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Archive for October 2011
With a lot of attention on the CBO report finding that out that income inequality has increased dramatically in the past 30 years, you might have a momentary lapse and think something like “say, maybe those protesters are onto something.” Resist the urge! A reader pointed us to this from Greg Mankiw, who is presumably planning his counter-demonstration now:
Here is a fact that you might not have heard from the Occupy Wall Street crowd: The incomes at the top of the income distribution have fallen substantially over the past few years.
According to the most recent IRS data, between 2007 and 2009, the 99th percentile income (AGI, not inflation-adjusted) fell from $410,096 to $343,927. The 99.9th percentile income fell from $2,155,365 to $1,432,890. During the same period, median income fell from $32,879 to $32,396.
“Goldman could benefit from MF Global’s plight,” Bove said in a note today. “One might argue that Goldman is over capitalized and that it has too much liquidity. Buying some or all of MF Global might create the opportunity to make a windfall profit.” MF Global, run by Chairman and Chief Executive Officer Jon Corzine, is exploring strategic options, including a potential sale, after reporting its biggest quarterly loss ever and having its credit ratings cut by Moody’s Investors Service, a person with knowledge of the matter said today. [Bloomberg]
Maybe Rajat Gupta Just Wanted Raj Rajaratnam To Console Him Over Goldman’s 3Q2008 Loss, Not Go And Trade On ItBy Matt Levine
Rajat Gupta was arrested today for maybe telling Raj Rajaratnam some stuff that he wasn’t supposed to tell him, and thus putting in motion a complex chain of events that has ruined the lives of many a man, woman, and dog. You can have two broad categories of theory about why Rajat Gupta went around telling Raj Rajaratnam inside stuff about Goldman and P&G board meetings:*
1. He expected Raj to trade on that information and make money, and he was cool with that because (1) they were some sort of sinister South Asian cabal intent on bringing down the WASP financial system, (2) he was going to make money off of it, or (3) they were friends, and friends want to see their friends succeed in business/crime. Or
2. He did not expect Raj to trade on that information and just thought neat stuff was happening and wanted to share it with his friend. “Whee, Raj, we’re getting money from Buffett! Bet you’ve never done that.” Or, as his lawyer put it, “There were legitimate reasons for any communications between Mr. Gupta and Mr. Rajaratnam – not the least of which was Mr. Gupta’s attempt to obtain information regarding his $10 million investment in the GB Voyager fund managed by Mr. Rajaratnam.”
What matters is that #1 is probably a crime and #2 is probably not, because the crime of insider trading depends not only on what you did but on what was in your heart when you did it. If you did it for gain – even the vague gain of winning your friend’s gratitude – then it’s a crime. If not, not. :robably. It’s hard to get direct access to a man’s heart, particularly if he was trained by McKinsey. And Raj isn’t about to sell out friends to these choots in the US Attorney’s office.
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On December 17, 2009, Ken Lewis introduced to the company the guy who would be taking over his job, Brian Moynihan, by telling the audience that one of his successor’s “unique characteristics” was that he “actually wanted the job,” a reference to the fact that no one else, literally, did. While Moynihan was undoubtedly aware that the new gig would not carry the same prestige or money as running Goldman, or the groupies that come with running JPMorgan, or the pony rides that come with running Citi, one thing that apparently came as a surprise to him– but that those who turned down the position could foresee– was that this job? Really, really sucks.
In the beginning, if indeed Bri-O reached that conclusion as well, he kept it to himself, maintaining a stiff upper lip. But as the fruits of Countrywide founder Angelo Mozilo’s labor really began to blossom and Moynihan? Started to lose it. Read more »
Rajat Gupta To Face Criminal Charges (WSJ)
The 62-year-old Mr. Gupta is expected to surrender to the Federal Bureau of Investigation Wednesday on criminal charges of leaking inside information to Galleon Group hedge fund founder Raj Rajaratnam, according to people familiar with the matter…Gary Naftalis, Mr. Gupta’s lawyer, said in a statement that he is innocent and “has always acted with honesty and integrity.” Mr. Gupta “did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo,” Mr. Naftalis said, adding that he would fight any charges…Specific details of the expected charges, which were sealed, couldn’t immediately be determined. But prosecutors and the Securities and Exchange Commission have said in filings and in court that Mr. Gupta gave Mr. Rajaratnam details he had learned at Goldman board meetings in 2008 about a $5 billion investment in the bank by Warren Buffett’s Berkshire Hathaway Inc. and about Goldman’s first ever quarterly loss as a public company.
Europe Struggles For Crisis Cure Ahead Of Summit (Bloomberg)
The euro’s stewards are back in Brussels today for an emergency summit struggling to heed the world’s calls to once and for all eradicate what U.S. Treasury Secretary Timothy F. Geithner called the “catastrophic risk” of the debt crisis. A potential Greek default threatens shockwaves that could engulf Italy and France, jolt the banking system and spell havoc for the global economy. “Buck up, this crisis is going to be with us still for a while,” Barry Eichengreen, an economics professor at the University of California at Berkeley, said on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I fear they’re not going to take the kind of steps to resolve it.”
Nomura Whets Scalpel For Cutting (WSJ)
Scaling back its ambitions to become a full-service global investment bank, Nomura Holdings Inc. is planning a major cost-cutting drive that will likely land heaviest on its money-losing European operations, people familiar with the matter said. Executives inside Nomura are debating the plan, with some calling for cutting as much as $1 billion a year while refocusing the bank on profitable businesses in the U.S., Japan and the rest of Asia. Others argue that the firm, Japan’s biggest brokerage, will miss out on any rebound in the markets if it cuts too deeply. “Nomura cannot be everything to everybody, but will choose the areas where it’s strong,” a person familiar with the discussions said.
Yahoo Board Renews Emphasis On CEO Hunt (WSJ)
The people familiar with the matter added that given the uncertainty surrounding Yahoo’s fate, the pool of potential candidates for CEO might not be large. Yahoo directors currently have no list of candidates for its top job, these people said.
Investors Abandon Reeling Netflix (WSJ)
Ex-FBI Chief To Secure SATs (NYP)
The fallout from a mushrooming SAT cheating scandal on Long Island will affect how the college- entrance examination is administered. Speaking at a state Legislature hearing on the scandal yesterday, red-faced executives at ETS, which administers the exam, said that they’ve hired a risk-management firm headed by former FBI chief Louis Freeh to tighten security. In September, seven Long Island, New York, students were charged with “taking part in a scheme in which six of them paid the seventh to take the SAT college-admissions test on their behalf, prosecutors said. Six current or former students were accused of paying Samuel Eshaghoff, 19, to impersonate them so they could get higher scores on the test. He was paid $1,500 to $2,000 for each test, and took the exam for free for a female student.” Read more »