It is difficult not to be entertained by the coverage on the meteoric plunge towards bankruptcy that is Chrysler. The Journal article is pretty circumspect about some rather important details, failing even to mention bondholders until the 18th paragraph in a 19 paragraph article. The deep and heartfelt sacrifices the UAW is making are front and center:
The United Auto Workers union would eventually own 55% of the stock in a restructured Chrysler LLC under the deal reached by the union and the auto maker, according to a summary of the agreement that was reviewed by the Wall Street Journal.
Fiat SpA “eventually” will own 35%, and the U.S. government and Chrysler’s secured lenders together will end up owning 10% of the company once it is reorganized, that summary said.
Hmmm, employee owned and operated. Where have we heard that before?
The Washington Post, however, claims to have the scoop on bondholders with:
The Treasury Department reached an agreement with Chrysler’s creditors late last night that may prevent the troubled automaker from going into bankruptcy, a source familiar with the matter said this morning.
The carmaker had owed a fractious group of 45 banks, hedge funds and other firms about $6.9 billion. These creditors have agreed to write down the debt to $2 billion, the source said.
Fortis’s extraordinary meeting had to be adjourned on Tuesday after angry shareholders raided the stage and threw shoes at the management.
Mischael Modrikamen, an activist lawyer representing 2,300 small shareholders in the once-dominant banking group, is hoping to scupper the planned sale of Fortis Bank to BNP Paribas, the French bank, in favour of recreating a Belgian financial champion.
Management including Jozef de Mey, chairman, faced several calls to resign from angry shareholders.
Despite, among other things:
– Putting Morgan Stanley on his resume (he was a “senior vice president and senior high-tech merger adviser”) and then not taking the extra precaution to blackmail John Mack into corroborating the story.
– Stealing $3 million from an escrow account while working at a venture capital firm called Sky Capital Partners in the mid-90s, and, when confronted by his boss, shrugging and telling him, he “just needed the money.”
– Being on the phone all day making bets with bookies
– Allowing “tough-looking men” to drop by the office during business hours “all the time”
– Entertaining prosties on the company dime
– Taking $15 million in investor funds and buying himself a Gulfstream IV
– Flying a bunch of girls from work to Vegas, and on the return flight, not sufficiently drugging up onlookers so that they wouldn’t be able to give an eye-witness account that he: “had a briefcase stuffed with cash and…started throwing money to the girls, stacks of $10,000. I thought it wasn’t right to treat the girls from the office that way, like we were pimps and gamblers.” And taking pics!
– Directing employees to “create a phony documents” and then not taking the necessary steps to make sure they don’t talk.
– In a moment of weakness, feeling the need to get something off his chest, inviting a partner into his office and going, “Nasar, I want you to know we are in a Ponzi scheme.” David Schindler, an attorney for Mr. Pang, said his client expects to be fully vindicated.
A CNBC commentator asks a question we’re probably not supposed to be asking (silly goose, you’re just supposed to roll over and take this stuff). Since he’s likely been hauled off in a body bag in the last ten minutes, we’ll repeat it now– “What if the banks refuse to raise more capital?” Bank of America is apparently submitting its rebuttal today, and in the event they get the same answer, we don’t see Lewis having the pair to say “thanks, but we’re good.” However do not underestimate the liquid courage one can grow after mainlining five bottles of Boone’s on the drive to Tim Geithner’s office, and so we ask, what if? This is a serious question that certain high-up bank officials really, really want an answer to. Is worst case scenario, like, they take the CEO’s out office, or the more disturbing and to be avoided enforced bird-watching time with Hank Paulson?
As previously mentioned, regulators have told Bank of America and Citi they need to raise more capital, “insinuations” (Lewis’s drunken words, not ours) with which the firms take issue and plan to appeal. Not to give the banks any credit, but on some level, you have to feel for them, in light of what they’re dealing with:
During that process, executives have griped that examiners were demanding detailed information from every corner of the sprawling organization, consuming thousands of man-hours without briefing anyone on what the government was looking for, according to people familiar with the matter.
The regulators are asking “a million questions” and it’s “very unclear what they’re aiming at,” one senior executive said earlier this month. “We can’t discern a pattern.”
Some bank executives have said that even after meeting with Fed examiners on Friday, they still don’t understand details of the government’s methodology for conducting the tests.
On the one hand, perhaps the government is being purposely vague about what they’re looking for (“top secret mission” and somesuch). On the other, more likely hand, regulators have no idea what they’re trying to “ascertain”– which they refuse to admit, as any good corrupt cop would– and are just breaking into the place and shoving random employees into broom closets and asking questions that have nothing to do with anything like “Who’s your urinal cake distributor”** and then telling the interrogatee (the first second year analyst they happened to cross paths with upon entering the joint) to “Shut up, no, answer the question, I SAID SHUT UP.”
Also included in the “process” are unannounced building break-ins (unnecessary as they could’ve just used the front door), and sealings off of Ken Lewis’s office, which he’s forced to stand outside of, just beyond the yellow tape, while a bunch of guys rifle through his drawers, every so often going “Found it!” (an ah-ha! moment that has nothing to do with the stress test but just unbridled glee at having stumbled upon one of the many (half empty) bottles of Boone’s K to the L has stashed around the place).
*And it’s not like they can mouth off, since it’s the government.
**This actually isn’t a good example, as the various answers are way more telling than you’d think. That’s all I can say about that at this time.
London Bankers Look For Exits After Tax Raise (Bloomberg)
Apparently the recent push to 50-something-percent was just too much to take; it looks like our London brethren are looking for exits to decidedly less tax-involved areas. Swine Flu Hits Ernst & Young In Times Square (WCBS)
We always knew the trouble would start* in accounting.
*Manhattan edition. Deutsche Bank To Keep Ackermann (FT)
“The decision to prolong Mr Ackermann’s tenure at the bank until 2013 is a sharp reversal of the bank’s repeated indication that the Swiss-born banker was ready to step down when his current contract ends in May next year.
Clemens Börsig, chairman of Deutsche’s supervisory board, said the decision “secures leadership continuity” for Germany’s largest bank. The bank said the offer to Mr Ackermann was made at the unanimous request of the supervisory board, which met on Monday. Mr Ackermann had agreed to the request, the bank said.”
In related news, Deutsche turned in its numbers:
“Deutsche Bank posted a better-than-expected net profit of €1.19 billion ($1.55 billion) for the three months ended March 31, compared with a net loss of €131 million a year earlier. Analysts polled by Dow Jones Newswires had forecast, on average, a €764 million profit.
The latest results included charges of €1.5 billion, including €1 billion in mark-downs, bringing total crisis-related charges to €10.7 billion. Year-earlier results, the bank’s first quarterly net loss in five years, were hit by additional asset write-downs, lower revenue and a trading loss in a deteriorating market.
Revenue in the first quarter rose 57% to €7.2 billion from €4.6 billion.” Italy Seizes Millions In Assets From Banks (NYT)
“With municipal bond investigations spreading to Europe from the United States, Italian authorities have seized about $300 million in assets of four global banks — JPMorgan Chase, Deutsche Bank, UBS and Depfa — whose officials have been accused of fraud.” Wilbur Ross To Join PIPP Effort (WSJ)
Bill Gross just makes it look too magical to pass up, doesn’t he? Gulfstream, Cessna Sales to Slide for 2 Years as CEOs Shun Jets (Bloomberg)
Damn you, Congress. Damn you to hell.
Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government’s so-called stress tests of lenders, according to people familiar with the situation.
The capital shortfall amounts to billions of dollars at Bank of America, based in Charlotte, N.C., people familiar with the bank said.
Executives at both banks are objecting to the preliminary findings, which emerged from the government’s scrutiny of 19 large financial institutions. The two banks are planning to respond with detailed rebuttals, these people said, with Bank of America’s appeal expected by Tuesday.
We are given to understand that BAC will be objecting on the grounds of “shrinkage” (Lewis was in the pool), which gave us an inaccurate representation of things, and Citi’s yet to come up with something. Do Vikram Pandit a solid and offer a good excuse now. He’ll pick the best one from comments in the morning. Fed Pushes Citi, BofA to Increase Capital [WSJ]