And we thought the FDIC’s public comment period was comic. Try the SEC’s recent disclosure on comments that have flooded in for short selling rules. (And don’t forget to pick up a “Don’t Short Me Bro!” Mug before the rule returns. Here is but a sample:
Free trade must not be eliminated , however , pointedly aggressive short selling must end . I believe in free trade , I am a begining [sic] investor , I am an American Citizen and I lost on 900 shares of Washington Mutual . I would not like to lose again . Thank you , Ed .
My preferences are as follows
1. Prohibit short sales totally in US markets.
2. If US firms engage in short sales in foreign markets, profits should be taxed at 80%. Firms and/or individuals found in violation of the tax regulation will face jail-time not less than ten years per transaction. Foreign individuals will be deported for life.
The SEC needs to decide whether where the stock market belongs. Right now it belongs in Las Vegas. It is a casino. Investing has become syonymous [sic] with gambling. There is no difference. Investing should mean that you are buying shares in a company to help them succeed – and then reaping the reward from their success. Investing should not mean creatively buying or selling articificial [sic] tokens that are being artificially manipulated up or down by a community far removed from the companies that those tokens are meant to represent. Short selling is just another means of gambling. I can see no honorable reason for short selling whatsoever. Don’t restore the uptick rule – abolish short selling altogether. I would go further even. Investing in a company should be just that – if you buy shares, then you should be required to hold them for a reasonable amount of time or pay a significant penalty. Ultra short term gains should be taxed out of existance [sic] – its not investing it is gambling.
But for bold regulatory comment period audacity, you just don’t get any better than Benjamin N. Dover III, recreated in full, after the jump.
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Sure, Bank of America beat the expectation they were going to report ‘bleeding out the ass’ level earnings for the first quarter but some people, like shareholder Jonathan Finger, are still banging on with their intent to throw Ken Lewis out on his ass. Ahead of the firm’s annual shareholder meeting on April 29, various groups are making various demands, among them a) separate the CEO and chairman role, and strip Lewis of the latter b) take Lewis out of the CEO seat c) some sort of elephant walk involving K to the L, his lieutenants and O. Temple Sloan. The Boone’s connoisseur has gone back and forth on whether we’ll have to drag his dead lifeless body out of the place or if he’ll go willingly, an inconsistency that can probably be best attributed to lack of sobriety during interviews (and business hours in general, which we have no problem with). Anyway, since we hate surprises, let’s just determine what’s going to happen now:
By request this time, but we wish we thought of it first on a crazy day.
Guess the Dow begins (again).
As you know, the rules are simple. Closest to the close without going under (reverse price as right rules). Bets are closed ten minutes before the bell.
We’ll run some side bets on likelihood “guest” wins this time too.
GO!
Does anyone else think there are too many “Nobel Prize Winning Economists?” I mean, you can’t turn your head without seeing the opinion of one or another of them these days. Today it’s “Nobel Prize-winning economist Michael Spence,” who is pretty sure (but don’t quote him) that not every bank will pass the stress tests. Of course, Spence couldn’t possibly have been listening. Everyone knows that even if you fail, you pass.
Spence said in an interview with Bloomberg Television he would be “very surprised” if all the banks pass the exam, which he says will probably give a better picture of the banks’ health than earnings statements. He also said that “the data on lending and credit are still not that encouraging.”
Well, we just have to nod our heads when it comes to “earnings statements.”
The U.S. economy will also change in the next few years, Spence said. “There’s no question we’re going to have a new normal,” he said. “It’s going to have a higher savings rate, closer to a match with the investment rate. We’ll probably have a period where the cost of capital is higher because leverage is lower, and I think our growth will be somewhat diminished.”
Apparently, this is Nobel Prize Winning Insight here.
Spence Says Would Be Surprised If Every Bank Passed Stress Test [Bloomberg]
The government’s going to tell us 16 out of 19 banks are insolvent? Bitches, please. We’ll monitor the situation, on the off chance the source of the “story” is none other than T. Geith, but for now, quit getting your panties in a bunch and chill out.
Blending two stories from our Opening Bell this morning, we cannot think it coincidence that the administration has picked this time to begin discussing nationalizing (really nationalizing- not just conducting an FDIC raid and dropping firms into receivership) the banks in its TARP clutches by converting its holdings into common stock, putting conditions on TARP repayment like another inventive “test,” (giving PR and spin cover to banks that don’t pay it back because they can’t without rupturing their own spleens) and angsting over the timing of stress test releases.
Why, we might ask, is the administration so worried about tests that, in their own words, the banks cannot fail? Why, we might ask, is it only now that we are hearing about the much more aggressive nationalization possibility- and why is it mentioned only in the same breath with the notion that it will provide new capital? Just when Bank of Amerillwide and Chris Marinac are talking about the end of this nationalization-speak (B of A one-time gains in the period saving the bacon- if you buy that sort of “saving the bacon”) the administration fires up the nationalization-speak. Hmmm.
Something is rotten in the state(s) of Denmark.
US to put conditions on Tarp repayment [The Financial Times]
U.S. May Convert Banks’ Bailouts to Equity Share [The New York Times]
In what must be indication that he’s fully participating in today’s holiday, Charlie Gasparino has a new column out this morning entitled “Blame Spitzer,” which argues that the noted hooker fucker is responsible for the current state of AIG. The reasoning is that Spitzer, by ousting Hank Greenberg, triggered a chain of events (Martin Sullivan being named CEO, the company taking on more risk) that ultimately brought the insurer to its knees. (Chaz concludes that this is why we shouldn’t allow Ness to make the comeback he’s quite obviously been attempting over the last several months.)
In related news, we’re pleased to report that’s not even the most hilarious thing recently printed about the Steamroller. No, that title goes to a bunch of ink spilled in a Newsweek profile over the weekend, the source of which is none other than Spitzer himself, about his two dogs (one of which wasn’t prepared for the limelight he was thrust into last March when his owner banged a prostie and another that was heretofore kept locked up in the house for fear Eliot would look gay walking him).
But dogs have needs that transcend damage control. And so the first images of Eliot Spitzer, private citizen, were of a man in baggy sweatpants, trailing after his wheaten terrier, James. The photographers followed them. “I explained to James that he was a good-looking dog,” Spitzer recalls. “People wanted to take his picture.” He didn’t know what he would encounter outside his door, but there was nothing he could do about it. “You put up barriers and sort of prepare yourself.”
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“Mr. Gibbs, some questions have come up recently linking [x] to…”
“[x] has the full confidence of President Obama.”
“But don’t you think [x]‘s connection…”
“[x] has the full confidence of the President.”
“But don’t you think that given the environment of bailouts and workouts and bankruptcies…”
“Look, [x] is not accused of any wrongdoing yet and he’s not likely to face and criminal or civil charges as it relates to this.”
“You’ve spoken to the prosecutors then?”
“We’ve known about this for some time.”
“You have?”
“I mean to say, we were informed about the pending investigation.”
“Before the appointment?”
“The President has total confidence in [x]. We don’t expect these revelations to cast a shadow over [y].”
(Let [x] = an array…)
It isn’t hard to see how a concentration of fund allocation power in a single political figurehead (or even a pliant board) quickly leads to these kinds of problems. The Wall Street Journal is only the most obvious Op-Ed hammering away on the power structure and its potential for abuse. (And, of course, they ask the obvious question we presented to you last week. “Why would a smart guy invest in a movie named ‘Chooch’?”).
Eventually someone is going to have to have more to say about this sort of thing than “[x] has my full confidence.” Who and when is an open question.
Obama backs auto czar Rattner [CNN Money]
Apologies for the technical difficulties this morning. We’re back up with (hopefully) no further interruptions.
BAC: $4.2 Billion (Bank Of America)
Bank of America Corporation today reported first-quarter 2009 net income of $4.2 billion. After preferred dividends, including $402 million paid to the U.S. government, diluted earnings per share were $0.44.
Those results compared with net income of $1.2 billion, or diluted earnings per share of $0.23 after preferred dividends, during the same period last year.
Results for the quarter include Merrill Lynch & Co., which Bank of America purchased on January 1, 2009, and Countrywide Financial, which was acquired on July 1, 2008. Merrill Lynch contributed $3.7 billion to net income, excluding certain merger costs, on strong capital markets revenue. Countrywide also added to net income as mortgage lending and refinancing volume increased. The year-ago period does not include Merrill Lynch and Countrywide results.
The company also took several actions in the quarter to enhance its capital and liquidity position, including strengthening its loan loss reserves and building its cash position.
“The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment,” said Kenneth D. Lewis, chairman and chief executive officer. “It shows the power of our diversified business model as well as the ability of our associates to execute. We are especially gratified that our new teammates at Countrywide and Merrill Lynch had outstanding performance that contributed significantly to our success.”
US to put conditions on Tarp repayment (FT)
There’s a reason the US government is a lender of last resort, at least to Finance people; they never want to go home. It’s a political thing: once you get your hands on to something that has some modicum of power, you can’t let it go. Apparently the banks have plenty of capital; that’s not that they’re worried about. What they’re really worried about is bank’s willingness to loan during the recovery – the administration wants to make sure that there’s credit flowing down to those in high need. In other words, let’s stop taking houses away from people that can’t afford them.
“The official, meanwhile, said banks that had plenty of capital and had demonstrated an ability to raise fresh capital from the market should in principle be able to repay government funds. But the judgment would be made in the context of the wider economic interest. He said the government had three basic tests. It needed first to “make sure the system is stable”. Second, to not create “incentives for more deleveraging which would deepen the recession”. Third, to make sure the system had enough capital to “provide credit to support the recovery”. ”
Obama Administration Considering Bank Nationalization (NYT)
The Administration is considering converting its shares to Common, which will in fact give the Administration a considerable interest in some of the largest financial institutions in the world.
“The Treasury has already negotiated this kind of conversion with Citigroup and has said it would consider doing the same with other banks, as needed. But now the administration seems convinced that this maneuver can be used to make up for any shortfall in capital that the big banks confront in the near term.”
Goldman On Citi (Bloomberg)
Goldman’s calling bullshit on Citi’s numbers, saying the 1.6B in net income gain actually sat on an underlying loss of 38 cents, not the 18 previously reported. The analyst (Richard Ramsden) repeated his sell rating.
“The results “included several one-time items which muddied the waters,” Ramsden wrote in the note. “The key question mark in our mind remains what Citi’s earnings power will be on the other side of the crisis.”"
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RE: yesterday’s post, from a “former senior insider”:
I can assure you that as of today, the New York’s RBS Lev Fin in New York has not been fired or eliminated. Instead, the top talents at RBS Lev Fin have been retained and redeployed into a few new groups that will be announced shortly. These groups will continue to harness the many talented senior bankers as well as their experienced junior staff in areas where RBS has been well-known, especially on their debt product / distressed debt advisory side along with their reputable TMT group (which advised on Clear Channel, Alltel, Univision, Hertz buyouts).
