Former Goldman Sachs trader Fabrice Tourre has only one tie left to the securities firm where he helped assemble an infamous bond deal: his legal bills. Mr. Tourre no longer works for Goldman, which put him on paid leave after the Securities and Exchange Commission accused him in April 2010 of misleading investors in a collateralized debt obligation called Abacus 2007-AC1. Goldman soon settled related allegations, but Mr. Tourre decided to fight. Since late 2011, Mr. Tourre has been a graduate student in economics at the University of Chicago, and Goldman changed his status to unpaid leave. He left the firm at the end of December 2012, a company spokesman said…The SEC’s lawsuit instantly made Mr. Tourre one of the most memorable names of the financial crisis. In an email to a friend that was disclosed by the agency, Mr. Tourre wrote: “The whole building is about to collapse anytime now … Only potential survivor, the fabulous Fab[rice Tourre] … standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!” [WSJ]
Except for, you know, the team that loses. Read more »
When regular old bank analysts switch firms, people don’t tend to make a big deal about it. Gardening leave is taken, contracts are signed, key cards are distributed, new business cards are printed. Sometimes you’ll get an email address with updated contact information. That’s usually it. Dick Bové, as you all know, however, is no regular bank analyst. Which is following his departure from Rochdale Securities, potential employers didn’t interview him, he interviewed them, why his son/spokesman, Joe Bové sent out a press release announcing the final countdown to Bové Day, and why, when that blessed day arrived, it was celebrated with a three-course feast fit for a king and a little something called the Dick Bové Banking Manifesto. Read more »
So it looks like Apollo Global Management and Metropolous & Co. will be bringing back the Twinkie. And they’re willing to pay almost as much for that right as Hostess said it was worth—all of it—when it filed for bankruptcy.
The private equity firms bid $410 million for most of Hostess’ cakes, and certainly all of the important ones: Twinkies, Ding Dongs, CupCakes and Ho Hos, as well as some things called Donettes. (I’ve never heard of the latter. Were they available in the greater New York area during the late 80s and early 90s?) Read more »
We’ve talked a lot about bank capital today but there’s still time for one quick addendum. First, though, two rough-and-ready equations:
- Capital = cash paid in by shareholders plus retained earnings
- Capital ratio = capital divided by assets
The first equation explains my puzzlement at the claim that Deutsche Bank “book[ed] a loss to boost its capital ratio without selling shares;” it’s arithmetically impossible to boost your capital by losing money, though you can (separately) boost your capital ratio by fiddling with the denominator.
The important thing about the second equation is that, for banks, the ratio is well under 1. So if your capital ratio is a relatively robust 10%, that means that 90% of your total assets are funded with borrowed money, and 10% are funded with cash from shareholders and retained earnings. Some people dislike this system.
Anyway there are various semi-magical ways to monkey with the denominator but there is one simple and obvious way to monkey with the numerator – the actual amount of capital that you have – and it is this:
- Take some money,
- dress it up in a fancy costume, and
- issue some new shares to the the now-cleverly-disguised money.
You have magically transformed Assets (money) – which, remember, are 90%+ funded with borrowed money – into Capital. This has perpetual-motion-machine properties,1 so it’s pretty good.
Also it is, like, wildly wildly wildly illegal. Or, I mean, it’s pretty illegal as I just outlined it above, but if you put a fancy enough costume on the money maybe that makes it okay.2 Anyway draw your own conclusions about this: Read more »
If you were going to try and extort money Bear Stears alum, how would you do it? Would you call him at his new job and talk trash about his wife? Would you call his house and tell his wife he was running around on her with another woman? Would you call his mother-in-law in New Jersey and breathe heavily into the phone? Or would you bring out the big guns and start sending pizzas, sometimes 20 at a time, to his home in New Canaan, as a sign you really meant business? Donato Anthony Minicozzi chose all of the above. Read more »
Among the many reasons typically cited by hedge fund managers who choose to run their business out of Connecticut instead of New York are: 1. The room to stretch their shit out 2. Proximity to the Long Island Sound 3. Convenience for those already living in the area. Some probably also believe that the Fairfield County is slightly safer than New York City. That you’re not going to get jumped walking out of the office or beaten with a tire iron because you messed with someone’s man or woman. OR WILL YOU? Read more »
For all their saber-rattling and bold talk about a fix to the problem of global financial risk, the Germans haven’t done a hell of lot to rein in their banks. There is, for instance, no Großdeutschesvolckerregierung. At least, not yet. Read more »
Bank earnings season is always a little surreal, I guess because there’s an inherent surrealism about banking. Deutsche Bank reported earnings today,1 and those earnings had an up-is-down quality that Bloomberg’s summary captured in this amazing sentence:2
Deutsche Bank AG, Europe’s biggest bank by assets, exceeded a goal for raising capital levels as co-Chief Executive Officer Anshu Jain focused on bolstering the firm’s finances rather than limiting losses.
So there’s one way of running a business where you bolster your finances by making money. And then there is global banking. Here is another, possibly even more astonishing line from the same article:
Deutsche Bank “took pain” in the quarter by booking a loss to boost its capital ratio without selling shares, Jain said.
Booking a loss to boost its capital ratio. Losing money, in the regular universe, should reduce your capital: capital is mostly retained earnings. Everything here is backwards.
Here is how Deutsche Bank boosted its capital ratios without (1) raising capital from the market or (2) making money: Read more »
Ed. note: This post appears courtesy of Techdirt. We’ll be sharing business-related posts from Techdirt from time to time on Dealbreaker.
We’ve talked in the past about how unfortunate it is that the US Copyright Office seems almost entirely beholden to the legacy copyright players, rather than to the stated purpose of copyright law. That is, instead of looking at how copyright can lead to the maximum benefit for the public (“promoting the progress of science”) it seems to focus on what will make the big legacy players — the RIAA and MPAA — happy. Part of this, of course, is the somewhat continuous revolving door between industry and the Copyright Office. Just a few months ago we wrote about how the Copyright Office’s General Counsel, David Carson, had jumped ship to go join the IFPI (the international version of the RIAA).
Last night the news came out that the US Copyright Office had now named Karyn Temple Claggett as the Associate Register of Copyright and Director of Policy & International Affairs. While Temple Claggett has actually been at the Copyright Office for a little while as Senior Counsel for Policy and International Affairs, not too long ago she was a hotshot litigator for… the RIAA. In fact, an old bio of hers, from when she was at the RIAA (as VP, Litigation and Legal Affairs), notes that she was instrumental in their ever-present legal campaign against pretty much any innovative technology that comes along: Read more »