Archive for September 2011

Opening Bell: 09.27.11

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UBS Bankers Face Dwindling Options as Securities Unit Prepares to Shrink (Bloomberg)
“As soon as the news about Delta One came in, CVs from UBS started flying,” said Jason Kennedy, chief executive officer of London-based recruiter the Kennedy Group, using an abbreviation for resumes. “There are some very good people at UBS and they will be in demand. But for many there’s nowhere to go.”

Goldman Sachs Draws Up Deeper Cuts (DealBook)
With the company’s third quarter closing on Friday, Goldman has been revising its plans, potentially raising the cuts by as much as $250 million, to $1.45 billion. Based on its 2010 spending, such reductions would amount to 5 percent of the firm’s expenses. Along with the possibility of additional layoffs, the firm is expected to reduce employee pay, much of which is handed out later in the year. It is also sharpening its focus on noncompensation expenses, like real estate and travel, according to one of the executives with knowledge of the discussions.

$200K Per Job? Timothy Geithner Says White House Jobs Plan Is Still a Bargain (ABC)
“You’ve got to think about the costs of the alternatives,” Geithner said when asked about Harvard economist Martin Feldstein’s calculation that each job created by President Obama’s American Jobs Act would cost taxpayers about $200,000. “If government does nothing, it does nothing now because they’re scared by politics or they want to debate what’s perfect, then there will be fewer Americans back to work, the economy will be weaker,” he said.

Wall Street Demonstrations Test Police Trained for Bigger Threats (NYT)
The police’s actions suggested the flip side of a force trained to fight terrorism, in a city whose police commissioner acknowledges the ownership of a gun big enough to take down a plane, but that may appear less nimble in dealing with the likes of the Wall Street protesters.

I can’t be sued: DSK (NYP)
Accused maid molester Dominique Strauss-Kahn says that even the civil case against him should be tossed out now — because he’s got diplomatic immunity as the former head of the IMF. … International-law expert Bradford Trebach of The Bronx disagreed. “He can claim whatever he wants … [but] under the IMF’s articles of agreement, high-ranking IMF officials have what’s called ‘official acts immunity,’ so that means that they would be immune from a lawsuit regarding acts done by them in their official capacity,’’ Trebach told The Post. “The type of thing the maid is talking about does not seem to be something that is an official act.’’
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Write-Offs: 09.26.11

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$$$ UBS in ‘Disarray’ as CEO Gruebel Is Replaced by Ermotti (Bloomberg)

$$$ UBS ‘rogue trader’ offices to be knocked down (Telegraph)

$$$ Europe is running out of time (II)

$$$ During his high school years at Memphis University School in the early 1970s, Tudor Jones worked at The Daily News. He used a pen name – “Paul Eagle” (MDN via BI)

$$$ Full Tilt’s Collection Woes Bred Alleged Ponzi Scheme (WSJ) Read more »

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  • 26 Sep 2011 at 6:35 PM

An Above the Law/Dealbreaker Debate: Insider Trading Sentencing

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You might think that Dealbreaker HQ exists only metaphorically in virtual space, or maybe in the fan fiction you’re hiding in your desk, but in fact Bess and I share a real physical garrett both with our sibling sites Fashionista and Above the Law. Occasionally we even talk to each other. “Talk,” in this context, normally means that Above the Law editor Elie Mystal shouts at us about some outrageous political position. In order to quiet him down a bit, we’ve decided to take it to the internet, thus spawning the first – and maybe last! – Above the Law / Dealbreaker Debate Society.

I have been set the task of defending a proposition like “white collar criminals should not get anything near the jail time they get.” (We are pretty casual with our resolutions here at the Breaking Media Debate Society.) Fortunately I believe that, so here goes.

Matt:

Let’s start with the basics. It’s not generally a net good to send someone to prison. They have children and friends and dogs who depend on them. So you need a reason to fuck up their lives. The pretty accepted theory is that you punish people to stop them from doing more bad things, to deter others from doing bad things, and/or because you have a moral objection to what they’re doing. The first – “incapacitation” – doesn’t argue much for imprisoning insider traders. It’s pretty easy, once you’ve caught them, to make sure they don’t do it again. Banning them from the securities industry usually does the trick. Everyone in the Galleon case – like almost every insider trader ever caught – is a first-time offender.

The second – “deterrence” – does make sense. People who work at hedge funds really don’t want to go to jail. Compared to their Greenwich homes, jail has worse food, more violence, and fewer golden retrievers. Also they get ordered around by people with less education than them, which is why they left BofA in the first place.
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  • 26 Sep 2011 at 4:30 PM

NYPD Pretty Sure Video Of Cop Blasting Wall Street Protestors With Pepper Spray Was Edited To Make Him Look Bad

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That, or the camera man had to have been slacking on the job. Read more »

  • 26 Sep 2011 at 3:49 PM

Confidential To Future UBS CEO Tasked With Turning Bank Around: Dream This Big

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Trying not to get carried away here, or sound boastful, or crazy, but this idea has a whiff of genius to it; I have a feeling you’re really going to like it. Had I proposed it to you a couple of weeks ago, or even around 2:30 p.m. Eastern time on Sunday, you would have laughed in my face, but right now it feels like irresistible, beautiful destiny, and you’re totally going to want to see it for yourself. The Detroit Lions and the Buffalo Bills are going to play in the Super Bowl…Lions. Bills. XLVI. [WSJ]

  • 26 Sep 2011 at 2:32 PM
  • Banks

Minor UBS Shareholder Wants Everybody Out, Has A Few Ideas About Future Leadership

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Over the weekend, the UBS board appointed Sergio Ermotti interim CEO, following Oswald Gruebel’s resignation. This was a good start, but not enough, according to Ethos Foundation head Dominique Biedermann, who only owns a 0.1% stake in UBS but feels strongly his opinions are good ones and should be heard. First off, Biedermann wants Chairman Kaspar Villiger and I-bank chief Carsten Kengeter canned. Then, he wants UBS to get rid of the investment bank. As for CEO candidates? While the board has apparently been sitting around with its thumbs up its ass, Biedermann went out and found the perfect guy for the job, who may or may not be his brother-in-law and/or just a guy he owes a favor. Read more »

Volcker Rule To Go After Your Moneys

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The rulemaking process for implementing the Volcker rule, which will ban proprietary trading by banks, seems to be proceeding by periodic leaks to the media about the draft rules – which are always described as having 174 pages but also always discussed one small bit at a time. Today’s leak is from Bloomberg and is about pay:

The rule, which aims to ban most proprietary trading by banks with federally insured deposits, would exempt trades related to market-making as long as the activity met at least seven standards, or principles. One principle would be that traders get paid from fees and the spread of the transactions rather than the appreciation or profit from their positions, according to a copy of the draft reviewed by Bloomberg News.

As a quick aside, I don’t really know what a “spread” is in this context. If you buy $10MM bonds from Client X at 101 and sell $10MM of the same bonds to Client Y at 101.25 a second later, then your spread is pretty clearly a quarter on $10MM bonds. Easy enough. If however you wait 3 days and sell the bonds at 103, is the 2 points “spread” or “price appreciation” or a combination that the payroll department would have to disaggregate?

That quibble aside, though, this is actually quite clever and diabolical. It is difficult to separate “permitted” inventory and hedging activities from “not permitted” proprietary position-taking. But if you just tell traders “all you can do is get paid on volume of transactions times commission that you can charge,” then there’s no incentive to do anything but flow transactions. Making money on hedges, inventory, etc. can’t help the trader and so almost by definition is irrelevant to him.

It is predictably easy to find someone to say “people who aren’t paid giant gobs of money will quit and go to hedge funds and do dark evil things in unregulated corners of the world.” Specifically: Read more »

Dick Bové Has A Message For Bloomberg BusinessWeek

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The short version: “I challenge you to a duel.”

The long version:

Spoiler alert: Bové doesn’t believe BBW has the balls to respond to him. Read more »

Jamie Dimon Will Use The Phrase “Anti-American” Until You People Get It

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Jamie Dimon of JPMorgan Chase launched a tirade at Mark Carney, Bank of Canada governor, in a closed-door meeting in front of more than two dozen bankers and finance officials, underscoring mounting tensions between bankers and officials over financial regulation. The JPMorgan chief executive’s remarks to Mr Carney, who is touted as a potential next head of the Financial Stability Forum, the international group of regulators, were focused on a capital surcharge for the largest banks, according to several people who attended the meeting of about 30 bank chiefs…Mr Dimon told Mr Carney that many of the rules discriminated against US banks and he was going to continue to use the phrase “anti-American” because it seemed to resonate with people who might be able to modify the reforms. The atmosphere was so bad after the meeting that Lloyd Blankfein, chief executive of Goldman Sachs and head of the Financial Services Forum bankers’ group which arranged the session, emailed the central banker to try to smooth relations, people familiar with the matter said. [FT via BI]

  • 26 Sep 2011 at 10:14 AM
  • Banks

Who Wants To Be CEO Of UBS?

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As you may have heard, over the weekend, UBS CEO Oswald Gruebel informed the board that as much fun as this job’s been, he’d like to quit while still ahead. Sergio Ermotti, head of European business, has been named interim CEO and while a candidate for the gig before the whole Kweku Adoboli incident, the bank isn’t set on him running the place for the long term (“He takes clients out, he’s got a nice tan, but he doesn’t have the charisma to run a place like UBS and to cope with the risk,” one analyst said in July). So, a search is underway, both internally and externally, neither scenario thrilling anyone (an outsider CEO would be tough since next year they’ll be getting an outsider CEO in Axel Weber, while an insider would be someone who was there when shit went down), and a total of one name being proposed in the last 3 days. Read more »

Phil Falcone Has Great News For Harbinger Capital Investors, Less Than Great News For The City Of New York

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Over the last 10 months or so, the relationship between hedge fund manager Phil Falcone and his investors has not exactly been mutually satisfying. Not that they’ve been keeping a list but, if pressed to get into specifics, Harbinger Capital clients might cite a few reasons why they’ve been less than thrilled with Falcone of late such as: 1) The lackluster returns in Harbinger Capital’s flagship, which have in no way mimicked the highs of 2007. 2) That time he told reporters his investors are idiots. 3) The fact that he’s come to adopt a loose definition of the term ‘hedge,’ and put a whole lot of their money in a wireless venture that the universe seems hell bent on making sure never even has the chance to cause GPS interference. 4) The note those who requested their money back received in July, informing them that rather than getting cash, they’d be the lucky recipients of illiquid LightSquared equity. And then there would be the incident about which they really get pissy, and where things started to go down hill: 5) The time Phil choose to “loan” himself $113 million from a gated fund in order to pay personal taxes. Today, however, brings word that should do a lot to smooth ruffled feathers. On points 1-4, not much to say there. No one changes in a day. But! On point 5? Big progress. Huge. Read more »