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]
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.”
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