The old, sassy, speaks-her-mind-no-matter-who’s-listening Dick Bové. The new Dick, having been sued by the brutes at BankAtlantic for casually asking over cocktails, “Who Is Next To Fail,” and then proceeding to list firms in ascending order of financial health, doesn’t take such risks. And for that we all die a little inside.
In a report on Tuesday, Richard X. Bove of Rochdale Research said that “the application of the stress test to these companies could conceivably drive at least 150 of them out of business quickly.” He didn’t name names, however, adding that “due to a lawsuit, I am unable to provide a more specific definition.”
(Attempting to step into her shoes but in no way coming close to filling those stilettos was RBC which wrote in a note today that Huntington Banc would need about $1.8 billion, M&T Bank would need $1.6 billion, and a slew of other lenders, including Comerica and Synovus Financial, would need smaller amounts.)
What About All Those Other Banks? [Dealbook]
What’s life like at the ole Securities and Exchange Commission? Moe Tkacik read the Government Accountability Office’s report on the regulator issued yesterday, and apparently days at the ranch are spent asking “why does it say paper jam when there is no paper jam,” threatening to “kick this piece of shit out the window,” composing oneself and making a trip to Kinkos.
Investigative attorneys with whom we spoke concurred that having little or no administrative or paralegal support causes them to spend considerable time on non-legal duties such as copying, filing, document-scanning, preparing exhibits, making travel arrangements, soliciting bids for court reporters, and logging and processing documents submitted by respondents. For example, one attorney told us such duties can take 2 to 3 hours daily. Another, who joined the agency from private practice, said that investigative attorneys can spend up to half their time on tasks handled by support staff in their previous position. One attorney told us of plans to spend a day assembling document storage boxes. Because there is insufficient in-house copying capability, confidential documents sometimes are sent to non-secure outside copy shops. Frequent equipment breakdowns mean attorneys must search for working copiers and scanners, a number of attorneys told us.
If you’re on the fence about killing yourself and need that extra push, read on to hear about how long it takes the agency to draft an internal memo (hint: it’s closer to two months than twenty minutes).
Scenes From The Ninth Circle Of Financial Bureaucracy [TPM]
Continue reading »
For a brief instant in the post-Markopolos period their was a flash of brilliance: Totally gut the SEC and use the occasion to develop a new regulator without the ass-backwardsness that has become the Commission’s hallmark. It is a useless regulator with little or no redeeming qualities except perhaps as a refuge for failed bankers, stockbrokers and attorneys- such that they could be kept busy and away from other mischief (a quick look at Congress will remind you that there is nothing more dangerous than a bunch of idle attorneys and finance types with no meaningful work and unlimited access to visual aides). That fleeting flash of brilliance, however, has faded. Now, the answer appears to be to throw cash at the SEC and hope a tall pile of bills buries whatever smoking memos of other Ponzi schemes and frauds may otherwise have been discovered.
President Barack Obama’s fiscal 2010 budget request would give federal securities and commodities regulators additional resources to investigate fraud and manipulation in the financial markets.
According to budget figures released by the Obama administration Thursday, the Securities and Exchange Commission could see its budget go up by about 6.8% to $1.027 billion from an estimated $961 million budget obligation for fiscal year 2009. The Commodity Futures Trading Commission, meanwhile, would see its budget go up by about 8.8%, to about $161 million from an estimated $148 million budget obligation in fiscal year 2009.
The SEC would use some of the budget increases to invest in technologies for the enforcement division that are “similar to those used by the law firms it faces during investigations and litigation.”
Obviously, we can look forward to more PTA-like “Meet Your Regulator” pieces in the Wall Street Journal, owing to an expanded public relations budget.
SEC, CFTC Would Get More Enforcement Resources [The Wall Street Journal]
That is, if the latter isn’t taken out before then. And by “taken out” we do not mean in the “fired by the government” sense but in the “Charlie Gasparino” sense. To recap, Ken Lewis, possibly under the influence of the Boone’s (travel size, for her discretion), told Andrew Cuomo that he was pressured by Bernanke and Paulson to keep his trap shut on the whole metric asston of losses situation he was going to get his shareholders in by acquiring Merrill Lynch. Then Paulson said that yeah, sure, he threatened Lewis, but it was because Bernanke told him to. Then Bald came out and claimed that when he put the heat on Lewis, tire iron in hand, it was all his idea and that the soft-spoken college professor had nothing to do with it (believable), a story which GandalFed later corroborated on the Hill. Finally, at Bank of America’s annual shareholder meeting two weeks back, an again sauced up Lewis told a shareholder, inquiring about what kind of perceived pressure was put on him to zip the lip on Merrill losses, that the bank’s decision to keep investors in the dark was “independent of any government threat,” adding, “you have your facts wrong.” So, okay! In Lewis’s defense, he probably didn’t realize people were going to go back and look at what he’d said on the record, or that there were any reporters at the meeting.
House Panel to Probe BofA’s Merrill Deal [WSJ]
Stinging from a rebuke that the rest of us will not soon forget, the SEC is seeking to demonstrate value once again. What better way to accomplish this than by lifting tried and true methods from the local PTA? A little polish, some duct tape, the application of a Dremel tool and poof! Meet Your Regulator:
Leading the charge is SEC assistant regional director Bruce Karpati, who heads the agency’s Hedge Fund Working Group.
“We need to be policing even the most complex markets to ensure that all investors, regardless of their supposed-sophistication, have a fair shake,” Mr. Karpati said. “We have to be every bit as sophisticated.”
It’s somewhat an about-face for the SEC, whose former chairman, Christopher Cox, said in a 2006 congressional hearing that “neither the SEC nor any regulator has authority over the CDS market.” The SEC has always maintained it has authority to enforce fraud involving derivatives.
[...]
Mr. Karpati, a 39-year-old native of Buffalo, N.Y., and SEC staff member since 2000, led the SEC’s 2003 civil insider-trading case against homemaking magnate Martha Stewart. The case alleged Ms. Stewart sold ImClone Systems Inc. stock in 2001 based on inside information that ImClone’s cancer drug wouldn’t be approved by the Food and Drug Administration. Ms. Stewart served jail time for lying to federal prosecutors, and settled in 2006 with the SEC.
Celebrity jail time for lying! Outstanding! A leap forward for regulator customer service. Smiles all around, particularly, as you see, on Mr. Karpati. Good Job! We are here for your protection, remember. Next week: Big regulators come in small packages.
As SEC Steps Up Vigilance, It’s Policing Some New Beats [The Wall Street Journal]
He’s back, baby! It starts slowly, with a twenty minute appearance on Squawk Box. Next, subbing on Opening Bell while Erin Burnett’s on vacay. Soon, whispers Melissa Lee’s got reason to watch her back. Is this a hint at *someone* taking over for Dylan Ratigan? Fingers crossed. Ness was noticeably a bit cranky this morning, but he’s just not used to waking up before noon. Bless her heart, Becky Quick tried to get him to talk bangin’ prosities, but the noted hooker fucker was having none of it (“I’m said I’m sorry, that’s the end of it. What do you want to hear Becky, that I’m a whore? Okay, I’m a big fat whore.”) Give it time. Among things Big E would like answers to, is why Goldman doesn’t need money under the results of the stress test. Lloyd? Wanna take that one?
“There is a truck labeled Internal Demolition…and a crew of people carrying stuff out of Lehman (sorry, Barclays) this morning…coming out the second floor…a corner office being visibly torn down.”
You know, more so than they were before this little note?
In addition, as part of the 30-day planning process, firms will need to review their existing management and Board in order to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment and maintain balance sheet capacity sufficient to continue prudent lending to meet the credit needs of the economy.
The Treasury Capital Assistance Program and the Supervisory Capital Assessment Program [Federal Reserve via clusterstock]
Barclays Posts First Quarter Earnings (BBC)
The bank has posted their first quarter numbers; it looks like their efforts to shed holdings were in line with their potential for write downs – they just had the common sense to do it as they encountered expenses.
“Profits before tax came in at £1.37bn ($2.07bn), up by 15% compared with the same period last year.
Total income almost doubled to a record £8.15bn because of strong performance at the group’s investment banking arm.
[...]
The strong results were achieved despite losses from write downs of £2.61bn and increased costs related to the bank’s acquisition of parts of US bank Lehman Brothers last year.”
KKR To Buy South Korean Brewer (DealBook)
“Kohlberg Kravis Roberts, the giant private equity firm, said on Thursday that it is buying Anheuser-Busch InBev’s South Korean brewery for $1.8 billion in cash, in one of the largest leveraged buyouts announced this year.
K.K.R. beat out two other private equity firms, MBK Partners and Affinity Equity Partners, for the AB-InBev brewery, Oriental Brewery, according to a person briefed on the matter.”
Société Générale Posts Loss (WSJ)
“For the three months ended March 31, SocGen posted a net loss of €278 million ($370.6 million) compared with a net profit of €1.1 billion a year earlier. Revenue slid 14% to €4.91 billion from €5.68 billion. Analysts polled by Dow Jones Newswires had forecast, on average, a €381 million profit on revenue of €5.61 billion.
Most of the damage came from the corporate and investment-banking division where SocGen took €1.5 billion in write-downs on high-risk exposures, including monolines and exotic credit derivatives. Fluctuations in the value of other items took a further toll of €340 million. These elements drowned out improved performances at the unit’s equities and fixed-income trading businesses.”
The Emergence Of A Bull Market? (Bloomberg)
“”The most likely scenario is that we’ve entered a new bull market,” said John-Paul Smith, the London-based chief strategist at Pictet Asset Management, which oversees about $103 billion. “Investors are being dragged kicking and screaming into the market.”"
Sallie Mae Looking For Ways To Survive (Bloomberg)
Sallie Mae has decided they’re not going to put up a fight so much as suggest how to make the President’s plan better; the latter includes them still being able to touch student loans, of course. There’s been an ongoing argument about the role of Government in private enterprise – one built largely on perceived roles – that’s fallen somewhat by the wayside given recent actions of the administration; we have to wonder if given the recent bull-run (and if it continues) if government intervention plans will continue to gain support.
“Sallie Mae may lose as much as 40 percent of its revenue if Congress passes Obama’s plan without modifications, said Matt Snowling, an analyst with Friedman Billings Ramsay Group Inc. in Arlington, Virginia. Sallie Mae’s revenue totaled $1.78 billion last year, and most of the rest came from private loans and from services such as collecting on defaulted loans.”
Ban Lifted, Oil Companies Allowed Back In Iraq (FT)
“International oil companies are preparing to go back into Iraq by the end of the year, in spite of Baghdad’s failure to pass an oil law and continuing concerns over security.
BP and Royal Dutch Shell are among companies expected to bid for oil service contracts in June, with the long-term objective of being allowed to develop the world’s third-largest oil reserves”"
Chrysler Creditors Harassed For Asserting Legal Rights (FT)
The clusterfuck that is the Chrysler bailout is still causing waves through the legal system as senior creditors (junior-senior creditors, at that) are the last to intimate they’ve got the testicular fortitude to do the right thing: fight for their money. We can understand that it’s a tough position: the government is breathing down your neck to take the deal; they have seemingly unlimited power – you just have wonder what the end game is when good men do nothing.
$$$ Morgan Stanley needs money [WSJ]
$$$ One Sign the Worst Is Behind Us [Cityfile]
$$$ Records Show How Madoff Used Firm as ‘Piggy Bank’ [Dealbook]
To keep the engine in this fantasy hot-air blimp running, you occasionally have to steal some petrol from the passengers, and then paint “Complaint Office” on the door that leads out to thin air and a 9,500 foot drop. Oh, and you have to borrow a bunch of cash to pay the landing crew.
The U.S. Senate on Wednesday approved a measure to expand a government credit line for the Federal Deposit Insurance Corp in case the agency’s reserves prove too small to deal with a growing wave of bank failures.
The legislation would also shield mortgage finance companies from investor lawsuits if those firms ease monthly payments for troubled homeowners.
The FDIC, which guarantees bank deposits, has been able to tap the Treasury Department for up to $30 billion since 1991. That credit line would be increased to $100 billion under the new bill.
Of course, we all hoped that gassing up the FDIC like an Indy 500 pit crew wasn’t going to be necessary, but that was a pretty fantastic hope as well.
Look on the bright side: Sure, no one believed that the FDIC’s participation in the PPIP’s was “riskless,” but now that the administration has demonstrated what cooperation with the government means, and a variety of government attorneys have pointed out that salary caps likely will apply to PPIP participants, there really is no risk as there will be no guaranteeing. FDIC cash can, therefore, go where it was meant to go. To backstopping the Treasury’s expanding balance sheet. (What? What do you mean that’s not what it’s for?)
Senate expands credit lines to FDIC reserves [Reuters]
