Remember when Bank of America bought Countrywide in 2008 and CFC Chief Executive Officer/Oracle Angelo Mozilo said they wouldn’t be sorry and it wouldn’t be long before BofA would “reap what Countrywide hath sowed“? He wasn’t kidding and now, finally, BAC and Ken Lewis, the guy who had the foresight to do the deal, are having their vision and skills recognized. Read more »
Ooh look there’s another Europe thing. In this thing, Europe, in the form of the almost-existing ESM,* will take equity (?) stakes in troubled Eurozone banks, rather than its previous plan of buying senior debt of troubled Eurozone sovereigns so those sovereigns can invest the proceeds in equity stakes of their troubled banks.
There has been a lot of talk about collectivizing some European government debt, with people proposing plans in which Europe as a whole would be responsible for the amount of each country’s debt under X% of GDP, or over Y% of GDP, or other. You can think of this as sort of a more financialized, more palatable, and more targeted version of that: instead of collectivizing an arbitrary dollar amount of each country’s sovereign debt, you collectivize the amount needed to bail out that country’s insolvent banks. This favors peripheral countries (because they have most of the bad banks, or at least the bad banks whose badness expresses itself in the form of insolvency rather than criminality), yet also has a certain appeal to Euro-core financial bureaucrats because the collectivized debt is going to bankers like them rather than to over-vacationed Greek pensioners etc. And money being fungible it’s not the worst outcome for the pensioners etc. either.
The other thing about this new Europe thing is that the EFSF/ESM can stabilize peripheral government debt in the market without imposing new austerity conditions and without taking seniority, though people have doubts about that because you can always flip yourself into seniority if you’re the lender of last resort. And there are many other details to be worked out and I invite you to read about them from someone who knows something about them. But the new news is the bank capitalizing, and that seems promising; the syllogism is I guess (1) this is TARP and (2) TARP kind of worked, ergo (3) this will kind of work. Read more »
“We know that about investing with John Paulson. He makes macroeconomic calls,” says Joelle Mevi, the chief investment officer of the New Mexico PERA [which piled into the fund after 2007 and has since liquidated its holdings]. But “we started to notice a consistent underperformance of the fund, and we were noticing a bit of style drift” — investor-speak for getting into areas outside one’s expertise. And, Mevi says, “The Sino-Forest issue was notable.” “If you’re going to come in and then leave, come in and leave, I don’t think you’ll reap the benefits of investing with us,” Paulson says. “Investors that do the best, and have done the best, are those that stay and compound at above-average rates over the long term.” [Bloomberg Markets, earlier]
JPMorgan Cushions Drew’s Retirement With $21.5 Million (Bloomberg)
JPMorgan’s decision to let Chief Investment Officer Ina Drew retire four days after the bank disclosed a $2 billion loss in her division allowed her to walk away with about $21.5 million in stock and options. Drew, who resigned May 14, can keep $17.1 million in unvested restricted shares and about $4.4 million in options that she otherwise would have been required to forfeit if the New York-based bank had terminated her employment “with cause,” according to regulatory filings and estimates from consulting firm Meridian Compensation Partners LLC. A 30-year JPMorgan veteran, Drew also had accumulated 661,000 unrestricted shares of common stock worth about $23.7 million based on the May 14 closing price, $9.7 million in deferred compensation and $2.6 million in pension pay as of Dec. 31, according to company filings. Altogether, Drew’s stock, pension and deferred pay come to about $57.5 million.
JPMorgan Models In Spotlight (WSJ)
The Office of the Comptroller of the Currency, the bank’s primary regulator, has requested reviews of models that measure the possible effects of everything from trading losses to interest-rate moves, the people said. A change in one of these models contributed to losses in the bank’s Chief Investment Office, a once-obscure unit that manages $370 billion in excess cash. The change effectively increased the amount of risk traders were allowed to take.
Jim Rogers: Be Afraid (CNBC)
Even as markets cheered the agreement by European leaders to allow the direct use of the bloc’s bailout funds to recapitalize struggling banks, investor Jim Rogers told CNBC the move does nothing to help solve the region’s biggest problem…Rogers argues that the deal does not improve the solvency of indebted nations such as Spain. Spain’s central government budget deficit has soared to 3.41 percent of GDP in the first five months of 2012, above the EU limit of 3 percent. He adds that the governments need to stop coming to the rescue of failing banks, even if it results in “financial Armageddon.”
SEC May Order Nasdaq Upgrade (WSJ)
As part of the deepening inquiry, regulators are weighing demanding that Nasdaq agree to revamp its processes for developing, changing, testing and implementing the computer code used in initial public offerings and other exchange functions, according to people familiar with the investigation.
FBI arrests Bernie Madoff’s brother Peter ahead of expected guilty plea (AP)
Given Peter Madoff’s “level of financial experience and sophistication,” the trustee alleged that he either knew or should have known that he reaped gains “derived from purported transactions grounded in fraud and deception.” The trustee also took aim at his daughter Shana, who once worked as an in-house lawyer at the firm and has denied involvement in the scheme. “Had Peter, as the Chief Compliance Officer, or Shana, as Compliance Counsel, done their jobs properly, the fraud might have been revealed years earlier,” the complaint said. “Either they failed completely to carry out their required supervisory/compliance roles, or they knew about the fraud but covered it up.” Read more »