$$$ EU Targets Bank Bonuses That Fly in the Face of ‘Morality’ [Bloomberg]
$$$ Gupta Faces New Charges in Insider Trading Case [DealBook]
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$$$ EU Targets Bank Bonuses That Fly in the Face of ‘Morality’ [Bloomberg]
$$$ Gupta Faces New Charges in Insider Trading Case [DealBook]
The past couple years have not been what one might characterize as the best of times for former RBS CEO Fred Goodwin. After retiring from his post in November 2008, he missed out on helping the bank collect the award for biggest loss in British corporate history (£24.1 billion for the year), the windshield of his Mercedes-Benz S600 was smashed by a bunch of hoodlums, a brick was thrown through his window, and the banging of an underling came to light. He’s also had quite a bit of trouble getting a new gig on account of being “overqualified.” No, he’s had it pretty rough but the one thing that kept him going? That made life slightly more bearable? That kept him warm at night? The fact that he could look himself in the mirror and see an official Knight looking back. “Fuck ‘em if they can’t take a joke [vis-à-vis bombing a bank from the inside],” he’d say to himself. “One of us is a Knight and the other? Not so much.” When the neighborhood kids would throw shit throw shit at his house and spray paint “royal bum” on his front walk, he could at least comfort himself by muttering, “That’s Sir Royal Bum to you, thanks very much.” And now? He can’t even do that. Read more »
The cuts won’t go down until the spring, so just something to keep in mind. Read more »
Remember a couple of months ago when former AIG CEO and current dog fancier Hank Greenberg sued the government for $25 billion because it had stolen AIG from him? We all had a good giggle at that but some people think he wasn’t entirely crazy. One of those people is friend of Dealbreaker and Stanford GSB student Ed Couch, who feels Hank’s pain but also has some doubts about his lawyers’ efforts on the case. We pass along his views on the complaint in case you are (1) Hank’s lawyers (give Ed a call!), (2) particularly keen on Hank getting or not getting, as the case may be, his deserved or undeserved $25bn from AIG’s government captors, or (3) just generally interested in the wonky mechanics of equity-linked voting and exchange procedures, which YOU DAMN SURE KNOW I AM but the rest of you can keep your own counsel. Here’s Ed: Read more »
“How does Bill Ackman do it” is a question the investing community surely asks itself on a daily basis. Three words: Berkshire Mountains hideaway. Outsiders may figure in-depth research combined with skillful and ethical activism and a highly concentrated portfolio are the keys to Pershing Square’s success but, really, a 100-acre spread in upstate New York is the engine that drives this firm.
Specifically, the one found in Chatham, New York, that Ackman “scraped together the money” to buy in 2003, just months before his second act hedge fund launched, to arguably more success than its predecessor, Gotham Partners. Coincidence? Bill doesn’t think so. “This place has really good investing karma,” Ackman tells us. (Since buying the house, Pershing has had 21 percent compound returns. You do the math.) Is this information relevant in any way to your universe? If you’ve got $5 million to spare, a yen for sweeping views of the Berkshire mountains, and a desire to pump up lackluster returns it might be.
Despite spending many a happy (and profitable) weekend at the place over the last nine years, Ackman has with great reluctance and probably more than a few tears decided to put it on the market, having precious little time to make the (quick and painless!) trip up now that his three children have many an extracurricular commitment to tend to. According to Bill, he’s offering you “the deal of a lifetime” (and, in our professional opinions, we agree), when you consider 1) what he bought it for ($3.2 million, then put another $1.5 million in) and 2) what you’re getting. Things like: Read more »
Ryan Seacrest, the radio and TV producer and host of “American Idol,” garnered a commitment for as much as $300 million from Thomas H. Lee Partners LP and Bain Capital LLC to fund media ventures. The private-equity investors will provide capital to Ryan Seacrest Media to buy and develop companies, content and other properties, according to a statement today. Clear Channel Communications, the radio broadcaster controlled by the investors, will also participate…The accord deepens the ties between the private-equity groups and Seacrest, who hosts nationally syndicated radio shows carried by San Antonio-based Clear Channel, the largest U.S. radio broadcaster. Ryan Seacrest Productions makes “Keeping Up with the Kardashians,” the highest-rated show on the E! cable TV network, as well as spinoff programs. [Bloomberg]
I’ve been pretty skeptical of the whole Volcker Rule thing because I don’t really understand the conceptual division between “making bets with your own money” and “market making,” and I’ve been gratified to see that paid financial industry mouthpieces are on the same page. Now it’s nice to see unpaid mouthpieces agreeing too:
Yet finance ministers from around the world lined up to whisper in the ear of Timothy Geithner, the Treasury secretary, who made the rounds in Davos on Thursday and Friday, about a specific element of the Volcker Rule that has them apoplectic: The rule says that United States banks — and possibly certain foreign banks that do business in America — would be restricted in trading foreign government bonds. Yet the rule, conveniently, provides an exemption for United States government securities. Every other country is out of luck.
The measure, critics say, is likely to increase borrowing costs for foreign governments, reduce liquidity and make the market for foreign government bonds more volatile, the opponents charge. In the end, it may fall into the category of unintended consequences of a proposed new regulation.
So, yeah, totes agreed, but for diversity here is a more measured view:
The Volcker rule is, in many ways, a riddle wrapped in a mystery. It is impossible to know what the impact on market liquidity will be. Foreign banks, or non-banks, may step into the fray to pick up the slack… or perhaps the impact of the rule won’t be that big on US banks, anyway. Without a set of final rules, a period of time to watch them in action, and a parallel universe to see what would have happened if they hadn’t been implemented, it’s all speculation.
Again, I come down on the side of robust market-making by banks being a good thing and so I suspect those lined-up-and-whispering finance ministers are right, but it’s also true that that’s just, like, my opinion, man, and nobody really knows what will happen but if I were Citadel I’d be lobbying like crazy for the Volcker Rule and promising European governments that I’d make awesome tight markets in their bonds. Read more »
EU Nears Greek Confrontation Amid Fiscal Pact (Bloomberg)
Euro leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover. “Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”
FSA Fines Ex-JC Flowers Officer (WSJ)
The U.K.’s Financial Services Authority said Tuesday it has issued one of its highest ever fines against an individual, former J.C. Flowers U.K. Chief Executive Ravi Sinha, for fraud. The fine is the latest in a series of tougher enforcement actions against individuals in recent months, marking a shift by the regulator away from its previous strategy of focusing largely on companies. Mr. Sinha, previously one of the U.S.-based private-equity firm’s highest profile deal makers, has been ordered to pay £2.87 million ($4.51 million) —including £1.37 million to repay fraudulently obtained funds—and a so-called “punitive” £1.5 million payment, the FSA said in statement. He is also prohibited from performing any function in relation to any regulated activity in the financial services industry, the FSA said.
Bill to Prohibit Insider Trading by Members of Congress Advances in Senate (NYT)
The bill states that members and employees of Congress are not exempt from the federal law and regulations that ban insider trading. “No member of Congress and no employee of Congress shall use any nonpublic information derived from the individual’s position as a member of Congress or employee of Congress, or gained from performance of the individual’s duties, for personal benefit,” the bill says. Federal securities law does not explicitly exempt members of Congress, but experts disagree on whether and when lawmakers may be found to have violated the law. The bill is meant to eliminate any ambiguity. It says that lawmakers have “a duty arising from a relationship of trust and confidence” to Congress, the federal government and the citizens of the United States — a duty they violate by trading on nonpublic information. The bill also requires members of Congress to disclose the purchase or sale of stocks, bonds, commodities futures and other forms of securities within 30 days of transactions. The information would be posted on the Web in a searchable format.
Queries on RBS Chief’s Fate (WSJ)
On Sunday, the bank said Mr. Hester would waive his 2011 bonus award of about £963,000 ($1.51 million) in shares, which the board had only last week decided to give him. The move came after members of the U.K. opposition Labour Party called the payout “not fair,” “immoral” and vowed to force a parliamentary vote on the matter. Britain’s Daily Mail newspaper called the bonus “a reward for failure.” People familiar with the matter said Mr. Hester is increasingly frustrated with the public scoldings and suggested he could exit the bank, which is increasingly a target of political intervention, as early as the end of this year…Mr. Hester, who took over as CEO in late 2008 after a government rescue of the bank, has been a lightning rod for criticism, given that RBS is still 83% government-owned after its bailout and is currently laying off thousands of employees.
S&P Warns Cuts Loom for G20 Nations on Health Costs (Reuters)
Ratings agency Standard & Poor’s warned it may downgrade “a number of highly rated” Group of 20 countries from 2015 if their governments fail to enact reforms to curb rising healthcare spending and other costs related to aging populations. Developed nations in Europe, as well as Japan and the United States, are likely to suffer the largest deterioration in their public finances in the next four decades as more elderly strain social safety nets, S&P said in a report. “Steadily rising healthcare spending will pull heavily on public purse strings in the coming decades,” S&P analyst Marko Mrsnik wrote in the report. “If governments do not change their social protection systems, they will likely become unsustainable.”
Pair Detained in Twitter Homeland Threat Mix-Up (ABC)
A young couple from across the pond was detained at a Los Angeles airport after Homeland Security agents mistook a couple Twitter quips for threats against the U.S., the two told British media today. Friends Irishman Leigh Van Bryan, 26, and British citizen Emily Bunting, 24, were reportedly interrogated and spent 12 hours locked up under armed guard after going through customs in Los Angeles International Airport last week. According to several British outlets, the couple was taken into custody by U.S. Department of Homeland Security agents because of the slang in Bryan’s tweets. “Free this week, for quick gossip/prep before I go and destroy America,” one of the tweets read. Bryan told The Sun that in this context “destroy” just meant party…Bryan had also tweeted that he planned to be “diggin’ Marilyn Monroe up!” — another joke, he said. “The officials told us we were not allowed in to the country because of Leigh’s tweet,” Bunting said. “They wanted to know what we were going to do… They asked why we wanted to destroy America and we tried to explain it meant to get trashed and party… I almost burst out laughing when they asked me if I was going to be Leigh’s lookout while he dug up Marilyn Monroe.” After spending the night in custody, Bryan and Bunting were reportedly put on a plane back home through Paris. Read more »
$$$ Insider Jury May Hear From a Top Aide at Berkshire [DealBook]
$$$ “At his first rally of the morning, Newt Gingrich rolled out a new attack line: Mitt Romney took kosher food away from elderly Jewish people.” [Politico via DI]
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Mr. Mason, who sometimes posts online videos of himself in his underwear doing yoga or dancing, sat down for a recent interview in his Chicago office to discuss challenges facing the company and his ability to handle them. WSJ: The SEC also took issue with a memo you wrote to employees during the quiet period that was leaked to the press. Mr. Mason: I wrote the memo because 23-year-olds were coming into my office and asking how they should respond to their parents when they ask if Groupon is about to go bankrupt. The risks of not communicating to my employees were greater than the risks of doing otherwise. If I knew it was going to leak, I would have been less bizarre, and I wouldn’t have made a joke about my now-wife. She was upset. (He joked that his then-girlfriend asked him why he never said anything nice about her.) [WSJ]