There is an FDIC Conference Call for Bankers (and Investors now) discussing Legacy Loans Program under the newly announced Public Private Partnership, scheduled for noon.
1-888-790-3946
Passcode: 9857969
11:51: The hold music is…Tears In Heaven.
11:55: Now it’s the theme song from Trading Places (“Overture, Marriage of Figaro”). No joke.
12:06: Bair: “We don’t have all the answers now, so we want to hear from you. Put your thinking caps on.”
Questions:
Franklin Card: In terms of starting the program, do you have a time range for when you hope to be up and running? A month? Couple months?
FDIC: Not before we get public comments. We put a end date on that of April 10. We’re anxious to get it moving as quickly as possible. We need the input before we give a specific time frame.
Card: Is price discovery here going to impact accounting treatment for similar assets?
FDIC: Only if there are enough transactions to give several data points, and you have to remember that the leverage distorts the pricing to some degree.
Missed questioner’s name: Will participating in the program potentially put a hole in capital to the extent we have to remark assets? How will this effect our regulatory capital requirements? Will the requirements be changed to alleviate this problem?
FDIC: Uh… maybe.
Missed questioner’s name again: Will the FDIC, I don’t want to use the word ‘coerce’, but use this to nudge the bank along to sell the assets?
FDIC: The supervisory process is already there.
Guy: Can you give us a headcount of people you have devoted to this?
FDIC: No, next question.
‘Nother Guy: Has it been determined if there are bidders, and what the qualifications are to bid?
FDIC: We’re soliciting comments on that. There will be qualifications.
Dude from JPMorgan: breathing into phone
Operator: Sir, your line is open.
Dude from JPMorgan: Hello? Hello? Hello?
Operator: Sir, your line is open.
Dude from JPMorgan: Hello?
FDIC: We’re here. Ask your question.
Dude from JPMorgan: Sorry, I’m an analyst at JP Morgan who doesn’t know how to use a phone.
Guy from DE Shaw: What level of interest have you seen from the banks to participate in this process so far. If you’re not seeing a lot of participation, will you force people to?
FDIC: We just started this monday so…but yeah, people have told us they’re interested.
RBC Capital Markets: Will unaccepted bids impact mark-to-market marks?
FDIC: Depends.
RBC Capital Markets: If not enough banks want to get involved, is there something you can do to force encourage them to?
FDIC: We’re seeking comment on that.
Hedge funds investments in the PPIP will be levered, but the equity downside is still 100%. Apparently, though, that’s not enough for Rep. Kenny Marchant, who believes the private side doesn’t “have enough skin in the game.” He wants them taking this shit seriously, and in order to get them to do so, we’ve got to up the stakes. So, suggestions? Off the top of our heads we’re thinking 300% downside for the hedge funds that get involved. You know, a real Dantesque financial plan. We also like the idea of them getting burned but like, REALLY burned, as in third degree burned, via dipping managers in a life-sized deep fryer, with gigantic tongs.
Zee frogs see your silly little proposed tax and say, “90%? You flaccid Americans! Try 100%.” Yes, mon chichis, dry your eyes ’cause it could be so much worse. The French government is apparently set to “issue a decree banning bonuses and share options for executives of banks that have received government aid,” to be adopted as early as next week. Presidential “official” Claude Gueant said in a statement that “Capitalism is there to enrich all the population and not just the bosses.”
Sorry, we meant throw this up earlier, but got distracted by Barney Frank’s thoughts on the industrial revolution. Anyway, via the Journal, the li’l fella’s prepared remarks.
Thank you Chairman Frank, Ranking Member Bachus, and other members of the Committee. I appreciate the opportunity to testify about the critical topic of financial regulatory reform.
Over the past 18 months, we have faced the most severe global financial crisis in generations. Some of the world’s largest financial institutions have failed. Equity and real estate prices have fallen sharply, eroding the value of our savings. The supply of credit has tightened dramatically. Confidence in the overall financial system, in the protections it is supposed to afford for investors and consumers, has eroded. These financial pressures have intensified the recession now underway around the world.
Continue reading »
Make room on the Goldman conspiracy bandwagon. As you may or may not be aware, oil pipeline giant Semgroup Holdings took $2.4 billion in losses last summer following the oil price spike. Semgroup had been short crude and paid for it dearly. The firm went under, filing for bankruptcy protection in July. At least one voice is blaming Goldman:
But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup’s collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup’s accounts.
“What transpired at Semgroup was no less than a $500 billion fraud on the people of the world,” says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.
We love a good conspiracy theory and this one has all the ingredients:
Target of the theory is a powerful and somewhat mysterious entity? (Check)
Claim is difficult to (dis)prove? (Check)
Well known names attach to various tentacles of the theory? (Check)
The Daniel Pipes Criteria (the perpetrator always gains power, fame, money, and sex) is satisfied? (Check)
Excellent!
Did Goldman Goose Oil? [Forbes]
Alpha magazine officially followed up yesterday‘s list of 2008′s top earning hedge fund mangers this morning with its list of 2008′s top losers. Clocking in at number one, we are sad to say, is our favorite midwestern fund boss, Ken Griffin, who lost $2 billion last year, as opposed to making $1.5 billion in 2007. Eddie Lampert won the dubious honor of making the list two years in a row, having lost $1.1 billion in 2007 and $1 billion in 2008. Rounding out the top three was the industry’s resident Zamboni driver, who personally misplaced $900 million after taking in $750 million the last time around. Tontine’s Jeffrey Gendell, who has not previously qualified for the mag’s top earnings list, having only made $190 million last year, took a $625 million hit in ’08 but please don’t worry about JG, ’cause he’s got a plan to make it all back and then some. And, to reiterate, as one of the men above noted to his troops yesterday, “I know this looks bad, but don’t worry about me compadres. You should see our clients.”
Continue reading »
Geithner Pushes For Oversight (WSJ)
At the Congressional hearing today we’re going to hear Geithner’s best on systemic risks to economy, and changes necessary to prevent them going forward (there’s good reasons for not making brash decisions when emotions are high, you end up with things like the Patriot Act). There’s talk of changes to the rules of risk management in Banks, though we’re not entirely sure what that might look like; the only thing concrete that we’ve seen from the Administration thus far is that they want the ability to seize or take over any institution that’s imminent collapse could cause damage to the economy. Good stuff.
“One area where the U.S. is departing from its European allies is the Obama administration’s approach to hedge funds, private-equity firms and venture-capital funds. Mr. Geithner is expected to ask Congress to require all of these firms over a certain size to register with the Securities and Exchange Commission and disclose certain information so government officials can determine whether their size or complexity puts the broader economy at risk.”
AIG Managers In Paris Resign, Billions Could Default (WSJ)
“The executives at Paris-based Banque AIG, Mauro Gabriele and James Shephard, have resigned in recent days but have agreed to stay on for a transition, according to people familiar with the matter. In the wake of their resignations, AIG must replace them to the satisfaction of French banking regulators.
If they don’t, French regulators may appoint their own designee to manage the bank — an outcome that could trigger defaults under the bank’s derivative contracts. The private contracts say that a regulator’s appointment of a manager constitutes a change in control, according to a person familiar with the matter; the provision is often included in derivative contracts where parties want to preserve a way out if something about their counterparties changes.”
EU Leader Condemns US “Road To Hell” (FT)
I’m sure it wasn’t meant like that, probably a cultural difference. Something lost in translation, or maybe, I dunno – he’s been drinking?
“”The US Treasury secretary talks about permanent action and we, at our spring council, were quite alarmed at that . . . The US is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on,” he told a European parliament session in Strasbourg. “All these steps, their combination and their permanency, are the road to hell.”"
PIMCO Calls For Fed To Double Balance Sheet (Reuters)
I’ll leave it to you: Genius or Mad Man?
“Bond giant Pacific Investment Management Co said the Federal Reserve needs to double its balance sheet up to $6 trillion to replace the amount of wealth destroyed in the United States, an executive said on Thursday.
Liabilities on the Fed’s balance sheet should rise to between $5 trillion and $6 trillion later this year amid the financial crisis that roiled global markets, said Brian Baker, chief executive Pimco Asia Ltd.
“Right now, the Fed has spent about $3 trillion. We believe there has to be further stimulus policies put in place,” Baker told Reuters.”
Barclays Officers Land In Hot Seat (WSJ)
So, here’s what’s up: the kids over at Barclays have been doing their best to keep the bank from Government control (kind of not easy in Britain), but it doesn’t look like they’re going to be successful. Meanwhile, not only have they put themselves up for re-election early for the board seats, but they’ve been trying to sell all kinds of shit. Oh, and also, if they try to raise capital they turn control of the bank over to investors from the Middle East:
“Along the way, Messrs. Varley and Agius have made some calls that are now putting them in a tough spot. Last fall, in an effort to avoid government ownership, the bank raised £7 billion from investors from Qatar and Abu Dhabi, who received securities similar to preferred shares paying 14% annual interest.
The deal includes a clause that could give the Middle Eastern investors control of the bank if Barclays issues shares to raise fresh capital before June 30. Many shareholders still are angry that they initially didn’t get the same terms, according to a person familiar with the matter.”
Governments Unwilling To Prosecute Pirates (Bloomberg)
While it’s clear they could prosecute them, they’re not – it’s just too much of a pain in the ass, apparently. So this is really more like a pirate catch and release program, pirate fishing?
$$$ Law student gets Bernard Madoff’s brother’s assets frozen [Newsday]
$$$ “The banks are not going to be nationalized for any reason,” Mr. Bove wrote. “Most important, they do not need to be. They are healthy with positive cash flows.” [NYT]
$$$ AIG Exodus [Breaking Views]
We sold California short months ago, but perhaps we were a little to hasty. We would have bet the rest of our Hyatt Gold Passport Points that their $4 billion bond sale was doomed after nine months of being shut out of the credit markets all together and being downgraded to the lowest credit rating any state in the Union has to offer. That would have totally ruled out our trip to Lake Tahoe (off peak, you know) because Cali managed to suck in over $6.5 billion instead. We think, however, we know why:
Of the $6.54 billion, California sold $3.2 billion to individual investors.
An effective 9% yield may also have pulled shell shocked Cali denizens out the door (along with the blitz of an advertising campaign).
California Ends Bond Sale [The Wall Street Journal]
