Barclays Profit Growth Held Back by Investment Banking Revenue (Bloomberg)
The bank said first-half profit rose 29 percent as a drop in provisions for bad loans mitigated a decline in investment banking revenue. Net income rose to 2.43 billion pounds ($3.9 billion) from 1.89 billion pounds in the year-earlier period, the London-based bank said in a statement today. Earnings beat the 2.26 billion- pound median estimate of 10 analysts surveyed by Bloomberg. “The second quarter was tough,” Diamond, 59, said on a conference call. “Clients were taking less risk in that period of May and June. We have clearly seen in the second half of July more activity in the market. I don’t want to predict how that all plays out for the second half, but it looks more positive.”

Goldman Sachs To Shift Principal Strategies Into A Fund (Bloomberg)
The team, which aims to complete the process by the end of the year, hasn’t set a target for the amount it wants to raise, the person said. Goldman Sachs Principal Strategies, the trading team led by Hong Kong-based Morgan Sze, 44, may be keen to raise money before competition emerges from proprietary- trading teams leaving other banks, analyst Brad Hintz said. “What you don’t want to be is the 50th prop desk being spun out,” Hintz, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. “I think what they’re saying is, ‘Get out while the getting’s good.’”

Buffett Gets In Bind Over Options (Reuters)
A new law requiring most derivatives users to post collateral on trades could diminish potential gains to the point where Buffett could lose interest in keeping his bet. Options prices have been rising amid concern that Buffett might buy back the options he sold, traders said.In the worst-case scenario, if markets tank and Buffett has to post collateral, he could face tens of billions of dollars if the underlying stock indexes went to zero.

New Law Fuels a Shake-Up at Morgan Stanley (WSJ)
In recent days, executives at the Wall Street firm and FrontPoint, which has $7 billion in assets, have been hashing out terms for a no-cash agreement that would bring Morgan Stanley’s full ownership of FrontPoint—purchased at the height of the hedge-fund market—down to between 20% and 25%, said the people close to the matter. FrontPoint was profitable in 2007, but not in 2008, people familiar with the matter said. It went from $5.5 billion in assets when purchased in 2006 to $10 billion at its peak. FrontPoint executives offered about $150 million to buy back the firm from Morgan Stanley, said people familiar with the talks. That would have triggered a painful write-down, which Morgan Stanley wasn’t willing to take. Morgan Stanley currently values FrontPoint at around $350 million, one person with knowledge of the matter said.

Brett Favre sent X-rated photos to Jenn Sterger (NYDN)
Deadspin editor-in-chief A.J. Daulerio reported Wednesday that model, actress and TV host Jenn Sterger told him that Favre had sent her inappropriate and explicit pictures of his himself. Daulerio said Sterger, 26, told him that she had received several friendly but strange voicemail messages early in the 2008 season. “But then, one night, Sterger received a picture on her phone which was so shocking that she just tossed it across the room. It was his d—. Brett Favre’s d—.” Continue reading »

$$$ Falcone’s wireless plan relies on hedge fund assets [Reuters]

$$$ “I do feel I’m attacked from certain quarters,” said Tesla’s Elon Musk. “If you’re starting a company in an industry that hasn’t had a successful start-up in many decades and you say you’re going to succeed, unless somebody really understands why you’re going to succeed their automatic reaction is that you’re not going to succeed…It is not unreasonable for conventional wisdom to say Tesla is not going to be successful. If I had a dollar for every time someone brought up DeLorean, I wouldn’t need an IPO. For a lot of people out there, certain journalists in particular, they assume that we must be some combination of a fool or a liar. Or maybe both. Because we’re saying we’re going to succeed.” [Bloomberg]

$$$ Paulson & Co Takes Bearish Turn [FT] Continue reading »

HSBC In Money Laundering Probe (WSJ)
A spokesman for HSBC in the U.K. said the investigations relate primarily to HSBC’s “global banknotes” business, whereby HSBC ships banknotes around the world on behalf of clients, mainly from central banks to major commercial and investment banks. It also concerns what HSBC describes as its “foreign correspondent” business, which allows businesses to transmit funds to countries where they don’t have a banking presence.

RBS Fined Over Sanctions Slip (FT)
The bank has been fined £5.6m – one of the largest penalties ever imposed by the financial regulator – for failing to ensure that funds were not transferred to terrorist groups or other people facing Treasury sanctions. RBS was punished for having insufficient checks in place to identify payment transactions that could potentially have involved those on the Treasury’s sanctions list. This resulted in an “un­acceptable risk” that RBS could have facilitated payments to terrorist organis­ations.

Geithner: Bush Policies ‘Misguided,’ Should Be Ended (Reuters)
“We are living today with the damage that misguided policy caused,” Geithner said, adding that country needed to choose a new course. “Rather than recreating a false prosperity fueled by debt and passing the bills on to the next generation, we need to restore America to a pro-growth tax and fiscal policy,” he said.

Dual Role In Housing Deals Puts Spotlight On Deutsche Bank (WSJ)
Deutsche says that helping investors bet either way—either for or against an asset—is part of doing business for a securities firm. “Some clients sought more exposure to the housing market, while others sought less,” a spokesman for Deutsche said. “We served clients whatever their investment objective, but only after being satisfied that they had arrived at their view after thorough consideration.”

Forget Doom, Old-Fashioned Rally Coming (CNBC)
“Risk aversion is the new black and the professors and black swans are falling over themselves to predict the collapse of a debt-laden economy,” Michael Browne told CNBC. But results from the banks indicate that things are getting better, he said. “Almost all come up with the same pattern…they are lending again to small and mid-sized corporations and would like to lend more but there is no demand, especially from large corporations who are funding themselves from a very cheap market,” according to Browne. “Individual lending is also showing signs of life. So if on top of this you get the consistent pattern of falling provisions then they are telling me that the economy is recovering. Rather faster than we should have expected,” he added. Continue reading »

$$$ Morgan Stanley’s FrontPoint Spin-Off And The End Of The Era Of John Mack [CNBC]

$$$ Nassim Taleb: “I recently had a lunch conversation with Arianna [Huffington] that was mostly about ethics; so I suddenly felt ashamed of not having publicly denounced what appears to be a blatant generator of moral hazard. As someone who claims to be as independent as one can possibly be, with nothing to lose, and fear of nobody (except my mother’s occasional reprimands), I am even more obligated than anyone else to expose hidden scams.” [HP] Continue reading »