One of the rating agencies’ best friends, the First Amendment, is starting to distance itself. Had Moody’s and S&P broadcast their opinions on why subprime MBS deserved AAA ratings to the masses, they may have been able to dodge the current class action lawsuit facing them and Morgan Stanley regarding the implosion of Cheyne Finance Plc. But because they saved their free speech for a select group of investors, a judge ruled the triumvirate will have to spend some time drafting carefully worded responses to explain their take on the inherent credit quality of subprime assets.

Without ruling on the merits of the lawsuit, the judge said opinions by the ratings companies may be the basis for a lawsuit “if the speaker does not genuinely and reasonably believe it or if it is without basis in fact.”

But the MS and the agencies may still have another out here. Anybody who truly believed subprime MBS warranted AAA ratings clearly does not have the competency to stand trial.
Ratings Firms Lose Free-Speech Bid to Dismiss Lawsuit [Bloomberg]

BAC can hardly afford any more losses. In the era of widespread identity theft and fraud, the bank needs to take a zero tolerance policy towards nefarious individuals trying to run afoul of the law. So to those like Steve Valdez, Bank of America has made its stance clear, they will not be duped.

A Florida man born without arms says a Tampa bank would not let him cash a check because he couldn’t provide a thumbprint.
Steve Valdez didn’t have an account at a Bank of America location in downtown Tampa, where he tried to cash a check from his wife last week. However, Valdez has prosthetic arms and is unable to provide a thumbprint. He says he presented two forms of identification but was still denied.

The great mystery has now been solved. Following repeated pleas from Kanjorski to SEC Inspector General H. David Kotz to reveal exactly what caused the agency to allow King Ponz to get away with his $50 billion heist, the SEC has an answer that was well worth the wait. The months spent going through thousands of emails and reports has yielded a bounty of information previously unknown to the world. In the 22 page executive summary the SEC reaches an unthinkable conclusion for the good Congressman: we had all the information we needed and completely fucked everything up. Now if they could explain why they need an additional 450 pages of cut and paste jobs from the Markopolos file to cement their claim, that would be value added.

The world of one-day wonders is under serious fire. Enough people stayed on the leveraged ETF roller coaster too long and wondered how a theoretical 30%+ gain turned into a small loss that the class action lawsuit wave has started. And what better place to start than the ETF that most folks who expected at least part of last year’s bonus to be paid in stock had to hedge their employers, the SKF. ProShares will have a fun time reliving and explaining away performance track records such as one six week period last fall.

For example, in a six week period from September 15, 2008 through October 31, 2008, the DJFI declined by over 17%. Despite a reasonable expectation based upon Defendants’ disclosures that SKF would rise by up to 34% during this period, SKF actually fell by nearly 6%.

If anything, regulators should be throwing ProShares a party. If all those evil short sellers who allegedly caused the market to free fall wound up losing money by doing what they do best, isn’t that what the masses have been waiting for all along?

So, a bankruptcy judge ruled yesterday that Lenny Dykstra was not mentally competent enough to manage his own Chapter 11 bankruptcy, and that his finances be turned over to a court appointed trustee. This of course riles me to no end (Nails owned and operated his own chain of car washes, lady, I think he knows what he’s doing here), but what really sticks in my craw is the insinuation L-Dykes might not have some well-pocketed contacts in his Rolodex.

Dykstra also told the judge he has a $12 million offer for the Gretzky home from someone “who runs a hedge fund.” That amount would cover the first mortgage from Washington Mutual (now Chase). With no documents to support the claim, and with other liens on the house, the judge called the offer “speculative”.

Assuming this is legit, which one of you is going to step up and prove Geraldine wrong?

As most people know, last year was a tough year for bank CEOs- especially at bailed out institutions. Ask Kenny boy or Vikula if they’d like to repeat 2008 and you’d probably hear a resounding ‘hell no’. Just how bad was it? So bad the average compensation for CEOs at 20 banks that got some form of government handout was a pedestrian 37% higher than the average for S&P 500 heads of state.

Lenders including Bank of America Corp. and Wells Fargo & Co. paid CEOs an average of $13.8 million last year, topping the $10.1 million for S&P 500 leaders, according a report released today by the Institute for Policy Studies. Average CEO pay was 430 times larger than for typical workers, and at nine of 20 banks the value of stock options soared $90 million in a year, the Washington-based group said, citing proxy statements.

Get the popcorn ready for the moment of realization when the bonus theater resumes this fall. No doubt members of the compensation firing squad in DC will wind up looking at each other in a bit of a haze when they think through the burning question on their minds. Who would be careless and thoughtless enough to encourage these bank CEOs to take their compensation in the form of stock which could double instead of cash?
Bank CEOs Paid More Than S&P 500 Chiefs, Study Shows [Bloomberg]

First, buy her book, because he’ll be taking half the profits, Ron Weinstein told The Daily Beast. Also discussed in what must have been the most awkward conversation ever were Ron’s thoughts on:
The adultery being NBD but hit his portfolio took? Quite another:

The Weinsteins move in circles where it’s tacitly understood that wives play around, too, but they do it discreetly. Disclosing an affair isn’t desirable, but Ron doesn’t think it should be the end of a marriage. “Affairs are commonplace and shouldn’t be such a big deal,” he says. “However, having an affair with the person who is the biggest crook in the world and stole all my assets is another issue entirely.”

The dick talk:

“I thought it was trashy,” Ron says, “but I thought it was necessary to get insight into how somebody becomes a sociopath. What happens when they’re young that can cause somebody to be this horrible?”

Me and you:

Citing the Judeo-Christian principles “this country was built on,” he says he told her, “I think the masses are not going to feel a whole lot of empathy for you. I don’t think they understand. I read blogs, I read the comments, and I get nauseous. As hurtful as [the book] is to me, it was probably necessary or she’d be a basket case. It doesn’t mean I have to agree with her, but I understand it. When people write these things on these blogs, what the hell do they know? They’re looking at the surface.” He describes the cliché-ridden attacks–”She cheated on her husband, she’s a money hungry slut”–stops talking in order to collect his emotions, then explains: “I dislike the choice she made. I am not okay with it, but I try to understand it.”

CBS knows, ’cause they tried to get him to dish on the subject of assets possibly being seized yesterday and Fish Boy was having none of it. He offered only “no comment” and that face (which at the moment has a serious Sam Israel thing going on). Then in typical Madoff form, it was his wife who told reporters on the scene where they could go, possibly though not definitely stopping short of throwing down fisticuffs like Andy’s girlfriend, Catherine. That’ll be this weekend on Nantucket, during what might be M&A’s final days of freedom. Be forewarned she’s looking for a fight.

There is a real crisis brewing. One that is going to take a unified, global effort to avoid. The problem is the government of the Cayman Islands is headed for bankruptcy and, in a chilling development, may consider instituting taxes to save itself. After betting big that continued growth in its financial sector would cover its $67.5 million budget deficit, the past two years have driven the original tax haven in the sun into begging the mother ship in the UK for £190m in emerging bailout funds. But, so far, the news has not been good.

“I fear you will have no choice but to consider new taxes – perhaps payroll and property taxes,” (junior Foreign Office minister Chris) Bryant wrote to (the leader of government business William McKeeva) Bush. “I understand, of course, that in so doing you will want to consider carefully the implications for Caymans’ economy, including the financial services industry.”

With tax havens from Switzerland to Vanuatu quitting the game on a daily basis, there seems to be a simple solution to the Caymans’ problem. If the worst thing hedge funds fleeing London have to worry about is the interaction between British skin and Caribbean sun, that seems like a small price to pay.
Bankruptcy threat brings new concept to the Cayman Islands … taxes [Guardian]