Archive for December 2011

Opening Bell: 12.08.11

By Dealbreaker

Jon S. Corzine: ‘I Simply Do Not Know Where The Money Is’ (WSJ)
A contrite Jon S. Corzine will express both sorrow and a firm defense of his actions Thursday in his first public appearance since the collapse of MF Global Holdings Ltd. in late October. “Recognizing the enormous impact on many peoples’ lives resulting from the events surrounding the MF Global bankruptcy, I appear at today’s hearings with great sadness,” Mr. Corzine plans to say in testimony prepared for a hearing by the House Agriculture Committee, which subpoenaed the former MF Global chief executive Friday. The testimony Thursday is sure to be contentious.

Jon Corzine Is Sad (CNBC)
“My sadness, of course, pales in comparison to the losses and hardships that customers, employees and investors have suffered as a result of MF Global’s bankruptcy,” Corzine said in testimony prepared for his appearance before the House Agriculture Committee today. “Their plight weighs on my mind every day — every hour. And, as the chief executive officer of MF Global at the time of its bankruptcy, I apologize to all those affected.”

Corzine: MF Global Board Knew What Was Up (BW)
MF Global’s board of directors was told of the European debt trades and approved limits on the risk in the trades by specific countries, Corzine said. “At the time of the bankruptcy, MF Global was within the risk limits set up by the board of directors,” Corzine said. “MF Global’s board was not a rubber stamp,” he said. None of the foreign debt securities that MF Global used in so-called repurchase-to-maturity transactions has defaulted or been restructured, Corzine said.

Franco-British Alarm of 1989 Comes True (Bloomberg)
Berlin’s dominance has shaken the Franco-German equilibrium at the heart of the post-World War II balance of power. Debt contagion and slumping growth have driven French borrowing costs to a euro-era record against Germany. The result may be a remade political map with even Poland, invaded by Adolf Hitler in 1939, calling for a stronger German role.

Geithner: US Has Interest In Strengthening The Euro Zone (Reuters)
FYI.

Jobless Claims in U.S. at Lowest in Nine Months (Bloomberg)
Jobless claims dropped by 23,000 to 381,000 in the week ended Dec. 3, the fewest since February, Labor Department figures showed today in Washington. The median forecast of 47 economists in a Bloomberg News survey called for a drop to 395,000. The number of people on unemployment benefit rolls and those getting extended payments also decreased.

Police: Package Sent To Deutsche CEO Was A Bomb (Reuters)
No one has so far claimed responsibility for the package, which was intercepted late on Wednesday. “Initial investigations show that this was an operational letter bomb,” the Criminal Investigations Office for the state of Hesse and Frankfurt prosecutors in a statement, adding that no further information was available.

Elementary school teachers ‘caught having sex in stadium restroom at Buffalo Bills game’ (DM)
France’s wife (not the woman he had sex with in the bathroom) confirmed that her husband was stopped while leaving the lavatory…A Bills spokesman says, ‘We do not comment on arrests that are made on game days at the stadium.’ School district superintendent Michael Wendt said his office is doing its own investigation. Continue reading »

Write-Offs: 12.07.11

By Dealbreaker

$$$ European banks are next on S&P’s list [Reuters]

$$$ Someone tried to blow up Josef Ackerman [Reuters]

$$$ Morgan Stanley’s farewell party for John Mack [NetNet]

$$$ A supporter of President Barack Obama, [Jim] Chanos also wondered why so many of his peers are critical of the president: “I keep asking my hedge fund compatriots, ‘How bad has your life under Obama really been?’” [FINalternatives]

$$$ Michael Moore: “Wall Street already has their man and his name is Barack Obama” [Real Clear Politics]

$$$ Jamie Dimon: “Acting like everyone who’s been successful is bad and that everyone who is rich is bad — I just don’t get it.” [CNBC] Continue reading »

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  • 07 Dec 2011 at 6:44 PM

Consumer Protection Agency Takes A Page From ISDA’s Playabook

By Matt Levine

The Consumer Financial Protection Bureau, the socialist conspiracy politburo set up to allow Elizabeth Warren to terrorize the banks until her Senate seat is ready for her, or something, today released a new model credit card agreement. It’s two pages long and looks sort of comforting and friendly, like a new Facebook competitor or something. Matt Yglesias likes it:

Basically what they did was sit down and try to apply some basic design principles to the question “how can we convey to consumers information about their credit card.” Currently the way credit card agreements are written is more like the reverse, they apply basic design principles to the question “how can we maximize the chances that consumers will neglect something or get confused while meeting our technical legal obligations toward disclosure.” In an increasingly attention-constrained world, these kind of design questions around disclosure rules matter more and more.

I had my doubts that a two-page agreement in a normal font size could convey the level of detail and obfuscation you can get in a good credit card agreement, but I agree with him, this is a nice effort. The way they manage to keep it to two pages is by putting all the definitions on the CFPB web page. So you have a very skeletal document that just fills in basic numeric and economic terms – your APR, how long you have to dispute charges – while all the legalese, and lots of things that have economic effect like how interest is calculated, are squirreled away in definitions that you can find elsewhere.

Now because I was once a derivatives marketer, rather than a human, this made me think of the ISDA documentation system, which basically allows dealers and customers to send each other two-page confirmations documenting their derivatives transactions while all the nasty guts of the agreement are buried elsewhere, in a Master Agreement or in ISDA definitions. And so you get two pages that say things like “Fixed Rate: 1.25%,” which is pretty clear and very efficient, but also things like “Loss and Second Method apply,” which is totally inscrutable. Continue reading »

  • 07 Dec 2011 at 5:44 PM

We’ve Got Your Office Holiday Party Right Here

By Bess Levin

Are you employed by an organization that jumped on the Holiday Party Ban bandwagon back in ’08 and never got off, or chose to downsize what were once magical affairs where anything could happen to a bunch of people milling around in the lobby? This year, do you want all that to change? Do you want to be able to go hog wild and eat more than the one bag of chips allotted per employee? Do you want to propose paying a senior staffer for a lap dance and not have it be grounds for dismissal this time? You’ve come to the right place. Continue reading »

  • 07 Dec 2011 at 4:21 PM

With A Name Like Feline Pride It Has To Be Good

By Matt Levine

Sometimes it’s useful to be reminded that not all financial structuring is designed to get around capital requirements or defraud customers. Some is designed to get around taxes and defraud the treasury! One group of people who like to think about that kind of thing is the Congressional Joint Committee on Taxation, who took some time out from shouting about payroll taxes yesterday to have a geeky hearing about the state of financial instrument taxation. Short version is, they’re not all that happy about it.

The JCT staff generally say pretty smart stuff about tax policy, and they get that shit is fucked up and bullshit. Or as they put it more diplomatically:

The timing, character, and source rules apply differently to (and are sometimes uncertain for) equity, debt, options, forward contracts, and notional principal contracts. These five basic instruments can be combined in various ways to replicate the economic returns of any underlying asset. … The flexibility of financial instruments also creates great difficulties in the taxation of financial instruments. This report provides examples of taxpayers’ uses of financial instruments to achieve desired timing, character, and source outcomes and describes how the tax laws have or have not addressed this tax planning.

There are two useful takeaways here. One is kind of weird: there are a bunch of fairly basic things (exchange-traded notes, CDS) where nobody – not the IRS, not the JCT, nobody – knows how they’re supposed to be taxed. That … seems like a bad thing. And, I’m going to guess, not so much the fault of evil financial innovators.

The second takeaway, which is related but more satisfying to fulminate about, is that evil financial innovators can mix and match stuff until they get any tax result they want: Continue reading »

  • 07 Dec 2011 at 2:58 PM

Bonus Watch ’11: Citigroup

By Bess Levin

Thinking you’d be getting a bonus this year? Think again, says the anonymous banker who spent the day bursting innocent financial services employees’ bubbles and asking young children “riddle me this” re: why they think anyone other than their parents would not only a) give rat’s ass that they went through the normal incidence of aging known as losing one’s tooth and b) compensate them for doing so? Continue reading »

  • 07 Dec 2011 at 1:46 PM

Accuracy Is Important

By Bess Levin

The article entitled “What Really Happened to Strauss-Kahn,” by Edward Jay Epstein, which appeared in our December 22, 2011, issue, contained a description of what “looked like” a “dance of celebration” by two employees of the Hotel Sofitel in New York City at approximately 1:35 PM on the day that Dominique Strauss-Kahn was arrested in connection with an alleged sexual assault. Security camera recordings have established that the episode, as described, lasted approximately thirteen seconds, not the three minutes mentioned in the article. [NY Review of Books via GW]

  • 07 Dec 2011 at 1:11 PM

Guys Who Manages Family’s Money Takes Page From JPMorgan Don Juan’s Playabook

By Bess Levin

Yesterday afternoon, we met David Gray, a JPMorgan investment banker whose love interest had yet to come around to why they should be together, despite his 1,983 text and emails (over 16 hours), among other romantic gestures, stating as much. Oddly, some people thought that Gray’s decision to, for instance, install a tracking device in his [fingers crossed, it could still happen] future wife’s phone went a bit too far. Said people included the object of his affection, Daniela, her family, the police, who granted her a restraining order against him, and the Internet. Right about now, despite knowing in his heart he’s done–and will continue to do?– the right thing, David is likely feeling a bit alienated by those who just don’t get it, or him. Know who might? A guy named Mike.

Mike recently went out on a date with a woman named Lauren. According to Mike, things went pretty great, as evidenced by the fact that 1) She played with her hair a lot (sayeth Mike: “A woman playing with her hair is a common sign of flirtation. You can even do a google search on it. When a woman plays with her hair, she is preening. I’ve never had a date where a woman played with her hair as much as you did. In addition, it didn’t look like you were playing with your hair out of nervousness.”) and 2) “On a per-minute basis,” he’s never had as much eye-contact during a date as he did with her. Did Lauren say “It was nice to meet you” at the end of things? Yes, and Mike is willing to concede that sometimes that’s a sign of a woman not being interested and rule it as being “inconclusive.” Having said that, all in all, he was pretty sure the signals had more than been put out that a second date and perhaps a serious relationship were on tap.

And yet, Lauren didn’t respond to any of his calls and follow-up texts. Why was that the case? Mike didn’t know, because, as previously stated, someone whose name rhymes with Whoren never got back to him. And while we can spend some time theorizing about the various reasons, before rejecting them as invalid– (A. Occupation: Sayeth Mike, “Perhaps, you’re unimpressed that I manage my family’s investments and my own investments. Perhaps, you don’t think I have a ‘real’ job. Well, I’ve done very well as an investment manager. I’ve made my parents several millions of dollars. That’s real money. That’s not monopoly money. In my opinion, if I make real money, it’s a real job. Donald Trump’s children work for his company. Do they have ‘real’ jobs? I think so. George Soros’s sons help manage their family investments. Do they have ‘real’ jobs? I think so.” B. Physical attraction: Sayeth Mike again, “I assume that you find me physically attractive. If you didn’t find me physically attractive, then it would have been irrational for you to go out with me in the first place. After all, our first date was not a blind date. You already knew what I looked like before our date.”)- Mike knew that there was only one person, whose name rhymes with Big Fucking Whoren, that could answer that question.

Furthermore, despite admittedly finding Lauren “less appealing now,” in the aftermath of No Response-Gate, Mike was still willing to set that aside in order to get the 30 Year Plan he jotted down on a napkin while Lauren was in the bathroom during their first date back on track. (All great relationships get rocky at some point and besides, this would be a good story to tell Lauren and Mikey Jr. one day. What, you’re not a fan of generational suffixes? I knew you’d fight me on that one. That’s so us, to argue over something like this.) And so, after doing a Google search to find Lauren’s email address, fired off the following: Continue reading »

Opening Bell: 12.07.11

By Dealbreaker

Germany Doubtful On Euro Meeting (WSJ)
“I am more pessimistic than I was last week on the chances of total agreement,” the official said on condition of anonymity. A more likely scenario, the official said, is that the 17 euro-zone countries, together with “four or five” other EU countries, would separately agree to far-reaching coordination of economic policies, supervision of their budgets through European officials and strict limits on debts and deficits.

Geithner Backs French-German Plan For Tighter EU (Bloomberg)
Geithner, speaking in Berlin yesterday after talks with German Finance Minister Wolfgang Schaeuble, praised the commitment to fiscal programs put in place by new governments in Spain, Italy and Greece, and said he was “very encouraged” by recent efforts to buttress the euro area. He welcomed “progress toward a fiscal compact for the euro zone,” echoing language used last week by European Central Bank President Mario Draghi.

CIO: No Way Europe Will Hold Itself Together (CNBC)
“Europe is in a terminal phase of its life. There is no way I can see a glomeration being a successful way of smaller entities into bigger entities without growth. There will be fractures. (There is) no way Europe is ever going to hold it together,” said David Murrin chief investment officer at Emergent Asset Management.

House Panel To Vote On Insider Trading (WSJ)
The chairman of the House Financial Services Committee on Tuesday said he is planning to hold a panel vote next week on legislation to ban insider trading by members of Congress. The announcement by Alabama Republican Rep. Spencer Bachus came as other lawmakers used a committee hearing to propose ways to prohibit lawmakers from using information they gather in the halls of Congress to trade stocks. A bill by Rep. Louise Slaughter (D., N.Y.) would prohibit lawmakers from trading on information they learn on Capitol Hill and require more frequent disclosure of stock transactions. Similar proposals are pending in the Senate.

Tiny Tax On Financial Trades Gains Advocates (NYT)
They call it the Robin Hood tax — a tiny levy on trades in the financial markets that would take money from the banks and give it to the world’s poor…Driven by populist anger at bankers as well as government needs for more revenue, the idea of a tax on trades of stocks, bonds and other financial instruments has attracted an array of influential champions, including the leaders of France and Germany, the billionaire philanthropists Bill Gates and George Soros, former Vice President Al Gore, the consumer activist Ralph Nader, Pope Benedict XVI and the archbishop of Canterbury.

Kitten Discarded In Cat Food Bag Rescued By Dog (CBS)
Reports that the two kittens, named Tipper and Skipper, were sealed in a Meow Mix bag with the rest of the litter, and then left in the street. The bag had been run over by a vehicle, killing some of the kittens and making it difficult to tell exactly how many cats were inside. Somehow, Tipper and Skipper survived. “It was not a pretty sight,” Linda Blakely from Iowa’s Raccoon Valley Animal Sanctuary said. That’s when Reagan stepped in. He grabbed the bag, and carried it home. He didn’t stop whining until his owner opened the bag. Covered in the blood and remains of the kittens who were killed, she found two seriously injured survivors. “The instinct of the dog was to nurture and not kill the kittens. With all the blood some dogs would have responded to the scent. Reagan the dog is a hero,” Blakely said. Continue reading »

Write-Offs: 12.06.11

By Dealbreaker

$$$ EU talks on doubling financial firewall [FT]

$$$ Tiny Tax on Financial Trades Gains Advocates [NYT]

$$$ Read an intricate argument about moral hazard in the Eurozone PSI, marvel at Felix Salmon’s purple suit [BI]

$$$ Apply to be Warren Buffett’s assistant’s assistant, watch out for the tax bill [LinkedIn via Deal Journal]

$$$ Vote here to help Let’s Get Ready, a non-profit that expands college access for low-income and first generation college-bound high school students, win $1 million from Chase’s American Giving Award [LGR/Facebook]
Continue reading »

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  • 06 Dec 2011 at 6:45 PM
  • Banks

S&P Downgrade Warning Gives European Politicians A Chance To Remind You That Eurozone Crisis Is All S&P’s Fault

By Matt Levine

Maybe this is just an effect of distance or translation, but one thing I really like about reading the fulminations of European politico-financey types is that they are savvier than their American counterparts about who to pick on. I never see a European politician or central banker quoted in the FT attacking poor children. They’ve got better scapegoats. Any time anyone says anything bad about European financial governance, they can go back to the well of “really this is all the fault of eeeevil financial speculators and ratings agencies.” And nobody likes those guys, because they’re eeeevil and dipshits, respectively.

So lots of European politico-financy types are very publicly very not amused by S&P’s threats to downgrade all of Europe, though I suspect that deep down a lot of them are excited to be able to spend today making fun of S&P rather than fielding serious questions about whether rising Italian yields are going to lead to trench warfare. So Christian Noyer of the Banque de France:

“The rating agencies were one of the motors of the crisis in 2008,” Mr Noyer said. “One can ask if they are not playing that role again today.”

Or: Continue reading »