Matt Levine



    Controversial New Theory: S&P Got A Few Ratings Wrong

    One day – one day soon – the Justice Department will sue S&P for mis-rating a bunch of CDOs, and when that happens let’s all read the complaint and then meet back here to discuss it, okay? [update!] In the meantime we have S&P’s preemptive denial: A DOJ lawsuit would be entirely without factual or […]

    / Feb 4, 2013 at 5:10 PM
  • I would certainly buy bonds from this man

    Private Equity

    Blackstone Getting Into The Lazy-Investment-Banking Business

    Underwriting a stock or bond deal can be very difficult and work-intensive: you need to coordinate your t-shirts for the pitch, manage logistics ranging from prospectus writing to investor-lunch-sandwich-buying, and actually convince investors to buy whatever it is you’re selling. But it can also be very easy. The limit case of easy underwriting is: Your […]

    / Feb 4, 2013 at 11:01 AM
  • The temptation to use a googly-eyed pile of money was strong but I resisted. The guy gave the speech after all.


    NY Fed President Wants To Subsidize Shadow Banking More, Or Get Rid Of It, One Or The Other

    One reason that it’s silly to get worked up about banks gambling with your deposits is that they’re mostly not. Your deposits have a tendency to be structurally senior, insured, at regulated subs, etc.; nothing all that bad will happen to them. Banks are gambling with your money market funds, and with the securities-lending proceeds […]

    / Feb 1, 2013 at 5:23 PM
  • Figure 4


    Banks May Have Manipulated Euribor Out Of Modesty

    The Libor scandal’s little brother, the Euribor scandal, is different from the Libor scandal in one important way. With Libor, banks are asked where they can borrow, and so if they can borrow at 2.5% and submit 2.4% then they’re lying. With Euribor, banks are asked where a prime bank can borrow, and so if […]

    / Feb 1, 2013 at 12:12 PM
  • I've  missed you Bob! This is totally unfair, it was before his time; John Varley was CEO. Still.


    When No One Else Would Invest In Barclays, Barclays May Have Just Invested In Itself Itself

    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 […]

    / Jan 31, 2013 at 6:14 PM
  • Slide 24. I like the color scheme: "the gray is the bits we're ashamed of."


    Deutsche Bank Improved Its Balance Sheet By Losing A Lot Of Money

    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 […]

    / Jan 31, 2013 at 2:04 PM
  • Figure 5, first panel. Y axis is ratio of trading RWAs to total trading assets: lower numbers suggest umm more aggressive RWA practices, *maybe*. X axis is "a crude proxy for reliance on internal models for calculating mRWA," as opposed to using standardized approaches. Higher numbers = more use of internal models.


    Banks’ Risk Measurements Rarely Off By Much More Than A Factor Of Ten

    Banks are opaque, or so I hear, and so the only way many people can stand to be around them is if they can have some sort of number to serve as a flashlight into all that opacity. One of the big numbers is Basel III risk-weighted assets, which are intended to, as the name […]

    / Jan 31, 2013 at 10:24 AM
  • better whale-human relationship


    Human-Whale Relations At JPMorgan Were Pretty Frosty

    Is JPMorgan too big to manage the quantity of public confusion about its operations? Maybe? This Reuters story about how JPMorgan was betting against its own Whale trades is a bit silly: the fact that JPMorgan’s investment bank dealer desk may have been long (short) some of the instruments that JPMorgan’s Chief Investment Office was […]

    / Jan 30, 2013 at 2:32 PM
  • I'm not sure if all the small banks are supposed to be clustered in one big green square. But there are like 20 of them.


    Big Banks Do Plenty Of Lending, Though Mostly With Other People’s Money

    I’m mesmerized by this JPMorgan research chart showing that big banks shouldn’t be broken up because they lend so much more to businesses and consumers than small banks do. See: Basically for every dollar of normalized capital, JPMorgan has extended $12 of credit between March 2010 and September 2012, according to this note by JPM’s […]

    / Jan 29, 2013 at 6:37 PM
  • Is this about RBS? I dunno. I'm getting more into creepy lobby pictures, etc.


    RBS Isn’t Sure Its Foreign Subsidiaries Could Survive In Prison

    The Wall Street Journal story today about the next Libor domino to fall – RBS, which will be coughing up $700mm or so to regulators in the next few weeks – is full of quietly hilarious lines, perhaps none more so than the Journal‘s deadpan clarification that “the Justice Department has the power to file […]

    / Jan 29, 2013 at 12:59 PM
  • This is about as dramatic as pictures of Jefferies get


    Federal Prosecutors Don’t Appreciate Former Jefferies Trader’s Vivid Imagination

    The Journal had an article this morning about how cash equities traders are getting used to having computers as coworkers but I say unto you: can a computer do this?1 52. On March 31, 2010, Customer A, an investment adviser to a private fund, asked Jefferies to find buyers for several MBS, including Lehman XS […]

    / Jan 28, 2013 at 5:31 PM
  • This has nothing to do with anything but y'know it's Art. And I like it.


    Worst Abuses Of Unregulated Art Market Look A Lot Like Typical Day In Financial Industry

    If you like or hate financial regulation you might take a quick look at today’s front-page New York Times article about how the art market is unregulated. Apparently this leads to terrible things like “chandelier bidding,” where auctioneers get the ball rolling by calling out a few fake bids, as well as conflicts of interest […]

    / Jan 28, 2013 at 11:10 AM
  • oh yeah?


    Men Dislike Each Other, Might Also Have Opinions On A Stock

    If you have an opinion on whether Carl Icahn or Bill Ackman got the better of today’s amazing CNBC shoutfest over Herbalife, you have a number of options for expressing it. We’ve had like four posts so, y’know, comment away, but if you want something more formal both CNBC and Business Insider have polls you […]

    / Jan 25, 2013 at 4:25 PM
  • J.P. Morgan in a hat. *You* illustrate "liquidity backstops for variable-rate municipal issuers."


    Basel III Liquidity Rules Already Making Banking Simpler And Safer

    Financial innovation gets kind of a bad rap, and one of my favorite parts of this job is when I get to celebrate it just for being itself. Sometimes this means breathtaking magic like the derivative on its derivatives that Credit Suisse sold to itself, or elegant executions of classic ideas like the Coke shares […]

    / Jan 25, 2013 at 11:16 AM
  • Write-Offs

    Write-Offs: 01.24.13

    $$$ Dimon: U.S. Consumer is in Better Shape [FBN] $$$ Buffett pulls ahead in wager against hedge funds [Fortune] $$$ Obama Throws Down The Gauntlet With New Pick To Head The SEC [ATL] $$$ Greenhill Results a Positive Omen for M.&A. Boutiques [DealBook] $$$ “After a thoughtmash session with the Dalston Davos co-chairs – my […]

    / Jan 24, 2013 at 6:41 PM
  • Banks

    JPMorgan Sees No Need To Appoint Committee To Break Up JPMorgan

    Do you have an opinion on whether JPMorgan is too big to manage and should be broken into its constituent bits? You do? Hey, that’s great, good for you. Here’s what you can do about it, in roughly descending order of effectiveness: Be Jamie Dimon, do what you want. Be a board member, try to […]

    / Jan 24, 2013 at 6:10 PM
  • action shot


    AIG Put A Lot Of Thought Into Making Its Obvious Decision Not To Sue The Government

    Have you ever wanted to hold a mock trial of Hank Greenberg’s lawsuit over the AIG bailout from the comfort of your own home? If so, you’re in luck, because yesterday AIG filed with a federal court the complete AIG Mock Trial Deluxe Kit. It’s all here: A written protocol for conducting the mock trial […]

    / Jan 24, 2013 at 10:11 AM
  • Do you worry that a modern-day CDO structurer wouldn't even know what Mike Tyson's Punch Out is? Or exist, for that matter?


    Morgan Stanley Finalizes Its Entry In The “Who Said The Worst Things About Its Own Products?” Competition

    One thing that would probably be fun would be reading the internal emails sent around at the places that bought terrible RMBS CDOs in the end times of 2006-2007. What did they say? Was it “these mortgages are worth twice what Morgan Stanley is selling them for! We are ripping their faces off”?1 Was it […]

    / Jan 23, 2013 at 4:58 PM
  • You said it, Paul, not me.


    Bank Investors Push For Change Via Strongly Worded Poll Responses

    I feel like this exchange did not go well for Jamie Dimon: [Elliott Capital’s Paul] Singer said the unfathomable nature of banks’ public accounts made it impossible to know which were “actually risky or sound”. … Mr Singer noted that derivatives positions, in particular, were difficult for outside investors to parse and worried that banks […]

    / Jan 23, 2013 at 1:32 PM
  • cut yer hair ya hippie


    At Long Last Egan-Jones Has Been Brought To Justice

    The SEC’s press release touting its triumph over rebel-without-a-cause rating agency Egan-Jones gives just the slightest impression that it was written in embarrassment. A trope of SEC press releases is “[thing we are enforcing] is among the most important things in the whole wide universe”; this is hard to say with a straight face when […]

    / Jan 22, 2013 at 4:07 PM
  • Former H-P CEO Léo Apotheker + floating giant head


    H-P Wasn’t Going To Let A Little Fraud Stand In The Way Of Acquiring Autonomy

    There’s a lot going on in today’s Wall Street Journal story about how Hewlett-Packard “missed a chance to back away” from its acquisition of Autonomy – which H-P now thinks did a lot of revenue recognition fraud and on which it has taken zillions of dollars of writedowns – but this description of the board’s […]

    / Jan 22, 2013 at 1:25 PM
  • This is just a great picture.


    2007 Fed Not As Informed About 2008 As 2013 Critics

    Today the Federal Reserve released transcripts of its 2007 FOMC meetings. The Fed has a policy of releasing these transcripts with a five-year lag. This has various advantages in terms of encouraging candor and allowing the FOMC members to discuss material nonpublic information, etc., but it has the singular disadvantage of making them look like […]

    / Jan 18, 2013 at 4:42 PM


    Citi CEO Knows This Idea Sounds Crazy But Just Hear Him Out, Okay?

    Back in October when Mike Corbat was dragged from bed in the middle of the night to take over the top job at Citigroup after Vikram Pandit’s ouster, he did a hastily assembled damage-control conference call while still wearing his footie pajamas. On this call CLSA analyst Mike Mayo surprised Corbat by asking him a […]

    / Jan 18, 2013 at 12:06 PM
  • unperturbed


    SEC Insider Trading Investigation Reveals SEC Is Really Good At Insider Trading Investigations, Anyway

    Sheelah Kolhatkar’s cover story today in Bloomberg BusinessWeek about the SEC’s hunt to capture Steve Cohen is pretty amazing, and depending on your priors will leave you impressed or infuriated or both with the SEC. I vote both, but I always vote both. The core of it is the story of how Sanjay Wadhwa, a […]

    / Jan 17, 2013 at 11:48 AM
  • Sources: GS earnings release, Google Docs, my own two hands, random errors introduced by me, etc.


    Goldman Welcomed New CFO With A Nice Earnings Beat

    If you read a lot of media coverage of Goldman Sachs earnings you get the sense that the most important number the firm reports is average compensation per employee, which this year was a nice oh-so-close-to-round $399,506. I CONCUR, of course.1 Also of interest is the comp ratio, which was only 39% this year, as […]

    / Jan 16, 2013 at 5:54 PM
  • whale diagram


    JPMorgan Dissects A Whale Carcass

    How should one read JPMorgan’s Whale Report? I suppose “not” is an acceptable answer; the Whale’s credit derivatives losses at JPMorgan’s Chief Investment Office are old news by now, though perhaps his bones point us to the future. One way to read it is as a depressing story about measurement. There were some people and […]

    / Jan 16, 2013 at 1:41 PM
  • That'll be $273 please


    Instead Of A Trillion-Dollar Platinum Coin, Treasury Should Mint A Trillion-Dollar $500bn Bond

    Here are four problems in the world: “The search for yield never ends” and is particularly intense these days A shortage of safe assets The conjunction of (A) everyone’s burning desire to lend money to the U.S. government and (B) the U.S. government’s curious lack of interest in borrowing all that money The debt ceiling […]

    / Jan 15, 2013 at 7:40 PM
  • intense Lloyd


    Goldman Exits A Tax Trade Early

    Here is an important cultural difference between the US and the UK that you should, like, stick in the boot of your lorry or whatever: in the UK, it’s apparently not socially acceptable to put off paying bonuses by two months to save your employees five percentage points in taxes. In America, it’s considered perfectly […]

    / Jan 15, 2013 at 2:48 PM

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