Matt Levine

Posts by Matt Levine

Barclays today announced a fancy new capital plan that illustrates the subtle cultural differences between US and UK banking. When U.S. regulators want banks to raise more capital, they tell them to do it by 2018, and the banks spend the intervening five years whining about it. When UK regulators want Barclays to raise more capital, they tell them to do it by June 2014, and Barclays goes out and announces a rights offering pronto. A rights offering! That preferred European way of raising capital has a pleasing symbolism; it’s like, okay you equity holders, you let your management get into this mess, and you’re responsible for fixing it, so cough up some more cash or there’ll be consequences. Bail yourselves out.

The mess, in this case, is that newish leverage-ratio rules require European banks to have assets (measured under IFRS, plus some off-balance-sheet stuff) equal to no more than 33.3 times their capital, and Barclays is at a somewhat astounding-sounding 45.9x,1 so it either needs to chuck around a third of its assets or raise about a third again of its capital or some combination thereof.

They elected combination thereof, to wit: Read more »

The Federal Energy Regulatory Commission fined JPMorgan $410mm today and you can see why JPMorgan would be okay with that. The details are in this marvelously complicated FERC order and settlement agreement,1 but the outlines of the story are simple. FERC built a terrible box, and the box had some buttons that were labeled “push here for money,” and JPMorgan pushed them and got money. You can understand the category mistake very easily:

  • FERC thought the box was for generating electricity at market prices but with a robust backup system to ensure reliable supply, and
  • JPMorgan thought the box was for dispensing money.

It’s a perfectly understandable mistake to make if you have spent your career building and operating boxes that dispense money, as JPMorgan global commodities head Blythe Masters has. What else could the box be for?

I suppose we should talk about how the box worked, because this is that sort of blog. Read more »

A fun thing about being rich is that it expands your opportunities for passive-aggressive sniping. Like, if Michael Dell wants to insult Carl Icahn, he can call up the Wall Street Journal and Bloomberg and say “hey, I was thinking about insulting Carl Icahn, if I do will you print it?,” and of course the answer is yes.1 Or if Carl Icahn wants to insult Michael Dell, he can just tweet his insults like any underemployed 26-year-old, but then he files his tweets with the SEC, which gives them an unusual gravitas, for tweets.

So those boys are having a good time. Their pretext for sniping today is a debate over who should get to vote on the Dell buyout. The current rule is that anyone who owned shares as of June 3 can vote, and that a majority of the non-insider shareholders have to vote to approve Michael Dell’s buyout. Since those rules seem to lead to the deal being voted down,2 and since Carl Icahn opposes the deal, he’s happy with the rules and thinks it’d be a massive betrayal to change them. Michael Dell, unsurprisingly, wants to change them, so as to limit the required vote to a majority of the votes cast and maybe to allow more recent buyers to vote: Read more »

A question that I don’t generally spend a lot of time thinking about is “what if Hank Greenberg wins his $25 billion lawsuit against the government claiming that they unfairly took AIG away from him?,” because come on. Hank Greenberg winning his $25 billion lawsuit against the government always struck me as being about as likely as AIG joining that lawsuit: there’ll be a lot of expensive process, everyone involved will make a big show of treating Greenberg fairly, everyone not involved will get furiously angry at the cheek of it, and at the end the thing that everyone knows will happen will happen.

But the judge in the case just ordered that Ben Bernanke has to answer questions in the case, which I feel like it might change the handicapping a bit? This doesn’t seem like the sort of lawsuit where Greenberg can just make himself annoying enough to get a settlement – it’s hard to see the government kicking him, say, $1 billion for his troubles – but still this is a marginal win for him. Here’s why Greenberg needs to sit down with Ben: Read more »

  • 29 Jul 2013 at 10:26 AM

Fabulous Fab Really Wanted To Get Abacus Done

Fabrice Tourre testified in his SEC trial late last week and many perplexing things came out, with the most perplexing being a tie between:

Perhaps less perplexing is that Fab’s feelings about Abacus seem to have been less about bamboozling one client on behalf of another and more about just printing a trade, whichever direction it went in. John Carney reports that Goldman was taking too long getting ABN Amro to intermediate ACA’s guarantee of the super senior tranche of the deal, Paulson was getting antsy, and Fab, ever servicey, was trying to assuage their antsiness by just getting Goldman to do the deal naked: Read more »

Yesterday SAC was indicted for insider trading, more or less, so today people are fighting on the internet about whether insider trading should really be illegal. You know what I think, more or less, but really I just think that’s sort of an unhelpful way to put it. Here is a rough stylized chart of the benefits of informed trading:


That is: Read more »

One hopes “black edge” wasn’t on the list. Anyway today’s indictment against SAC, for wire fraud and securities fraud, is a hoot:

For example, on or about July 29, 2009, a recently hired SAC PM (the “New PM”) sent an instant message to [Steve Cohen] and relayed that, due to some “recent research,” the New PM planned to short Nokia when he started work 10 days later. The New PM apologized for being “cryptic” but noted that the head of SAC compliance “was giving me Rules 101 yesterday – so I won’t be saying much[.] [T]oo scary.”

Possibly the weirdest part here is that new hires got compliance lectures two weeks before they showed up at the firm? But maybe not; the DOJ takes a pretty dim view of SAC’s hiring process generally, and if you believe the DOJ that SAC’s main hiring criterion was “is good at insider trading” then you could imagine the need for a little pre-start-date warning about email etiquette: Read more »

I’m sure this is false but I’m going to carry on believing that someone, somewhere, flew to Round Rock, Texas last week for the Dell shareholder meeting, arrived to learn it was cancelled, got on the next plane back to New York or, I dunno, Switzerland, and then flew in again this morning for the rescheduled meeting, only to find out that it was cancelled again. Cartoon steam is coming out of his ears right about now, though this time at least he’s being compensated for the delay: Read more »