As you may have heard, today is Jon Corzine’s third day testifying in Washington about the whole MF Global thing. All morning and this afternoon have been devoted to questioning by the House Financial Services Committee, with a couple of the standard 15 minute recesses sprinkled in. In fact, there was one not too long ago. You know what Corzine uses his break time for? Grabbing a snack. Shooting the breeze. Taking a piss. Watching YouTube clips. Telling himself “You, got this, Jon,” in the bathroom mirror. You know what he doesn’t use it for? Being served with papers from some messenger boy on behalf of some jerk trying to sue him. Thinking about testing him on this? DO SO AT YOUR OWN RISK. Continue reading »
Archive for December 2011
Don’t Even Entertain The Thought Of Serving Jon Corzine With A Lawsuit While He’s On His Break
By Bess LevinChristine Lagarde: There’s No ‘I’ In Teamwork But There’s Something That Looks Like An ‘I’ In “WWIII”
By Bess Levin
“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super- advanced economies that will be immune to the crisis that we see not only unfolding, but escalating at a point where everybody would actually have to focus on what it can do,” Lagarde said. If the international community doesn’t work together, “the risk from an economic point of view is that of retraction, rising protectionism, isolation,” Lagarde said. “This is exactly the description of what happened in the ‘30s and what followed is not something we are looking forward to.” [Bloomberg]
Regular Dealbreaker readers know that we spend a lot of time around these parts having the CFA v. MBA debate. Which is most beneficial? Which is worth your time? Which has the highest NPV? Today brings a point in favor of the b-school track, courtesy of Columbia. While business school may offer more opportunities to get drunk, sleep with your fellow students, and take a break from the working world, it costs considerably more money than CFA books, requires you to go to class if you care about grades, and causes a considerable amount stress vis-à-vis going on interview and impressing potential employers. But what if we told you that there was a way to go to business school and not have to worry about all that? Would that be something you’d be interested? Would it tip the scales toward MBA in your mind? Enter, the Sponsored Student designation, wherein one’s employer pays for their schooling and keeps a job lined up for them at the end. A wildcard, if you will, in the CFA v. MBA debate. According to an informational video put together by a group of Columbia students, as a Sponsored, looking porn in class will be your “smallest transgression” (on the rare occasions you go to class), “drawing a picture of [your] dick” will be an acceptable answer on a leadership final, and “deep-diving” in someone else’s girl will count as your core competency. Let’s learn more. Continue reading »
The House of Gorman is planning to free up some desk space next year. Continue reading »
Bernanke: Fed Has No Plans To Aid EU Banks (Bloomberg)
Senator Bob Corker, a Republican from Tennessee, said Bernanke made it “very clear” in closed-door comments today the central bank doesn’t intend to rescue European financial institutions. Lindsey Graham, a South Carolina Republican, said Bernanke told lawmakers that “he doesn’t have the intention or the authority” to bail out countries or banks. Both senators spoke to reporters after leaving the one-hour session at the Capitol in Washington.
ECB’s Draghi Plays Down Hopes on QE (WSJ)
European Central Bank President Mario Draghi Thursday rejected suggestions that the ECB should embark on quantitative easing as a means to boost the euro zone’s economic performance, which has been dragged down by the region’s sovereign debt crisis. “I don’t think quantitative easing leads to stellar economic performance. I see no evidence that quantitative easing greatly boosts the U.K. and U.S. economies,” Mr. Draghi said in response to a question after giving a speech in Berlin.
Wall Street Cools To Groupon (WSJ)
Analysts at a majority of Groupon’s underwriters which initiated coverage for the first time Wednesday issued the equivalent of “hold” or neutral recommendations, with “holds” outnumbering “buys” by a margin of six to five. In fact, two of the three top-line managers of Groupon’s initial public offering—Morgan Stanley and Credit Suisse Group—were neutral, while the report from Goldman Sachs Group Inc. was positive.
Paulson’s Bright Spot May Fade As Gold Plunges (Bloomberg)
Until this month, gold had been the bright spot for Paulson & Co. clients, who can choose to invest in gold-denominated shares of the hedge funds. Gains in bullion had alleviated losses of 46 percent, in the dollar share class, for one of the firm’s biggest funds this year through November. Paulson also offers a dedicated Gold Fund, its best performer this year.
Traders Confounded as Volatility Extends Run (Bloomberg)
Jeffrey Kronthal, a former Merrill Lynch & Co. senior fixed-income executive, said he’s never seen so much volatility over such a long period as this in his 33-year trading career. “Volatility, to a certain extent, was a friend of Wall Street, but not like this,” said Kronthal, who co-runs the $1.2 billion hedge fund KLS Diversified Asset Management in New York. “I haven’t seen volatility like this in a sustained way ever before.” Continue reading »
$$$ Bernanke Tells Senators Federal Reserve Has No Plan to Aid European Banks [Bloomberg]
$$$ Merrill Lynch bonuses may be down 40% [FBN]
$$$ Credit Agricole will lay off 2,350 people [WSJ]
$$$ Greek Creditor Committee Said to Be Near Hiring Blackstone [Bloomberg]
$$$ MF Global had a “break-the-glass” survival plan that did not include “steal customer money” [Reuters]
$$$ What would happen if ratings agencies were run by French philosophers? Nothing good [Daily Beast]
Continue reading »
Bank Of New York Didn’t Mean For You To Take Things Like “Best Available Price” Literally
By Matt Levine
You may recall that the New York attorney general is suing Bank of New York Mellon for maybe ripping off its FX customers a little bit by doing things like telling them that they would get the “best price” of the day on transactions and then actually giving them the “worst price,” which you could totally see how they might confuse those two.*
I love this suit because, to my untrained ear, it all sounds pretty maximally shady but also weirdly normal, and kind of like BoNY isn’t doing anything illegal here. BoNY … kind of agrees with that, since they filed a motion to dismiss the case today:
“This lawsuit is wrong, both on the law and on the facts,” Kevin Heine, a BNY Mellon spokesman, said in a statement. “It is based on a fundamental misunderstanding of the role of custodian banks and the operation of the global foreign currency market.”
BNY Mellon argued in its filing that customers “had all the material information they needed to assess the trades.” The bank each day published rates and executed standing-instruction transactions at rates “no less favorable” to the client than the published rates.
The bank then provided clients with confirmations or account statements accurately reflecting the actual price BNY Mellon applied to each transaction, it said. The bank wasn’t legally obligated to disclose its pricing methodology or its profit margins.
So that’s a little silly – “we publish rates, and then we execute at no worse than the published rate” is just a little bit short of “we execute at the best rate.” (It’s closer to “we make up a rate, and then we execute at it.”) Continue reading »
Over the past year or so, a lot of people have chosen to voluntarily leave UBS, which may have something to do with the fact that people would like to get paid. While a handful of marquee names (within the industry) have been lured with big checks, many senior bankers have heard nary a peep re: bonuses in several years (the staff’s pay overall being nothing to write home about, either), and with morale taking a hit in the wake of suggested layoffs and someone losing the place $2.1 billion, employment with places where you’re robbed at knifepoint look good. The last time staffers inquired about compensation, investment-banking chief Carsten Kengeter told them to put a sock in it. So, some may be a bit gun-shy about bringing it up again. Happily, today brings exciting news. Some people are getting a raise! Continue reading »
Yankees star Derek Jeter, one of New York’s most eligible hunks since his split with longtime gal pal Minka Kelly, is bedding a bevy of beauties in his Trump World Tower bachelor pad — and then coldly sending them home alone with gift baskets of autographed memorabilia…“Derek has girls stay with him at his apartment in New York, and then he gets them a car to take them home the next day. Waiting in his car is a gift basket containing signed Jeter memorabilia, usually a signed baseball,” a friend dished…And while the parting gift may seem cold, signed Jeter memorabilia sell like hotcakes on the Internet, with an autographed baseball fetching hundreds and even thousands of dollars. [NYP]
Speculation has been going around that some employees will be receiving a whole lot of nothing. Continue reading »
Ooh look a chart:
That’s from this quite punchy paper by Patrick Slovik of the economics department at the OECD. It shows you that, in 1992, big banks had risk-weighted assets, which determine how much capital they’re required to have, of over 65% of their total assets, which measures how much lending and investing and trading and financing-their-governments they actually do. In 2008, the ratio was under 35%. What’s special about those dates?
When the first Basel accord was implemented in 1992, risk-weighted assets represented close to 70% of bank total assets, which means that bank regulatory capital was calculated based on a large share of bank total exposures. In the years following the introduction of the Basel accord, the ratio of riskweighted assets to total assets (RWA/TA ratio) gradually decreased and reached about 35% in the immediate pre-crisis period, which means that the regulatory capital of systemically important banks was calculated based on only a small fraction of their total exposures. … [T]he drop in the RWA/TA ratio has been very smooth since the implementation of the Basel accords without any significant deviations from the trend line until the crisis. This trend suggests that innovative engineering of regulatory risks and the move to unconventional business practices by systemically important banks has been a consistent trend for almost two decades and was not limited to a few years preceding the financial crisis. The trend reached its lowest point at the onset of the financial crisis when the capital requirements of systemically important banks were determined based on the historically lowest amounts of risk-weighted assets (relative to total assets). Risk-weighted regulation leads to unintended consequences as it encourages innovation designed to bypass the regulatory regime rather than to serve non-financial enterprises and households. Strengthening capital requirements based on risk-weighted assets may further contribute to these skewed incentives and their profitability.
This is a theory that has been sloshing around the internet for a good long while but this is neatly expressed and – that chart! It is – pretty stark, no?
That chart is worth the price of admission, but Slovik goes on to argue that risk-weighted capital requirements lead to a decline in lending activity: “One of the main reasons why non-loan-related activities have become so important for banks is the relatively high regulatory risk weights on loans relative to other types of assets, which puts them at a comparative disadvantage in the profit-seeking strategies of banks.” The numbers look … not totally unlike the risk-weighted-to-total-assets chart: Continue reading »
