We don’t want to type it, let alone think it, but it’s possible Vikula won’t be around long enough to enjoy his new $10 million office (though, really, now that it’s been stripped of a Zen Garden, is it really worth sticking around for? Probably not). The Financial Times reports that senior officials at the FDIC have been talking Pandito replacements, in the event the bank needs more cash-money. Apparently successors include new CFO Ned Kelly, old CFO Gary Crittenden, and an unnamed new board member.
“It is unthinkable that Vikram could stay on if Citi requires more federal funds,” said a person familiar with the matter. “It is prudent to be thinking about different scenarios.”
The FDIC is only one of the regulators that has a say on whether Mr Pandit steps down if the government bails out Citi for the fourth time in six months following completion of a “stress test” of its health.
Any decision on Citi’s leadership will be led by the Treasury, which is about to take a 36 per cent stake in the company and will sanction further capital injections.
The Federal Reserve and the Office of the Comptroller of the Currency, which regulate national banks, will also have to bless top management changes.
Any Allen Stanford interview that doesn’t come with tears or promises to “die and go to hell if [this] is a Ponzi scheme” or threats to punch his interviewer in the mouth or at the very least take place within earshot of a cocktail lounge is going to be something of a letdown. That much is obvious. He’s spoiled us, and if you’re going to kick off your media blitz with salty discharge and threats of assault, you’d better have something good down the road. Nevertheless, here are some highlights from the latest meet and greet with CNBC’s Scott Cohn, on the matter of Stanford Financial possibly being a massive fraud.
Q: At the heart of the allegations from the sec are the returns you claimed and the interest you paid on the CDs: 7.45% in 2005, 7.87% in 2006, 5.375% last year when prevailing interest rates were a whole lot lower and you couldn’t get a CD in this country paying more than about 2 percent. How did you do it if it wasn’t a Ponzi scheme?
A: First of all how did we pay 2 billion in early redemption of CDs in October, November, December, early January of this year without having the Fed to go to like the big banks here? Citibank and Bank of America and Wachovia– just going down the line–ran out of money, and they had to go to the Federal Reserve to get money to pay their depositors or they wouldn’t have had any money. We stood on our own two feet with no fed window to go to and that right there tells you it’s no Ponzi scheme.
Q: So these weren’t fictitious returns?
A: No…though there were some things I found out in meetings that my attorney has instructed me not to discuss.
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Ratings Companies Lean On First Amendment (WSJ)
The Firm’s attorneys are claiming they issue opinions, and thus are protected under the first amendment. I would go with totally fabricated bullshit in the place of opinions, but either way it works.
“Richard Blumenthal, the Connecticut attorney general, sees it differently. Mr. Blumenthal has filed a lawsuit about ratings issued by S&P, though not in connection with mortgage-backed securities. “The very nature of [rating firms'] so-called speech is very different from the classic First Amendment-protected expression,” Mr. Blumenthal says. “It’s much more akin to an advertisement that misstates the price of an item on sale than a political candidate on a soapbox.”"
Loan Quality Big Part Of Stress Tests (Bloomberg)
It would be amazing if the Government missed loan quality as a primary point of interest in any “test” that could be performed on banks (results driven or not); I suppose they deserve a bit of a golf clap here for picking up on the obvious.
“The person also said the tests don’t amount to solvency judgments, noting that estimates of each bank’s losses over the coming two years won’t necessarily equal the amount of new capital it needs to raise.
The goal of the reviews is to keep the major financial institutions lending over the next two years, and to determine how much capital they might need should the economic downturn worsen. Assumptions about capital will be forward-looking, the official said.”
Inspector General Reams Treasury On Transparency, Potential Fraud (NYT)
If you can make it through the 250 pages in one sitting without hemorrhaging you deserve something akin to lottery winnings. Barofsky doesn’t save any punches here, nor should he.
“Mr. Barofsky also warned that the Treasury’s plan might allow investors to double up on government subsidies for buying up troubled assets. The Public-Private Investment Program would have the Treasury invest alongside private investors. But the partnerships would also be able to borrow money from the Fed through “nonrecourse” loans. If the investments flopped, the investors could walk away from the loans and leave taxpayers with most of the losses.”
EU Drafts To Regulate Hedge Funds ‘Almost Worthless’ (FT)
See, this is the problem with there not being a major intercontinental (global?) military conflict; everyone has time to think of stupid shit.
“The leaked draft suggests that the Commission plans to regulate managers of “alternative” funds, rather than the funds directly. This is one of the main objections of the Socialist MEPs and the private-equity industry, who say it would mean that non-EU managers could still operate in the EU, and market their funds, without any effective oversight.”
UBS Might Be Looking To Sell Hedge Fund Business (Reuters)
It appears that the disassembly of UBS is continuing; they’re now looking to dump their Alternative & Quantitative Investments line.
“Citing unnamed financial sources, the Neue Zuercher Zeitung said a management buyout offer for A&Q, or parts of it, was on the table, which the newspaper said would fit into the bank’s strategy of focusing the bank and cutting its risks.
UBS was not immediately available for comment on the report.
The NZZ said the business had more than $39 billion in assets under management and employed about 350 people worldwide.”
NEVER let it be said that Michael Lewis spares himself from his keen reporting. In his new memoir of fatherhood, “Home Game,” he writes that when he was dropping off his daughter at day care, the teachers giggled at him for no apparent reason. He asked his wife, Tabitha Soren, why they were laughing and she mumbled, “Er, it’s about your penis.” Lewis’ dogged reporting uncovered the grim facts: His toddler daughter, who had a habit of peeking on him in the shower, liked to blurt out to everyone at day care, “Daddy has a small penis!”
Sizing Up Daddy [Page Six]
As has been noted ’round these parts, over the last several months, noted hooker fucker Eliot Spitzer has been trying his darndest to re-inject himself into society as a remade, non-prostie bangin’ man. Mostly notably, Ness has done this by taking up a perch at Slate, which is known for doling out column inches to people with spotted pasts. Some are wondering today if Bernie Madoff will make the same attempt at public rehabilitation next year, and which outlet will offer him the space from which to do it. Obviously, that outlet is Dealbreaker. We’d be more than happy to give the Ponzier a home up in this piece. But, the question is, what should the column be about? While righting the wrongs of Wall Street and waxing hypocritical about crime and punishment get Spitzer off just fine, we’re thinking Ponzi-boy is sick of finance and is looking to branch out. Since you people will be the ones to read it, what would you like Berns to write about? Sex? Travel? Grab-bag life advice column?
Poor, poor Wharton students. Thing have gotten so bad that the last resort has become “a job teaching in Dubai,” “the State Department,” or, yes, “becoming a rabbi.”
“It’s always been about the brass ring and it’s always been about the brand recognition, and for a lot of students that meant jobs at Goldman Sachs,” said Emanuel Sturman, director of career services at Dartmouth College. “It’s premature to say the bloom is off the rose totally, but I think students are starting to look at a wider array of brass rings.”
So having discovered that, once you take finance out of the picture “…a lot of Wharton people were interesting” and as the recession greedily licks up their tears of ultimate sorrow, what advice might we have for Riana, Daniel and Jessica, oh, wisest Dealbreaker?
Business Grads Looking Beyond Wall Street [The New York Times]
The Obama Portfolio (Since Inception): +18.22%
Earlier: The Obama Portfolio
Regarding the aforementioned cuts going down at our favorite Swiss bank in town: “They’re going to be massive. HR booked a conference room for 2 hours…You can literally hear sobs.”
Addtionally: “Everyone knew it was happening since the room was reserved under the HR woman’s name. Now the same reservation says “BLOCKED” and all conference rooms have to be scheduled and confirmed verbally with the admin assistant, not through Outlook.” Sneaky bastards!
Earlier: Layoffs At UBS
And to “highlight” the star power of Countrywide and Merrill Lynch which, as you know, are his black holes of choice.
Jill Kargman, author of books like The Right Address and Momzilla, has a new tome out called The Ex-Mrs. Hedgefund. Despite the “Ex” in the title, the book isn’t about wives leaving or being left by their husbands. Rather, it’s a look at the end of a much more serious relationship– the relationship between these women and their husband’s money, which, due to unprecedented market volatility, has been taking something of a hit. Surely the majority of you pre-ordered it on Amazon (now marked down to $17.13 from $25.95), but for the few still debating whether or not you want to buy a hardcover from the same genre as Holly Peterson’s The Manny (Bored rich wives! Facing fake struggles! Which can be squarely blamed on their husbands!), Kargman offers a quick teaser in this month’s Bazaar.
Not surprisingly, it appears that none of the “Ex-Mrs. Hedge Funds” we wanted to hear from were inclined to speak with Kargman on the record (how is Anne Griffin dealing with the pain? What has Alex Cohen been cutting back on? Has Mrs. ESL been forced to actually start shopping at Sears)* because (choose one) a. Despite their husbands making this year’s Biggest Loser list, the effect on their lifestyles has been negligible b. they’d be thrown out on their asses faster than you can say “stretchhigh-water marks.” c. The phone at the Gendell residence was cut off a few months back due to delinquent payments. (Full disclosure, we’ve yet to read the book, but we’re pretty sure if you got her to talk, you’d want to shout “Mrs. Stevie agreed to be interviewed on the matter of having to run the Zamboni machine herself after the driver was fired!” from the rooftops of your preview). So we’re not certain we’re dealing with the wives of actual “prominent” hedge funders, so much, perhaps, hedge funders whose AUM maxes out at a unit, hedge fund employees, or just straight up glorified day traders.
Nevertheless, the following are a bunch ways a few self-described “Ex-Mrs. Hedges” are being forced to demean themselves due to cruel-hearted market. You’ll want to mentally jot down the adversities they’re facing, and then show up to the book party being held tonight, armed with a shoulder to cry on:
*Ladies! If you want a safe space to talk about this stuff, don’t hesitate to give us a call. I’m a good listener.
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A billion (sorry, it just feels like a billion, it’s actually only 8,000) employees to can, and they’ve got to start somewhere. Worker bees in Wealth Management (US) are said to be getting the axe today, tomorrow and Wednesday (so far it’s apparently been “a bunch of ED and directors…at least 8 out of 80″).
