill’s top five executives.”

William Isaac Says Bank Nationalization Isn’t The Answer (WSJ)
In direct response to Greenspan (it appears), Isaac (who may actually know his shit) has come forward with some compelling thoughts about nationalization.

“So-called experts frequently cite the success of the Swedish experience with bank nationalization in the last decade. Nothing could be less relevant. Sweden’s population, economy and banking system are roughly the size of Ohio’s. Sweden’s largest bank is roughly 10% the size of each of our three largest banking companies. Moreover, Sweden nationalized only Gota Bank — and that was after it had already collapsed.”

UBS Fights For Names In Court (Reuters)
“UBS AG shares fell to a new all-time low on Tuesday after news the Swiss bank will have to wait until July to fight in court a U.S. bid to force it to disclose client names in a tax fraud probe.

UBS, the world’s largest banker to the rich, agreed last week to pay a $780 million fine and disclose the identity of about 300 of its U.S. clients to avert criminal charges, raising hopes the troubled bank could end its U.S. legal problems.”

AIG May Convert Government Held Shares To Common (Bloomberg)
It looks like AIG is considering a move to common shares to kill the dividend associated with the preferred shares. The problem is AIG is currently paying 10% on their preferreds - which makes you wonder whether the responsible/rational Government move would have been to set that at LIBOR to start with.

Not that the government is one for responsible/rational.

“”Paying a huge dividend on the preferred only makes you bleed slowly over time, so this would help,” said Robert Haines, an analyst at CreditSights Inc. in New York. AIG is facing a “huge potential loss on its investment portfolio,” which could lead to credit-rating downgrades, he said.”

UAW Concedes To Ford, There May Be Hope Yet (NYT)
In what could be a turning point for the negotiations with auto makers, the United Auto Workers has agreed to Ford’s stance on retiree health plans. I understand that this is going to hurt a lot of people, and that’s not exactly a point of joy for anyone - but the fact remains that it’s one step closer to a solvent company. Besides, there’s an underlying current here that’s really to blame for all of this: people are living far too long. I’m talking Social Security, retirement bene’s, hell - even my parents planning for retirement. Too long people.

AIG Gets Bid From MetLife, Axa (Reuters)
This has to be embarrassing. I’ll leave it at that.

“American International Group Inc received bids from MetLife Inc and Axa SA for its American Life Insurance Co unit, Bloomberg reported on Tuesday, citing people familiar with the situation.

MetLife made a preliminary offer of $11.2 billion for the life insurer, a price that may drop to about $8 billion because of a deterioration in the unit’s financial condition, the people told the agency.

A rival bid from Axa excludes operations in Japan, the unit’s biggest market, the people told the agency.”

$$$ Microsoft overpaid severance, wants money back [The Deal]

$$$ Madoff: The Monster Mensch [NYM]

$$$ Zachary Michaelson to Teach Portfolio Management Course as Part of New York University’s Credit Crisis Offerings [PRN]

$$$ AmEx Offers Some Holders $300 To Pay And Leave [DJ]

$$$ J.P. Morgan Cuts Dividend 87% [WSJ]

Yes, yes, we know that the excuse to start pushing for common stock with voting rights is that Tangible Common Equity is the standard for bank health that everyone is raving about- as if the voting rights were just an afterthought- but we told you before what this would mean when it came right down to it:

In an unexpectedly assertive joint statement, the Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might end up demanding a direct ownership stake in major banks after they undergo a tough evaluation of their strength, which is to begin shortly.

“The capital needs of major U.S. banking institutions will be evaluated under a more challenging economic environment,” the administration said. “Should that assessment indicate that an additional capital buffer is warranted,” it continued, the banks could be required to give the government a right to acquire common shares, with voting rights.

The statement came as federal regulators confirmed that they were in discussions with Citigroup over precisely that kind of swap. Citigroup, which has received $45 billion in direct assistance and given the Treasury nonvoting preferred shares that pay a guaranteed dividend — is negotiating to swap the preferred shares for common shares that would give the government a stake as high as 40 percent.

You can’t get a little bit pregnant, people. Best you can do is to offer to go halfzies on an abortion. Plus, if you don’t seem to care about preferred anymore, its likely at least partly because you have given up any attempt to claim that taxpayers are ever going to see a dime of the money back.

In Latest Plan for Banks, U.S. Could Demand Voting Stake [The New York Times]

It literally was only a matter of time, and it really makes no difference how “temporarily” businesses are absolutely-definitely-totally-not-really nationalized. Patronage politics will show their ugly face and give us the insanity of a government tempted to dumb down a business it had to take over because of poor performance. Citi isn’t even technically nationalized yet and already, it’s starting. Latest nonsense follows:

Citigroup’s rivals are lobbying the government to shackle its investment banking business and international operations if the authorities nationalise or take a large stake in the troubled financial group.

The increasing likelihood the US Treasury will end up with a big holding in return for throwing Citi its third lifeline in less than four months has prompted other Wall Street groups to go on the offensive in Washington.

Apparently, the slippery slope is covered in melted butter runoff from all the popcorn being consumed on the sidelines.

Rivals want curb on nationalised Citi [The Financial Times]

They’re few and far between (pawn shops, anti-Semites, Gary Busey…so much you don’t know) but the number of people making bank as a result of the greatest Ponz of all time is growing by the day. Like the guy who took this photo of Bernie-boy back in the day, when he was a mostly anonymous rich prick. Now that he’s an infamous poor schmuck, the photog, Jonathan Saunders, has found his work in high-demand. And that got us thinking— we should try and make some cash-money off the pic we recently came across when cleaning out a former co-worker’s desk. So we’re pimping it out to the highest bidder, after the jump. Next, the Ruth y Fish files.

This is not the environment in which to mess with Cuomo. Particularly if you are John Thain. Seriously. Says Dealbook:

Merrill Lynch’s former chief executive, John A. Thain, was questioned by the New York State Attorney General Office last week. In a six-hour session [complete with stress positions, extended standing, cultural humiliation (for example, exposure to retail banking executives, state employees), exploitation of phobias (for example, the use of dogs, poor people, coach class seating)]^* Mr. Thain answered wide-ranging questions about the bonuses he paid Merrill employees and about his interactions with officials at Bank of America, which acquired Merrill at the end of the year.

Attorney General Andrew M. Cuomo was not satisfied by Mr. Thain’s answers, and he filed a motion on Monday asking that Mr. Thain return and provide more details about the bonuses .

What did the Thain dish? Take a look after the jump.

^* Dramatization. May not have actually happened.

[voice, body shaking] “We’re really gonna to make it work this time, promise…Seriously, really, from one Joe to a Bro.”

AIG Is In Talks With Government To Secure Additional Funds to Keep Operating [CNBC]

You had to know that appointing a “Car Czar” with the kind of powers that might actually get something done when it came to Big Auto was just never going to happen. There is, after all, only one Lord of the Bailout, and he does not share power (unless it is via a gridlocked committee of varied interests and affiliations to make sure every view is represented and no major initiative ever sees the light of day).

Yeah, ok, but you have to give Steven Rattner an “advisory position” after you taunted him with a Czar slot. I mean you can’t take away his favorable taxation setup at Quadrangle Group and deny him the promised Car Czar slot. Sheesh.

Rattner Is Said to Join Treasury as Adviser on Autos [Bloomberg]

The BAS Commercial paper group in San Francisco was apparently, in large part, axed this morning. According to one of the victim’s of the population restructuring, “no bonuses, despite being profitable.”

YESSSS. Charlie Gasparino reports that Andrew Cuomo, none to happy about the fact that John Thain, subpoenaed to answer questions re: Merrill bonuses and refusing to do so, has filed motion against the former MER CEO. According to Thain, who dollars to donuts has already strapped into the old onesie, it’s because Bank of Amerillwide lawyers are “prohibiting” him from doing so. Now, that scenario has a lot of great potential, the question being, what is Bank of Amerillwide trying to hide? But we’d be lying if we didn’t say we’re hoping Thain is just purposefully being a difficult prima donna in an effort to stick it to K. Lewis.

Update: The word from Jesse Derris, Thain’s representation at Sunshine Sachs & Associates: “Bank of America attempted to direct Mr. Thain not to discuss specific [individuals’] bonus details. We continue to cooperate fully with the Attorney General’s office.”

In this case, Vikram Pandit’s job security. You know it’s coming (putting the under/over at a CNBC “Call Of The Wild” segment on the matter at 1 day, and taking the under) so we might as well kick things off here. For the record, we don’t appreciate what appears to be a lack of support for our favorite elfin CEO from the Journal, which can kiss its free pass to the Give Vickle a Tickle Booth good-bye:

Among the question marks looming over the current discussions is the future of Citigroup Chief Executive Vikram Pandit and the company’s board. Pandit’s Future

In November, as part of the sweeping rescue, federal officials privately discussed the possibility of replacing Mr. Pandit, who became CEO in December 2007. But the government decided not to remove him, in large part due to a dearth of qualified replacements. Still, top government officials warned Mr. Pandit that a third trip to the taxpayer trough would probably cost him his job.

However, since the latest talks don’t involve the possibility of Citigroup receiving additional government capital, it isn’t clear whether Mr. Pandit’s job is on the line. A Citigroup spokeswoman declined to comment.

So, it kills us to even ask but:

Regarding speculation that the Hongkong and Shanghai Banking Corporation would be taking a page from Bank of America and UBS’s playabooks, re: bonuses, it seems as though acronym haters were indeed inspired to compensate employees in Pop Rocks. But they’re (presumably) not doing so over a period of ten years so, that’s something! The breakdown was supposedly as follows:

If there was any doubt that Eastern Europe was in trouble, it should be slipping away by now. Years of carry-trading mortgages without hedging has left a number of borrowers on the wrong side of the Swiss Franc, and facing serious defaults. Poland has something like 60% of all residential mortgages denominated in Swiss Franc- a product of low rates and aggressive marketing through the “feeder” of Austria. Don’t worry though. The IMF (read: Angela Merkel) is here to save the day.

European leaders called for doubling the International Monetary Fund’s war chest to $500 billion for bailing out financially stricken nations, amid new signs that Europe’s former Communist east is sliding into a full-blown crisis.

Europe’s developing economies are facing their worst economic trauma since the fall of the Berlin Wall 20 years ago. Capital is fleeing Europe’s east, sending currencies sliding and threatening the region with deep declines in output and employment, and a deluge of debt defaults. Poland’s industrial output in January fell at a painful 15% annual rate; its currency last week hit an all-time low against the Swiss franc.

Crisis Spurs Call for Bigger Bailouts [The Wall Street Journal]

We may well get to watch a sizable good bank / bad bank plan in action before long. RBS has decided to go the fiscal hermaphrodite route (we understand the surgery is radical and risky enough that lots of capital infusions are being hung on the drip cart in preparation).

The Royal Bank of Scotland (RBS) is to be split into a “good bank” and “bad bank” in a dramatic rescue restructuring in which assets worth several hundred billion pounds will be put up for sale.

Stephen Hester, RBS chief executive, will outline the plans this week as he unveils Britain’s biggest-ever corporate loss of up to £28 billion. He will cut costs by more than £1 billion a year, a move expected to lead to the loss of about 20,000 jobs, more than half of which will be in Britain.

Large parts of the group’s investment-banking business will be earmarked for sale or closed down. Its Asian operations and retail operations across central and eastern Europe will also be sold off.

All these operations will be bundled together in a “bad bank” inside the group, which will report its figures separately.

Given the almost caustic split between views on the wisdom of the “good bank / bad bank” method, it will be interesting to see how the process develops. What say you? Is this likely to turn out to be brilliant elective surgery or result in a lingering, hospital-acquired and antibiotic-resistant infection?

Radical revamp splits RBS in two [Times Online]

Luckily for everyone involved, the pains it seems Bernie took to spread the wealth (around various banking secrecy jurisdictions) seem to have been in vain as even notorious banking environments froze anything with the magic word Shazam Madoff on it. Victims will feel much better knowing that the Gibraltar branch of the International Safra Bank is on the case to the tune of $50 million. (Phew!)

The Gibraltar funds were deposited at Safra just a few weeks before Madoff was exposed, according to a source close to the Gibraltar police. This money may have been placed with Madoff through a feeder fund operated by Safra, which asked Madoff to redeem a portion, but not all, of its investment—somewhere between $50 million and $75 million. The returned funds were still being held in the Safra branch when the scandal broke.

After the bank put a stop on the funds, local police informed authorities in the US and are now cooperating with the New York investigation. Gibraltar has a history of shady banking practices, but like many offshore havens, it has made a better effort in recent years to police illegal activity. And in general the behavior of the international banking community in the Madoff case demonstrates an unprecedented level of cooperation with American prosecutors—far more, certainly, than investigators received in earlier cases such as the BCCI scandal.

Update: Safra comments as follows on the text we quoted from The Daily Beast:

In the article, “Phew! Found It” in today’s Deal Breaker there is a description which is inaccurate. The description is: “This money may have been placed with Madoff through a feeder fund operated by Safra.”

For the record, Safra has never operated a feeder fund. If it is possible, we please would ask this inaccuracy be corrected.

It is accurate to say that the fund you refer to in your article had an account at Banque Jacob Safra Gibraltar.

In addition, for your information, Madoff never has had any accounts at a Safra bank.

Missing Madoff Money Found! [The Daily Beast]

Not sure we’d name our ‘move the bank overseas’ project after the plane that is best known for a deadly crash but WTF do we know? Supposedly:

Most of the US operations will be shut down as part of global initiative to move most/all US banking, sales and trading to the UK balance sheet. For some reason, this is all code named “Project Concorde.” Eric Knight will be happy.

HSBC is now considering a $20 billion rights offer. Trying to get out of here before is US shut down, and the bank goes the way of RBS. Or become an incompetent Global Head of Markets.

Don’t worry folks, because…

…a survey of 47 professional forecasters released by the National Association of Business Economists on Monday predicted the recession-hit economy would begin to recover in the second half of this year, returning to a potential growth trend in 2010.

The recovery was seen driven by the Obama administration’s $787 billion economic stimulus plan, the group said.

Well, of course. How silly of us. If only we knew Zoltar and Miss Cleo were on the case we would have started buying equities last week. Now that the professionals have chimed in, I feel most comforted.

U.S. economy seen starting recovery in second half of ‘09: poll [Reuters]

Clients— bunch of meddling bastards, aren’t they?

From: Citibank Communications

Date: February 20, 2009

Re: Talking Points on Nationalization & Financial Strength

There has been ongoing media speculation today around the nationalization of banks and we understand that customers are calling and coming into our branches with questions. Please use the points below to address any concerns.

**************************

Q: Is Citi going to be nationalized?

A: While it would be inappropriate for me to speculate on any actions the government may or may not take, I can tell you that Citi’s capital base is very strong.

Today (February 20, 2009), White House Press Secretary Robert Gibbs commented that: “This administration continues to strongly believe that a privately held banking system is the correct way to go, ensuring that they are regulated sufficiently by this government.”

If Pushed

Our Tier 1 capital ratio as measured at the end of the fourth quarter was 11.9%, among the highest in the industry. We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth.”

Talking Points

· Citibank is part of Citi, one of the leading financial services firms in the world.

· Citibank is an FDIC insured institution so your deposits are insured up to $250,000 per depositor through December 31, 2009.

· Citi’s capital base is very strong and our structural liquidity is among the strongest of the world’s financial institutions.

· Citi has significant risk capital that far exceeds the levels required of a “well capitalized” bank.

· We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth.

· Citi has a diverse range of funding alternatives and our businesses are sound and very well positioned in the U.S. and key markets throughout the world.

· As of the fourth quarter, Citigroup had a deposit base of approximately $770 billion that was diversified across products and regions. This diversification provides us with an important, stable and low-cost source of funding.

· We stand ready to serve you and we want to express our thanks to you for choosing Citi.

So, Vikram Pandit sent this letter to employees late Friday. In it, he repeats the line from Press Secretary Gibbs about the White House being into a private banking sector, which, considering last night’s news, now comes off as a little awk! Or maybe not, if you don’t consider the “U.S. government substantially expanding its ownership of the struggling bank” a line in the sand.

From: vikrampandit@citi.com

Sent: Friday, February 20, 2009 10:40 PM

To: vikrampandit@citi.com

Subject: Financial Markets Update

Dear Colleagues:

As you know, financial markets around the world remained under great pressure this week, again fueling speculation about additional intervention in financial institutions by the U.S. government. As we continue to navigate these unprecedented times, I want to reassure you that I remain very confident in Citi’s prospects and business position around the world. Our Tier 1 capital base is very strong and is one of the strongest in the financial services industry. Additionally, we continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth.

While rumors and speculation persist in the market, I want to highlight for you statements earlier today from U.S. government officials. The White House reiterated that it “continues to strongly believe that a privately held banking system is the correct way to go.” Additionally, the U.S. Treasury Department said it “plans to preserve a financial system that is owned and managed by the private sector.”

UBS Shares Dive On Tax News (Reuters)
The willingness of UBS to give the United States the names and money in settlement form has pissed off investors - though I can’t imagine why - and led to calls for the resignation of UBS leadership from some parliamentarians. It’s funny how short memories are, as Reuters has it the settlement was backed by the Swiss government.

Citi Scammed By Nigerians. Seriously. (NYT)

Swindles in which someone overseas seeks access to a person’s bank account are so well known that most potential victims can spot them in seconds.

But one man found success by tweaking the formula, prosecutors say: Rather than trying to dupe an account holder into giving up information, he duped the bank. And instead of swindling a person, he tried to rob a country — of $27 million.

To carry out the elaborate scheme, prosecutors in New York said on Friday, the man, identified as Paul Gabriel Amos, 37, a Nigerian citizen who lived in Singapore, worked with others to create official-looking documents that instructed Citibank to wire the money in two dozen transactions to accounts that Mr. Amos and the others controlled around the world.

The money came from a Citibank account in New York held by the National Bank of Ethiopia, that country’s central bank. Prosecutors said the conspirators, contacted by Citibank to verify the transactions, posed as Ethiopian bank officials and approved the transfers.

Slumdog Millionaire Big Winner (CNBC)
The Oscars are a huge event for millions yearly, and given the recent downturns in the market and shortages in liquidity the timing seems pretty good - if only there were weekly events like this to keep consumers interests off daily happenings. Aside, Slumdog Millionaire seems to have taken the night by storm (though I’m not sure that was unexpected..) and I have it on good authority that Penelope Cruz was just hot enough to buckle your knees a little.

Also, importantly, CNBC has it that “Madea Goes to Jail” has locked up number 1 at the box office.

East Europe Looks For More Money (WSJ)
“European leaders called for doubling the International Monetary Fund’s war chest to $500 billion for bailing out financially stricken nations, amid new signs that Europe’s former Communist east is sliding into a full-blown crisis.

Europe’s developing economies are facing their worst economic trauma since the fall of the Berlin Wall 20 years ago. Capital is fleeing Europe’s east, sending currencies sliding and threatening the region with deep declines in output and employment, and a deluge of debt defaults. Poland’s industrial output in January fell at a painful 15% annual rate; its currency last week hit an all-time low against the Swiss franc.”

Of Budgets And Tax (FT)
“His first budget, released on Thursday, will show the deficit falling to $533bn (€415bn, £369bn) by fiscal year 2013, compared with an inherited deficit aides estimate at $1,300bn.

[…]

Revenue from the sale of emissions permits under a cap-and-trade system will help pay for the deficit reduction, along with reductions in spending on the war in Iraq and higher taxes on wealthy individuals and businesses.

[…]

The budget will allow the Bush tax cuts for those earning more than $250,000 to expire after 2010. The top marginal income tax rate will rise to 39.6 per cent. The top capital gains tax rate will be set at 20 per cent.

However, hedge fund and private equity executives will be taxed on “carried interest” - their share of profits on investments - at the higher income tax rate rather than the lower capital gains tax rate as at present.”

SEC Faces Scrutiny Over Trading Inquiry At Lehman (NYT)
“In a letter sent to the commission last Thursday, Charles E. Grassley, the Iowa Republican who is the ranking member of the Senate Finance Committee, asked Mary L. Schapiro, the chairwoman of the S.E.C., whether it had followed up on allegations that were brought to its attention last spring involving a unit at Lehman Brothers. Employees in the unit, known as the Product Management Group, appear to have tipped off clients and traders about the content of the firm’s research reports before they were released, a former Lehman analyst said.

[…]

According to the letter, the documents provided by Mr. Parmigiani indicate that officials in Lehman’s Product Management Group routinely received research reports before they were made public. The case also raises questions of whether the content or gist of the reports was disseminated to select traders in advance.”

Who wants somea this?

Dear Clients and Friends,

Today, we are proud to announce the opening of Meredith Whitney Advisory Group, LLC.

Our new firm combines a unique approach of macro outlook, strategy, and company specific research. In addition to our signature style of thematic based industry analysis with expanded products, we will provide increased and unparalleled access to corporate management, government officials, regulators and thought leaders for a best in class client experience.

Citigroup Inc. is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup’s common stock. Bank executives hope the stake will be closer to 25%, these people said.

[…]

Under the scenario being considered, a substantial chunk of the $45 billion in preferred shares held by the government would convert into common stock, people familiar with the matter said. The government obtained those shares, equivalent to a 7.8% stake, in return for pumping capital into Citigroup.

The move wouldn’t cost taxpayers additional money, but other Citigroup shareholders would see their shares diluted. A larger ownership stake by the federal government could fuel speculation that other troubled banks will line up for similar agreements.

Bank of America Corp. said Sunday that it isn’t discussing a larger ownership stake for the government. “There are no talks right now over that issue,” said Bank of America spokesman Robert Stickler. “We see no reason to do that. We believe the goal of public policy should be to attract private capital into the bank, not to discourage it.”—WSJ

This may explain Timmeh’s absence. He was twisting some Swiss tribunal arms to prevent tax evasion data from flowing back to the United States. In retrospect, it was so obvious!

A Swiss tribunal has barred financial regulators from handing banking information of UBS bank clients to US authorities investigating tax fraud, ATS news agency reported.

Siding with a complaint from UBS clients, the tribunal on Friday issued an order forbidding Swiss bank regulator FINMA from giving the plaintiffs’ “banking documents to third parties, particularly US authorities,” ATS said.

The tribunal’s decision came amid US Justice Department efforts to break through Switzerland’s banking secrecy to go after tax cheats hiding their money in the European country.

UBS, Switzerland’s biggest bank, reached a settlement with US authorities on Wednesday in which it admitted to US tax fraud and agreed to pay 780 million dollars.

The bank was also ordered to hand over details of 250 to 300 US clients.

But UBS rejected a new US government lawsuit filed Thursday asking that the bank disclose the identities of some 52,000 US customers who allegedly evaded taxes.

Swiss court blocks bank data sharing with US: report [Breitbart]

$$$ The Hamptons Half-Price Sale [WSJ]

$$$ Personal Ponzi schemes [NYT]

$$$ Wall Streeters’ Lifestyle Modified, Slightly [Cityfile]

Berkshire, once again, laboring under the cloud of the long dated index puts the firm has sold, has hit five year lows. The fear is that collapsing indexes, against which Berkshire has written a number of long dated puts to unknown counterparties (-cough- Goldman -cough-) will cause writedowns in the coming quarterlies. True, Berkshire doesn’t have to pay out on these instruments until 2019 at the earliest, but that’s not stopping the panic and it drove Berkshire Class A shares down to $73,677.30 this afternoon. Shares have since recovered some, but the cloud lingers.

As we’ve mentioned before, the options are European style (i.e. cannot be exercised before the expiration date) and Berkshire is apparently not required to put up collateral based on the price of the options or their underlying, but rather only in the event the firm itself suffers some sort of impairment. (There aren’t a lot of details here, but we suspect this means a credit downgrade or a significant cash crisis). In a way, this has made Berkshire stock a proxy for global index expectations. Insofar as Charlie and Warren don’t care about stock price, this probably doesn’t mean much- except that now might be a good time to buy back some stock.

Buffett’s Berkshire Drops to Lowest in Five Years [Bloomberg]

To my teammates:

Public debate on the subject of potentially nationalizing some banks continues to put great pressure on our stock. And yet, our company continues to be profitable. I see no reason why a company that is profitable, with capital and liquidity levels that are very strong, and that continues to lend actively, should be considered for nationalization. Speculation about nationalization is based on a lack of understanding of our bank’s financial position as well as a lack of appreciation for the adverse ramifications for our customers and the economy.

Bank of America does not need any further assistance today, and I am confident we will not need any further assistance in the future. I believe our company has more than enough capital, liquidity and earnings power to make it through this downturn on our own from here on out.

There is no question that the recession is continuing to worsen and that rising credit costs will continue to put great pressure on our ability to generate earnings. But here’s the good news: Your hard work is producing results in businesses all across the company.

Steve Liesman reports that the Treasury, too, has heard the nationalization rumors and wants you to know that they “should not [be] regarded as an indication of administration’s policy” and to please remember that T. Geith has previously stated that “we will preserve a financial system that is owned and managed by the private sector.”

As you’ve likely heard, White House Press Secretary Robert Gibbs said earlier that the administration believes a “privately held US banking system is the correct way to go.” There’s been a lot of speculation as to what he really meant when he said that. A lot people, who are not down with nationalization are all, high-five! Others, are more like, he’s the Press Secretary, not T. Geith, this means jack. So:

But, but… we thought liquidity wasn’t a problem?

CNBC stuck Dick Bove and Cramer on the tube and primed the nationalization pump. “Is it possible in your view that the U.S. Government could nationalize some banks?”

Yeah, pretty much not. If by “nationalization” we mean a total takeover, just the debt burden makes the prospect unlikely, sayeth the talking heads.

Choice Cramer Quote: “It’s quite obvious that Tim Geithner has disappeared.”

I’d start looking on Sir Allen’s private island.

Timmeh- if you’re out there… and if you are thinking about skipping town (not at all a bad idea) may we recommend a helpful service journalism piece?

Cramer On Bank Nationalization [CNBC]

Bloomberg reports that Dallas-based Highland Capital has shot for and scored the trifecta: the firm will be closing its third fund since October. This time its the CDO Opportunity Fund LP, which was “wiped out by losses on high-risk debt securities” and will be wound down, with remaining assets being distributed to creditors, and sad trombones being distributed to shareholders. According to those in charge of the we lost all your money letter, the matter of insolvency occurred due to “the unprecedented market volatility and disruption to the financial system,” which sounds familiar because its what they said when they closed the Highland Credit Strategies Fund and the Highland Crusader Fund.

Apparently, Sir Allen was working on a “private island” development for all his favorite victims pals. Thirty estates, exclusivity, undisclosed location. All we need now is to blow up Tim Geithner’s seaplane with a solar powered laser and for Nick Nack to show up and start tempting regulators into a funhouse gun battle on the Man With The Golden Gun’s private island. (Of course, that island was near Thailand, not the Caribbean, but still- you get the point).

Scheduled to open in 2011, it would have featured the largest private aviation complex in the world, Forbes said, with enough room to park 100 private jets as well as a jumbo marina with enough dock space for 30 massive yachts. The super-exclusive resort would require members to shell out a $50 million deposit, which would be refunded if they left the development. That was on top of the $15 million annual membership fee.

No word on the actual presence of a solar powered laser on the island, but we wouldn’t be the least bit surprised. Stanford was nothing if not environmentally conscious.

Allen Stanford’s Mystery Island [Dealbook]

Care to have a word with Ken Lewis? Surely you’ll be able to find him at Phil’s Tavern, one of his two fave dive bars, on Monday, when PT will be providing beers for around the price of the firm’s stock, $1.50. The rub here, though, is that you must drink them out of your BAC-issued biodegradable propaganda mugs, which will prove difficult for some.

FOX Business Network has won a victory against the Treasury Department in its Freedom of Information Act request for details about the government’s bailout plan.

Judge Richard J. Holwell of the U.S. District Court for the Southern District of New York said in a decision Friday that the government is directed to comply with FOX Business’s request under the FOIA “within 30 days and to produce a Vaughn index with 45 days.”

[…]

The initial request, filed on Nov. 25, sought actual data on the use of the bailout funds for American International Group and the Bank of New York Mellon, and an additional request, filed on Dec. 1, sought similar data on the bailout funds for Citigroup.

FBN asked the Treasury Department to identify, among other issues, the troubled assets purchased, any collateral extended, and any restrictions placed on these financial institutions for their participation in this program.

Cody must be thrilled.

FOX Business Wins FOIA Lawsuit Against Treasury [FBN]

Firm Name / Market Cap (billions)

France Telecom/ 57.65
Emerson Electric / 21.81
Accenture / 21.56
Bank of America / 20.33
Bank of Nova Scotia /19.48
Telefonos de Mexico / 13.26
Apollo Group / 12.68
Staples / 11.02
Lemonade Stand on Hudson Street / 10.51^*
Citigroup / 10.25
Paychex, Inc. / 8.64

^* No active market for these securities.

And that’s cool, but everyone should just know that that’s what’s fueling the nationalization speculations, your stupidity, and not the reality that the sinking ship will soon be consigned to the scrap heap of corporate history without the gov’s help. Sayeth Lewis, in an statement to CNBC earlier:

“We see no reason why a bank like ours should be nationalized…there’s no reason why a company that is profitable with strong levels of capital and liquidity should be considered for nationalization…speculation about nationalization is based on a lack of understanding.”

Reuters-blogs (yes, Reuters has blogs like everyone else) is running a James Saft op-ed piece today that bears a stinging but cogent message: Let Housing Crash.

Ok, it might be a bit late, housing already has crashed, but supporting a broken market is useless and expensive. Let’s just get this out of the way: asset prices in housing were made of fog. Bringing them back is simply beyond the capacity of any central planner. No one has a sufficiently large checkbook.

The Mortgage Bankers Association did a study in 2008 that found 70 percent of foreclosures were on properties either not occupied by owners, were on borrowers who could not be found or did not respond, or on borrowers who had already had a modification and were defaulting again. Of the 30 percent not in those categories must surely be quite a few of tomorrow’s re-defaulters!

The housing rescue plan is in part an attempt to rescue banks, whose balance sheets will be further undermined by falls in house prices and defaults causing many more failures. The bottom line is that many Americans who now have mortgages would be better off renting.

But, but… what would become of the American Dream of Home Ownership?

Let Housing find its clearing price [Reuters]

Yes, we know Ken Lewis put up a great front when grilled by Maxine Waters, but that was then, this is now and Country Bank of Amerillwide Lynching is down 20%. (Of course, when your stock is hovering around below $3 a 20% move really doesn’t seem like much and we are just not going to say anything about Citibank’s sub $2 price).

So, when Senator Dodd today chimes (will chime) in with “I’m concerned that we may end up having to do that, at least for a short time…”

…well, bye bye shareholders.

All this just reinforces the belief that shorting NASDAQ’s Government Relief Index is an entertaining way to watch the bailout drama unfold.

Unless you can collect the protection in Swiss Franc, we find it difficult to get our head around credit default swaps on U.S. Treasuries. Surely, if you find yourself actually needing the protection, the last thing you want is U.S. Dollars. And in addition, if you find yourself in a position to expect payment from your counterparty, how likely are you to get paid? And finally, why in the world would the U.S. choose to default, rather than just turn on the printing presses?

First, default, at least domestic default, is much more common than you might think. Reinhart and Rogoff’s The Forgotten History of Domestic Debt is an interesting place to start if the topic compels you.

Second, what constitutes a default isn’t at all clear when you see credit default swap prices thrown about. To the extent the OTC market is a substantial portion, it is difficult to know exactly what constitutes a default.

Third, use of the “no-arbitrage” model to price credit default swap spreads can be misleading, particularly in times of financial crisis. (Sound familiar?)

All this is a gentle way of bracing you for the rumor fact that spreads on credit default swaps on U.S. Treasuries have blown out to triple digits today.

Uh oh.

Now if only we could find a reliable counterparty to write us some CDS contracts denominated in gold.

We’ve been wondering all morning why, whereas Ken Lewis has been working his ass off batting down rumors of nationalization, we’ve heard nary a peep from the other candidate for the government’s tentacles, Vikram Pandit. Perhaps it’s cause he’s got his hands tied? We’re told that the Citi CEO is in Mexico circa now, apparently meeting with Roberto Hernandez.

Is the sit-down in re: Banamex going back into Mexican hands? (And is this in anticipation of Big C nationalization, since Mexican authorities presumably would not appreciate Banamex to be in (indirect) US government hands?) Or is it a meeting of the minds re: how much baby oil is too much, when one is in pursuit of the perfect tan? You tell us.

You know, we weren’t expecting that authorities, once they found him, were going to stick Allen Stanford in a burlap stack and beat him with reeds. But we also weren’t expecting handshakes and cordiality. We believe in innocent til proven guilty and all that jazz but times like these call for some dog and pony shows, and when you can’t count on the apparently worthless FBI to, at the bare minimum, shove a possible fraudster up against the wall and demand that he “spread ‘em!” and “shut up, I said shut up,” even if they had to lean in and whisper, “We’re just doing this for the press, we ain’t gonna hurt ya,” you really can’t count on anything. So, no holding in a meat locker, AND, apparently, this hideousness:

Agents with the Federal Bureau of Investigation, brought into the case by the Securities and Exchange Commission, located Mr. Stanford on Thursday afternoon in Fredericksburg, Va., about 55 miles south of Washington, said Richard Kolko, a spokesman for the F.B.I.

F.B.I. agents were waiting at the home of a relative of Mr. Stanford’s in Fredericksburg when he arrived in a car with a girlfriend, according to a law enforcement official who spoke on the condition of anonymity because he was not authorized to discuss details of the episode.

Mr. Stanford was “extremely cordial and cooperative,” the official said. “They served him with the papers, said ‘Have a good day,’ and left.”

F.B.I. Finds Financier Suspected of Fraud [NYT via Daily Intel]

[Stanford Financial] had a major office in Miami - the doorway to Latin American money - that was staffed by curiously few people.

[…]

“It didn’t look like a typical brokerage office,” said one insider about the Miami operation. “There was nobody in the office.”

The company did have about 40 hard-working and apparently totally legit analysts toiling out of a Boca Raton office.

And it paid its salespeople very well, reportedly between 1 percent and 2 percent of the investments they brought in.

So well, in fact, that some of the salespeople seemed embarrassed by their riches.

My insider remembers a time when the company held a party for its biggest producers and a list of their monetary accomplishments had been printed for distribution.

The salespeople got so flustered by the transparency that all 1,000 copies of the list were burned before the meeting could go on.

Another time the heads of Stanford Group’s divisions were told to nominate someone for the company’s annual $10,000 prize.

Six finalists were told to stand among the crowd of their co-workers at an annual meeting and Stanford himself walked among them game-show style before tapping the winner on the shoulder.

“It was like pulling wings off a fly,” said someone who was there.

Everyone Wants To Look At Stanford’s Client List [NYP]

The call starts 15 minutes late. Suspect.

“Welcome to the first meeting of Bernard creditors.”

Irving H. Picard, trustee: “We’d like to point out the emergency exits to the left and right of the auditorium.”

“The purpose of this meeting is to discuss the administration of the case, marshaling of the assets, as well as litigation, some of which has already begun, some of which is down the road. There are a couple of ground rules. We are operating out of a crime scene….we’re working closely with US attorney’s office, as well as the SEC, but there is a limit to what we can say. “

“The history of this proceeding is rather simple.” Gives us a recap of what’s gone down in the life of Bernie-boy since December 11.

“Under the statute and court appointment order the proceedings were removed from bankruptcy court, and the case is being conducted as though it were a liquidation.”

As previously mentioned, in tough times like these, not in lieu of but perhaps in conjuntion with professional counseling, we invite you to lay down on the Dealbreaker couch and let it all out. If anyone else has a grievance they’d like to work through and/or more widely disseminate, send it our way. From the mailbag:

Much like BofA, the legacy Barclays folks got screwed this bonus season. Barcap bonus numbers were ~50% of what the Lehman people got, with 50% of that lower number deferred over the next two years, making the Barcap folks all feel like second class citizens.

Now what you may not be aware of, is that Barcap also switched over to the Lehman analyst system (3 years and you’re out if you don’t get an associate offer). By some magical coincidence (AKA 10-person analyst promotion board composed 80% ex-Lehmanites), hardly any of the third year Barcap analysts got promotion offers. They are being told that if they did not get a promotion offer, they will be done in June and will not be receiving any of the deferred portion of their comp. I don’t know why you would put a number down on paper, just to slide it across a table to tell the person that this is what they will NOT be receiving, but that’s exactly what they did.

First off, when Ken Lewis tells me something, I believe him. So this is most likely the work of some disgruntled employees (Ang Moz), but nevertheless: “Bank of America and Citigroup won’t live to see May. The government will take them over within the next 60 days. The announcement may come as soon as tomorrow evening.” Do we buy this, in part or whole? We feel like traitors to the brand for even thinking such thoughts but we need to determine what’s what, democratically:

The Bank of Amerillwide CEO had had it up to here (points to Angelo Mozilo’s forehead) with this nationalization talk, so you know what he did about it? He got “policy officials” in Washington on the horn and they assured him it is categorically not gonna happen (they’re just going to let BAC fail— kidding!). Of course, the worthless wonks won’t get out there and spread the good news to the masses, so we’re gonna need your help to widely disseminate the message. Fire up your e-mail blasts, stuff your carrier pigeons, and let’s get this thing done.

Mr. Lewis addressed the nationalization speculation during a senior leadership meeting Thursday at the bank’s headquarters, according to a person there. Policy officials in Washington have assured Mr. Lewis that such an option isn’t on the table, the CEO said. He also said he has urged the government to say this publicly.

No word on plans or Citi, or leaks of Vikram addressing the matter with first year analysts at Trivia Night on Wednesday, so we assume they’ve resigned themselves to the idea.

BofA’s Lewis Subpoenaed Over Merrill; Thain Talks (WSJ)
How about everyone keeps their bonus and we can stop hearing about it?
“Bank of America Chairman and Chief Executive Kenneth Lewis was issued a subpoena by New York State Attorney General Andrew Cuomo, who is investigating whether the bank withheld information from investors in violation of state law, according to people familiar with the matter.

Mr. Lewis, who received the subpoena late last week, is the highest-profile subject of Mr. Cuomo’s investigation into the Charlotte, N.C., bank’s purchase of Merrill Lynch & Co. on Jan. 1. Mr. Cuomo’s office is trying to determine if investors were misled about the depth of Merrill’s losses in late 2008 and whether details of the bonuses to Merrill employees, contained in a nonpublic document, should have been disclosed to investors.”

Prudential Looking To Expand (Reuters)
“Prudential Financial Inc (PRU.N) is leading the race to buy two Japanese life insurers put on sale by American International Group Inc (AIG.N) in a deal due to close next week, sources familiar with the matter said on Friday.

AIG Edison Life Insurance Co and AIG Star Life Insurance were put on the block last year as part of AIG’s efforts to shed assets globally following a bailout by the U.S. government.”

Hints Of A Credit Thaw (Bloomberg)
For those of you that can remember back far enough: this actually started as a liquidity problem. That the liquidity problem managed to catapult itself into equities isn’t exactly unexpected, but it’s a little off putting that there’s any expectations that new found liquidity in the debt markets will in turn show growth in equities.

“Corporate bond trading in the U.S. is rising to the highest in two years, adding to evidence that credit markets are thawing even with stocks off to their worst start since the 1920s as the recession deepens.

An average $17.1 billion of corporate bonds traded daily this month, compared with $17.7 billion in January, according to the Financial Industry Regulatory Authority. The business is up from last year’s low of $9.4 billion in August and reached the highest level since February 2007, Finra data show.”

Government Plans To Float Loans To Hedge Funds and PE Firms (NYT)
The Administration is planning on making available as much as $1T to hedge funds and private equity firms in hopes that they’ll take the money and buy bundled loans. The only hedge funds I could imagine would take the money are the ones that are failing miserably, though: there’s not a stable fund on the planet that would risk government intervention to source capital.

The BBC’s Contribution To Our Graphics Filled Morning (BBC)
The BBC has and graciously provided this morning’s chief source of entertainment: the bailout as expressed through nine graphics, with three part harmony.

$$$ Cheer up: cocaine prices are falling [Cityfile]

$$$ Goldman Sachs Exec’s Retirement Seen Tied To Succession [DJ via Clusterstock]

$$$ Coping When a Close Co-Worker Is Laid Off [WSJ]

$$$ Wilbur Ross: Obama Foreclosure Fix Not Enough [Housing Wire]

The situation is fluidicy.

In the US, by FBI agent, according to NBC, though that’s all they’re willing to tell us at this time.

Update: He was served with “a number of papers” in Virginia, though he was not arrested (and is now running free??).

Late last June, Countrywide CEO Angelo Mozilo told CFC shareholders that Bank of America “will reap the benefits of what we have sowed.” And though we were deeply interested seeing how what has got to be the greatest veiled threat EVER would play out, another, possibly more disastrous BAC integration gripped our attention. Today we decided to circle back and see what’s been a poppin’ re: Bank of Countrywide, and we are delighted to inform you that things are going just great. Here’s what Barbara Desoer, the Bank of America executive “in charge of cleaning up and integrating Countrywide” said in an interview with the Charlotte Observer:

Q. Your chief executive (Ken Lewis) recently said that Countrywide is “on fire, in a positive sense.” Can you tell us more about what that means?

We’re seeing the lowest rates that we’ve had in a long, long time, so we’re the beneficiary of that, with a tremendous amount of volume in both refinancing and purchasing. The capacity that Countrywide brought is enabling us to take advantage of it, so this is reinforcement of “Thank goodness we did the transaction.”

Traditionally, fourth quarter takes a meaningful dip in volume, but we’ve really seen a lot of activity from Nov. 25 forward. That’s when the Fed committed to buy up to $500 billion in mortgage-backed securities, in an attempt to bring rates lower. And psychologically, for the consumer, being able to get a rate below 5 percent - that’s where the markets are hottest.

Both brands are being very aggressive in marketing. We’re paying overtime, extending hours, hiring contractors, hiring full-time employees, taking them from parts of our business that are slower and bringing them into first mortgage.

Yeah, it looks kinda bad that Misha Malyshev, the Citadel trader who was instrumental in two of the firm’s funds gaining 40 percent last year, as opposed to losing nearly 50, has up and peaced, and taken two members of his team with him, but that’s because you’re thinking about it in the completely wrong way. This isn’t a sign of sinking, this is a sign of soaring, and an opportunity for KG to roll up his sleeves and get back into the scrum of things, like he was planning on doing anyway (answering phones, makin’ calls, just getting dirty in general, like the old days). As for where traitor-boy is headed, that’s unclear, though, like they always say, follow the cookie crumbs. (Or just shoot us a line and say definitively.)

Because we’re already dead inside. But no, seriously, while it is deeply upsetting that former Countrywide CEO and current Bank of America window-washer Angelo Mozilo will no longer be able to log-on to this here site from the comfort of your desktop, as Dealbreaker was blocked at BAC as of 2:30PM today, a mobile version of DB is being rolled out shortly, and we had the foresight to buy the lil’ fella an iPhone for his birthday. That’s all, and good luck with your firings.

PS: If this was an “accident,” like asking the Bank of Amerillwiders who landed in the Hudson to hand over the reimbursed money from US Airways, let us know and it’s all good.

Can it be? Could they pull it out of the fire?

Fortress blocked redemptions from its flagship Drawbridge Global Macro Fund in December, telling investors at the time that they would get 72% of their requested withdrawals by April. But on Jan. 22, the New York firm moved up the timetable, promising investors they would get the 72% back this month, subject to a 10% hold-back pending a final audit. The remaining 28% of assets that the investors sought to redeem — representing illiquid investments — has been put into a side pocket to be paid out over 18 months.

Fortress, Tudor and Threadneedle Permit Redemptions Again [Hedge Fund Alert via Zerohedge]

You waited. You hoped. You prayed. You bribed. You begged. Now, it has all paid off. You can revel in the details. You can embrace the hypocrisy. You can share in the reflected glory of abject corruption. (Pending appeal).

A Manhattan judge has ordered the government to make public sealed documents about wiretaps in the Eliot Spitzer scandal.

U.S. District Judge Jed S. Rakoff ordered prosecutors Thursday to release documents detailing calls on cell phones used by a prostitution ring whose clients included the former governor. The documents were not immediately released; prosecutors will have a chance to appeal.

Judge orders release of Spitzer wiretap documents [Associated Press]

Meeting of Madoff Creditors to Take Place Friday

Special Toll-Free Phone Line Provided for Creditors Unable to Attend in Person*

WASHINGTON, Feb. 19 /PRNewswire/ — Stephen Harbeck, president of the Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms, and Irving H. Picard, the court-appointed trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS) of New York, NY, issued the following joint statement today:

“On Friday, February 20, 2009, Irving H. Picard, the Court-appointed trustee for the liquidation of Bernard L. Madoff Investment Securities LLC, will preside over the First Meeting of BLMIS Creditors. This meeting will be held at 10 a.m. EST in the Auditorium of the United States Bankruptcy Court. Detailed meeting information is available here.

*That’s us, gang.

Now Greenspan tells us that temporarily nationalizing broke US banks might be OK. If that doesn’t stop you in your tracks, it should. The man often called the high priest of laissez-faire capitalism is saying that he can imagine briefly taking some of the most troubled US banks into state ownership because that is better than the alternative of letting the market sort it out. That is vertigo-inducing indeed, like Lenin doing an about-face on the whole capitalism thing. It is, quite rightly, getting a lot of attention. After all, if Greenspan thinks there are problems with laissez-faire capitalism, and with market-based solutions to banking problems, what is he likely to say next? That marginal revenue doesn’t equal marginal cost for profit maximization? The economic mind boggles at the idea.

Greenspan’s Hidden Agenda [The Daily Beast]

And when I say “shoot this poison into your face,” you shoot this poison into your face. Or don’t, it’s really your call. Only those of you interested in finding/keeping a job should listen. You wanna be a working girl, boys? You’re going to have to start acting like one. In a fabulous piece of service journalism today, the Financial Times suggests that you, my little boy(girl)s, hightail it to the nearest plastic surgeon and get yourselves some Botox.

According to Peter Burling gainful employment is all about “look[in] good— fresh and bright” and not “tired and stressed out.” And if you don’t think your competition is already there, how wrong you are. By cosmetic surgeon Cap Lesesne’s estimate, “There are definitely more business guys coming in and they have very focused demands. They are worried about their job futures and their professional longevity. [Typical male patients] might be in their mid-forties. They’re fairly successful and they’re looking to work into their sixties.” And if you really want to guard against joining the unemployment line, start dressing like a total whore, and remember, no one ever lost their job, or didn’t get a call back, for accidentally shoving their breasts in the boss’s, or interviewer’s face.

Use the photo above as a guide, Men of Dealbreaker. That should be you on the left.

Megan McArdle throws a wrench in the running gears of foreclosure assistance with her “lunatic proposal for the day.” Specifically:

…why not make it easier to move homeowners out of homes they can’t afford? Set up a streamlined foreclosure proceeding where a current or mildly delinquent homeowner can simply give the house to the bank and walk away. Do this with two legal provisos:

1. No tax on the forgiven loan

2. No black mark on the credit record. The bank marks the loan as fully satisfied.

The homeowner gets a fresh start, and the bank gets the house without the huge administrative costs that are normally associated with foreclosure. Everyone loses something, but no one loses a crippling amount, and there is no net transfer between two parties who are both in financial trouble.

It is sort of novel to target the admittedly burdensome administration costs rather than the losses themselves. Some courts are already adopting similar means by running “rocket dockets” and processing thousands of foreclosures a day- I can smell the lawsuits from over here though. One thing that is appealing about McArdle’s proposal is that it doesn’t attempt to perpetuate any fantasy that:

1. We can inflate asset prices at will with no longer-term consequences.
2. We can stave off foreclosure indefinitely.

Damning with faint praise [Asymmetrical Information]

…or so says the Justice Department.

The situation (assets) is fluid.

That’s the line we’re being fed by Prime Minister Winston Baldwin Spencer. “I don’t know, but I don’t think so,” the PM said absurdly vaguely in an interview last night. We’re not saying he’s wrong (and, as previously mentioned, we’ve given the guy a ridiculously cushy head start) but if you “don’t know [definitively],” what’s driving the feeling he’s not there? Gut instinct? Tarot cards? Some bad chinese? INSIDE INFORMATION?

Earlier: Stanford Probably Definitely In Antigua

Oh to the yes. We’re told that Meredith Whitney Advisors, the den of iniquity being founded by our favorite Dollar Dominatrix, will employ MW’s husband, pro-wrestler John “Layfield” Bradshaw. Cute! And they can carpool. But in what capacity with JLB be workin (it) for the wife? That point is unclear though, obviously, the possibilities are endless. For the unimaginative fucks in the group, he could be a broker (though MWA will start out with just research, the lady of the hour has said the long-term goal is to make it a full-service firm). Or: he could head of an in-house body guard detail, reprising the role he debuted when Dubs first made her bold call on Citi, and received several death threats. Or: he could be part of a team tasked with reporting on the sex potion market, in an attempt to corner the erectile dysfunction biz. Or: he could be the main selling point in MWA’s platinum package, wherein clients receive not just research but an on site beat-down of their CEO of choice, by JLB, with their subscription. For those choosing option C, a preview of what Count Vikula can expect, after the jump.

James Stanford, “chairman emeritus” of Stanford Financial and father of you know who, spoke with the Houston Chronicle last night re: you know what. He actually comes off pretty sincere in his worry for Junior, making us want to shake the (maybe) rat bastard and shout, “You’re killing your father!” Choice excerpts below:

Q: How did you find out (about the SEC’s charges)?

A: I was called by some people, friends of ours, who’d seen it on television… and I said, “What in the world?” I’d spoken to him a week or so ago—he’d called—about problems with the business climate in general, but nothing of this magnitude. I cannot imagine, I cannot believe, I will not believe what is being alleged actually happened.

Q: And have you spoken to your son since all this happened?

A: About last week, maybe last Thursday or Friday he called.

Q: And what did you all talk about?

A: He just told me to watch the papers, the Wall Street Journal and all that. He said something, stuff that had been rumored, but nothing like this. Anyway, that’s what I know.

COME ON! CNBC reports that the Securities and Exchange Commission is alleging a $4 million Ponzi scheme by Marvin Cooper, which targeted not Jews, not athletes but “the deaf community.” We get the SEC’s need to really take off its pants and show us what it’s made of, after, ya know, blowing it BIG TIME for the last century, but seriously? SERIOUSLY?

Now that I’ve regained my composure, a little more color. The firm is Hawaii-based Billion Coupons, which reeled in 125 investors since at least Semptember 2007 by “holding investment seminars at deaf community centers.” According to the SEC, CEO Cooper misappropriated $1.4 million of investor dollars to pay for stuff like a new home, a Lay-Z Boy with a fridge on the side and “other personal expenses.”

The Commission, now big and tough and not taking any shit or prisoners, noted, “This emergency action shows that the Commission will act quickly and decisively to help victims of affinity fraud.”

Does it? Up until today you would’ve had me but now I think you, SEC, have made the error in doing too much too soon. Obviously this is terrible if true (as is news of anyone, deaf, dumb, female* or blind being taken for a ride) but I’m not entirely convinced that this isn’t the work of some newly formed subdivision whose sole job is to make up cases designed to grab moral outrage in an effort to make the New SEC look like some sort of white knight that’s not only not incompetent, but sensitive, too.

Tomorrow they’re going to blow the whistle on a $500 million scam perpetrated almost exclusively the gay dolphins with AIDs community (perp/fund name: Glenview Capital). Watch. You’ll see.

SEC Halts Ponzi Scheme Targeting Deaf Investors [Mondovisione]

*Get over yourselves, I’m just trying to keep things interesting.

The House of Blankfein is said reserving conference rooms for next week, in anticipation of some tearful good-byes. It’s unclear if the population restructuring refers to the cuts rumored to be planned for April(ish) but moved up so as not to coincide with Passover, or if they’re a separate round.