Ed. note: Last night was the Manhattan debut of the play Monetizing Emma. We sent Above The Law editors David Lat and Kashmir Hill to check it out. Here’s their review.
Over at Above The Law, we often write about the business side of law firms, but we don’t have the appreciation and knowledge of securities, futures, and the like that you Dealbreaker folks have. So Monetizing Emma, about the first-ever securitization of smart teenagers, was a nice little lesson for us, with its humanizing of the balance sheet.
Interestingly enough, playwright Felipe Ossa wrote the script several years ago, well before securitization became a household (and maybe dirty) word. The play is quite timely today, as we live through what characters in the play, set in 2013, refer to as “the Great Unwinding of 2009.”
An investment bank, Thackeray Walsh, is setting up a fund composed of some non-traditional assets: gifted youngsters. Investors can buy shares in the teenagers’ futures and will get a cut of their future earnings, in exchange for effectively funding low-interest loans for the kids’ college educations. If this idea sounds far-fetched to you, think again. (For the more technically oriented among you, who are curious about the nuts and bolts of securitizing teens, see this flowchart.)
Emma Dorfman is a 15-year-old gifted student that two Thackeray bankers want to securitize. A Jane-Austen-book-devouring nerd, Emma’s painfully shy and doesn’t want to be taken public.
Archive for June 2009
Three former Merrill employees, originally convicted of conspiracy and fraud in 2004 and subsequently exonerated in 2006, may be back on the stand soon to explain their roles in helping Enron commit fraud. The ex-Merrillites got a pass in 2006 when an appeals court determined government tried the original case improperly. At issue is their little scheme whereby Enron “sold” 3 barges to Merrill to help meet its profit targets and then took them back in 6 months. Merrill earned a guaranteed return on the “sale” which bears a striking resemblance to a lease. Should the government not trip over its own feet for a second time, Andy Fastow may have some new cellmates.
Ex-Merrill bankers may be retried over Enron fraud [Reuters]
So, we’re happy to see that Secretary Geithner has gotten a bit more comfortable with regard to public speaking and being in front of the camera. It’s been quite the awkward trip for a while but he really seems to be coming into his own. And that’s nice. Before this morning’s hearing got underway he looked downright giddy having his picture taken. Ear to ear smile and asking those up front to get his good side. The mics weren’t on but we’re pretty sure we saw him mouth “Brooks Brothers,” having mistakenly thought the paparazzi wanted to know what he’s wearing today. But the li’l fella is possibly getting a bit too comfortable with his newfound celeb status as evidenced by this overstepping just now.
Senator Corker: “Thank you Mr. Chairman–uh– Mr. Secretary.”
Geithner: “I’m not ‘Mr. Chairman.’ Yet.”
Mailbag:
Heads up – quite a few people are expecting the indictments in the Stanford Financial matter to be handed down today…nothing concrete but those who have been following the matter closely are saying they are hearing that today is the day.
Related: “I can still see him sitting on the bench, doing curls, and then standing up and dropping these weights from as far up as he could do. And people would turn and look at him. It was just for the attention, see?”
While there are many sectors of the financial services industry that likely feel they were on the losing end of yesterday’s 80+ page regulatory reform proposal, there was one true winner- the rating agencies. In fact, the proposal has arguably strengthened their position. The proposal does not address the misalignment of interests between the agencies and issuers, but does recommend less reliance on ratings alone when making investment/credit decisions while remaining silent on encouraging new firms to enter the market.
So, in effect, the proposal recognizes the ratings are worthless and shouldn’t be relied on but doesn’t want any new competitors who might be slightly more competent to add a shred of legitimacy to the process and capitalize on the quid-pro-quo fee arrangement which will remain intact. It looks like the proposal’s subtitle, A New Foundation: Rebuilding Financial Supervision and Regulation, needs an overhaul of its own.
Overhaul Leaves Rating Agencies Largely Untouched [NYT]
So, not sure if the vibe over at MSNBC is just one big orgy of free love of and verses of Kumbaya but I do know that at CNBC it’s every man, woman and Mark Haines for himself. They will cut one of their own bitches to get a story and go circus freak crazy on the ass of whoever dares step into their den. Territory is routinely marked, and when Charlie Gasparino first started at the network he dropped trou and went from desk to desk leaving “a little pieca me,” just to get the word out that there was a new guy in town. Presumably, that would explain Dylan Ratigan’s behavior of late.
Ratigan hasn’t even started his new gig at MSNBC, and he’s already alienating staffers in the newsroom. The acerbic financial guru “has posted ‘Team Ratigan’ signs on the desks he and his team are taking over, as well as in an empty office he’s turning into his conference room,” an insider tells us.
Bailout Bonus At Bank of America (NYP)
“Well-regarded” investment bank vice-chairman Fares Noujaim and “well-connected” West coast banker Harry McMahon were both offered millions to stay at BofA. People (the Post) are upset about this.
Sir Fred Goodwin bows to pressure (Times Online)
Perhaps to avoid having the windows of his car/house smashed in again, the ex-RBS chief “has agreed that his annual pension be cut from £703,000 to £342,500.”
Insurance Fraud Sends Cash To North Korea (Washington Post)
“For Kim Jong Il’s birthday, North Korean insurance managers prepared a special gift. In Singapore, they stuffed $20 million in cash into two heavy-duty bags and sent them, via Beijing, to their leader in Pyongyang, said Kim Kwang Jin, who worked as a manager for Korea National Insurance Corp., a state-owned monopoly. ”
Barbarians In Bankruptcy Court (WSJ)
“Wall Street has a favorite new spot for the power lunch: bankruptcy court.”
JPMorgan’s Lee sees S&P 500 retest of ’07 record (Reuters)
“The benchmark S&P 500 index .SPX should surge back to its October 2007 record above 1,500 by the end of 2012, provided the U.S. economy sees a V-shaped recovery,” JPMorgan Chase Chief U.S. Equity Strategist Thomas Lee said on Wednesday.
Sheila’s Bair-ly There (NYP)
Not so down with She-Bair? Then you’ll love Obama’s regulatory changes.
Jim Chanos: “I’m worried we’re erecting another Maginot Line” (CBC)
$$$ Jamie Dimon could’ve enclosed a nice note with the TARP check he sent the government, like Lloyd Blankfein did, or written “suck it” in magazine clippings, or enclosed pictures of him doing T. Geith’s wife. Instead, he had a minion shove the money in a bag which Dealbook notes, “didn’t include any comment from the firm’s chief executive.” That’s what you call cold. Ice cold. [Dealbook]
$$$ “The recession is great.” [Forbes via AWL]
$$$ Lisa Maria Falcone: The Lost Interview [Cityfile]
We cut you guys down prettay, prettay, prettay frequently. It’s all warranted, of course, but we’ve decided we should be pumping you up, too, for the things you occasionally get right. Moving forward, we’ll be taking the time to highlight the best comments from the peanut gallery (please note that the frequency of these little back pats will be dependent a) how badly you show me you want it and b) how lazy we’re feeling). I don’t know if it was the sharks or the coke, but today a whole bunch of you brought it and brought it hard. Two in particular.
Re: Cantillion Capital Closing Up Shop, letter from von Mueffling:
17 June 2009
Dear Investor,
After eleven years in the hedge fund business, six of which have been at Cantillon, my colleagues and I have concluded that the opportunity going forward for our investors is to focus on our long-only Global Equity business exclusively. This decision has been made for two reasons.
Within the thick blanket of new regulatory proposals unveiled today was a plan that would require firms securitizing loans to retain 5% of the credit risk and prohibit hedges for that risk which would “undermine the economic tie between the originator and the issued asset-backed security”. The issue of aligning interests in ABS trades is a valid one. However, when the Fed sees zero interest for the first round of CMBS TALF loans, and the administration has paid such lip service to the need to reignite the securitization market, picking a seemingly arbitrary amount of credit risk for ABS issuers to retain is a confusing first step at best.
Wall Street Calls Obama’s Mortgage-Market Debt Plan a Burden [Bloomberg]
