…..to pay its legal bills as the SEC investigates it for making materially false and misleading statements about the Merrill deal. CNBC is reporting that Kenny (whether in a Boone’s induced haze or not) and his troops took some liberties with the truth surrounding, shockingly, bonuses. Among the details so far is the claim that BAC agreed to pay up to $5.8B in ML bonuses which the SEC says doesn’t jive so well with their earlier claims. No doubt there will be more to follow.
Update I: The SEC has apparently chickened out (for now) and settled with BAC, subject to court approval.
Archive for August 2009
Taking their lead from the recently announced MBS fraud Senate panel, the UK’s no-nonsense Serious Fraud Office is trying to answer the question of whether or not some CDO pitchmen knew their products weren’t worth what they said they were. Undaunted by the warning of SFO director, Richard Alderman,that, “Some of them are incredibly complicated and they are sold by very, very clever people”, the agency will seek to prove that certain bilateral agreement utilizing proprietary pricing models qualify as fraudlent. Hopefully the SFO will offer their services as omniscient valuation agent to issuers in the future to avoid these little misunderstandings from happening again.
It turns out JPM is not the only firm with interns on the verge of collapse. We are told a few weeks ago a GS IBD intern got a spider bite and had to go to the hospital. After a short hospital stay, she checked herself out against doctors orders and returned to work. For the next few days, she made regular trips to the nurse’s offce for additional shots. However, one day while working on a deadline, she kept pushing off her trip downstairs. Her breathing became labored to the point where she was struggling to inhale, so she ran to the bathroom, stuck herself with the EpiPen, then went back to her cubicle and finished up the model before the deadline.
After being the dominant provider of index and single name CDS data for years, the credit derivatives vilification campaign has emboldened the Justice Department enough to go after Markit for anticompetitive practices. Figuring that a company owned by some of the most hated firms on the planet which offers pricing information for the primary scapegoat of the financial crisis might give into temptation and impose its status on the market, the Justice Department has likely already declared political victory merely by announcing its investigation. Among the alleged sins are taking a page out of the cable TV playbook and requiring customers to buy bundled services to access the good stuff as well as playing gatekeeper for which CDS trades can be cleared. Evidently the DC braintrust figures if you throw enough conspiracy theories and lawsuits at GS, JPM et al, one of them has to stick eventually.
Back in the “any port in a storm” days in February, RBS was foolish enough to commit to a legally binding lending quota in exchange for a few more wheels of government cheese. (One can only hope it was imported from France, but we doubt it.) RBS had to pay for the recently constructed largest trading floor in the known universe, after all. (Don’t be sad. The UBS building is there to keep it company.) So, some £25 billion was supposed to flow into the hands of RBS borrowers… and hasn’t.
With “the government” as a 70%+ owner of RBS (through the proxy of “United Kingdom Financial Investments,” the British version of the trusts holding shares in U.S. bailout recipients) RBS could effectively be a government ministry. The lending quotas were intended to present the illusion that RBS would be permitted to make commercially reasonable loans without interference from the UKFI. That, of course, is impossible.
Lending quotas, so popular with U.S. institutions as the “anti-redline spray” used to ward off the enforcement agencies, certain civic leaders and “community organizers” back in the ’90s (we understand that Deep Woods Pay-Off™ works well too) are, by definition, either too low, and therefore useless, or too high. In the latter case, the only way to comply is, obviously, to reduce underwriting standards. The soft illusion spun by the quota quickly evaporates in this case. There is nothing commercially reasonable about quotas, no matter how they are dressed up.
The great irony is that RBS is complaining that a number of business customers have paid back loans early, lowering their lending figures. Tragic, we know.
Still, even the scintillating intellect and pure management acumen of Alistair Darling is insufficient, it seems, to curb the current crisis without some force-fed debt from the captives. Accordingly, now is probably the perfect time to take your one page business plan for a global chain of authentic British cuisine restaurants on over to RBS.
RBS Is Missing Lending Target [BBC News]
When they’re not in need of rescue by the Brooklyn Bridge, some junior Barclettes are incensed that their employer has not followed the lead of other banks and raised their bases to $70k. Taking matters into their own hands, ambitious first year S&T analysts reportedly leveraged their recent time in training in NJ to market their unique skill sets and books of business to GS, JPM, and MS in search of a $10k raise.
Call Termanatrix Waters and protect John Connor’s investments. The Goldmanator is coming.
It would be difficult to make the case that, over the last decade or so, financial institutions haven’t begun to resemble the sovereigns that purport to regulate them. Certainly, with the news that the spying scandal brewing at Deutsche Bank is wider than initially realized, it becomes more and more obvious that global financial institutions have begun, also, to act like sovereigns, particularly with respect to the creation and use of intelligence services. For what it’s worth, 2008 revenues at Goldman outpace the Gross National Product (much less the tax receipts) of Panama, Estonia and Iceland- and the odd alien visitor could be forgiven for thinking that this latter had outsourced its central bank function to any of three global banks. (Take your pick).
Sovereigns are playing right along, sending their agents to penetrate and gather intelligence on Swiss banks (Germany, we are looking at you) as if they were the Abwehr, and though it might look like the United States has concluded swaps with Schweizerische Nationalbank, those transactions might as well be directly with UBS and Credit Suisse. And who would argue that the United States Department of State is really negotiating primarily with the Swiss Government, rather than UBS, on the issue of naming U.S. depositors? Of course, the result here (no fine for You and Us) reminds one of treaty negotiations more than a regulatory probe. But, then, when two or three big banks have the power to make (or break) the country’s economy, what’s the difference?
Bank Scandal Widens [The Wall Street Journal]
HSBC And Barclays Report Profits (NYT)
HSBC’s number’s sagged pathetically in the first half of the year, showing a net of $3.3B compared to $7.7B from last year. Barclays fared somewhat better (though, notably, they’ve sold off nearly everything they own) having returned $3.5B over the first half.
Fed Plays Crucial “Phase 2″ Role In Money Making On Wall (FT)
There’s concern over whether the Fed is being made to buy securities at an inflated price, and whether or not some firms are capitalizing on the inefficiencies of the Government and intervention in general. The answer is obviously no; I mean it would be ridiculous for anyone to seek to profit off the Fed (or the US Government in general) and their lackadaisical approach to finance.
Roubini Has Commodity Prices Rising In 2010 (Bloomberg)
Looking to make the most obvious call possible Roubini has decided to jump on the “inflation for 2010″ bandwagon. Be careful, little ones, the chief prognosticator has it that commodities could see a bump in days to come.
Citadel Moving To Become A Market Maker (WSJ)
Griffen & Co is looking to become a primary dealer in some EU government bonds, which would make theirs the first fund to do so.
Catholic Church Invests In Sin (BBC)
The Catholic Church, still reeling from having its ass handed to it by a certain dealbreaker editor, has apparently been heavily invested in some of our favorite nouns: firearms, birth control, and tobacco.
UBS Not Fined In US Tax Settlement (Reuters)
UBS is releasing the data but keeping their cash in an exchange that will surely strengthen US ties internationally, and force evil evaders out into the light of public.
Goldman Suffering From Waning Reputation (FT)
“”Goldman Sachs still has that Gordon Gekko look to it among the general public,” said Anne Rivers, who oversaw the survey, referring to the villain of the 1987 film Wall Street.”
Third Point Partners, Partners Qualified, Offshore, and Ultra Funds returned 8.0%, 7.9%, 10.0% and 12.2% for the second quarter of 2009, and have returned 5.6%, 5.5%, 7.1% and 8.5% for the year to date.
And that’s not all my Little Loebians:
Third Point Q2’09 Investor Letter [PDF]
