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]
Archive for February 2009
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.”
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]
If Pushed Further: Are We Going To Be Nationalized? Let Me Reiterate The Comments From The White House: “I Did Not Have Sexual Relations With That Woman.” Now I Have A Question For You: Will You Get Off My Ass, Mr. Geithner?
By Equity PrivateClients– 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.
Vikram Pandit: “I want to highlight for you statements earlier today from U.S. government officials”
By Equity Private
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.”
