Archive for September 2011

  • 13 Sep 2011 at 12:55 PM
  • Banks

Soon You’ll Be Able To Go To The FDIC Website And See If Uncle Jamie Left You Anything In His Will

By Matt Levine

The term “living will,” applied to liquidation plans for big banks, has always seemed like a bit of a euphemism. After all, it really means “instructions on how to divide up our stuff when we die.” So, y’know, more of a regular will:

The Federal Deposit Insurance Corp. board voted unanimously today to release a joint final rule laying out what the largest and most complex financial firms must include in so-called living wills they’re required to file. The panel also approved contingency planning guidelines for insured banks. … Regulators are requiring financial firms to file plans that are developed under the context of the bankruptcy code, with each designed to give a blueprint for how a firm could be taken apart.

And, lest your estate planning was going to be along the lines of “I must keep in good health and not die,” the Feds are on to that scheme too. From the rule:

Several commenters were concerned that the Proposed Rule favored resolution over recovery and was biased in favor of separation of the insured depository institution from the parent organization rather than looking to maintain enterprise value. By issuing the Rule, the FDIC does not intend to substitute resolution planning for recovery planning. Both are very important and serve complementary purposes. The Rule, however, focuses on resolution planning.

It turns out, though, that this may be a bit of an exaggeration. Continue reading »

  • 13 Sep 2011 at 10:49 AM
  • Banks

Bonus/Layoffs Watch ’11: European Bankers May Be Paid In Handshakes, New Drachmas

By Matt Levine

And they’ll be the lucky ones. This may have something to do with a Eurozone financial meltdown but let’s not neglect the role of 100% base-salary raises for MDs in ruining everyone else’s year:
Continue reading »

Opening Bell: 09.13.11

By Dealbreaker

The Trouble With French Banks (WSJ)
‘We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore,” a bank executive for BNP Paribas, who declines to be named, told me last week. “Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. . . . We hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore.”

Market turmoil lands hedge funds with big losses (FT)
According to the latest provisional figures from Hedge Fund Research, the average hedge fund manager has lost 4.1 per cent in the past four weeks. Equity-focused managers have fared even worse, losing an estimated 6.9 per cent – a staggering drop for an industry that prides itself on risk management, and charges accordingly.

Merkel Rejects Greek Default, Defends Euro-Area Integrity (Bloomberg)
“The top priority is to avoid an uncontrolled insolvency, because that wouldn’t just hit Greece and the danger that it hits everyone, or at least a number of other countries, is very big,” Merkel told Berlin-based broadcaster Inforadio. “I have made my position very clear: that everything must be done to keep the euro area together politically, because we would very quickly face a domino effect.”

Nomura Said to Prepare Cuts of About 5% of Jobs in Europe (Bloomberg)
The reductions may be announced as early as tomorrow, the people said, declining to be identified because the information is confidential. Fewer than 400 positions will be eliminated globally, with the majority in Europe, one of the people said.

Candidates Perry, Romney differ in tone on Fed and Bernanke (Reuters)
Former Massachusetts governor Mitt Romney, who has said he would not re-appoint Bernanke, has been less critical of the Fed and defended the central bank’s role to preserve the value of currency and ensure investor confidence. “Of course we should see what the Fed is doing – there should be some oversight to make sure that it is acting properly – but at the same time we need to recognize we need to have a Fed,” Romney said.

‘Killer’ rep for S&M’er (NYP)
Leather-loving Edythe Maa, whose lawyer boyfriend was shot and killed three years ago by a crazed client, just found her newest beau dead in the attic. The 29-year-old former-Ph.D.-student-turned- S&M-model, better known as Jade Vixen, made the horrific discovery Aug. 18 in their home in Drexel Hill, Pa., police said. Peter Stelzenmuller, 49, an engineer — who, based on online photos, seemed to share her kinky interests — was testing new scuba equipment when he died, according to a police report.
Continue reading »

  • 12 Sep 2011 at 5:55 PM

Banks Think “Living Will” Sounds So Negative, Would Prefer “Immaculate Victory Plan”

By Matt Levine

Sure it might make sense to have a rule, set to be finalized this week, requiring banks to have resolution plans for quick liquidation in the event of a liquidity crisis. But why does it have to be all about failure?
Continue reading »

  • 12 Sep 2011 at 5:32 PM

Steve Schwarzman Has Some Helpful Ideas For Obama

By Matt Levine

He gets it: no more comparing Obama to Hitler. The new plan is subtlety, which is why the Blackstone boss took to the FT today to show the President an olive branch. Then he whacked Obama with it repeatedly.

His best piece of advice? If you really want to fix what ails America, maybe you should get a private equity executive to turn things around. Just saying.

The US economy resembles a business badly needing turnround. Its growth is anaemic. Like many a faltering business, it has too much debt. No one, least of all S&P, believes that the latest deficit reduction package will solve this. There is too little investment. Corporations and consumers are cautious about spending, while the recent sharp drop in equity prices shows that investors do not want to risk capital in the market.

My firm has invested in, and advised on, hundreds of businesses in the past 25 years and we’ve seen companies successfully overcome such challenges.

Continue reading »

  • 12 Sep 2011 at 3:34 PM

How Much Time In Jail Will A Little Bit Of Insider Trading Cost You?

By Matt Levine

Raj Rajaratnam doesn’t want to spend the next 20 years in prison, which would be understandable for anyone, really, but especially for him given his unmentionable but Extremely Serious assortment of illnesses. But this perfectly sensible desire to not go away for two decades runs up against a problem, which is that the US Sentencing Guidelines call for a 19.5 to 24-year sentence.

Fortunately, those guidelines aren’t mandatory, so his lawyers are working to convince the judge that Raj shouldn’t get the longest insider trading sentence ever just because he is, according to the government, “arguably the most egregious offender of the insider trading laws prosecuted to date.”

I find insider trading sentencing a bit perplexing and took Raj’s case as a reason to try to make some sense of it – and to try to predict how long Raj is going down for.
Continue reading »

  • 12 Sep 2011 at 2:27 PM

Dick Bové Has Figured Out Warren Buffett’s Scam

By Matt Levine

Dick Bové would like to think that he knows Bank of America better than anyone else, since he knew to buy when everyone else was selling and correctly interpreted “10,000 layoffs” to be more of an order-of-magnitude lower bound than the actual number of layoffs to expect. So he’s offended that, while he was doing the legwork to make those calls, certain other people just had inside information handed to them on a silver platter. People like Warren Buffett:
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  • 12 Sep 2011 at 11:36 AM

Jamie Dimon Used To Live In America

By Matt Levine

Over the years, Jamie Dimon has had a little bit of mild unpleasantness with banking regulators. But he’s always been bullish on America, which has formulated a secret sauce made out of “the best universities, best military, best rule of law, most innovation, the hardest working ethic of all.” Most important, America has this little thing called “freedom,” specifically Jamie Dimon’s freedom to run his bank for his shareholders, not for regulators.

That’s why it pains Dimon so much to have to tell us that our freedoms are slipping away into the clutches of some Swiss commies:
Continue reading »

  • 12 Sep 2011 at 8:06 AM

Opening Bell: 09.12.11

By Dealbreaker


They shall grow not old, as we that are left grow old:
Age shall not weary them, nor the years contemn.
At the going down of the sun and in the morning
We will remember them.
- from Laurence Binyon, “For the Fallen.” Sent to us, with this photo taken on the morning of 9/9/2001, by a reader and commenter

Greek default jitters hammer French banks, euro (Reuters)
Greece’s deputy finance minister said on Monday the government had cash to operate until next month, highlighting the urgent need for the next emergency loan to stay afloat. “We have definitely maneuvering space within October,” Filippos Sachinidis told television channel Mega when asked how much longer the state would be able to pay wages and pensions.

Sweeping change proposed for UK banks (FT, ICB report)
As foreshadowed, the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, is that banks’ core operations – including consumer deposits and small business lending – must be ringfenced from the rest of their businesses. The ringfenced entity must have its own board of directors. On capital, the commission held to its interim conclusion from April that the ringfenced entity must maintain equity capital equivalent to 10 per cent of risk-weighted assets.

Bank Chief Has Big Job to Reassure Stockholders (NYT)
Mr. Mayo says the challenge for Mr. Moynihan is that more radical solutions that might lift the stock in the short-term could prove risky in terms of the future of the company and its long-term performance. For example, spinning off its highly profitable Merrill Lynch unit might give the stock a short-term bounce but deprive the bank, the country’s largest, of a major source of profits even as margins in more traditional areas of banking like commercial lending are squeezed.

Dimon sizes up post-crisis banking (FT)
In his office, looking relaxed in white shirt with two buttons undone, Mr Dimon is still exercised about what he sees as a “miscarriage of justice”. US policymakers, he says, have sold their banks down the river – the Yangtze river. “There are plenty of countries out there that are happy with the changes being implemented in the US. They realise that they can be huge beneficiaries of this. I’m talking about China, India, Singapore, Japan. I wouldn’t want to see, 20 years from now, the US asking, ‘what happened? How come the winners in the marketplace are all outside the US?’”

9/11 Flights of Fancy Lead to Moments of Fear (ABC)
The plane was met in the Detroit airport by law enforcement and taken to a remote area for a security screening, but no explosives were found, Joly said. Instead, the “suspicious behavior” was two people “making out” in the bathroom mid-flight, law enforcement sources told ABC News.
Continue reading »

  • 09 Sep 2011 at 6:19 PM

Write-Offs: 09.09.11

By Dealbreaker

$$$ Euro Weakens to Six-Month Low as Swaps Indicate 90% Odds of Greek Default (Bloomberg)

$$$ U.S. Pursues Three Individuals in 9/11 Threat (WSJ)

$$$ Resignation Reveals Internal Split at European Central Bank (NYT)

$$$ KKR, Blackstone Deal-Rig Antitrust Suit Expanded by Judge (BW)

$$$ Extreme makeover BofA: An asbestos solution (Reuters)

$$$ Feasting on Paperwork (NYT)

$$$ ‘Sexy nuns gave Silvio Berlusconi lapdances’ (Sun)
Continue reading »

  • 09 Sep 2011 at 5:08 PM

Housekeeping

By Bess Levin

Just a little programming note that I will be on vacation next week, returning on Wednesday, the 21st. Matt will of course be here holding down the fort. Everybody be good and I’ll bring you back a treat.