Lehman Crisis Veterans Warn Europe Leaders Against Provoking Greek Default (Bloomberg)
Neel Kashkari, who was on the policy frontlines when Lehman Brothers Holdings Inc. crumpled in 2008, warns European governments against pushing Greece too far as they impose conditions for aid. “It can be very politically satisfying to be tough, but if an uncontrolled default were to lead to contagion around the euro zone, that could be very damaging for all of Europe and for the global economy,” said Kashkari, who four years ago was an aide to then-U.S. Treasury Secretary Henry Paulson and now is head of global equities at Pacific Investment Management Co.
Analyst Arrested In Insider Probe (WSJ)
Independent research analyst John Kinnucan was arrested Thursday night by federal agents at his home in Portland, Ore., as part of an ongoing insider-trading investigation. Federal Bureau of Investigation agents arrested Mr. Kinnucan without incident, an FBI spokesman said. The government’s charges against Mr. Kinnucan remained sealed. Mr. Kinnucan, who ran a firm called Broadband Research LLC with high-profile hedge-fund firms as his clients, was caught on government wiretaps as part of the insider-trading investigation, prosecutors have said in court. Mr. Kinnucan became well-known after FBI agents visited him in October 2010, trying to “flip” him, or persuade him to cooperate, as part of the broadening probe…Mr. Kinnucan didn’t cooperate with the agents, but sent an email to traders and analysts describing the agents as “fresh faced eager beavers,” as reported in a November 2010 Wall Street Journal article that also disclosed details of the insider-trading investigation.
Most-Hated 2011 Stocks Burn Short Sellers in 2012 (Bloomberg)
The 26 companies in the S&P 500 with the highest so-called short interest relative to shares available for trading rallied 18 percent this year, compared with 8 percent for the full index, data compiled by Bloomberg show. Speculators who borrowed Sears shares and sold them to profit from a drop got hammered as the stock surged 73 percent. Netflix, with short interest of 17 percent at the end of 2011, rose 76 percent.
LightSquared Looks To Lawyers (WSJ)
The lawyers are investigating the merits of a potential suit against the Federal Communications Commission, which this week rejected LightSquared’s plan for a broadband network, and the Global Positioning System industry. GPS companies and Defense Department officials have argued that LightSquared’s signal could interfere with their networks.
Traders Manipulated Key Rate, Bank Says (WSJ)
A group of traders and brokers successfully managed to manipulate an interest rate that affects loans around the world, one of the banks being investigated has told regulators. In a court filing in Ottawa, Canada’s Competition Bureau said a bank it didn’t identify has told the agency’s investigators that people involved in the alleged scheme “were able to move” interest rates. People familiar with the situation said the “cooperating party” is UBS AG. The Swiss bank has said it is assisting regulators in a sprawling interest-rate probe in North America, Europe and Asia, which has led to a score of individuals being fired or suspended by major U.S. and European banks and leading brokers.
Ex-Goldman Sachs Programmer Conviction Reversed (Bloomberg)
Sergey Aleynikov, the former Goldman Sachs computer programmer found guilty of espionage for stealing the firm’s code for high-frequency trading, had his conviction overturned by a federal appeals court in New York. In a one-page order yesterday, the U.S. Circuit Court of Appeals in Manhattan told the lower court to enter a judgment of acquittal, saying an opinion will follow later. Aleynikov was convicted by a Manhattan federal jury in December 2010 of violating the Economic Espionage Act and the Interstate Transportation of Stolen Property Act. He was sentenced to more than eight years in prison last March. On his last day of work at New York-based Goldman Sachs in June 2009, Aleynikov uploaded hundreds of thousands of lines of source code from the firm’s high-frequency trading system, prosecutors said. He circumvented Goldman Sachs’s security, sent the code to a server in Germany, compressed and encrypted it, and took it with him to a meeting with new employers in Chicago, the U.S. said. Prosecutors argued Aleynikov wanted it as a “cheat sheet” to start a trading system at his new job.
Loss of a Wireless Dream Caps a Fast Fall From Grace (Dealbook)
Dealbook writes “Mrs. Falcone’s pet pig, Wilbur, became a feature character in Wall Street blog posts about her husband’s fortune,” oddly chooses not to mention the one place where this actually happened.
Quinn puts pressure on MSG and Time Warner Cable (NYP)
City Council Speaker Christine Quinn fired off letters yesterday to the two top executives of Time Warner Cable and Madison Square Garden, warning they’ll face a public grilling if Knicks and Rangers games aren’t restored to more than 2 million blacked-out cable subscribers. “It has been reported that discussions between the two sides have recently taken place for the first time in nearly two months,” Quinn wrote MSG Chairman James Dolan and Time Warner CEO Glenn Britt. “If these discussions cannot produce a resolution within two weeks, the City Council will hold hearings and request that both parties explain themselves to the public . . . At a time when all New Yorkers are getting together behind Jeremy Lin and the New York Knicks, now is the time to resolve this dispute once and for all.”
Citigroup Managers to Own Part of Hedge Unit (Bloomberg)
Citi will let managers of its hedge funds own part of the business ahead of rules that limit shareholders’ cash in the unit, Chief Operating Officer John Havens said. Employees in the Citi Capital Advisors division, or CCA, will get a “significant” stake in managing the funds, Havens said in an interview. This will increase, he said, as New York- based Citigroup withdraws its own money and attracts outside investors to comply with the Volcker rule, which restricts deposit-taking banks from making bets with their own capital.
German president resigns in setback for Merkel (Reuters)
Angela Merkel’s hand-picked choice for the ceremonial post of president resigned on Friday in a scandal over political favors, dealing a blow to the German chancellor in the midst of the euro zone debt crisis.
Options To Ease ‘Stress’ At BofA (WSJ)
The bank would consider selling its retail-branch network in Texas and its U.S. Trust wealth-management unit if the giant bank is forced to raise capital in a market shock or severe economic downturn, according to a document provided to U.S. regulators. The Charlotte, N.C., company submitted the hypothetical scenarios as part of a list requested last year by the Federal Reserve, said people familiar with the situation. The list is part of an emergency-planning exercise requested by regulators, who are conducting “stress tests” at 31 large U.S. banks early this year. It isn’t clear if other large banks were asked last year to prepare similar plans.
Record $6 Trillion of Fake U.S. Bonds Seized (Bloomberg)
Italian anti-mafia prosecutors said they seized a record $6 trillion of allegedly fake U.S. Treasury bonds, an amount that’s almost half of the U.S.’s public debt. The bonds were found hidden in makeshift compartments of three safety deposit boxes in Zurich, the prosecutors from the southern city of Potenza said in an e-mailed statement. The Italian authorities arrested eight people in connection with the probe, dubbed “Operation Vulcanica,” the prosecutors said.
Rick Santorum backer suggests Bayer aspirin as a birth control method for women (NYDN)
Foster Friess, the primary supporter of a pro-Santorum super political action committee, suggested on MSNBC that women use Bayer aspirin as a contraceptive. “This contraceptive thing, my gosh, it’s so expensive,” he told host Andrea Mitchell. “Back in my days, they used Bayer aspirin for contraceptives. The gals put it between their knees and it wasn’t that costly.”