And they’ve brought a pink dude. Unfortunately for Big Lar, he failed to prove a ladies man of the same caliber as Lloyd Blankfein, and the planned “$5.2 million for one day of work!” shouts proceeded at a pace, but he’s apparently been taking a class and will show those bitches some mad skills yet.
Archive for April 2009
For a quick lesson in hypocrisy and smoke and mirrors all tied into one, how about the test that no banks can fail, and that, in any case, is based on such lax standards and assumptions that even the institution passing with high honors should give investors no comfort whatsoever? We refer, of course, to the much touted (by the Administration in any event) “stress tests,” the economic assumptions of which have already been overtaken by current conditions.
Really, it is insulting to the public to think that their confidence will be restored by some arbitrary “stress test.” We suppose that we are supposed to draw from our experience with federal standards like those “regulating” “no trans-fats” and “no calorie sweetener” claims to feel certain that the government knows what it is doing and happily go long all financial institution (since none will fail the “stress test.”)
Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it.
But the tests, which are expected to be completed by the end of this month, are being conducted out of public view. Federal law prohibits the unauthorized disclosure of the results of any bank examination, including the stress tests. Some investors wonder if the new tests are rigorous enough, given the potential problems lurking inside the banking industry.
We are shocked, shocked, to discover that no banks are failing the test.
Banks Holding Up in Tests, but May Still Need Aid [The New York Times]
And Don’t Stop There: Stick Pins In Your Jamie Dimon Voo Doo Doll! Cut Him Out Of All The Pictures Of The Two Of You!
By Bess Levin
If Chrysler LLC’s main bank is not willing to help the struggling automaker, concerned consumers should not support JPMorgan Chase, say two advocacy groups that launched an online national boycott Wednesday.
Progress Michigan and FireDogLake.com are asking people to close their JPMorgan bank accounts and cut up their credit cards in protest.
Sparking the campaign is the stalemate in negotiations to convince Chrysler’s largest debt-holders to help reduce debt as a condition of receiving $6 billion more in federal aid.
[...]
There are plans to add names to a petition on the FireDogLake.com Web site.
A Facebook page called “Americans Boycotting JPMorgan Chase” has been set up and there are plans to post a video of someone closing their account on YouTube in the next day or two, Fifelski said.
Pro-Chrysler groups back a boycott of JPMorgan [Detroit News]
As if the taint of having been taken by Madoff weren’t bad enough, five fund of funds have now essentially been relegated to worse than cow status.
Standard & Poor’s Fund Services has downgraded five fund of hedge funds (FoHFs) to the category of “not rated” because of their exposure to Madoff exposed vehicles and lax due dilligence.
The funds affected are Bonhote Alternative Multi-Arbitrage, Constantia Composite, the Constantia Low Volatility, DGC Pendulum, Dinvest Concentrated Opportunities, Dinvest Total Return and RMF Four Seasons.
Earlier: We rate every deal. It could be structured by cows and we would rate it.
Seven FoHFs downgraded by S&P [Hedge Fund Reviews]
We have come to the grudging conclusion that the Banking industry, of which we have lately been rabid supporters, will do anything they can to evade the most basic of responsibilities for what has been five years of wholesale mismanagement. The news that the American Bankers Association is one of the major forces behind the recent push for short-sale curbs makes us wonder if the clamor to find scapegoats, any scapegoats, to cover misdeeds and dilute the shellacking stock and incentive options have taken over the last 18 months.
The proposals were largely welcomed by banks, which had been pleading with the SEC to rein in short selling. The American Bankers Association called Wednesday’s move “balanced and reasoned” and predicted action will limit “downward stock spirals and restore investor confidence.”
This, in combination with the totally unfounded and baseless rumors that certain members of the Treasury have been less than private with their personal (and one assumes professional) distaste for short sellers, and the various shenanigans designed to prop up bank share prices start to look like state sponsored short squeezes.
In this connection, we understand that it is popular at present to claim that trending away from mark-to-market accounting will have little real effect, but this attitude puzzles us. First, if it means so little, why make the change away from what is a solid bit of conservative accounting? Second, real effect or not, how wise can it be to sanction mythology pricing at the expense of even some real data extrapolation? Let’s just face it. Anyone who tells you that basing pricing on current bid-ask data is wrong because the market is “illiquid” or “panicked” or “at fire sale levels” is merely substituting their own future view of the likelihood and size of future cash flows for the market’s. We think this sort of conceit should be viewed with suspicion as it is based on the prospect that all asset prices must rise eternally, the same self-serving conceit that demonizes short sellers.
If the combination of these moves seems to suggest to you that the market is increasingly becoming a side-attraction ride at Imaginationland, you aren’t alone. This gives the lie to the American Bankers Association’s claim that short seller curbs will “restore investor confidence,” unless they mean “investor confidence in the continuation of the present sham.”
Wrangling Ahead on Short-Sale Plans [The Wall Street Journal]
Related: “Don’t Short Me Bro!” Mug [Dealbreaker Swag]
In spite of ourselves, we’ve grown strangely fond of you– not your views, your crazy old kookness– but “Victor” Pandit? Larry, no.
He’s letting the homeland down. And, really, that’s so much worse.
The Indian presence is almost evenly divided among the private and state-run companies. While none of the Indian companies has managed to find a place among the top 100 firms this year as well, the elite club includes a firm run by person of Indian origin.
Lakshmi Mittal-headed steel behemoth ArcelorMittal is at 41st position. However, Vikram Pandit-run banking giant Citigroup has dropped to 472nd rank this year.
This must be killing his father.
47 Indian cos among Forbes ‘Global 2000 List’ [Business Standard]
As you will know from our Opening Bell, the latest from the bailout boys is the concept that a series of mutual funds raised to buy toxic assets are the modern equivalent of patriotic “Liberty Bonds” or “War Bonds” of years past. Aside from being a rather nauseating bit of gamesmanship to compare bonds used to fight the Great War or World War II, we bristle at the suggestion that there is some patriotic duty to bail out the failed policies that fostered the illusory “American Dream of Home Ownership” for every citizen (no matter what the cost) and the fraud these perpetrated on the country. Is it not enough that we are already providing what are effectively failed institutions unbearably low cost capital while the likes of Berkshire Hathaway must wallow in high rates?
It is more than despicable that, now that the PPIP looks like it may be an abject failure even before bids have hit the screens, we should see the attempt to throw the problem onto the “dumb money” of the retail investor, without the leverage of the PPIP and while collecting fees, we might add. (As if same wasn’t already going to bear the burden of several trillion in extra debt, and the taxes that will go to pay for it along with the vanity that imagines now is the perfect time to tax all energy and reform the health care system by socializing its costs). No doubt large mutual fund failures will tear of each other’s ears trying to climb on top of each other to reach the brass ring of reset-high water marks by purging out units of the newest CDOs to the public.
If ever there were cause to invent the fanciful institution of the Vomitorium, this is it. You’re welcome to your turn when we are though.
U.S. May Enlist Small Investors in Bank Bailout [The New York Times]
The Washington Post has a long profile of Ben Bernanke today, about how the Bearded wonder “staged a revolution” by being a soft-spoken thinking man open to hearing other people’s ideas, who doesn’t “pound on the table screaming” or call colleagues “jerks” if they don’t agree with him.
According to Neil Irwin, Bernanke “has remade the Federal Reserve not in spite of his low-key style and proclivity for consensus-building. He has been able to remake the Fed because of it…whereas Greenspan once was briefed before policymaking meetings in ritualistic sessions with staff, Bernanke presides over sessions with more debate and discussion, often involving anyone on the staff with expertise on an issue rather than just top-level directors.”
Even as the situation got progressively more tense, Bernanke not only continued rely on but all the more embraced his do-it together, let’s-think-organically about this style. Though you were probably unaware at the time, much of the stuff that the Fed’s come up with has originated from a I’m-completely-calm-but-putting-this-out-there, shit-is-hitting-the-fan-as-I-type, now-more-than-ever-I’m-open-to-anything, this-is-a-call-for-submissions email.
More than a few times over the past year, senior Fed staff members have logged into their e-mail accounts to find an unusual message. Subject: Blue Sky. Sender: Ben S. Bernanke.
The point of the e-mails has been to encourage them to think of creative ways that the Fed can guard the economy from the downdraft of a financial collapse.
This is an institution that not long ago could spend the better part of a two-day policymaking meeting deciding whether its target for short-term interest rates should be 5.25 percent or 5 percent. But in this crisis, rate cuts, the most common tool for helping the economy, have lacked their usual punch. The Fed already has dropped the rate it controls essentially to zero, meaning there is no room left to cut.
That’s why Bernanke’s Fed has been trying to dream up ideas out of the clear blue sky. The result has been 15 Fed lending programs, many with four-letter acronyms, most of them unthinkable before the current crisis.
Other invoked subject lines that didn’t make it to print:
- The Best Think Outside The Box Idea Will Get A Trip Inside The Box Of His/Her Hill Staffer Of Choice At Close Of Business Monday
- Nothing Is Too Stupid Tuesday
- The First Person To Come Up With Something Today Gets The Contents Of My Wallet Wednesday
- It’s Hawaiian T-shirt And Pull A Solvency Idea Of Your Ass Thursday
Weidner: Meredith Whitney Is Overhyped, Not The Brilliant Prognosticator She’s Made Out To Be
By Bess Levin
David Weidner wants everyone to gird their loins, and beware the analyst wearing spiked heels. Why? Simple: she’s going to hurt you in the end, and not just because she comes bearing ball gags and doesn’t believe in safe words, though those are factors that should be considered, but because someday she’s going to let us down on account of the fact that, really, she’s not that great an analyst.
Sure, she made “The Call” back in October 2007 but a lot of people “made” “The Call” (why aren’t you people falling over yourselves when it comes to Mike Mayo? And how ’bout Dick Bové, hmm? Where’s the love there?). Then the media made her a star, gave her a Money Honey-esque nickname (Dollar Dominatrix), and the whole thing snowballed to where we are today. But it’s not too late to pump the brakes on this thing! Sure, she’s worked us over good and, full disclosure, I at times found myself enjoying her insistence on using the spreader, truss bar, and executioner’s mask, but enough is enough. Get out now, before she puts us in a sleeper-hold.
But to put it bluntly, Ms. Whitney’s call on Citi wasn’t that great. It wasn’t the first, nor was it the best. Before we douse her with more champagne, put her on TV with Charlie Rose and hand over the keys to the Treasury Department, it might be worth taking another look at what really happened in October 2007.
Citigroup was already in deep trouble. Mr. Prince was on the hot seat for Citi’s inability to rein in costs. Credit issues were beginning to come to the fore when on Oct. 12, Dick Bove, then at Punk Ziegel & Co., Mike Mayo, then at Deutsche Bank and Charles Peabody at Portales Partners all issued sell ratings on the stock.
Citi held a conference call three days later and, according to a transcript, Ms. Whitney participated. She asked three questions of Gary Crittenden, then Citi’s chief financial officer. She asked about Citigroup’s banking business in Japan and other regions. She also asked how Citi planned to grow its credit card business. She asked no questions about Citi’s dividend or capital position.
Two weeks later, Ms. Whitney made The Call and cut her rating. The rest is history.
Well, almost. The Call did not say Citigroup was stuffed with hundreds of billions of dollars in toxic assets. It did not say that multiple banks will fail unless the government intercedes. It didn’t mention Bear Stearns (which she once expected to earn more than $11 a share in 2009), Lehman Brothers or American International Group Inc. It was a call that Citi was losing money and would have to take drastic action to raise capital.
Morgan Stanley To Post Loss (WSJ)
“Because of the accounting treatment on some bonds issued by Morgan Stanley before the financial crisis erupted, the New York company is expected to take a hit of $1.2 billion to $1.7 billion on the bonds when it reports quarterly results later this month, according to people familiar with the situation.
That is somewhat higher than the $500 million to $1 billion mark that many analysts are predicting Morgan would take from the bond-price move.”
Wells Fargo Expects Record First Quarter Earnings of Approximately $3 Billion (PRNewswire)
“Our business momentum is strong, and we expect our operating margins to remain at the top of our peer group,” said Chief Executive Officer John Stumpf. Expected results include:
* Total revenue of $20 billion, including another quarter of double-digit revenue growth at legacy Wells Fargo, up an estimated 16 percent;
* Strong operating results at legacy Wachovia;
* Solid operating margins with consolidated net interest margin of approximately 4.1 percent and efficiency ratio of approximately 56 percent;
* Combined net charge-offs of $3.3 billion, compared with fourth quarter net charge-offs totaling $2.8 billion at legacy Wells Fargo and $3.3 billion at legacy Wachovia;
* Provision expense of approximately $4.6 billion, including $1.3 billion credit reserve build, bringing the allowance for credit losses to $23 billion; and
* Pre-tax pre-provision profit of approximately $9.2 billion.
Jean-Claude Trichet Interview, Post G20 (ECB)
He actually sounds half sane through this one; new Rx?
Interactive Recruitment Map (FT)
Citi has recruited more people than UBS; that’s just funny for some reason.
Wells Fargo May Keep Evergreen (Reuters)
Wells Fargo-Edwards-Ovia isn’t quite sure what they’re keeping and what they’re not yet; Evergreen seems like it’s something you would want to hold on to though, guys. Or, for the sake of the Evergreen employees, sell it to a bank that knows what they’re doing.
“Wells Fargo said the asset management unit Evergreen Investments which it inherited when it bought Wachovia Corp was not for sale, even as it scales back Wachovia’s investment banking operation, the NY Post reported citing sources.
In a report posted on its website, the paper said Wells Fargo had informed potential buyers of Evergreen that it would not sell the money-management firm.
The bank is likely to keep Wachovia’s investment banking unit, although in a smaller form, even though market observers had predicted that Wells Fargo would sell the business, the Post reported.”
U.S. Imagines Bailout As Investment Tool (NYT)
There’s going to be a lot of propaganda in days to come on how the PPIP makes sense for the everyday person; this starts by likening it to the war-bonds of days past (and then goes on to point out the Government thinks of this as an investment strategy in the Country’s future).
“This is an opportunity to forge an alliance between Main Street, Wall Street and K Street,” said Steven A. Baffico, an executive at BlackRock, referring to the Washington address of many lobbying firms. BlackRock, a giant money management firm, is playing a central role in the government’s efforts and is considering creating a bailout fund. “It’s giving the guy on Main Street an equal seat at the table next to the big guys,” he said.”
Buffett Gets Handed Downgrade From Moody’s (NYT)
One wonders if this isn’t an attempt to clean up their reputation, as though to boast they’re willing to downgrade the big O. But I got news for ya, Moody’s: you can’t download that level of sex appeal. It won’t play by your rules.
“Moody’s Investors Service on Wednesday stripped away the triple-A rating of Berkshire Hathaway, the conglomerate and investment vehicle run by Mr. Buffett, citing the economic pressures on the firm.
The news is yet another sign that, despite all of Mr. Buffett’s investing prowess and business savvy, even the man that investors regard as the Oracle of Omaha cannot avoid the tremors coursing through the markets.”
Regulators Don’t Want TARP Money Back Anytime Soon (Reuters)
This is why you should never play with the Government.
“But banking experts said regulators will likely be wary of letting big banks, at least, repay TARP any time soon.
“They have to be very careful about sending any accidental signals,” said Seamus McMahon, an independent bank and regulatory consultant. “There is not much downside from (the regulators’) perspective to taking their time.”
Mindful of their role in keeping the financial system healthy, regulators would not want to allow banks to return money only to find later the repayment was premature and they needed new capital.”
US Destroyer VS. Pirates! (FT)
“A US navy destroyer, the USS Bainbridge, reached waters off Somalia on Thursday to help free the captain of the Maersk Alabama, whose 20-strong crew had fought back after the vessel was boarded by pirates 350 nautical miles off Somalia’s east coast, in an area that has seen a surge in piracy.”
