Archive for April 2012

Write-Offs: 04.30.12

$$$ Here are Dick Fuld’s call logs from March through September of 2008. Tim Geithner, Hank Paulson, Lloyd Blankfein, Jamie Dimon, Ken Lewis, Rodge Cohen, Raj Rajaratnam … [Jenner]

$$$ The quants and derivatives traders of Occupy Wall Street [WaPo]

$$$ Spain in talks over ‘bad bank’ scheme [FT]

$$$ [@JeffMacke]

$$$ Duke University grad doesn’t want to waste her unique talents working on Wall Street, works in management consulting instead [DealBook, earlier]

$$$ A leading M&A boutique is looking for a class of 2011 or 2010 FIG associate [DBCC]
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As some of you may recall, a month after Lehman Brothers went under, the House Committee on Oversight and Government Reform released an interesting email Dick Fuld had sent to LEH vice-chairman Thomas Russo on Saturday, April 12, 2008, circa midnight. Dick had just come back from a dinner with Hank Paulson and was so excited to relay the details he couldn’t wait ’til the next day to get in touch with Russo, who he apparently viewed as his “teacher.” Fuld said his key “takeaways” were that the government loved Lehman, that Paulson wanted to “kill the bad hedge funds” (like those diabolical shorts Fuld knew were to blame for his problems), and that while the then Treasury Secretary appeared to have a “worried view” of Merrill Lynch, Dick got the sense that Paulson thought Lehman was in terrific shape. Per the bankruptcy documents put online last week, here’s how the rest of the conversation between Fuld and his Sensei–the wisest man Fuld had ever met–went. Read more »

We’ve talked a little before about how I don’t understand Wall Street research. Let’s start slow: why publish research? There are I think three, or three-ish, possibilities:

1. To inform your investing clients (asset managers and such) about your best views on how they should manage their money, so that they can manage their money well and thus one day have more of it,
2a. To induce your investing clients to do trades that generate trading revenues for you,
2b. To induce your investing clients to do trades that optimize your book (i.e. slapping a Buy on whatever you need to sell and vice versa), or
3. To induce banking clients (corporate issuers) to pick you as an underwriter.

So, #1, ha ha ha. Choosing between #2 and #3 is harder and if you wanted to be serious about it you might ask questions like how much revenue does trading bring in versus underwriting (more!), how good is that revenue (market making for pennies using your capital: probably not as good as risk-free 7% IPO gross spreads), and how much does research influence trading (meh?) vs. how much does it influence underwriting (meh?).

This weekend, though, we got kind of a strange data point via this FT article about the JOBS Act and the research settlement. In brief, as we’ve discussed, the JOBS Act lets banks basically do whatever they want for research on “emerging growth” companies, including in particular publish research pre-IPO and have bankers and analysts and the company all in the same room pitching business and generally scheming. But there’s a catch, which is that the ghost of Eliot Spitzer, in the form of the global research settlement, still restricts that activity, so all the banks subject to the settlement (the bulge-bracket ones) are disadvantaged vis-à-vis their smaller cousins. But, the FT points out, the big banks have a trick up their sleeves, which is to make all the small banks sign an agreement preventing them from publishing research ahead of the big banks, as a condition of joining the syndicate for any deal: Read more »

Several months back, it was announced that Goldman Sachs’s head of equity trading in Moscow, Peter Kizenko, was quitting Wall Street to finally make his dreams a reality. Specifically, the dream of opening a line of New Jersey-based banyas (Russian saunas in which visitors “begin with several rotations in and out of a steam room to allow the body to warm up and naked bathers typically beat one another with birch or pine branches before plunging into cold water or rolling in snow to cool down”), called Bear and Birch. At the end of February, the first B&B location was complete. If you’ve yet to make the trip (LLOYD) and aren’t doing anything Saturday, Peter has invited one and all to stop by and we definitely think you should take him up on the offer. Read more »

In 1992, Tara Obenauer was a dancer at a now-defunct gentleman’s club called Stringfellows. The Long Island native had graduated from Adelphi University the year prior and was set to attend law school but, she told the New York Times for an article titled “Topless Bars For A Crowd In Pin Stripes,” “The money here is just so good. I can make $1,000 a night or more, if I really work at it.” Obenauer worked hard for the money a few years longer and following a brief interlude as a stay-at-home mom, received her MBA from Hofstra and got a job at Guggenheim Capital Markets, where she spent five years as a compliance officer before joining Forbes Private Capital Group as a Vice-President. If Mike Tedesco, the Long Island police officer who used to two-time his wife with Obenauer had taken a page from her playbook, maybe he would have been lieutenant or something by now. Unfortunately, none of Obenauer’s can-do work ethic rubbed off on Tedesco and this had to happen: Read more »

  • 30 Apr 2012 at 1:27 PM

JPMorgan (Et Al) Sued By Occupy Wall Street

Four New York City Council members sued the city today over the handling of Occupy Wall Street protestors, claiming the police used excessive force and should be subject to an outside monitor. The city and the Police Department made false arrests and violated the free-speech rights of protestors and journalists last year, 15 people including the council members said today in a complaint in Manhattan federal court. JPMorgan Chase, Brookfield Office Properties and Mayor Michael Bloomberg are among the defendants…“Through unlawful exercises of public power and misapplication of law, the NYPD has sought to prevent and has prevented plaintiffs and other citizens from exercising certain constitutional rights, including the right to public assembly and expressive speech,” according to the complaint. [Bloomberg]

Dick Fuld: “The Bros Always Wins”

As previously mentioned, if one were inclined to relive the fall of Lehman Brothers, one could do so via the bankruptcy documents that were recently made available online. There you’ll find, among other things, countless examples of what has been said so many times since September 15, 2008, which is that it’s amazing how delusional those at the very top were, vis-à-vis the firm’s solvency/what people thought of it/everything. Also worth marveling at? The fact that Lehman lasted as long as it did with what appear to be barely literate troglodytes running the place. Read more »

  • 30 Apr 2012 at 8:31 AM

Opening Bell: 04.30.12

Falcone Agrees To Step Aside (WSJ)
Hedge-fund manager Philip Falcone agreed to step aside eventually as the public face of his LightSquared Inc. venture, a concession that may keep the wireless-telecommunications company from defaulting on its debt, people familiar with the negotiations said. Mr. Falcone’s compromise is expected to prompt LightSquared’s lenders to approve a one-week extension on a debt-term violations waiver that expires Monday morning, the people said. If a deal is finalized, Mr. Falcone and LightSquared’s lenders plan to continue negotiations for a longer extension of somewhere between 18 months and two years, the people said…Mr. Falcone has said he viewed bankruptcy as the “best way” for him to keep control of the company and keep it from creditors he believes want to “take control and flip” the firm.

Occupy Wall Street Plans Global Disruption of Status Quo May 1 (Bloomberg)
In New York, Occupy Wall Street will join scores of labor organizations observing May 1, traditionally recognized as International Workers’ Day. They plan marches from Union Square to Lower Manhattan and a “pop-up occupation” of Bryant Park on Sixth Avenue, across the street from Bank of America’s Corp.’s 55-story tower. “We call upon people to refrain from shopping, walk out of class, take the day off of work and other creative forms of resistance disrupting the status quo,” organizers said in an April 26 e-mail…Tomorrow, beginning at 8 a.m. in Bryant Park, scheduled events include teach-ins, art performances and a staging area for “direct action and civil disobedience,” such as bank blockades.

RBS M&A Bankers Plan Boutique Spin-Off (Reuters)
The bank, 82-percent owned by the British government, is exiting mergers and acquisitions as part of a restructuring announced in January aimed at reducing costs and exposure to areas of investment banking deemed risky by the authorities. Sources told Reuters last week that the M&A business would be spun off, with around 45 bankers from RBS joining the new firm led by John McIntyre, currently head of corporate finance for EMEA at the bank.

Romney Holds Fund Raiser At John Paulson’s House (TDB)
FYI: A neighbor who witnessed the event from across the street described it to as a large crowd of “older white people, mostly men,” who started showing up around 7:30 p.m. Thursday. Around 8 p.m., sirens started blaring as more and more people started to show.

Hedge Funds Hurt By Volatility (WSJ)
All told, U.S.-based funds that bet on and against stocks had a median return of -0.92% from April 1 through April 13, according to data from Morgan Stanley’s MS -1.51% prime brokerage, after having returned 1.16% in March. Returns improved as the markets stabilized. Through April 26, the median return was down 0.03% for the month.

City Mulls Happy Hour Ban (NYP)
“It’s absolutely been discussed,” confirmed a department source. “It goes to show you the spirit with which they operate. Everyone is a child.” High-level conversations have gone beyond merely “throwing pencils on the ceiling and seeing what sticks,” another Health source revealed. Sources said the happy-hour ban is being pushed by the agency’s marathon-running boss, Commissioner Thomas Farley, and is serious enough for one source to say the alcohol lobby had better find itself a good lawyer. Agency spokesman Sam Miller denied existing “plans to pursue any policy around discount-alcohol sale.” Read more »